Kinaxis Inc. Reports Fiscal Second Quarter 2017 Results

- Reports 21% Growth in Subscription Revenue and 29% Adjusted EBITDA Margin -

OTTAWA, Aug. 8, 2017 /CNW/ - Kinaxis^® (TSX:KXS), provider of RapidResponse®, delivering the leading cloud-based concurrent planning solution, reported results for its fiscal second quarter, which ended June 30, 2017. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

Second Quarter 2017 Highlights
(Comparisons made between fiscal Q2 2017 and fiscal Q2 2016 results, unless otherwise noted)

• Revenue totaled $32.9 million, up 14%
• Subscription revenue was $24.2 million, up 21%
• Gross profit was $22.9 million (70% of total revenue), up 14%
• Profit was $5.6 million or $0.22 per basic and $0.21 per diluted share
• Adjusted EBITDA⁽¹⁾ totaled $9.6 million (29% of total revenue)
• Adjusted diluted earnings per share⁽¹⁾ of $0.30

(1) "Adjusted EBITDA" and "Adjusted diluted earnings per share" are non-IFRS measures and are not recognized, defined or standardized measures under IFRS. These measures as well as other non-IFRS financial measures reported by Kinaxis are defined in the "Non-IFRS Measures" section of this news release.

"Demand from global enterprises for RapidResponse's concurrent planning capabilities continues to grow, driving our revenue growth and strong adjusted EBITDA margin in the quarter," said John Sicard, Chief Executive Officer of Kinaxis. "Our strategic partner relationships have played an increasingly important role in generating awareness that the conventional approach to supply chain planning no longer fits today's business environment. These relationships provide us access to a much broader audience of prospective clients with a shared desire for end-to-end supply chain visibility."

Mr. Sicard continued, "While these strong fundamentals underlie our long-term prospects, our 2017 forecast has been revised for two reasons. First, a large Asia-based customer, whom we have been working with for over one year, has breached its contractual obligations during the second quarter. As a result, we are no longer recognizing revenue from this company and have removed future revenue from the guidance. Second, our strategic partners are increasing their role in deploying new customer implementations, and gaining the related Professional Services revenue as a result. This positive trend has occurred earlier than we anticipated - which in turn has reduced our outlook for professional services revenue growth for 2017. While this has a short-term revenue impact – we are excited by the acceleration of partner contributions to our business. This also creates a stronger mix of subscription revenues in our business model."

"As a result of these developments, we have updated our 2017 revenue guidance to a range of $131 million to $133 million," said Mr. Sicard. "The outlook for the business remains strong as we continue to deliver on combined subscription growth and strong EBITDA performance."

Fiscal Q2 2017 Financial Results

Total revenue for the three months ending June 30, 2017 (Q2 2017) was $32.9 million, an increase of 14% compared to the same period in 2016.

Subscription revenue was $24.2 million in Q2 2017, an increase of 21% from $19.9 million for the same period in 2016. The increase was driven by contracts secured with new customers in the last twelve months, as well as expansion of existing customer subscriptions.

Professional services revenue was $8.4 million in Q2 2017, a decline of 2% compared to $8.5 million for the same period in 2016. Professional services revenue reflects the support of our partners in implementing new customer projects.

Gross profit was $22.9 million in Q2 2017, compared to $20.0 million for the same period in 2016. As a percentage of revenue, gross profit was 70%, consistent with the prior year quarter. The increase in absolute dollars was due to revenue growing at a higher rate than the cost of revenue compared to the prior year period.

Profit for Q2 2017 was $5.6 million or $0.22 per basic and $0.21 per diluted share compared to a profit of $3.2 million or $0.13 per basic and diluted share for the same period in 2016. The change was primarily driven by an increase in subscription revenue and decrease in income taxes - which was partially offset by the investment in professional services, data center capacity, research and development and an increase in share-based payments. 

Adjusted EBITDA increased 32% to $9.6 million in Q2 2017, compared to $7.3 million in the same period last year. The increase in the period was driven by the growth in revenue offset by an increase in operating expenses from investments in headcount and program spending.

