Kinaxis Inc T.KXS

TD

[retiredcf]

Kinaxis Inc.

(KXS-T) C$162.39

Q4/21 Preview: All Eyes on the 2022 Guidance

Event

Q4/21 Results: Tuesday, March 1, 2022, after the markets close. Conference Call: Wednesday, March 2, 8:30 a.m. ET. Registration link.Impact: NEUTRAL

We forecast total revenue of $66.9mm, up 22% y/y. We expect SaaS revenue of $46.8mm, up 18% y/y. Our combined $50.0mm of SaaS and Maintenance & Support revenue estimate implies an ~75% recurring revenue mix this quarter. We estimate $15.0mm of Professional Services revenue, up 33% y/y. We forecast $8.8mm of EBITDA, or 13.1% EBITDA margin, largely due to lower subscription term licenses and continued investments in organic growth.

Looking for strong bookings to close the year. We estimate that Kinaxis will deliver strong SaaS bookings this quarter, following the seasonally softer bookings in the prior quarters. We estimate that SaaS backlog will need to grow to ~$173mm, or 20% sequentially, to be in a position to deliver 23-25% SaaS y/y growth in 2022. We believe that increased enterprise spending on cloud reflects positively on Kinaxis being able to deliver strong SaaS bookings this quarter. Accenture and SAP have recently posted strong results, driven by the strong spending environment. Accenture grew 20%+ y/y across all geographies, while new bookings expanded by 30% y/ y for a 1.1x book/bill ratio. SAP saw cc cloud backlog growth of 26% y/y in Q4/21 and now expects 2022 cloud revenue to grow by 23%-26% y/y in cc. In aggregate, we believe that the strong demand for cloud solutions and ongoing supply chain complexities reflect positively on Kinaxis. We believe investors will be focused on the 2022 guidance, given expectations for SaaS growth to return to the mid-20% range and a cyclical high for the high-margin Subscription Term License revenue.

TD Investment Conclusion

We maintain our BUY rating and C$230 target price. We believe that Kinaxis will deliver strong bookings growth, which sets the company up for strong SaaS growth next year. We believe that the strong demand environment and supply chain complexities will remain a tailwind for the company.