Kinaxis Inc. Reports Fiscal Third Quarter 2014 Results

- Reports Subscription 31% Revenue Growth and 30% Adjusted EBITDA -

OTTAWA, Nov. 6, 2014 /CNW/ - Kinaxis^®TSX:KXS, provider of RapidResponse^®, delivering cloud-based SCM and S&OP applications, reported results for its fiscal third quarter ended September 30, 2014. All figures are in U.S. dollars and, except for Adjusted EBITDA as described below under the heading "Non-IFRS Measures", have been prepared in accordance with International Financial Reporting Standards (IFRS).

Third Quarter 2014 Highlights
(Comparisons made between fiscal Q3 2014 and fiscal Q3 2013 results, unless otherwise noted)

• Subscription revenue was $13.3 million, up 31%
• Total revenue was $17.7 million, up 14%
• Gross profit was $12.8 million (73% of total revenue), up 7%
• Adjusted EBITDA totaled $5.2 million (30% of  total revenue), up 10%
• Profit totaled $2.5 million or $0.10 per diluted share

"Our increasing subscription revenue and strong Adjusted EBITDA reflect the growth potential of our unique SaaS offering," said Doug Colbeth, President and CEO of Kinaxis. "Organizations demand effective supply chain management solutions in order to achieve material performance improvement. We are well positioned within our market and our superior product offering will allow us to continue to deliver strong results."

Fiscal Q3 2014 Financial Results

Total revenue for the three months ended September 30, 2014 (Q3 2014) was $17.7 million, an increase of 14% compared to the same period in 2013. For the nine month period ended September 30, 2014 (YTD), revenue was $51.2 million, an increase of 15% compared to the same year ago period.

Subscription revenue was $13.3 million in Q3 2014, an increase of 31% from $10.1 million for the same period in 2013. YTD subscription revenue was $37.3 million, an increase of 28% over the same period in 2013. The increase was due to additional revenue from contracts secured with new customers during the fourth quarter of 2013 and in the first half of 2014 as well as expansion of existing customer subscriptions.

Professional services revenue was $4.1 million in Q3 2014, compared to $4.9 million for the same period in 2013. YTD professional services revenue was $13.1 million as compared to $14.1 million in the same year ago period. The change was due to the end of a significant engagement with an existing customer in December of 2013, and was largely offset by services provided for deployment of new customers acquired in the second half of 2013 and first half of 2014.

Gross profit was $12.8 million in Q3 2014, compared to $10.9 million for the same period in 2013. YTD gross profit was $35.9 million compared to $31.1 million in the same year ago period. As a percentage of revenue, gross profit was 73% in the third quarter compared to 71% in the third quarter of 2013 and was 70% in the nine months ended September 30, 2014 and 2013. The increase in gross profit was due to growth in total revenue in the third quarter of 2014 compared to the third quarter of 2013.

Adjusted EBITDA was $5.2 million in Q3 2014 or 30% of total revenue, compared to Adjusted EBITDA of $4.4 million, or 29% of total revenue in the same period last year.  Adjusted EBITDA in the current period reflects a higher than normal weighting of subscription revenue to professional services revenue in the quarter. Kinaxis expect this trend to persist through the end of 2014. YTD Adjusted EBITDA was $12.3 or 24% of revenue compared to $10.4 million or 24% of revenue in the prior year period. The change in Adjusted EBITDA during the periods was driven by an increase in profit from operations excluding the impact of an increase in share-based payment expenses for the third quarter and year to date 2014 compared to the same periods for 2013.

Profit for the third quarter of 2014 was $2.5 million or $0.11 per basic and $0.10 per diluted share in Q3 2014 compared to a net loss of $2.8 million or $0.16 per basic and diluted share for the same period in 2013. Year to date the loss decreased to $0.8 million or $0.05 per basic and diluted share from $8.9 million or $0.53 per basic and diluted share due to a lower fair value adjustment on the redeemable preferred share liability. 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 $13.6 million for the first nine months of 2014 as compared to $12.1 million in the same period of 2014. The change was primarily the result of an increase in non-cash share-based compensation of $1.2 million, deferred revenue of $7.8 million and receivables of $4.7 million due to timing of subscription billings and a contract amendment with an existing customer. This increase was offset by the Part VI.1 tax of $4.0 million and non-resident withholding taxes of $1.7 million paid in the first quarter of 2014 which had been withheld from amounts payable on a share repurchase completed in the fourth quarter of 2013, and a lower non-cash loss due to the change in fair value of redeemable preferred shares of $6.8 million in the first nine months of 2014 compared to $15.2 million for the same period in 2013.

