Kinaxis keeps Outperform rating with ATB Capital

ATB Capital Markets made no changes to its thesis on Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS) after the Canadian tech company’s second quarter earnings. Analyst Martin Toner stuck with an “Outperform” rating and C$220 target on the stock in a Wednesday report to clients.

Kinaxis, a supply chain management solutions provider headquartered in Ottawa, released its Q2 results on Wednesday, coming in with total revenue up 31 per cent year-over-year to $105.8 million and adjusted EBITDA up 47 per cent to $15.2 million. (All figures in US dollars except where noted otherwise.)

“While we need to remain appropriately cautious about the global economy, we continue to see a persistent urgency to transform supply chain management practices. Siloed approaches are giving way to a concurrent, end-to-end orchestration model and Kinaxis remains alone in its ability to deliver on that vision,” said CEO and President John Sicard in a statement.

The company’s topline broke down into $64.1 million in SaaS sales, $7.1 million in Subscription term licenses, $30.0 million in Professional services and $4.6 million in Maintenance and support. SaaS revenue was up 25 per cent year-over-year.

Toner called the quarterly results in-line with estimates, where revenue of $105.8 million compared to the same forecast from ATB and the consensus call at $105.9 million. Adjusted EBITDA at $15.2 million was also equal to ATB’s call at $15.2 million and above the Street at $14.9 million. Toner noted that the Q2 gross profit at $63.7 million was a miss of his estimate at $64.5 million. 

Toner also noted that management maintained its full 2023 guidance for the topline and EBITDA margins and was remaining cautious due to the current global macro outlook.

“The Company’s streak of raising guidance has ended, despite currency becoming a tailwind in H2/23. Given the tailwinds and structural growth for supply chain management software, we continue to believe guidance and our estimates are conservative,” Toner wrote.

Toner said cash flow from operations increased by 66 per cent to $13.9 million, while capital expenditures were just $0.8 million, which was below his estimate at $3.2 million and below the company’s quarterly average of about $5 million.

Kinaxis’ share price did well over the first few months of the year to bump up from just above $140 to the low $180 range, although the stock has trailed off more recently.

At the time of publication, Toner’s $220 target price represented a projected one-year return of 39 per cent.