TSX:KXS - Post Discussion
Post by
retiredcf on Nov 02, 2023 10:08am
RBC
November 1, 2023
Kinaxis Inc.
Q3 is better than feared, but ARR and RPO trends are still likely to sustain the debate
TSX: KXS | CAD 134.53 | Outperform | Price Target CAD 220.00
Sentiment: Neutral
Q3 revenue in line, adj. EBITDA and adj. EPS well above consensus. Q3 revenue was $108MM, effectively in line with RBC/ consensus at $107MM. SaaS revenue was $68MM (+26% Y/Y), also in line with RBC/consensus at $68MM. Adj. EBITDA of $23MM was well above RBC/consensus at $15MM/$14MM, on higher gross margins and lower opex. Similarly, adj. EPS of $0.53 was above RBC/consensus at $0.35/$0.32.
FY23 revenue guidance unchanged, FY23 adj. EBITDA guidance raised. Kinaxis reiterated FY23e guidance for total revenue of $425-435MM (+17% mid-point). SaaS growth guidance was lowered from 25-27% Y/Y to 24-25% Y/Y, which reflects certain contracts being recognized as Term License (1-2% impact to SaaS growth). SaaS guidance would be unchanged excluding this impact. Due to SaaS recognized as Term License, Kinaxis increased Term License guidance to $18-20MM ($16-18MM prior). Also, Kinaxis raised adj. EBITDA margin to 16-18% ($73MM adj. EBITDA mid-point), up from 14-16% prior ($65MM mid-point).
ARR and RPO trends to sustain debate. Kinaxis indicated in the press release that fundamental demand is "robust". However, ARR growth slowed to 18% Y/Y organic, down from 19% last quarter. Like last quarter, we believe new deals are starting at smaller sizes and then ramping in future years, which Kinaxis doesn’t include in ARR at this time. SaaS RPO (backlog) rose 1% Q/Q, but Y/Y growth slowed to 12% from 18% Q2. This reflects 900 bps tougher Y/Y comps (37% Q3/FY22 vs. 28% Q2/FY22). Additionally, Kinaxis disclosed that slower RPO growth YTD is driven by 48% lower renewals YTD due to its normal renewal cycle.
NCIB to repurchase up to 5% of shares. Kinaxis also announced a normal course issuer bid (NCIB) to repurchase up to 1.4MM shares or 5% of outstanding shares over the 12 month period from Nov 6, 2023 to Nov 5, 2024. At the current share price, the NCIB would equate to $138MM, which compares against Kinaxis’ net cash balance of $239MM and our forecast for Kinaxis to generate $85MM NTM FCF. This is the first NCIB that Kinaxis has implemented.
Conference call tomorrow at 8:30am ET.
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