Last week, integrated business and concurrent supply chain planning technology provider Kinaxis Inc. reported third quarter financial performance for the quarter ended on September 2020.
Among the headlines of financial performance were:
- Total revenues increasing 17 percent for the quarter, of which SaaS revenues reportedly increasing 28 percent and professional services revenues increasing by 23 percent.
- Adjusted EBITDA margin reported at a lower 18 percent level after the recent acquisition of Rubikloud and other described significant investments in the business.
- Third quarter operating cash flow up 326 percent to $4.5 million.
On the strength of year-to-date results, Kinaxis management updated its fiscal 2020 financial performance to the upper end of guidance for total year performance as follows:
Total Revenues of between $220-$223 million
SaaS Revenue Growth of between 24 to 25 percent
Adjusted EBITDA margin of between 22 to 24 percent.
Added Market Commentary
In commentary related to quarterly performance, CEO John Sicard summarized a rather upbeat quartering terms of meeting financial and operational goals but did indicate some areas of caution:
“Throughout Q3, and consistent with recent supply chain industry reports, we continued to see the impact of COVID-19 through protracted contract approval processes and deferred projects for some companies. Also, while retention rates remain very high, the environment has put some customers in a position where they are not currently able to renew their subscription agreements. However, the disruption has brought new levels of awareness to our unique differentiator – concurrent planning. We saw ongoing growth in our sales pipeline, and an unprecedented level of attendance by new prospects and customers at our Kinexions ’20 event. The integration of our Rubikloud acquisition is going as planned. We have closed our first joint customer, Coty, a marquee consumer products company, and are making headway with others. Quite simply, Kinaxis has never been more relevant, as massive disruption focuses attention on global supply chain resilience and agility, and the power of concurrent planning to enable it.”
“However, we have experienced some instances where customers coping with significant adverse financial situations are not currently in a position to renew their subscription agreement. These types of impacts on the broader market were documented in an August industry forecast for supply chain management software and are consistent with the experiences I’ve just described.”
In the Q&A interaction with equity analysts, Sicard clarified that customer retention rates remain high and the company continues to achieve over 100 percent net revenue retention with the current customer base. He pointed to some current instances where technology adoption decisions have been prolonged because of the instances of more detailed and extended senior management or board level approval processes, some taking six weeks or longer. That, from our lens is a cautionary message to the broader supply chain technology market.
Regarding overall supply chain management transformation interest levels, Sicard observed:
“I’ve never had more conversations about it with C level executives in a single quarter than I have in this past quarter. There’s a deep interest and understanding, can I be managing — governing supply chain planning differently, and achieve better results? And so that gives me confidence that there’s a trend towards transformation.”
Commentary was also directed at the recently conducted Kinexions customer conference which Supply Chain Matters has provided initial highlights. Relative to Kinexions, Sicard noted:
“We had a record- breaking registration of over 3,000 people representing over 500 companies spanning 70 countries. What is especially encouraging is that the majority of companies attending were prospective customers looking to understand how others are leveraging concurrent planning to absorb unprecedented levels of disruption.”
While supply chain management planning and decision-making capability remains of high interest among multiple manufacturers and retailers, the economic uncertainties brought on by COVID-19 are causing companies concern, and for those companies that have experienced negative product demand impacts, added concerns. Thus, global ERP provider SAP’s sudden announcement of cutting revenue and profitability goals for the remainder of 2020 and the next two years are indeed an indicator that there is not an appetite for multi-year and multi-year technology transformational initiatives.
Managed scope supply chain planning and/or execution remain an exception in that initiatives are far more focused, can present meaningful and measurable near-term business benefits.
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Disclosure: Kinaxis is a Named sponsor of the Supply Chain Matters blog as well as a client of the Ferrari Consulting and Research Group.