Kinaxis Inc. Reports Fiscal Third Quarter 2015 Results

- John Sicard to succeed Douglas Colbeth as the Company's CEO in 2016 -

OTTAWA, Oct. 28, 2015 /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, 2015. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

Third Quarter 2015 Highlights
(Comparisons made between fiscal Q3 2015 and fiscal Q3 2014 results, unless otherwise noted)

• Revenue totaled $23.7 million, up 34%
• Subscription revenue was $16.5 million, up 24%
• Gross profit was $16.8 million (71% of total revenue), up 31%
• Adjusted EBITDA⁽¹⁾ totaled $8.0 million (34% of total revenue), up 53%
• Adjusted diluted earnings per share⁽¹⁾ of $0.20

(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.

"We had a great third quarter that built on the momentum we established earlier this year," said Doug Colbeth, Chairman and CEO of Kinaxis.  "Our strong growth continues to be fueled by expansion of our subscription revenue base, in addition to a greater contribution from professional services as our teams implement new accounts. We remain confident in our overall subscription growth outlook for 2015 of between 26 and 28% and, based on the performance of the business, are raising our guidance for annual Adjusted EBITDA to between 28% and 32% of total revenue."

Fiscal Q3 2015 Financial Results

Total revenue for the three months ended September 30, 2015 (Q3 2015) was $23.7 million, an increase of 34% compared to the same period in 2014.

Subscription revenue was $16.5 million in Q3 2015, an increase of 24% from $13.3 million for the same period in 2014. The increase in subscription revenue is due to revenue from contracts secured with new customers during the second half of 2014 and first nine months of 2015, in addition to expansion of existing customer subscriptions.

Professional services revenue was $6.9 million in Q3 2015, compared to $4.1 million for the same period in 2014. Growth was primarily driven by the commencement of project engagements for new customers secured in the second half of 2014 and first half of 2015, as well as additional engagements with existing customers.

Gross profit was $16.8 million in Q3 2015, compared to $12.8 million for the same period in 2014. As a percentage of revenue, gross profit was 71% in Q3 2015 compared to 73% in the prior year quarter. The percentage change resulted from the increased cost of revenue in the third quarter of 2015 as a result of investments in additional headcount and data centre capacity.

Adjusted EBITDA was $8.0 million in Q3 2015, compared to Adjusted EBITDA of $5.2 million in the same period last year. The increase in Adjusted EBITDA in the quarter was primarily the result of an increase in operating profit, which was driven mainly by higher revenue and higher gross margin, as well as favourable foreign exchange rates on Canadian dollar operating expenses.

Profit for Q3 2015 was $3.8 million or $0.16 per basic and $0.15 per diluted share compared to $2.5 million or $0.11 per basic and $0.10 per diluted share for the same period in 2014. The increase in profit was primarily driven by higher revenue coupled with the impact on operating expenses from the weakened Canadian dollar compared to the U.S. dollar.

Cash generated by operating activities was $5.8 million for Q3 2015 compared to $6.3 million in 2014. The decrease was due to a comparable increase in accounts receivable balances offset by a comparable increase in deferred revenue as well as higher non-cash charges for share-based compensation and income tax expense.

Cash and cash equivalents were $90.6 million as at September 30, 2015 as compared to $56.7 million as at December 31, 2014. The increase is due to cash generated from operations and the receipt of prepayment of a multi-year subscription of approximately $20.0 million in the first quarter of 2015 as well as other subscription arrangements.

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.

Full Year 2015 Financial Guidance

For the full year 2015, the company reaffirms its expectation to grow annual subscription revenue in the 26% to 28% range and full year professional services revenue to between $22.0 million and $23.0 million.

Given the continued growth of the business and allowing for planned key investments scheduled for the remainder of the year, the company is pleased to revise its expectation for Adjusted EBITDA performance for fiscal 2015 to range between 28% to 32% of total revenue.

Management Update

The company also announced today that John Sicard will succeed Douglas Colbeth as the Company's next Chief Executive Officer. Mr. Sicard has most recently been the Company's Chief Products Officer, and will assume the role of CEO on January 1, 2016. Mr. Colbeth will continue to serve as Chairman of the Board.

