News Press Releases

Kinaxis Inc. Reports First Quarter 2018 Results

T.KXS | May 2, 2018

Canada NewsWire

OTTAWA, May 2, 2018

- Reports 24% growth in first quarter subscription revenue and Adjusted EBITDA of 26% of revenue ⁽¹⁾ -

OTTAWA, May 2, 2018 /CNW/ - Kinaxis ^® (TSX:KXS), provider of RapidResponse®, the leading cloud-based supply chain management solution based on concurrent planning, today reported results for its fiscal first quarter ended March 31, 2018. This is the first quarter that Kinaxis has adopted IFRS 15 and 16⁽¹⁾ (or "the Standards") and an initial date of application of January 1, 2018. Accordingly, the information presented for 2017 has not been restated.

Prior to adoption of the Standards, Q1 2018 total revenue was up 10% to $35.9 million, subscription services revenue grew by 24% to $29.5 million, Adjusted EBITDA⁽²⁾ was up 8% to $9.2 million (26% of revenue), and profit was level at $3.2 million, all compared to the same quarter in the previous year. Under IFRS 15 and 16, Q1 2018 total revenue was $36.8 million, total subscription revenue was $30.5 million, Adjusted EBITDA⁽²⁾ was $12.5 million (34% of revenue) and profit was $4.6 million. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

"Q1 represented another quarter of strong execution by Kinaxis. We continue to demonstrate ongoing momentum with top tier brands in the automobile market, where we have marquee accounts that include Toyota, Nissan, Ford and others. We also recently announced an excellent new customer in our Consumer Packaged Goods market," said John Sicard, Chief Executive Officer of Kinaxis. "Operationally, we have completed our planned, significant expansion of our European sales team and are positioned to take advantage of our momentum and opportunities in that region. We remain confident in our growth strategy and will continue to invest to take advantage of the market potential while maintaining strong bottom line performance."

Q1 2018 Highlights

			Under IFRS 15/16⁽¹⁾	Prior to IFRS 15/16⁽¹⁾
$ USD millions, except as otherwise indicated			Q1 2018	Q1 2018	Q1 2017	Change
Total Revenue			36.8	35.9	32.5	10%
		Subscription services	26.0	29.5	23.9	24%
	Subscription term licenses		4.5	-	-	-
	Total subscription revenue		30.5	29.5	23.9	24%
Gross profit			26.7 (72%)	25.7 (72%)	22.2 (68%)	16%
Profit			4.6 ($0.17/diluted share)	3.2 ($0.12/diluted share)	3.2 ($0.12/diluted share)	-
Adjusted EBITDA⁽²⁾			12.5 (34%)	9.2 (26%)	8.5 (26%)	8%
Cash from operating activities			10.5	10.5	10.3	3%

(1)

This is the first quarter that Kinaxis has adopted IFRS 15, using the cumulative effect method, and IFRS 16, using the modified retrospective approach, and an initial date of application of January 1, 2018. Accordingly, the information presented for 2017 has not been restated. The impact of the adoption of IFRS 15 relates primarily to accounting for Kinaxis' revenue from on-premise, fixed term subscription arrangements and capitalization of contract acquisition costs. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all major leases. See the Kinaxis' financial statements and MD&A for the three months ended March 31, 2018 for further information.

(2)

"Adjusted EBITDA" is a non-IFRS measure and is not a recognized, defined or a standardized measure under IFRS. This measure as well as other non-IFRS financial measures reported by Kinaxis are defined in the "Non-IFRS Measures" section of this news release.

Analysis of Q1 2018 Financial Highlights

As fully noted in our financial statements and management's discussion and analysis (MD&A), Kinaxis adopted the Standards in the first quarter of 2018. We have not restated the 2017 comparative information and but have presented the 2018 results prior to giving effect to the Standards, which provides a basis for this comparative analysis.

