Kinaxis Inc.
(KXS-T) C$143.98
Q4/21 First Take: Don't Get Spooked by the Margin Guidance
Event
Kinaxis released Q4/21 results last night. Conference Call: 8:30 a.m ET; Registration link. Impact: NEGATIVE
Kinaxis delivered strong ARR growth, record book/bill, robust SaaS backlog, record incremental subscription bookings, and new customer wins that were double that of 2020. We expect Kinaxis to name large well-known brands on the call as new customers. Although 2022 revenue guidance is above estimates, most of the beat is coming from one-time revenue. Combined with 2022 EBITDA margin guidance of 15-18% coming in well below estimates in the low-20% range, we believe the stock will trade lower today. In previous years, we believe the strong metrics and higher- than-expected revenue guidance would have taken the share price higher; however, the recent macro backdrop has made the market more sensitive to margin misses. Management is continuing to invest for growth, given that it is seeing more activity than ever — it sounded very optimistic during our call. In fact, demand is so strong that Kinaxis is helping its partners with more deployments, leading to the stronger- than-expected Professional Services (PS) revenue. In our view, all KPIs point to strong demand and we believe these investments can convert into accelerating growth. We would be buying if the shares trade lower today.
Strong PS revenue. Revenue of $68.5mm was relatively in line with estimates of $66.9mm (TD)/$67.0mm (consensus). SaaS revenue was in line with estimates and grew by 17.7% y/y. PS revenue came in above expectations, with strong deployments in the quarter. Although EBITDA of $11.3mm beat expectations of $8.8mm (TD)/$9.6mm (consensus), EPS of $0.16 was below estimates of $0.18.
KPIs point to very strong demand. ARR up 21% y/y in cc to $221mm, book/bill was a very strong 310%, the 2022 SaaS backlog exceeded the $175mm needed to support SaaS growth of 23-25% next year, and Kinaxis won a record number of new customers. We believe all these metrics suggest a very strong demand environment.
2022 guidance mixed. Although SaaS revenue guidance is in line with estimates, one-time revenue is expected to be stronger than expected. We believe a large portion of the revenue guidance beat is from higher-than-expected PS.