"With over twenty years' tenure at Kinaxis, John's extensive experience in overseeing all aspects of the product life-cycle, coupled with his strong track record of producing results has led him to be extremely qualified for his new position," said Doug Colbeth, Chairman and CEO of Kinaxis. "The Board and I have worked closely on succession planning, and this process will lead us through a smooth leadership transition.  We are very confident John is the right person to continue to drive Kinaxis' growth strategy."

"It is an absolute honour to have been chosen to lead Kinaxis through the next stage of our growth," said John Sicard. "I am looking forward to continuing to work with Doug and our entire senior leadership team to ensure we drive forward with our growth plans, and continue to produce exceptional results for our customers, shareholders, partners, and employees."

Doug Colbeth, who became Chairman of the Board and CEO of Kinaxis in 2003, will continue as Chairman after John assumes the CEO role to ensure a smooth transition of his responsibilities. John Sicard has 22 years of experience at Kinaxis, having started as a key contributor to the architecture and development of Kinaxis' supply chain management solutions in early 1994, and has since held a number of senior management roles in development, professional services, business consulting, marketing and customer support.

Conference Call

The company will host a conference call tomorrow (Thursday, October 29, 2015) to discuss these results. Doug Colbeth, Chairman & CEO and Richard Monkman, CFO, will host the call starting at 8:00 a.m. Eastern time. A question and answer session will follow management's presentation.

Date: Thursday, October 29, 2015
Time: 8:00 a.m. Eastern time
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 52933750

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 Thursday November 5, 2015.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 52933750

Live Webcast: http://bit.ly/1iQTvgp
Webcast will be archived for 90 days

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 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 stock option 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 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.

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

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Statement of Operations	(In thousands of U.S. dollars)
Profit (loss)..............................................................................	$	3,806		$	2,512		$	11,392		$	(805)
Loss due to change in fair value of redeemable preferred shares.....................................................................		−			̶			̶			6,760
Share-based compensation....................................................		1,176			794			3,223			1,813
		1,176			794			3,223			8,573
Adjusted profit.........................................................................	$	4,982		$	3,306		$	14,615		$	7,768
Income tax expense.................................................................		2,128			1,358			6,070			3,050
Depreciation............................................................................		461			317			1,227			817
Foreign exchange loss............................................................		497			262			1,023			134
Net finance (income) expense.................................................		(30)			(3)			(96)			507
		3,056			1,934			8,224			4,508
Adjusted EBITDA.....................................................................	$	8,038		$	5,240		$	22,839		$	12,276

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, and updated expectations for Adjusted EBITDA achievement and growth in professional services revenue, in each case looking forward for the balance of our fiscal year ending December 31, 2015, as well as statements as to Kinaxis' growth opportunities, planned key investments scheduled for the remainder of the year 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 "Forward Looking Statements" in our interim MD&A dated October 28, 2015, under the heading "Risk Factors" in our Annual Information Form dated March 2, 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.
Condensed Consolidated Interim Statements of Financial Position
As at September 30, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars)
(Unaudited)
													September 30,				December 31,
													2015				2014
Assets
Current assets:
	Cash and cash equivalents											$	90,626			$	56,725
	Trade and other receivables												19,848				17,023
	Investment tax credits receivable												1,571				1,974
	Prepaid expenses												1,809				1,926
													113,854				77,648
Non-current assets:
	Property and equipment												7,278				4,744
	Investment tax credits recoverable												3,632				3,091
	Deferred tax assets												-				5,726
												$	124,764			$	91,209
Liabilities
Current liabilities:
	Accounts payable and accrued liabilities											$	5,533			$	6,945
	Deferred revenue												44,074				35,740
													49,607				42,685
Non-current liabilities:
	Lease inducement												75				109
	Deferred revenue												12,850				1,778
													12,925				1,887
Shareholders' Equity
Share capital													88,633				87,219
Contributed surplus													8,951				6,152
Accumulated other comprehensive loss													(463)				(453)
Deficit													(34,889)				(46,281)
													62,232				46,637
												$	124,764			$	91,209

