Kinaxis Inc.
(KXS-T) C$159.02
Q4/22 First Take: Momentum Strong into 2023
Event
Kinaxis released Q4/22 results last night. Conference Call: 8:30 a.m ET; Registration link. Impact: MIXED
In-line revenue with strong margin beat. Total revenue of $98.5mm was relatively in-line with us at $100.9mm (TD) and consensus at $99.4mm. Despite currency headwinds, SaaS revenue of $58.8mm was up 26% y/y, or a strong 32% y/y in constant currency (cc). Professional Services of $26.2mm was relatively in-line with our expectations, growing 53.5% y/y, driven by new subscriptions and expansions with existing customers. We expect a larger mix shift towards professional services in 2023 given the sustained demand through 2022. Subscription term licenses (STL) revenue came in at $9.1mm, in-line with our $9.6mm estimate, reflecting the timing of renewals. EBITDA of $21.1mm was well above expectations of $15.6mm (TD)/ $13.6mm (consensus), posting a 21.4% margin, as operating expenses came in well below our estimates.
Guidance could be conservative. 2023 total revenue guidance of $420mm- $430mm represents a 15.8% y/y increase at the midpoint. Strong SaaS momentum is expected, with management guiding for 25%-27% y/y SaaS revenue growth. The RPO at the beginning of the year has typically represented ~83% of the year's revenue. Based on this historical average and 2023 SaaS RPO of $230.1mm, we estimate that 2023 SaaS revenue could come in at $276mm, ahead of guidance for $267mm-$271mm, and representing SaaS revenue growth of ~30%.
EBITDA guidance of 13%-15% is below expectations, but likely explained by further investments into S&M to support the sustained demand, a higher mix shift of professional services, and investments for the public cloud transition. While the EBITDA guidance miss may be viewed negatively, we believe the potential for accelerating profitable SaaS growth beyond 30% is more attractive.
Mid-term targets of 30%+ SaaS revenue growth and 25%+ EBITDA margin. We believe these goals are achievable given the RPO, heightened sales and deployment activity, and the company's historical EBITDA margin performance.
KPIs point to continued momentum. Kinaxis continues to deliver strong ARR, reaching $274mm, up 26% y/y in cc. SaaS book-to-bill was exceptionally strong at 2.03, suggesting Kinaxis' sales motions are working despite lengthening sales cycles.