Kinaxis is a “must-own” stock, says Laurentian

Supply chain software company Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS) is stepping on the accelerator, says Laurentian Bank Securities analyst Nick Agostino, who reported on the company’s latest quarterly results in a client update on Friday.

Kinaxis delivered on Wednesday its fourth quarter and full year financials, coming in with Q4 revenue up 44 per cent year-over-year to $98.5 million and adjusted EBITDA up 87 per cent to $21.1 million. The company grew its quarterly SaaS revenue by 26 per cent  to $58.8 million, while for the full year Kinaxis said it added a record number of new customers and exceeded the year’s initial targets on revenue and adjusted EBITDA margin. (All figures in US dollars except where noted otherwise.)

“Our unique concurrent planning technique, which combines heuristics, optimization and state-of-the art machine learning/AI, puts us in a leadership position to take advantage of the very strong demand backdrop in our markets, and will be key to driving a successful 2023, including another year of accelerated SaaS revenue growth,” said President and CEO John Sicard in a press release.

The Q4 sales of $98.5 million were in-line with expectations, according to Agostino, who had estimated $99.9 million while the consensus call was for $99.4 million. On the $21.1 million adjusted EBITDA, the company scored a beat of Agostino’s forecast at $14.2 million and the Street’s call at $13.1 million. EPS was also a strong beat at $0.30 per share compared to Agostino’s estimate at $0.06 and the consensus at $0.03 per share.

The analyst said management’s 2023 sales guidance at $420-$430 million arrived within the range of his previous estimate at $422.9 million and above the consensus at $416.9 million. 

“We attribute the year-over-year acceleration in SaaS growth to the combination of [2022 acquisition] MPO, expected traction on Planning.AI and a reported new product introduction (we believe on the Retail side leveraging the February 2022 algorithm-driven SC planning software module),” Agostino wrote.

Agostino noted Kinaxis’ plant to target the small company market and thereby expand its total addressable market by about 12,000, where the company’s current customer base is at approx. 250-300 customers. Kinaxis said it’s also looking at new verticals in Energy and the Retail subsegments of pharma and restaurants.

“The growing demand/pipeline, expected SaaS acceleration, expanded total addressable market, tightening sales cycle and accelerating momentum as depicted by KXS’s mid-term outlook are all factors that help reconfirm our thesis on KXS as a differentiated, IP-driven, disruptive player in the SC market and a must own for Canadian technology investors,” Agostino wrote.

With the update, Agostino reiterated a “Buy” rating on KXS and one-year target price of $225 per share, implying a return of 34.4 per cent.