Prior to adoption of the Standards, subscription services revenue grew by 24% to $29.5 million compared to the same quarter in the previous year due to contracts secured with new customers, as well as expansion of existing customer subscriptions. Total revenue compared to the same quarter in the previous year grew at a lower rate of 10%, to $35.9 million, due to a significant increase in our partners assuming deployment activity and the related professional services revenue. Under IFRS 15 for the first quarter of 2018, subscription services revenue was $26.0 million, subscription term license revenue was $4.5 million (for total subscription revenue of $30.5 million), and total revenue was $36.8 million.

Prior to adoption of the Standards, compared to the same quarter in the previous year, gross profit grew 16% to $25.7 million and gross profit margin grew to 72% from 68%, reflecting the higher growth rate of revenue, relative to related costs of revenue, which were relatively unchanged compared to Q1 2017. Profit for the first quarter of 2018 was $3.2 million ($0.13 per basic share and $0.12 per diluted share), or approximately equivalent to the comparable period in the previous year. The lower growth in profit, compared to gross margin growth, was driven primarily by increases in headcount and related compensation costs, reflected in operating expenses. Under IFRS 15 and 16, gross profit for the first quarter of 2018 was $26.7 million, or 72% of revenue, and profit was $4.6 million ($0.18 per basic share and $0.17 per diluted share).

Prior to the effect of the Standards, Adjusted EBITDA for the first quarter of 2018 grew 8% compared to Q1 2017, to $9.2 million, or 26% of revenue. The increase in Adjusted EBITDA was due to an increase in Adjusted profit compared to the same period in the prior year, driven by our growth in revenue. Under IFRS 15 and 16, Adjusted EBITDA in the first quarter of 2018 was $12.5 million, or 34% of revenue. Adjusted profit is a non-IFRS measure and is not a recognized, defined or a standardized measure under IFRS. Adjusted profit is defined in the "Non-IFRS Measures" section of this news release.

Cash generated by operating activities was $10.5 million for the first quarter. Cash and cash equivalents were $166.6 million at March 31, 2018, compared to $158.4 million at December 31, 2017.

Financial Guidance
Kinaxis is reaffirming the guidance it previously provided for key financial targets measured prior to the adoption of the Standards, and has issued guidance for key financial targets reflecting the adoption of the Standards. The following are the financial targets for FY 2018:

$ in USD millions, except as otherwise indicated			Under IFRS 15/16 FY 2018	Prior to IFRS 15/16 FY 2018
Total revenue			$150-154	$158-163
	Subscription services revenue		$109-111	23-26% growth
		Subscription term licenses	$7-8	-
Adjusted EBITDA margin			24-27% of revenue	23-26% of revenue

This guidance is provided to enhance visibility into Kinaxis' expectations for financial targets for the periods indicated. Please refer to the section regarding forward-looking statements which forms an integral part of this release.

This press release, along with the financial statements and Kinaxis' MD&A for the three months ended March 31, 2018, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call tomorrow, May 3, 2018, to discuss these results. John Sicard, Chief Executive Officer, and Richard Monkman, Chief Financial Officer, will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date:	Thursday, May 3^rd, 2018
Time:	8:30 a.m. Eastern Time
Webcast:	https://bit.ly/2Eyez6e
Dial-in Number:	(647) 427-7450 or (888) 231-8191
Taped Replay:	(416) 849-0833 or (855) 859-2056
	Available until 12:00 midnight Eastern Time Thursday May 10, 2018
Reference Number:	2468467

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

About Kinaxis Inc.
Offering the industry's only concurrent planning solution, Kinaxis is helping organizations around the world revolutionize their supply chain planning. Kinaxis RapidResponse, our cloud-based supply chain management software, connects your data, processes and people into a single harmonious environment. With a consolidated view of the entire supply chain, you can plan expected performance, monitor progress and respond to disconnects when reality hits. RapidResponse lets you know sooner and act faster, leading to reduced decision latency, and improved operational and financial performance. We can prove it. From implementation to expansion, we help our customers with every step of their supply chain journey.