Cash provided by operating activities was $7.5 million for Q2 2017 compared to $6.8 million generated in the same period in 2016. The change resulted from an increase in profit, partially offset by an increase in investment tax credits recoverable and a decrease in trade payables and accrued liabilities.

Cash and cash equivalents were $150.4 million as at June 30, 2017 as compared to $127.9 million as at December 31, 2016.

Full Year 2017 Financial Guidance

With today's announcement, the Company is updating its 2017 full-year financial guidance:

• Annual total revenue to be in the range of $131 million to $133 million
• Annual subscription revenue to grow 21% to 23%
• Annual Adjusted EBITDA as a percentage of total revenue to be between 26% and 28% of total revenue

This guidance is provided to enhance visibility into the Company's expectations for financial targets for the year ending December 31, 2017.  Please refer to the section regarding forward-looking statements which forms an integral part of this release.

This press release, along with the unaudited condensed consolidated interim financial statements and the Company's corresponding 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 today, August 8, 2017 to discuss these results. John Sicard, Chief Executive Officer, and Richard Monkman, Chief Financial Officer, will host the call starting at 5:30 p.m. Eastern Time. A question and answer session will follow management's presentation.

Date: Tuesday, August 8, 2017
Time: 5:30 p.m. Eastern Time
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 48048784

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 until 12:00 midnight Eastern Time on Tuesday, August 15, 2017.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 48048784

Live Webcast: http://bit.ly/2uGvUp2   
Webcast will be archived for 90 days

About Kinaxis Inc.

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 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 working 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 EBITDA and Adjusted diluted earnings per share 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.

The Company 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,
		2017			2016			2017			2016
		(In thousands of U.S. dollars, except percentages)
Statement of Operations
Profit		$	5,640		$	3,240		$	8,866		$	6,609
Share-based compensation		2,397			1,850			5,113			4,130
Adjusted profit		$	8,037		$	5,090		$	13,979		$	10,739
Income tax expense		1,043			1,510			2,974			3,687
Depreciation		818			543			1,606			1,063
Foreign exchange loss (gain)		12			188			23			(78)
Net finance income		(310)			(59)			(477)			(133)
		1,563			2,182			4,126			4,539
Adjusted EBITDA		$	9,600		$	7,272		$	18,105		$	15,278
Adjusted EBITDA as a percentage of revenue		29%			25%			28%			27%

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 revenue, and our expectations for Adjusted EBITDA achievement, in each case looking forward for the balance of our fiscal year ending December 31, 2017, as well as statements as to Kinaxis' growth opportunities, the potential benefits of our strategic partnerships 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 2017 annual revenue total revenue, annual subscription 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, 2017, under the heading "Risk Factors" in our Annual Information Form dated March 27, 2017, 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, 2017 and December 31, 2016
(Expressed in thousands of U.S. dollars)
(Unaudited)
		June 30, 2017		December 31, 2016
Assets
Current assets:
	Cash and cash equivalents	$	150,425	$	127,910
	Trade and other receivables	21,928		23,820
	Investment tax credits receivable	–		1,583
	Investment tax credits recoverable	1,597		755
	Prepaid expenses	3,105		3,333
		177,055		157,401
Non-current assets:
	Property and equipment	10,769		10,652
	Deferred tax assets	189		239
		$	188,013	$	168,292
Liabilities and Shareholders' Equity
Current liabilities:
	Trades payable and accrued liabilities	$9,679		$10,495
	Deferred revenue	57,828		55,458
		67,507		65,953
Non-current liabilities:
	Lease inducement	–		18
	Deferred revenue	11,668		13,198
	Deferred tax liability	1,097		1,412
		12,765		14,628
Shareholders' Equity
	Share capital	105,524		97,164
	Contributed surplus	16,599		13,924
	Accumulated other comprehensive loss	(390)		(519)
	Deficit	(13,992)		(22,858)
		107,741		87,711
		$	188,013	$	168,292