Cash and cash equivalents were $55.9 million as at September 30, 2014 as compared to $13.8 million as 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 the first nine months of 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 (Friday, November 7, 2014) 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: Friday, November 7, 2014
Time: 8:30 a.m. Eastern time
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 8255817

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 November 14, 2014.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 8255817

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 we have changed the composition of Adjusted EBITDA compared to previously disclosed Adjusted EBITDA, in order to better reflect the definition used by securities analysts.  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 September 30,											Nine months ended September 30
				2014						2013					2014					2013
				(In thousands of U.S. dollars)
Profit/(Loss)				$			2,512			$		(2,781)			$		(805)			$		(8,880)
Loss due to change in fair value of redeemable preferred shares							-					5,683					6,760					15,219
Share-based compensation							794					204					1,813					658
Adjusted profit				$			3,306			$		3,106			$		7,768			$		6,997
Income tax expense							1,358					1,244					3,050					2,806
Depreciation							317					209					817					616
Foreign exchange loss (gain)							262					(103)					134					160
Net finance (income) expense							(3)					(16)					507					(44)
Adjusted EBITDA				$			5,240			$		4,440			$		12,276			$		10,535

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 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. Readers are cautioned not to place undue reliance on such statements. Kinaxis' actual results, performance, achievements and developments may differ materially from the results, performance, achievements or developments expressed or implied by such statements. Risk factors that may cause the actual results, performance, achievements or developments of Kinaxis to differ materially from the results, performance, achievements or developments expressed or implied by such statements can be found in the public documents filed by Kinaxis with Canadian securities regulatory authorities. 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
(Expressed in thousands of U.S. dollars) (Unaudited)
							September 30,				December 31,
								2014						2013
Assets
Current assets:
	Cash and cash equivalents						$	55,928			$			13,804
	Trade and other receivables							7,636						12,449
	Investment tax credits receivable							1,811						1,330
	Prepaid expenses							1,567						1,207
								66,942						28,790
Non-current assets:
	Property and equipment							4,662						2,408
	Investment tax credits recoverable							2,980						2,108
	Deferred tax assets							7,210						8,166
							$	81,794			$			41,472
Liabilities
Current liabilities:
	Accounts payable and accrued liabilities						$	4,274			$			11,062
	Deferred revenue							32,283						24,700
	Current portion of long-term debt							̶						4,167
								36,557						39,929
Non-current liabilities:
	Lease inducement							120						155
	Long-term debt							̶						20,833
	Redeemable preferred shares							̶						54,135
								120						75,123
Shareholders' Equity (Deficiency)
Share capital								86,667						9,902
Contributed surplus								5,700						3,948
Accumulated other comprehensive loss								(385)						(360)
Deficit								(46,865)						(87,070)
								45,117						(73,580)
							$	81,794			$			41,472

Kinaxis Inc. Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(Expressed in thousands of U.S. dollars, except share and per share data) (Unaudited)
							For the three months								For the nine months
							ended September 30,								ended September 30,
							2014				2013				2014				2013
Revenue							$	17,681			$	15,451			$	51,234			$	44,497
Cost of revenue								4,855				4,556				15,312				13,413
Gross profit								12,826				10,895				35,922				31,084
Operating expenses:
	Selling and marketing							3,014				3,413				10,021				11,528
	Research and development							3,545				1,732				10,067				5,724
	General and administrative							2,138				1,723				6,188				4,571
								8,697				6,868				26,276				21,823
								4,129				4,027				9,646				9,261
Other income (expense):
	Loss due to change in fair value of redeemable preferred shares							̶				(5,683)				(6,760)				(15,219)
	Foreign exchange (loss) gain							(262)				103				(134)				(160)
	Net finance income (expense)							3				16				(507)				44
								(259)				(5,564)				(7,401)				(15,335)
Profit (Loss) before income taxes								3,870				(1,537)				2,245				(6,074)
Income tax expense:
	Current							232				173				626				519
	Deferred							1,126				1,071				2,424				2,287
								1,358				1,244				3,050				2,806
Profit (Loss)								2,512				(2,781)				(805)				(8,880)
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to profit or loss:
	Foreign currency translation differences - foreign operations							(49)				40				(25)				(24)
Total comprehensive income (loss)							$	2,463			$	(2,741)			$	(830)			$	(8,904)
Basic earnings (loss) per share							$	0.11			$	(0.16)			$	(0.05)			$	(0.53)
Weighted average number of basic Common Shares								23,594,556				16,891,970				17,530,210				16,838,280
Diluted earnings (loss) per share							$	0.10			$	(0.16)			$	(0.05)			$	(0.53)
Weighted average number of diluted Common Shares								24,758,532				16,891,970				17,530,210				16,838,280

