Kinaxis has a 32 per cent upside, says ATB Capital

ATB Capital Markets analyst Martin Toner is staying positive on Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS) after the supply chain management company reported third quarter earnings. In a flash update to clients on Thursday, Toner reiterated an “Outperform” rating and C$190.00 price target on KXS, which at the time of publication represented a projected one-year return of 31.6 per cent.

Ottawa-based Kinaxis saw its SaaS revenue grow by 21 per cent year-over-year in its third quarter, with total revenue up 39 per cent to $89.5 million. Adjusted EBITDA rose by 20 per cent to $14.8 million for a 17 per cent margin compared to 19 per cent a year earlier. (All figures in US dollars except where noted otherwise.)

The company reported strong bookings and renewals which helped push its backlog over the half a billion dollar mark for the first time. 

“Momentum in our business continues to prove consistent, as reflected in our exceptional Q3 performance,” said President and CEO John Sicard in a press release. “Year-to-date, we have won over 35 per cent more new customers compared to last year, excluding those we onboarded through our recent acquisition of MPO. In total, we have over 40 per cent more customers than this time last year.”

“Our entirely unique concurrent planning approach continues to be our most important differentiator as companies seek real-time visibility, actionability and agility to manage persistent uncertainty. We are a leader in this global transformation to best-of-breed, fully digitized supply chain management solutions,” Sicard said.

Looking at the Q3 results, Toner said the $89.5 million topline was a miss compared to the consensus estimate at $90.6 million but above his forecast at $89.0 million, while on earnings the adjusted EBITDA of $14.8 million beat the Street’s call at $13.3 million but was a miss compared to Toner’s $17.1 million. GAAP EPS at $0.08 per share was also a beat of the consensus forecast of a loss of $0.02 per share.

Toner noted that in the face of macro environment challenges and currency fluctuations, management raised its guidance, calling for full 2022 revenue of $365-$370 million, up from the previous $355-$365 million.

“Despite the revenue miss, the strength of the Company’s constant currency growth and the third guidance raise of 2022 should embolden investors. Constant currency ARR growth of 30 per cent marks a new high water mark for Kinaxis during this product cycle,” Toner wrote.

“We continue to believe that the combination of fundamental momentum, non-cyclical growth, and profitability should be attractive to investors at these valuations,” he said.