Non-IFRS Measures
This news release contains non-IFRS measures, specifically, Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA. We use Adjusted profit and Adjusted diluted earnings per share, which remove the impact of our redeemable preferred shares and share based compensation plans, to measure our performance as these measurements better align the reporting of our results and improve comparability against our peers. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and work capital requirements. Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA will likely differ from that used by other companies (including our peers) and therefore comparability may be limited. Non-IFRS measures should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures.

Kinaxis has reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as follows:

	Three months ended March 31,
			Pre-IFRS 15/16
	2018		2018		2017
	(In thousands of U.S. dollars)
Statement of Operations
Profit	$	4,553	$	3,210	$	3,226
Share-based compensation		3,158		3,158		2,716
Adjusted profit	$	7,711	$	6,368	$	5,942
Income tax expense		3,130		1,868		1,931
Depreciation		1,986		1,305		788
Foreign exchange loss (gain)		(196)		(22)		11
Net finance income		(145)		(361)		(167)
		4,775		2,790		2,563
Adjusted EBITDA	$	12,486		9,158	$	8,505
Adjusted EBITDA as a percentage of revenue		34%		26%		26%

Forward-Looking Statements
Certain statements in this release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements as to our expectations for growth of annual total revenue, annual subscription services and term license revenue, and our expectations for Adjusted EBITDA achievement, in each case looking forward for the balance of our fiscal year ending December 31, 2018, as well as statements as to Kinaxis' growth opportunities and the potential benefits of, and markets and demand for, Kinaxis' products and services. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of Kinaxis' products and services compared to competitive offerings in the industry.

In particular, our guidance for 2018 annual total revenue, annual subscription services and term license revenue and annual Adjusted EBITDA, is subject to certain assumptions, including:

our ability to win business from new customers and expand business from existing customers;
the timing of new customer wins and expansion decisions by our existing customers;
maintaining our current customer retention levels; and
with respect to Adjusted EBITDA, our ability to contain expense levels while expanding our business.

These and other assumptions, risks and uncertainties may cause Kinaxis' actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by forward-looking statements. Material risks and uncertainties relating to our business are described under the headings "Forward-Looking Statements" and "Risks and Uncertainties" in our annual MD&A dated February 28, 2018, under the heading "Risk Factors" in our Annual Information Form dated March 29, 2018, and in our other public documents filed with Canadian securities regulatory authorities, which are available at www.sedar.com. Forward-looking statements are provided to help readers understand management's expectations as at the date of this release and may not be suitable for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements. Kinaxis assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

Kinaxis Inc.
Condensed Consolidated Interim Statements of Financial Position

As at March 31, 2018 and December 31, 2017
(Expressed in thousands of U.S. dollars)
(Unaudited)

			March 31, 2018		December 31, 2017*

Assets

Current assets:
	Cash and cash equivalents	$	166,631	$	158,398
	Trade and other receivables		40,898		31,783
	Investment tax credits recoverable		–		911
	Prepaid expenses		6,363		4,196
			213,892		195,288
Non-current assets:
	Property and equipment		20,933		17,350
	Right-of-use assets		11,878		–
	Contract acquisition costs		13,114		–
	Unbilled receivables		2,059		–
	Deferred tax assets		22		55

		$	261,898	$	212,693

Liabilities and Shareholders' Equity

Current liabilities:
	Trade payables and accrued liabilities	$	16,351	$	11,176
	Deferred revenue		57,970		67,040
	Lease obligations		2,561		–
			76,882		78,216
Non-current liabilities:
	Deferred revenue		5,974		7,745
	Lease obligations		9,192		–
	Deferred tax liabilities		10,340		1,944
			25,506		9,689

Shareholders' equity:
	Share capital		112,051		108,253
	Contributed surplus		21,432		19,294
	Accumulated other comprehensive income (loss)		116		(284)
	Retained earnings (deficit)		25,911		(2,475)
			159,510		124,788