Kinaxis Inc. Condensed Consolidated Interim Statements of Changes in Shareholders' Equity (Deficiency)
(Expressed in thousands of U.S. dollars) (Unaudited)
												Accumulated
												other
					Share			Contributed				comprehensive									Total equity
					capital			surplus				loss						Deficit			(deficiency)
Balance, December 31, 2012				$	11,176			$	2,923			$	(297)			$		(29,508)			$	(15,706)
Loss					̶				̶				̶					(8,880)				(8,880)
Other comprehensive loss					̶				̶				(24)					̶				(24)
Total comprehensive loss					̶				̶				(24)					(8,880)				(8,904)
Share purchase plan subscriptions					228				̶				̶					̶				228
Share options exercised					41				̶				̶					̶				41
Share based payments					̶				658				̶					̶				658
Interest on receivable for share sale					5				17				̶					̶				22
Total shareholder transactions					274				675				̶					̶				949
Balance, September 30, 2013				$	11,450			$	3,598			$	(321)			$		(38,388)			$	(23,661)
Balance, December 31, 2013				$	9,902			$	3,948			$	(360)			$		(87,070)			$	(73,580)
Loss					̶				̶				̶					(805)				(805)
Other comprehensive loss					̶				̶				(25)					̶				(25)
Total comprehensive loss					̶				̶				(25)					(805)				(830)
Conversion of Class A preferred shares to Common Shares					60,895				̶				̶					̶				60,895
Shares issued per offering					59,562				̶				̶					̶				59,562
Share issuance costs					(3,837)				̶				̶					̶				(3,837)
Reduction of share capital					(41,010)				̶				̶					41,010				̶
Shares issued for cash					585				̶				̶					̶				585
Share options exercised					570				(61)				̶					̶				509
Share based payments					̶				1,813				̶					̶				1,813
Total shareholder transactions					76,765				1,752				̶					41,010				119,527
Balance, September 30, 2014				$	86,667			$	5,700			$	(385)			$		(46,865)			$	45,117

Kinaxis Inc. Condensed Consolidated Interim Statements of Cash Flows
(Expressed in thousands of U.S. dollars) (Unaudited)
For the nine months ended September 30,										2014						2013
Cash flows from (used in) operating activities:
Loss							$			(805)		$				(8,880)
Items not affecting cash:
	Depreciation of property and equipment									817						616
	Loss due to change in fair value of redeemable preferred shares									6,760						15,219
	Share-based compensation									1,813						658
	Amortization of lease inducement									(35)						(35)
	Long-term investment tax credits recoverable									(872)						(663)
	Income tax expense									3,050						2,806
	Change in operating assets and liabilities									8,167						2,857
Interest paid										(531)						(2)
Income taxes paid										(4,790)						(510)
										13,574						12,066
Cash flows from (used in) investing activities:
	Purchase of property and equipment									(3,071)						(814)
Cash flows from (used in) financing activities:
	Non-Voting Common Shares issued and share subscriptions received									991						291
	Common Shares issued									103						̶
	Common Shares issued per offering									59,562						̶
	Share issuance cost net of tax									(3,837)						̶
	Issuance of long-term debt									5,000						̶
	Repayment of long-term debt									(30,000)						̶
	Payment of finance lease obligations									̶						(32)
										31,819						259
Increase in cash and cash equivalents										42,322						11,511
Cash and cash equivalents, beginning of period										13,804						48,801
Effects of exchange rates on cash and cash equivalents										(198)						(438)
Cash and cash equivalents, end of period							$			55,928		$				59,874

SOURCE: Kinaxis Inc.

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