Kinaxis Inc.
Condensed Consolidated Interim Statements of Comprehensive Income
For the three and six months ended June 30, 2017 and 2016
(Expressed in thousands of U.S. dollars, except share and per share data)
(Unaudited)
		For the three months ended June 30,				For the six months ended June 30,
		2017		2016		2017		2016
Revenue		$	32,866	$	28,734	$	65,408	$	55,766
Cost of revenue		9,985		8,713		20,362		16,818
Gross profit		22,881		20,021		45,046		38,948
Operating expenses:
	Selling and marketing	7,367		7,783		14,298		13,762
	Research and development	5,874		4,736		12,097		9,473
	General and administrative	3,255		2,623		7,265		5,628
		16,496		15,142		33,660		28,863
		6,385		4,879		11,386		10,085
Other income (expense):
	Foreign exchange (loss) gain	(12)		(188)		(23)		78
	Net finance income	310		59		477		133
		298		(129)		454		211
Profit before income taxes		6,683		4,750		11,840		10,296
Income tax expense		1,043		1,510		2,974		3,687
Profit		5,640		3,240		8,866		6,609
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to profit or loss:
	Foreign currency translation differences - foreign operations	(17)		73		129		134
Total comprehensive income		$	5,623	$	3,313	$	8,995	$	6,743
Basic earnings per share		$	0.22	$	0.13	$	0.35	$	0.27
Weighted average number of basic Common Shares		25,331,522		24,570,593		25,188,312		24,508,111
Diluted earnings per share		$	0.21	$	0.13	$	0.34	$	0.26
Weighted average number of diluted Common Shares		26,523,749		25,900,028		26,427,595		25,825,290

Kinaxis Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
For the six months ended June 30, 2017 and 2016
(Expressed in thousands of U.S. dollars)
(Unaudited)
			Accumulated
			other
	Share	Contributed	comprehensive
	capital	surplus	loss	Deficit	Total equity
Balance, December 31, 2015	90,808	8,873	(474)	(33,603)	65,604
Profit	-	-	-	6,609	6,609
Other comprehensive income	-	-	134	-	134
Total comprehensive income	-	-	134	6,609	6,743
Share options exercised	2,614	(846)	-	-	1,768
Share based payments	-	4,130	-	-	4,130
Total shareholder transactions	2,614	3,284	-	-	5,898
Balance, June 30, 2016	93,422	12,157	(340)	(26,994)	78,245
Balance, December 31, 2016	97,164	13,924	(519)	(22,858)	87,711
Profit	-	-	-	8,866	8,866
Other comprehensive income	-	-	129	-	129
Total comprehensive income	-	-	129	8,866	8,995
Share options exercised	8,360	(2,438)	-	-	5,922
Share based payments	-	5,113	-	-	5,113
Total shareholder transactions	8,360	2,675	-	-	11,035
Balance, June 30, 2017	105,524	16,599	(390)	(13,992)	107,741

Kinaxis Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the three and six months ended June 30, 2017 and 2016
(Expressed in thousands of U.S. dollars)
(Unaudited)
		For the three months ended June 30,				For the six months ended June 30,
		2017		2016		2017		2016
Cash flows from operating activities:
Profit		$	5,640	$	3,240	$	8,866	$	6,609
Items not affecting cash:
	Depreciation of property and equipment	818		543		1,606		1,063
	Share-based payments	2,397		1,850		5,113		4,130
	Amortization of lease inducement	(4)		(11)		(18)		(22)
	Investment tax credits recoverable	(1,051)		122		(842)		544
	Income tax expense	1,043		1,510		2,974		3,687
	Change in operating assets and liabilities	(168)		(218)		3,166		525
Income taxes paid		(1,156)		(276)		(3,087)		(989)
		7,519		6,760		17,778		15,547
Cash flows used investing activities:
	Purchase of property and equipment	(1,327)		(2,055)		(1,644)		(2,413)
Cash flows from financing activities:
	Common shares issued on exercise of stock options	1,952		1,395		5,922		1,768
Increase in cash and cash equivalents		8,144		6,100		22,056		14,902
Cash and cash equivalents, beginning of period		141,989		108,348		127,910		99,390
Effects of exchange rates on cash and cash equivalents		292		388		459		544
Cash and cash equivalents, end of period		$	150,425	$	114,836	$	150,425	$	114,836

SOURCE Kinaxis Inc.

Media Relations: Melissa Clow, Tel: [phone] ext. 5513, [email protected]; Investor Relations: Rob Kelly, LodeRock Advisors Inc., Tel: [phone], [email protected]