Kinaxis’s third quarter results get thumbs up at Laurentian

Kinaxis’s (Kinaxis Stock Quote, Chart, News: TSX:KXS) third quarter results bested the lofty estimates of Laurentian Bank Securities analyst Nick Agostino.

This morning, Kinaxis reported its Q3, 2015 results. The company earned (U.S.) $3.8-million on revenue of $23.7-million, up 34% over the same period last year.

“We had a great third quarter that built on the momentum we established earlier this year,” said CEO Doug Colbeth. “Our strong growth continues to be fuelled 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 per cent, and, based on the performance of the business, are raising our guidance for annual adjusted EBITDA to between 28 per cent and 32 per cent of total revenue.”

Kinaxis also announced that John Sicard will succeed Colbeth as the company’s CEO on January 1.

Agostino notes that Kinaxis’s revenue topped his and consensus estimates and that the company’s Adjusted EBITDA mark of (U.S.) $8-million bested his street-high estimate of $5.2-million and the street consensus of $6-million. The analyst broke down the quarter in terms of business segments.

“The company reiterated 2015 Professional Services revenue guidance of US$22-23M, implying Q4 segment revenues of US$4-5M (we currently model US$5M),” noted the analyst. “On the flip side, Subscription revenues came in lower than expected at US$16.5M, up 24.4% YoY (vs. 29% in Q2/15 and 31% in Q3/14) vs. our US$17.2M estimate (-4%). Although we expect investors to focus on this growth number for Q3, we note KXS maintained its full year Subscription revenue growth guidance at 26%-28% (historically Subscription revenues grew at a 24% 3-year CAGR to 2014) implying US$16.2-17.2M for Q4 Subscription revenue (we currently model US$18M). It is important to note that Professional Services revenues are an onboarding pre-cursor for Subscription revenues. The strong Q3 results and 2015 guidance suggest solid Subscription growth for 2016 similar to what we saw between 2013 and 2014.

In a research update to clients today, Agostino maintained his “Buy” rating and one-year target price of $46.00.