Keep a close eye on Kinaxis’s subscription growth, says Laurentian’s Agostino

Laurentian Bank Securities analyst Nick Agostino expects strong revenue growth in Kinaxis’s (Kinaxis Stock Quote, Chart, News: TSX:KXS) upcoming fourth quarter and fiscal 2014 results, but there’s one number he will be watching closely.

Agostino says subscription revenue growth “defines the long term revenue stream” for the Ottawa-based supply chain management concern.

On Tuesday, February 24th, Kinaxis will follow on a third quarter in which its subscription revenue rose by 31% to $13.3-million, besting the overall rate of revenue growth. The company’s topline rose by 14% to $17.7-million in the third quarter.

Following the results, CEO Doug Colbeth said the company was well positioned to continue to deliver.

“Our increasing subscription revenue and strong Adjusted EBITDA reflect the growth potential of our unique SaaS offering,” he said. “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.”

Agostino expects the pace of subscription revenue growth will cool a little in the fourth quarter. He thinks Kinaxis will generate (U.S.) $13.6-million in subscription revenues, up 24% year-over-year, on overall revenue of $18.8-million, up 12% over last year’s Q4 topline of $16.31-million.

Founded in 1984, Kinaxis is a supplier of cloud-based supply chain management software called RapidResponse. The company IPO’d in June of last year, raising $65-million.

In a research update to clients this morning, Agostino maintained his “Buy” rating and one-year target of $21.00 on Kinaxis.