Kinaxis keeps Outperform rating with ATB

ATB Capital Markets analyst Martin Toner is staying positive on supply chain management SaaS company Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS) after its latest quarterly financials, reiterating an “Outperform” rating in a Wednesday report.

Ottawa-based Kinaxis posted Q1 revenue up three per cent year-over-year to $101.1 million, gross profit down 12 per cent to $61.0 million and adjusted EBITDA down 48 per cent to $17.1 million. (All figures in US dollars except where noted otherwise.)

In his comments, President and CEO John Sicard said, “Our win rate remains high, and we continue to secure marquee brands even as an uncertain economic backdrop drives some prospects to exercise extra rigour in their purchasing processes.” 

Kinaxis’ share price dropped about four per cent on Wednesday and a further two per cent on Thursday, but a rally over the past half-year has brought the stock to a year-to-date return of about 14 per cent and a past-12-months return of about 24 per cent. KXS remains about 18 per cent off its highs of late 2021.

Toner sees more upside to come and maintained a C$210 target price, which at the time of publication represented a projected one-year return of 18.3 per cent.

“Kinaxis continues to produce strong growth, driven by secular tailwinds, despite a slight deceleration in the growth rate. Q1/23 SaaS revenue plus remaining performance obligations are ~90 per cent of the mid-point of the Company’s 2023 guidance, which we view as conservative,” Toner wrote.

On the Q1, Toner said KXS’s $101.1 million topline was in line with the consensus estimate also at $101.1 million and ATB’s own forecast at $100.5 million. Gross profit of $61.0 million missed the Street’s call at $63.4 million and ATB’s $62.3 million, while adjusted EBITDA at $17.1 million was a miss of the consensus at $17.6 million but a beat of ATB’s $16.2 million.

Drilling down, Toner said the company’s SaaS revenue at $63.1 million was up 28.0 per cent year-over-year and had slightly accelerated from the previous quarter’s 26 per cent. 

The analyst said consolidated revenue growth was driven primarily by growth in SaaS and Professional Services revenue, which was were up 28.0 per cent and 23.8 per cent, respectively.

Annual recurring revenue reported year-over-year growth of 23 per cent compared to 24 per cent for the previous quarter. Meanwhile, Toner noted cash flow from operations at $38.9 million, which was a 77 per cent year-over-year improvement and driven by a $44.9 million increase in trade receivables.

For the full 2023 year, Toner is forecasting revenue of $422.6 million and adjusted EBITDA of $57.8 million, rising to 2024’s numbers of $509.4 million in revenue and $112.2 million in EBITDA.