		$	261,898	$	212,693

* The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

Kinaxis Inc.
Condensed Consolidated Interim Statements of Comprehensive Income

For the three months ended March 31, 2018 and 2017
(Expressed in thousands of U.S. dollars, except share and per share data)
(Unaudited)


			2018		2017*

Revenue		$	36,849	$	32,542

Cost of revenue			10,135		10,377

Gross profit			26,714		22,165

Operating expenses:
	Selling and marketing		7,386		6,931
	Research and development		6,749		6,223
	General and administrative		5,237		4,010
			19,372		17,164

			7,342		5,001
Other income (expense):
	Foreign exchange gain (loss)		196		(11)
	Net finance income		145		167
			341		156

Profit before income taxes			7,683		5,157

Income tax expense			3,130		1,931

Profit			4,553		3,226

Other comprehensive income:

Items that are or may be reclassified subsequently to profit or loss:
	Foreign currency translation differences - foreign operations		400		146

Total comprehensive income		$	4,953	$	3,372

Basic earnings per share		$	0.18	$	0.13

Weighted average number of basic Common Shares			25,542,978		25,043,512

Diluted earnings per share		$	0.17	$	0.12

Weighted average number of diluted Common Shares			26,667,141		26,316,198

* The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

Kinaxis Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

For the three months ended March 31, 2018 and 2017
(Expressed in thousands of U.S. dollars)
(Unaudited)


	Share capital		Contributed surplus		Accumulated other comprehensive income (loss)		Retained earnings (deficit)		Total equity*

Balance, December 31, 2016	$	97,164	$	13,924	$	(519)	$	(22,858)	$	87,711

Profit		–		–		–		3,226		3,226
Other comprehensive income		–		–		146		–		146
Total comprehensive income		–		–		146		3,226		3,372

Share options exercised		5,577		(1,607)		–		–		3,970
Share based payments		–		2,716		–		–		2,716
Total shareholder transactions		5,577		1,109		–		–		6,686

Balance, March 31, 2017	$	102,741	$	15,033	$	(373)	$	(19,632)	$	97,769

Balance, December 31, 2017	$	108,253	$	19,294	$	(284)	$	(2,475)	$	124,788

Adjustment on initial application of IFRS 15		–		–		–		23,833		23,833
Adjusted balance, January 1, 2018		108,253		19,294		(284)		21,358		148,621

Profit		–		–		–		4,553		4,553
Other comprehensive income		–		–		400		–		400
Total comprehensive income		–		–		400		4,553		4,953

Share options exercised		3,798		(1,020)		–		–		2,778
Share based payments		–		3,158		–		–		3,158
Total shareholder transactions		3,798		2,138		–		–		5,936

Balance, March 31, 2018	$	112,051	$	21,432	$	116	$	25,911	$	159,510

* The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

Kinaxis Inc.
Condensed Consolidated Interim Statements of Cash Flows

For the three months ended March 31, 2018 and 2017
(Expressed in thousands of U.S. dollars)
(Unaudited)


			2018		2017*

Cash flows from operating activities:

	Profit		$	4,553	$	3,226
	Items not affecting cash:
		Depreciation of property and equipment and right-of-use assets		1,986		788
		Share-based payments		3,158		2,716
		Amortization of lease inducement		–		(14)
		Investment tax credits recoverable		911		209
		Net finance income		(145)		–
		Income tax expense		3,130		1,931
		Change in operating assets and liabilities		(1,759)		3,334
	Interest received			361		–
	Interest paid			(148)		–
	Income taxes paid			(1,501)		(1,931)
				10,546		10,259

Cash flows used in investing activities:

	Purchase of property and equipment			(4,821)		(317)

Cash flows from financing activities:

	Payment of lease obligations			(748)		–
	Common shares issued on exercise of stock options			2,778		3,970
				2,030		3,970

Increase in cash and cash equivalents				7,755		13,912

Cash and cash equivalents, beginning of year				158,398		127,910

Effects of exchange rates on cash and cash equivalents				478		167

Cash and cash equivalents, end of year			$	166,631	$	141,989