Kinaxis Inc. Reports Fiscal Third Quarter 2016 Results

- Reports 25% Growth in Subscription Revenue and 23% Adjusted EBITDA Margin, Increases 2016 Financial Guidance -

OTTAWA, Nov. 2, 2016 /CNW/ - Kinaxis^® (TSX:KXS), provider of RapidResponse®, delivering cloud-based SCM and S&OP applications, reported results for its fiscal third quarter, which ended September 30, 2016. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

Third Quarter 2016 Highlights
(Comparisons made between fiscal Q3 2016 and fiscal Q3 2015 results, unless otherwise noted)

• Revenue totaled $29.9 million, up 26%
• Subscription revenue was $20.8 million, up 25%
• Gross profit was $20.5 million (68% of total revenue), up 22%
• Adjusted EBITDA⁽¹⁾ totaled $6.8 million (23% of total revenue)
• Adjusted diluted earnings per share⁽¹⁾ of $0.17

(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.

"Strong demand for RapidResponse continues to drive robust growth in subscription revenue which totaled 25% in the third quarter," said John Sicard, CEO of Kinaxis. "Overall revenue increase is fueled by the expansion of our subscription revenue base in addition to a strong contribution from professional services as we and our partners implement new accounts."

Mr. Sicard added, "We will continue to make strategic investments in support of business operations in South Korea, including fully functional datacenters, customer service and support staff, as well as expanding the sales team. In addition, we will continue to expand our growing operations in Europe in support of a major European based global customer win which closed in the quarter. Through RapidResponse, we are revolutionizing the supply chains of some of the world's largest companies and empowering them to make intelligent decisions and proactively react to change."

Fiscal Q3 2016 Financial Results

Total revenue for the three months ending September 30, 2016 (Q3 2016) was $29.9 million, an increase of 26% compared to the same period in 2015.

Subscription revenue was $20.8 million in Q3 2016, an increase of 25% from $16.5 million for the same period in 2015. 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 increased 30% to $8.9 million in Q3 2016, compared to $6.9 million for the same period in 2015. Growth was driven primarily by the initiation of deployment projects for new customers acquired in fiscal 2015 and 2016 as well as supporting the expansion of existing customer configurations. In addition, our partners continue to play an increasing role in supporting new customer deployment.

Gross profit was $20.5 million in Q3 2016, compared to $16.8 million for the same period in 2015. As a percentage of revenue, gross profit was 68% compared to 71% in the prior year quarter. The percentage change in Q3 2016 was due to higher growth in the cost of revenue as a result of planned investments in additional headcount as well as the use of third party providers to support our customer growth.

Adjusted EBITDA was $6.8 million in Q3 2016, compared to $8.0 million in the same period last year. The change in the period was the result of higher sales, marketing and product development costs incurred in the current quarter.

Profit for Q3 2016 was $2.4 million or $0.10 per basic and $0.09 per diluted share compared to a profit of $3.8 million or $0.16 per basic and $0.15 per diluted share for the same period in 2015. The change compared to the prior period was primarily driven by higher sales and marketing and research and development costs which were partially offset by the lower Canadian dollar versus the U.S. dollar which had a positive effect on operating expenses and profitability. 

Cash used by operating activities was $1.5 million for Q3 2016 compared to $5.8 million generated in the same period in 2015. The change was primarily due to an increase in accounts receivables as well as a decrease in profit net of income tax expenses which was partially offset by an increase in share based compensation.

Cash and cash equivalents were $111.7 million as at September 30, 2016 as compared to $99.4 million as at December 31, 2015.

Full Year 2016 Financial Guidance

With today's announcement, the Company is updating its 2016 full-year financial guidance:

• Annual total revenue to be in the range of $115 million to $116.5 million
• Annual subscription revenue to grow 24% to 25%
• Annual Adjusted EBITDA as a percentage of total revenue to be between 23% and 26% of total revenue

This guidance is provided to enhance visibility into the Company's expectations for financial targets for the year ending December 31, 2016.  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 tomorrow, November 3, 2016 to discuss these results. John Sicard, 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: Thursday, November 3, 2016
Time: 8:30 a.m. Eastern time
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 96091868

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 10, 2016.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 45854512

Live Webcast: http://bit.ly/2eHJrGg

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 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 September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Statement of Operations	(In thousands of U.S. dollars)
Profit......................................................................	$	2,425		$	3,806		$	9,034		$	11,392
Share-based compensation..................................		2,060			1,176			6,190			3,223
Adjusted profit.......................................................	$	4,485		$	4,982		$	15,224		$	14,615
Income tax expense..............................................		1,687			2,128			5,374			6,070
Depreciation...........................................................		683			461			1,746			1,227
Foreign exchange loss (gain)................................		53			497			(25)			1,023
Net finance income................................................		(96)			(30)			(229)			(96)
		2,327			3,056			6,866			8,224
Adjusted EBITDA....................................................	$	6,812		$	8,038		$	22,090		$	22,839

