Is Kinaxis stock a buy?

ATB Capital Markets analyst Martin Toner said in an August 6 note that Kinaxis (Kinaxis Stock Quote, Chart, News, Analysts, Financials TSX:KXS) reported stronger-than-expected Q2/FY25 results, including a beat across all key metrics.

Toner maintained his “Sector Perform” rating and price target of $210.00 on KXS.

Total revenue was $136.4-million, up 15.3% year over year and above consensus of $133.7-million. Gross profit rose to $87.5-million, ahead of the $85.1-million consensus, with gross margin expanding to 64.2% from 59.3% a year earlier. Adjusted EBITDA hit a record $33.7-million, or 25% margin, beating consensus of $30.2-million. Annual recurring revenue grew 15%, up roughly 120 basis points from last quarter.

The company maintained its FY25 guidance, calling for revenue between $535-million and $550-million and an Adjusted EBITDA margin of 23% to 25%. SaaS revenue growth guidance was increased to 13%–15% (from 12%–14%), reflecting 1% growth in constant currency. Incremental ARR came in at $19.0-million, up from $12.0-million in Q2 last year.

“We are constructive on the SaaS growth guidance raise and incremental ARR print, which shows growing demand for the platform,” Toner said. “On the call tomorrow morning, we will look for updates on the outlook for ARR growth and margins beyond 2025, alongside further detail on momentum around new customer wins.”

SaaS revenue rose 17.3% year over year to $88.4-million, above the $85.3-million consensus and accelerating from 15.6% in the previous quarter. Professional services revenue increased 2.5% to $37.4-million, while subscription term license revenue reached $5.1-million, up from $1.4-million in Q2 last year.

Toner noted the record Adjusted EBITDA marked a 45% increase year over year and said management is continuing to focus on expense discipline in the absence of 20%+ revenue growth.

Kinaxis CEO Bob Courteau said this was the company’s strongest second quarter ever for new business, and was equally balanced between new customer wins and expansion orders.

“As a result of this strong performance, including record profitability, we achieved our fourth consecutive Rule of 40 quarter and are increasing SaaS growth guidance for 2025,” he said. “We now have early innovator customers using our new generative and agentic AI capabilities, which will help enable more autonomous supply chains that boost productivity, democratize access to data and generate better business outcomes. We couldn’t be more excited about how AI will transform both Kinaxis’ opportunity and the amount of value we offer customers.”

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