Kinaxis Inc. Reports Fiscal Fourth Quarter 2014 and Full Year 2014 Results

- Reports 28% Annual Subscription Revenue Growth, 23% Adjusted Annual EBITDA and Adjusted Annual EPS of $0.41 per share -

OTTAWA, Feb. 24, 2015 /CNW/ - Kinaxis^® (TSX:KXS), provider of RapidResponse^®, delivering cloud-based SCM and S&OP applications, reported results for its fiscal fourth quarter and year ended December 31, 2014. All figures are in U.S. dollars and have been prepared in accordance with International Financial Reporting Standards (IFRS), except for Adjusted EBITDA as described below under the heading "Non-IFRS Measures".

Fiscal 2014 Highlights
(Comparisons made between fiscal 2014 and fiscal 2013 results, unless otherwise noted)

• Subscription revenue was $51.1 million, up 28%
• Total revenue was $70.1 million, up 15%
• Gross profit was $49.3 million (70% of total revenue), up 15%
• Adjusted EBITDA totaled $16.1 million (23% of total revenue), up 7%
• Loss totaled $0.2 million or $0.01 per diluted share
• Adjusted diluted earnings per share of $0.41

Fourth Quarter 2014 Highlights
(Comparisons made between fiscal Q4 2014 and fiscal Q4 2013 results, unless otherwise noted)

• Subscription revenue was $13.9 million, up 27%
• Total revenue was $18.8 million, up 15%
• Gross profit was $13.4 million (71% of total revenue), up 14%
• Adjusted EBITDA totaled $3.8 million (20% of total revenue), down 15%
• Profit totaled $0.6 million or $0.02 per diluted share

• Signed $20 million multiyear subscription agreement - $0.05 per share customer acquisition cost expensed in Q4

"In 2014 we delivered on our goal to grow subscription revenues and EBITDA, while simultaneously delivering value to our customers through our supply chain management applications," said Doug Colbeth, President and CEO of Kinaxis. "By leveraging the power of RapidResponse, our customers are improving their supply chain visibility and analysis, and in doing so, empowering their ability to make better supply chain decisions and proactively react to change".

Mr. Colbeth added: "Looking to 2015, we remain confident that we will continue to grow annual subscription revenue in excess of 25% and expect to achieve Adjusted EBITDA in excess of 20% of total revenue. Furthermore, as we continue to have success with our partners and as they expand their role in customer deployments, we expect professional services revenue will grow between 10% and 15%. We look forward to continuing to build on the great achievements our team made this year."

Fiscal Q4 2014 and Full Year 2014 Financial Results

Total revenue for the three months ended December 31, 2014 (Q4 2014) was $18.8 million, an increase of 15% from $16.3 million for the same period in 2013. For the year ended December 31, 2014 (FY 2014), revenue was $70.1 million, an increase of 15% compared to the same year ago period.

Subscription revenue was $13.9 million in Q4 2014, an increase of 27% from $10.9 million for the same period in 2013. FY 2014 subscription revenue was $51.1 million, an increase of 28% over the same period in 2013. The increase was due to additional revenue from contracts secured with new customers as well as expansion of existing customer subscriptions.

Professional services revenue was $4.7 million in Q4 2014, compared to $5.1 million for the same period in 2013. FY 2014 professional services revenue was $17.8 million as compared to $19.2 million in the same year ago period. The change was due to the end of a significant services engagement with an existing customer in December of 2013, and was largely offset by services provided for deployment of new customers throughout 2014.

Gross profit was $13.4 million in Q4 2014, compared to $11.7 million for the same period in 2013. FY 2014 gross profit was $49.3 million compared to $42.8 million in the same year ago period. As a percentage of revenue, gross profit was 71% in the fourth quarter compared to 72% in the fourth quarter of 2013 and was 70% in both the years ended December 31, 2014 and 2013.