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, 2016, 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 2016 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 17, 2016, under the heading "Risk Factors" in our Annual Information Form dated March 21, 2016, 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, 2016 and December 31, 2015
(Expressed in thousands of U.S. dollars)
(Unaudited)
		September 30, 2016			December 31, 2015
Assets
Current assets:
	Cash and cash equivalents	$	111,661		$	99,390
	Trade and other receivables		31,843			15,833
	Investment tax credits receivable		1,617			1,532
	Investment tax credits recoverable		1,142			2,083
	Prepaid expenses		3,228			1,906
			149,491			120,744
Non-current assets:
	Deferred tax asset		237			-
	Property and equipment		10,731			7,352
		$	160,459		$	128,096
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities	$	10,963		$	6,794
	Deferred revenue		49,965			40,442
			60,928			47,236
Non-current liabilities:
	Lease inducement		30			62
	Deferred revenue		14,445			14,191
	Deferred tax liability		1,107			1,003
			15,582			15,256
Shareholders' Equity
	Share capital		95,352			90,808
	Contributed surplus		13,486			8,873
	Accumulated other comprehensive loss		(320)			(474)
	Deficit		(24,569)			(33,603)
			83,949			65,604
		$	160,459		$	128,096

Kinaxis Inc.
Condensed Consolidated Interim Statements of Comprehensive Income
For the three and nine months ended June 30, 2016 and 2015
(Expressed in thousands of U.S. dollars, except share and per share data)
(Unaudited)
			For the three months ended September 30,				For the nine months ended September 30,
				2016		2015		2016		2015
Revenue			$	29,921	$	23,665	$	85,687	$	67,080
Cost of revenue				9,466		6,862		26,284		18,954
Gross profit				20,455		16,803		59,403		48,126
Operating expenses:
	Selling and marketing			8,085		4,368		21,847		12,089
	Research and development			5,684		3,876		15,157		11,502
	General and administrative			2,617		2,158		8,245		6,146
				16,386		10,402		45,249		29,737
				4,069		6,401		14,154		18,389
Other income (expense):
	Foreign exchange (loss) gain			(53)		(497)		25		(1,023)
	Net finance income			96		30		229		96
				43		(467)		254		(927)
Profit before income taxes				4,112		5,934		14,408		17,462
Income tax expense:				1,687		2,128		5,374		6,070
Profit				2,425		3,806		9,034		11,392
Other comprehensive income (loss)
Items that are or may be reclassified
subsequently to profit or loss:
	Foreign currency translation
	differences - foreign operations			20		20		154		(10)
Total comprehensive income			$	2,445	$	3,826	$	9,188	$	11,382
Basic earnings per share			$	0.10	$	0.16	$	0.37	$	0.48
Weighted average number of basic
common shares				24,739,556		23,957,202		25,585,823		23,851,437
Diluted earnings per share			$	0.09	$	0.15	$	0.35	$	0.45
Weighted average number of diluted
common shares				26,113,401		25,498,758		25,905,597		25,365,629

Kinaxis Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
For the nine months ended September 30, 2016 and 2015
(Expressed in thousands of U.S. dollars)
(Unaudited)
					Accumulated
					other
		Share		Contributed	comprehensive
		capital		surplus	loss			Deficit		Total equity
Balance, December 31, 2014	$	87,219	$	6,152	$	(453)	$	(46,281)	$	46,637
Profit		-		-		-		11,392		11,392
Other comprehensive income		-		-		(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
Balance, December 31, 2015	$	90,808	$	8,873	$	(474)	$	(33,603)	$	65,604
Profit		-		-		-		9,034		9,034
Other comprehensive income		-		-		154		-		154
Total comprehensive income		-		-		154		9,034		9,188
Share options exercised		4,393		(1,426)		-		-		2,967
Deferred share units vested		151		(151)		-		-		-
Share based payments		-		6,190		-		-		6,190
Total shareholder transactions		4,544		4,613		-		-		9,157
Balance, September 30, 2016	$	95,352	$	13,486	$	(320)	$	(24,569)	$	83,949

Kinaxis Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the three and nine months ended September 30, 2016 and 2015
(Expressed in thousands of U.S. dollars)
(Unaudited)
		For the three months ended September 30,				For the nine months ended September 30,
			2016		2015		2016		2015
Cash flows from (used in) operating activities:
Profit		$	2,425	$	3,806	$	9,034	$	11,392
Items not affecting cash:
	Depreciation of property and equipment		683		461		1,746		1,227
	Share-based payments		2,060		1,176		6,190		3,223
	Amortization of lease inducement		(10)		(11)		(32)		(34)
	Investment tax credits recoverable		397		(36)		941		(540)
	Income tax expense		1,687		2,128		5,374		6,070
	Change in operating assets and liabilities		(8,493)		(1,689)		(7,968)		15,888
Income taxes paid			(259)		(36)		(1,248)		(500)
			(1,510)		5,799		14,037		36,726
Cash flows used in investing activities:
	Purchase of property and equipment		(2,712)		(851)		(5,125)		(3,761)
Cash flows from  financing activities:
	Common Shares issued		1,199		437		2,967		990
Increase (decrease) in cash and cash equivalents			(3,023)		5,385		11,879		33,955
Cash and cash equivalents, beginning of period			114,836		85,166		99,390		56,725
Effects of exchange rates on cash and cash equivalents			(152)		75		392		(54)
Cash and cash equivalents, end of period		$	111,661	$	90,626	$	111,661	$	90,626

SOURCE Kinaxis Inc.

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