Reports 24% growth in subscription revenue, and Adjusted EBITDA(2) of 27% of revenue (1)
OTTAWA, Aug. 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 second quarter ended June 30, 2018. Kinaxis has adopted IFRS 15 and 16(1) (or "the Standards") with an initial date of application of January 1, 2018. The information for Q2 2018 has been presented both before and after adoption of the Standards, while the information presented for 2017 has not been restated.
Prior to the effect of the Standards, Q2 2018 total revenue was up 22% to $40.0 million, subscription services revenue grew by 24% to $30.1 million, Adjusted EBITDA(2) was up 12% to $10.7 million (27% of revenue), and profit declined to $4.4 million from $5.6 million, all compared to Q2 2017. Giving effect to the Standards, Q2 2018 total revenue was $39.0 million, total subscription revenue was $29.1 million, Adjusted EBITDA(2) was $11.2 million (29% of revenue) and profit was $4.3 million. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.
"Q2 represented another strong quarter for Kinaxis—both the top and bottom line. We had record revenue from Europe, which reaffirms our decision to invest significant sales and operations resources in the region. We see even greater opportunity ahead as the expanded European team continues to engage with prospective accounts across all market verticals, but particularly Consumer Packaged Goods, Automotive, and Life Sciences," said John Sicard, Chief Executive Officer of Kinaxis. "During the quarter we launched our Self-Healing Supply Chain application applying advanced machine learning algorithms to detect key supply chain design gaps and automatically take corrective action before they impact performance. We also announced a number of new customers across regions and verticals, including top-tier brands such as Volvo, Ipsen and Extreme Networks, and provided some insight into the success we have been having at our existing customer, BASF. There is no greater testament to the proven transformative value of our unique concurrent planning technique than its ability to serve leaders in such different industries, all from the same cloud-based platform."
Q2 2018 Highlights
Under IFRS 15/16(1)
Prior to IFRS 15/16(1)
$ USD millions, except as otherwise indicated
Subscription term licenses
Total subscription revenue
4.3 ($0.16/diluted share)
4.4 ($0.17/diluted share)
5.6 ($0.21/diluted share)
Cash from operating activities
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 and six months ended Jun 30, 2018 for further information.
"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 Q2 2018 vs Q2 2017 Financial Highlights
As noted in our financial statements and management's discussion and analysis (MD&A) for the three and six months ended June 30, 2018, Kinaxis adopted the Standards on January 1, 2018. We have not restated the 2017 comparative information but have also presented the 2018 results prior to giving effect to the Standards, to create a basis for this comparative analysis.
Prior to the effect of the Standards, in the second quarter of 2018 subscription services revenue grew by 24% to $30.1 million, due to contracts secured with new customers, as well as expansion of existing customer subscriptions. Total revenue grew 22%, to $40.0 million. After applying the Standards, subscription services revenue was $26.5 million, subscription term license revenue was $2.5 million (for total subscription revenue of $29.1 million), and total revenue was $39.0 million.
Prior to the effect of the Standards, in the second quarter of 2018 gross profit grew 20% to $27.5 million and gross profit margin was 69% compared to 70%. The slightly lower gross profit margin reflects increases in headcount and related compensation costs and higher depreciation costs associated with the expansion of data center capacity, including new data centers in Europe and Japan, to support new and ongoing customer engagements, and global expansion. Prior to the effect of the Standards, Profit for the second quarter of 2018 was $4.4 million ($0.17 per diluted share), compared to $5.6 million ($0.21 per diluted share). The decrease in profit reflects an increase in operating expenses made to support our global expansion and ongoing product innovation, net of increases in revenue and gross profit. After applying the Standards, gross profit was $26.5 million, or 68% of revenue, and profit was $4.3 million ($0.16 per diluted share).
Prior to the effect of the Standards, Adjusted EBITDA(2) for the second quarter of 2018 grew 12%, to $10.7 million, or 27% of revenue, which reflects the growth in revenue and gross profit in the period. After applying the Standards, Adjusted EBITDA(2) was $11.2 million, or 29% of revenue.
Cash generated by operating activities was $9.3 million for the second quarter of 2018, up from $7.5 million. Cash and cash equivalents were $174.6 million at June 30, 2018, compared to $158.4 million at December 31, 2017.
Kinaxis is updating the guidance it previously provided for certain key financial targets, both prior to and after adoption of the Standards. The following are the updated 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
Subscription services revenue
Subscription term licenses
Adjusted EBITDA margin
25-28% of revenue
24-27% 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 and six months ended June 30, 2018, are available on Kinaxis' website and on SEDAR at www.sedar.com.
Conference Call Kinaxis will host a conference call tomorrow, August 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.
Available until 12:00 midnight Eastern Time Friday August 10, 2018
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're here to 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 June 30,
Six months ended June 30,
(In thousands of U.S. dollars)
Income tax expense
Foreign exchange loss
Net finance income
Adjusted EBITDA as a percentage of revenue
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 June 30, 2018 and December 31, 2017 (Expressed in thousands of U.S. dollars) (Unaudited)
June 30, 2018
December 31, 2017
Cash and cash equivalents
Trade and other receivables
Investment tax credits recoverable
Property and equipment
Contract acquisition costs
Deferred tax assets
Liabilities and Shareholders' Equity
Trade payables and accrued liabilities
Deferred tax liabilities
Accumulated other comprehensive loss
Retained earnings (deficit)
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 six months ended June 30, 2018 and 2017 (Expressed in thousands of U.S. dollars, except share and per share data) (Unaudited)
For the three months
For the six months
ended June 30,
ended June 30,
Cost of revenue
Selling and marketing
Research and development
General and administrative
Other income (expense):
Foreign exchange loss
Net finance income
Profit before income taxes
Income tax expense
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to profit or loss:
Offering the industry’s only concurrent planning solution, Kinaxis is helping organizations around the world revolutionize their supply chain planning. With RapidResponse®, our cloud-based supply chain management software, we connect your data, processes, and people into a...