Kinaxis Inc.
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
For the three and nine months September 30, 2015 and 2014
(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,
					2015			2014			2015			2014
Revenue				$	23,665		$	17,681		$	67,080		$	51,234
Cost of revenue					6,862			4,855			18,954			15,312
Gross profit					16,803			12,826			48,126			35,922
Operating expenses:
	Selling and marketing				4,368			3,014			12,089			10,021
	Research and development				3,876			3,545			11,502			10,067
	General and administrative				2,158			2,138			6,146			6,188
					10,402			8,697			29,737			26,276
					6,401			4,129			18,389			9,646
Other income (expense):
	Loss due to change in fair value of redeemable
	preferred shares				-			-			-			(6,760)
	Foreign exchange loss				(497)			(262)			(1,023)			(134)
	Net finance income (expense)				30			3			96			(507)
					(467)			(259)			(927)			(7,401)
Profit before income taxes					5,934			3,870			17,462			2,245
Income tax expense:
	Current				212			232			344			626
	Deferred				1,916			1,126			5,726			2,424
					2,128			1,358			6,070			3,050
Profit (loss)					3,806			2,512			11,392			(805)
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to profit or loss:
	Foreign currency translation differences - foreign operations				20			(49)			(10)			(25)
Total comprehensive profit (loss)				$	3,826		$	2,463		$	11,382		$	(830)
Basic earnings (loss) per share				$	0.16		$	0.11		$	0.48		$	(0.05)
Weighted average number of basic common shares					23,957,202			23,594,556			23,851,437			17,530,210
Diluted earnings (loss) per share				$	0.15		$	0.10		$	0.45		$	(0.05)
Weighted average number of diluted common shares					25,498,758			24,758,532			25,365,629			17,530,210

Kinaxis Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity (Deficiency)
For the nine months September 30, 2015 and 2014
(Expressed in thousands of U.S. dollars)
(Unaudited)
											Accumulated
											other
						Share			Contributed		comprehensive								Total equity
						capital			surplus		loss					Deficit			(deficiency)
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
Balance, December 31, 2014				$		87,219		$	6,152		$	(453)		$		(46,281)		$	46,637
Profit						-			-			-				11,392			11,392
Other comprehensive loss						-			-			(10)				-			(10)
Total comprehensive income						-			-			(10)				11,392			11,382
Share options exercised						1,414			(424)			-				-			990
Share based payments						-			3,223			-				-			3,223
Total shareholder transactions						1,414			2,799			-				-			4,213
Balance, September 30, 2015				$		88,633		$	8,951		$	(463)		$		(34,889)		$	62,232

Kinaxis Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the three and nine months September 30, 2015 and 2014
(Expressed in thousands of U.S. dollars)
(Unaudited)
					For the three months						For the nine months
					ended September 30,						ended September 30,
						2015			2014			2015			2014
Cash flows from operating activities:
Profit (loss)					$	3,806		$	2,512		$	11,392		$	(805)
Items not affecting cash:
	Depreciation of property and equipment					461			317			1,227			817
	Loss due to change in fair value of
	redeemable preferred shares					-			-			-			6,760
	Share-based compensation					1,176			794			3,223			1,813
	Amortization of lease inducement					(11)			(12)			(34)			(35)
	Long-term investment tax credits recoverable					(36)			(396)			(540)			(872)
	Income tax expense					2,128			1,358			6,070			3,050
	Change in operating assets and liabilities					(1,689)			1,971			15,888			8,167
Interest paid						-			(13)			-			(531)
Income taxes paid						(36)			(214)			(500)			(4,790)
						5,799			6,317			36,726			13,574
Cash flows used in investing activities:
	Purchase of property and equipment					(851)			(634)			(3,761)			(3,071)
Cash flows from financing activities:
	Non-Voting Common Shares issued and share
	subscriptions received					-			-			-			991
	Common Shares issued					437			90			990			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)
						437			90			990			31,819
Increase in cash and cash equivalents						5,385			5,773			33,955			42,322
Cash and cash equivalents, beginning of period						85,166			50,452			56,725			13,804
Effects of exchange rates on cash and cash equivalents						75			(297)			(54)			(198)
Cash and cash equivalents, end of period					$	90,626		$	55,928		$	90,626		$	55,928

SOURCE Kinaxis Inc.

Investor Relations: Robert Kelly, NATIONAL | Equicom, T: [phone],  [email protected]