Kinaxis keeps Buy rating with Laurentian Bank

It was a mixed quarter from Canadian supply chain management software company Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS), but Laurentian Bank Securities analyst Nick Agostino is staying bullish on the stock, renewing a “Buy” rating on KXS in a Friday recount of the company’s Q3 results.

Kinaxis, which supplies its cloud-based subscription software RapidResponse for end-to-end visibility, planning and coordination of supply chain networks, reported total revenue up 39 per cent year-over-year to $89.5 million for its third quarter, with adjusted EBITDA  rising 20 per cent to $14.8 million.

“As always, we remain pleased with our ability to deliver strong adjusted EBITDA,” said John Sicard, President and CEO of Kinaxis, in a press release. “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.”

Looking at the quarterly numbers, Agostino said Kinaxis’ $89.5 million topline was a miss compared to his estimate at $94.3 million and the consensus call at $90.5 million, while the adjusted EBITDA of $14.8 million came in ahead of both his forecast at $14.5 million and the Street’s forecast at $13.2 million. (All figures in US dollars except where noted otherwise.)

Agostino said Kinaxis’ topline would have been a beat on constant currency at $95.9 million, while notable was the company 38 per cent organic growth in new customer wins year-to-date and over 40 per cent growth in customers overall. 

Agostino said investors should look beyond the current foreign exchange headwinds and focus on the underlying demand for Kinaxis’ products.

“We look past the F/X impact in Q3 and once again come away encouraged by the growing client demand in both the enterprise and SMB markets,” Agostino wrote. “With a solid pipeline, growing inbound demand, tightened sales cycle and accelerating momentum, we believe KXS is well positioned to outperform, even in a weaker economic environment. We believe KXS’s IP and disruptive solution make it a must own for Canadian technology investors.”

Agostino adjusted his forward estimate to reflect higher full 2022 guidance from management while leaving his 2023 estimates largely unchanged. His fourth quarter 2022 revenue estimate rose by 6.9 per cent to $99.9 million, while the full 2022 revenue rose by 0.4 per cent to a projected $368.3 million. Q4 adjusted EBITDA rose by 28.6 per cent to $14.2 million and 2022 adjusted EBITDA climbed 5.0 per cent to a projected $72.6 million.

With his reiterated “Buy” rating, Agostino maintained a one-year target price for KXS of C$225.00, which at the time of publication represented a projected return of 60.5 per cent.