Operating expenses were $10.8 million in Q4 2014, compared to $7.8M for the same period in 2013.  In late 2014, the company closed a multi-year subscription agreement that provided for a single payment of the initial term subscription fee.   The subscription fee for this initial multi-year term was approximately $20.0 million.  While this fee was invoiced and received in the first quarter of 2015, the customer acquisition costs, equivalent to $0.05 per diluted share, were expensed in Q4 2014. 

Adjusted EBITDA was $3.8 million in Q4 2014 or 20% of total revenue, compared to Adjusted EBITDA of $4.5 million, or 27% of total revenue in the same period last year.  FY 2014 Adjusted EBITDA was $16.1 million or 23% of revenue compared to $15.0 million or 25% of revenue in the prior year period. The change in Adjusted EBITDA during the year was driven by an increase in profit from operations, excluding the impact of an increase in share-based payment expenses for the year end 2014 compared to the same period for 2013.

Profit for the fourth quarter of 2014 was $0.6 million or $0.02 per basic and diluted share compared to a net loss of $0.8 million or $0.05 per basic and diluted share for the same period in 2013. Year to date, the loss decreased to $0.2 million or $0.01 per basic and diluted share from $9.7 million or $0.59 per basic and diluted. The increase in profit was primarily driven by a lower fair value adjustment on the redeemable preferred shares which were converted to Common Shares at the time of our initial public offering in June 2014.

Cash generated by operating activities was $16.3 million for the year ended December 31, 2014 as compared to $19.6 million in the same period of 2013. The decrease in cash provided by operating activities of $3.3 million was due primarily to the Part VI.1 tax of $4.0 million paid in the first quarter of 2014 and interest paid on the term loan of $0.5 million during 2014.

Cash and cash equivalents were $56.7 million at December 31, 2014 as compared to $13.8 million at December 31, 2013. The increase is primarily due to the proceeds from our initial public offering net of repayment of our term loan, as well as cash from operations for fiscal year 2014. 

Please refer to the section regarding forward-looking statements which forms an integral part of this release. These results, along with the unaudited condensed consolidated interim financial statements and the company's unaudited MD&A, are available on the company's website at www.kinaxis.com and on SEDAR at www.sedar.com.

Conference Call

The company will host a conference call tomorrow (Wednesday, February 25, 2015) to discuss these results. Doug Colbeth, President & CEO and Richard Monkman, CFO will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date: Wednesday, February 25, 2015
Time: 8:30 a.m. Eastern time
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 72033107
Live Webcast:  http://bit.ly/1Gw4g22

Webcast will be archived for one year

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

A replay of the call will be available after 11:30 a.m. Eastern time on the same day through March 4, 2015.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 72033107

About Kinaxis Inc.

Kinaxis is a leading provider of cloud-based subscription software that enables our customers to improve and accelerate analysis and decision-making across their supply chain operations. The supply chain planning and analytics capabilities of our product, RapidResponse, create the foundation for managing multiple, interconnected supply chain management processes. By using the single RapidResponse product instead of combining individual disparate software solutions, our customers gain visibility across their supply chains, can respond quickly to changing conditions, and ultimately realize significant operating efficiencies.

Non-IFRS Measures

This news release contains non-IFRS measures, specifically Adjusted EBITDA. 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 working capital requirements.  Adjusted EBITDA is not a recognized, defined or standardized measure under IFRS. Our definition of Adjusted EBITDA will likely differ from that used by other companies (including our peers) and therefore comparability may be limited.  Readers should also note that commencing with the results reported for Q3 of FY 2014, we changed the composition of Adjusted EBITDA compared to previously disclosed Adjusted EBITDA, in order to better reflect the definition used by securities analysts.  Commencing with the results reported for Q3 of FY 2014, Adjusted EBITDA now includes a foreign exchange adjustment which is reflected in the "Foreign exchange loss (gain)" line item in the table below.  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.

