Kinaxis Inc. Reports Fourth Quarter 2023 Results

• FY 2023 delivers 24% SaaS revenue growth and 18% adjusted EBITDA¹ margin
• Q4 SaaS revenue grows 19%, adjusted EBITDA¹ margin of 18%, annual recurring revenue² grows 18%
• Record RPO and free cash flow reflects strength of business and focus on profitability
• Repurchased approximately 329,000 common shares for $36.6 million

Kinaxis® (TSX:KXS), the leading provider of supply chain management solutions, reported results for its fourth quarter and year ended December 31, 2023. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

“We finished the year with a record number of customer wins, a record backlog that provides strong visibility into 2024 and beyond, and record free cash flow. These achievements were won through a persistently high win rate against key competitors, ongoing progress penetrating all tiers of our markets, strong renewals and expansions, ongoing enhancement of the value we offer, and a focus on balancing rapid growth with profitability,” said John Sicard, president and chief executive officer at Kinaxis. “More and more, we are seeing siloed, legacy methods giving way to end-to-end supply chain orchestration, where Kinaxis is the acknowledged leader. We have made strong investments over the past few years that have put us in excellent position to capture even more share in our markets while we make steady progress towards our mid-term profitability goals.”

Q4 2023 Highlights

(1) “Adjusted EBITDA” is a non-IFRS measures that is not a recognized, defined or standardized measure under IFRS. This measure as well as any other non-IFRS financial measures reported by Kinaxis are defined in the “Non-IFRS Measures” section of this news release.

FY 2023 Highlights

Key Performance Indicators

The company’s Annual Recurring Revenue² (ARR), which includes subscription amounts related to both SaaS and on-premise contracts, rose 18% to $322 million at the end of the quarter.

(2) Annual Recurring Revenue (ARR) is the total annualized value of recurring subscription amounts (ultimately recognized as SaaS, Subscription term licenses and Maintenance and support revenue) of all subscription contracts at a point in time. Annualized subscription amounts are determined solely by reference to the underlying contracts, normalizing for the varying revenue recognition treatments under IFRS 15 for cloud-based versus on-premise subscription amounts. It excludes one-time fees, such as for non-recurring professional services, and assumes that customers will renew the contractual commitments on a periodic basis as those commitments come up for renewal, unless such renewal is known to be unlikely. We believe that this measure provides a more current indication of our performance in the growth of our subscription business than other metrics.

The nature of the company’s long-term contracts provides visibility into future, contracted revenue. The following table presents revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at December 31, 2023.

Financial Guidance

Kinaxis is introducing its fiscal 2024 financial guidance, as follows.

"We are steadily marching towards our baseline mid-term Adjusted EBITDA margin target of 25%. Our 2024 guidance reflects the current ARR growth level, ongoing operating leverage, but also the impacts of being at the low point in our normal cycle for our high-margin subscription term license revenue and our current transition to public cloud, which involves some duplicative costs. Normalizing for these two items better demonstrates our steady progress,” said Blaine Fitzgerald, chief financial officer at Kinaxis. "I am particularly pleased to have generated a record $77.1 million in free cash flow in 2023, which is over 70% higher than in any other year. It's another data point that demonstrates our focus on balancing strong growth and profitability."

Guidance in this press release is provided to enhance visibility into Kinaxis’ expectations for financial targets for the periods indicated. Please refer to the section regarding forward-looking statements that forms an integral part of this release. This press release along with the financial statements and MD&A for the quarter ended December 31, 2023 are available on Kinaxis’ website and on SEDAR at www.sedar.com.

Conference Call

Kinaxis will host a conference call tomorrow, February 29, 2024, to discuss these results. John Sicard, chief executive officer, and Blaine Fitzgerald, chief financial officer, will host the call starting at 8:30 a.m. Eastern Time. A question and answer session will follow management's presentation. Investors and participants must register for the call in advance. See registration link below. Please call the conference telephone number fifteen minutes prior to the start time.

About Kinaxis Inc.

Kinaxis is a global leader in modern supply chain management. We serve supply chains and the people who manage them in service of humanity. Our software is trusted by renowned global brands to provide the agility and predictability needed to navigate today’s volatility and disruption. We combine our patented concurrency technique with a human-centered approach to AI to empower businesses of all sizes to orchestrate their end-to-end supply chain network, from multi-year strategic planning through down-to-the-second execution and last-mile delivery. For more news and information, please visit kinaxis.com or follow us on LinkedIn.

Non-IFRS Measures

Adjusted EBITDA and Adjusted EBITDA Margin

This press release contains non-IFRS measures, specifically Adjusted EBITDA and Adjusted EBITDA margin. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. Adjusted EBITDA and Adjusted EBITDA margins are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted EBITDA and Adjusted EBITDA margin will likely differ from that used by other companies (including our peers) and therefore comparability may be limited. Non-IFRS measures should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures. Kinaxis has reconciled Adjusted EBITDA to the most comparable IFRS financial measure as follows:

Forward-Looking Statements

Certain statements in this release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements as to our expectations for:

• growth of annual total revenue, annual SaaS and Subscription term licenses revenue, and our expectations for Adjusted EBITDA margin achievement, in each case looking forward for our fiscal year ending December 31, 2024;
• SaaS growth and increased profitability in years beyond 2024; and
• contracted revenue in future periods, including 2024, 2025 and 2026 and later.

This release also includes forward-looking statements as to Kinaxis’ growth opportunities and the potential benefits of, and markets and demand for, Kinaxis’ products and services. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of Kinaxis’ products and services compared to competitive offerings in the industry.

In particular, our guidance for 2024 annual total revenue, annual SaaS and Subscription term license revenue and annual Adjusted EBITDA margin, as well as our comments on our expectations for SaaS growth and increased profitability in years beyond 2024, are subject to certain assumptions and associated risks including:

• our ability to win business from new customers and expand business from existing customers;
• the timing of new customer wins and expansion decisions by our existing customers;
• maintaining our customer retention levels, and specifically, that customers will renew contractual commitments on a periodic basis as those commitments come up for renewal, at rates consistent with our historic experience;
• fluctuations in the value of foreign currencies relative to the U.S. Dollar; and
• with respect to Adjusted EBITDA and profitability, our ability to contain expense levels while expanding our business.

Our guidance and commentary for achievement of contracted revenue in future periods, including in 2024, 2025 and 2026 and later, is based on assumptions and associated risks including:

• our ability to satisfy material unperformed obligations under our long-term contracts; and
• the continued financial capacity and creditworthiness of our customers under long-term contracts.

These and other assumptions, risks and uncertainties may cause Kinaxis’ actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by forward-looking statements. Material risks and uncertainties relating to our business are described under the headings “Forward-Looking Statements” and “Risks and Uncertainties” in our annual MD&A dated February 28, 2024, under the heading “Risk Factors” in our Annual Information Form dated March 3, 2023 and in our other public documents filed with Canadian securities regulatory authorities, which are available at www.sedar.com. Forward-looking statements are provided to help readers understand management’s expectations as at the date of this release and may not be suitable for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements. Kinaxis assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

SOURCE: Kinaxis Inc.

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