Kinaxis has a propensity to overachieve, says Laurentian

A quarter that bested his expectations has Laurentian Bank Securities analyst Nick Agostino feeling good about Kinaxis (Kinaxis Stock Quote, Chart, News: TSX:KXS).

Yesterday, Kinaxis posted its fourth quarter and fiscal 2015 results. In the fourth quarter, the company earned (U.S) $1.3-million on revenue of was $24.2-million, a 29 per cent increase over the $18.8-million topline it posted for the same period in 2014.

“Fiscal 2015 demonstrates the ability of our RapidResponse platform to deliver consistent top-line growth together with strong EBITDA and profit,” said CEO John Sicard. “Subscription revenue continues to drive our underlying fundamentals as we add new accounts and current accounts expand their applications. The recent announcement of our Leaders quadrant position in the Gartner Magic Quadrant for Supply Chain Planning System of Record strengthens the message we take to accounts. We enter 2016 with strong momentum and look to continue to deliver on the full promise of our supply chain management technology while driving continued value both for our customers and shareholders.”

Agostino says the results topped his estimates on the topline because of higher Professional Services revenue and the company’s quarterly EBITDA of (U.S.) $7.1-million was helped out by its Canadian dollar cost base, which accounts for 35 per cent of its operating expenses. The analyst says the company’s fiscal 2016 guidance of between (U.S.) $107-million and $110-million is in-line with his $109.3-million estimate, though he points out that the company could very well beat that.

“As discussed on the conference call, the sales pipeline remains strong despite macro environment concerns in the enterprise market, with partners (particularly Accenture) representing ~20% (from 14% in 2014), which we expect will translate into increasing deal size,” says Agostino. “We remind investors that KXS has shown a propensity to overachieve, with 2015 guidance reflecting conservatism when viewed against actual results: 2015 Sub rev growth guidance was 26-28% (actual 28%), 2015 Professional Services guidance was US$22-23M (actual US$26.1M) and EBITDA margin guidance was 28-32% post Q3 (actual 33%).”

In a research update to clients today, Agostino maintained his “Buy” rating and one-year target price of $51.50 on Kinaxis, impling a return of 38.1 per cent at the time of publication.