We have reconciled Adjusted EBITDA to the most comparable IFRS financial measure as follows:

		Three months ended  December 31,					Years ended December 31
		2014			2013		2014		2013		2012
				(In thousands of U.S. dollars)
Profit (Loss)		$           584			$           (840)		$            (221)		$       (9,720)		$        4,944
Loss due to change in fair value of redeemable preferred shares		̶			2,665		6,760		17,884		1,172
Share-based compensation		845			345		2,658		1,003		898
		845			3,010		9,418		18,887		2,070
Adjusted profit		$        1,429			$         2,170		$          9,197		$        9,167		$        7,014
Income tax expense		1,592			2,068		4,642		4,874		2,181
Depreciation		334			218		1,151		834		677
Foreign exchange loss (gain)		465			8		599		168		(215)
Net finance (income) expense		(17)			13		490		(31)		(46)
		2,374			2,307		6,882		5,845		2,597
Adjusted EBITDA		$        3,803			$         4,447		$         16,079		$      15,012		$        9,611

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 subscription revenue, Adjusted EBITDA achievement, and growth in professional services revenue,  in each case looking forward for 2015, 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 2015 subscription revenue, Adjusted EBITDA, and professional services revenue 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 heading "Risks and Uncertainties" in the MD&A dated February 24, 2015 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.
Consolidated Statements of Financial Position
(Expressed in thousands of U.S. dollars)
			2014		2013
Assets
Current assets:
	Cash and cash equivalents	$	56,725	$	13,804
	Trade and other receivables		17,023		12,449
	Investment tax credits receivable		1,974		1,330
	Prepaid expenses		1,926		1,207
			77,648		28,790
Non-current assets:
	Property and equipment		4,744		2,408
	Investment tax credits recoverable		3,091		2,108
	Deferred tax assets		5,726		8,166
		$	91,209	$	41,472
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
	Trade payables and accrued liabilities	$	6,945	$	11,062
	Deferred revenue		35,740		24,700
	Current portion of long-term debt		‒		4,167
			42,685		39,929
Non-current liabilities:
	Lease inducement		109		155
	Deferred revenue		1,778		‒
	Long-term debt		‒		20,833
	Redeemable preferred shares		‒		54,135
			1,887		75,123
Shareholders' equity (deficiency):
	Share capital		87,219		9,902
	Contributed surplus		6,152		3,948
	Accumulated other comprehensive income loss		(453)		(360)
	Deficit		(46,281)		(87,070)
			46,637		(73,580)
		$	91,209	$	41,472

Kinaxis Inc.
Consolidated Statements of Comprehensive Income
(Expressed in thousands of U.S. dollars, except share and per share data)
			For the three months				For the year
			ended December 31,				ended December 31,
			2014		2013		2014		2013
Revenue		$	18,820	$	16,319	$	70,054	$	60,816
Cost of revenue			5,433		4,603		20,745		18,016
Gross profit			13,387		11,716		49,309		42,800
Operating expenses:
	Selling and marketing		5,275		3,543		15,296		15,071
	Research and development		3,362		2,447		13,429		8,171
	General and administrative		2,126		1,812		8,314		6,383
			10,763		7,802		37,039		29,625
			2,624		3,914		12,270		13,175
Other income (expense):
	Loss due to change in fair value of redeemable preferred shares		̶		(2,665)		(6,760)		(17,884)
	Foreign exchange loss		(465)		(8)		(599)		(168)
	Net finance income (expense)		17		(13)		(490)		31
			(448)		(2,686)		(7,849)		(18,021)
Profit (loss) before income taxes			2,176		1,228		4,421		(4,846)
Income tax expense:
	Current		193		8,338		819		8,857
	Deferred (recovery)		1,399		(6,270)		3,823		(3,983)
			1,592		2,068		4,642		4,874
Profit (Loss)			584		(840)		(221)		(9,720)
Other comprehensive loss:
Items that are or may be reclassified subsequently to profit or loss:
	Foreign currency translation differences - foreign operations		(68)		(39)		(93)		(63)
Total comprehensive income (loss)		$	516	$	(879)	$	(314)	$	(9,783)
Basic earnings (loss) per share		$	0.02	$	(0.05)	$	(0.01)	$	(0.59)
Weighted average number of basic Common Shares			23,648,402		15,623,815		19,076,464		16,539,070
Diluted earnings (loss) per share		$	0.02	$	(0.05)	$	(0.01)	$	(0.59)
Weighted average number of diluted Common Shares			24,891,096		15,623,815		19,076,464		16,539,070

Kinaxis Inc.
Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
(Expressed in thousands of U.S. dollars)
		Share capital		Contributed  surplus		Accumulated  other  comprehensive  loss		Deficit		Total equity (deficiency)
Balance, December 31, 2012	$	11,176	$	2,923	$	(297)	$	(29,508)	$	(15,706)
Loss		‒		‒		‒		(9,720)		(9,720)
Other comprehensive loss		‒		‒		(63)		‒		(63)
Total comprehensive loss		‒		‒		(63)		(9,720)		(9,783)
Repurchase of shares and options		(2,751)		‒		‒		(47,842)		(50,593)
Share purchase plan subscriptions		347		‒		‒		‒		347
Share options exercised		163		‒		‒		‒		163
Share based payments		‒		1,003		‒		‒		1,003
Repayment of receivable on share sale		967		‒		‒		‒		967
Interest on receivable for share sale		‒		22		‒		‒		22
Total shareholder transactions		(1,274)		1,025		‒		(47,842)		(48,091)
Balance, December 31, 2013	$	9,902	$	3,948	$	(360)	$	(87,070)	$	(73,580)
Loss		‒		‒		‒		(221)		(221)
Other comprehensive loss		‒		‒		(93)		̶		(93)
Total comprehensive loss		‒		‒		(93)		(221)		(314)
Conversion of Class A preferred
shares to Common Shares		60,895		‒		‒		‒		60,895
Shares issued per offering		59,562		‒		‒		‒		59,562
Share issuance costs
net of tax		(3,837)		‒		‒		‒		(3,837)
Reduction of share capital		(41,010)		‒		‒		41,010		‒
Shares issued for cash		585		‒		‒		‒		585
Share options exercised		804		(136)		‒		‒		668
Restricted share units vested		318		(318)		‒		‒		‒
Share based payments		̶		2,658		‒		‒		2,658
Total shareholder transactions		77,317		2,204		‒		41,010		120,531
Balance, December 31, 2014	$	87,219	$	6,152	$	(453)	$	(46,281)	$	46,637

Kinaxis Inc.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
				2014		2013
Cash flows from operating activities:
Loss		$		(221)	$	(9,720)
Items not affecting cash:
	Depreciation of property and equipment			1,151		834
	Loss due to change in fair value of redeemable preferred shares			6,760		17,884
	Share-based compensation			2,658		1,003
	Amortization of lease inducement			(46)		(46)
	Long-term investment tax credits recoverable			(983)		2,573
	Income tax expense			4,642		4,874
	Changes in operating assets and liabilities			7,800		3,379
Interest paid				(545)		(3)
Income taxes paid				(4,966)		(1,149)
				16,250		19,629
Cash flows from investing activities:
	Purchase of property and equipment			(3,487)		(1,397)
Cash flows from financing activities:
	Non-Voting Common Shares issued and share subscriptions received			991		532
	Common Shares issued			262		‒
	Common Shares issued per offering			59,562		‒
	Share issuance costs			(5,220)		‒
	Repayment of receivable for share sale			‒		967
	Repurchase of Class A Preferred Shares			‒		(28,469)
	Repurchase of Common and Non-Voting Common Shares			‒		(50,593)
	Issuance of long-term debt			5,000		25,000
	Repayment of long-term debt			(30,000)		‒
	Payment of finance lease obligations			‒		(59)
				30,595		(52,622)
Increase (decrease) in cash and cash equivalents				43,358		(34,390)
Cash and cash equivalents, beginning of year				13,804		48,801
Effects of exchange rates on cash and cash equivalents				(437)		(607)
Cash and cash equivalents, end of the year		$		56,725	$	13,804

SOURCE Kinaxis Inc.

Investor Relations: Robert Kelly, TMX Equicom, T: [phone] ext. 253, [email protected]