Kinaxis Inc. KXS-T executive chair Robert Courteau signalled Thursday that the Ottawa supply chain software company’s board is open to receiving takeover bids as part of a continuing strategy review.
Mr. Courteau’s statements amount to a subtle but notable shift in tone from when Kinaxis said in September it had hired Goldman. At the time the company stated the board “strongly believes that execution of its strategic plan is the best path to maximize shareholder value.” That was met by a rebuke from some investors, who pushed the board to explore a potential sale.
A slew of Canadian software vendors have recently left the public markets amid a prolonged, slump in valuations, including nine of the 20 technology companies that went public on the Toronto Stock Exchange in 2020 and 2021. Two more, Lightspeed Commerce Inc. LSPD-T and Dye & Durham Ltd. DND-T, are exploring sales.
Kinaxis kept its prior top-line guidance, forecasting 2024 revenue of between US$483-million and US$495-million, up from US$427-million in 2023, and subscription software sales growth of 15 per cent to 17 per cent, from US$265.1-million last year.
Kinaxis said it has appointed supply chain software veteran executive Mark Morgan as president of commercial operations, and that it is pursuing partnerships with systems integrators to drive sales. Kinaxis is looking to increase prices selectively given its strong competitive positioning and recent addition of artificial-intelligence products, executives said on the call.
Chief financial officer Blaine Fitzgerald added Kinaxis should benefit from a forecast 14-per-cent increase in 2025 corporate spending on software, according to market research firm Gartner Inc. IT-N Kinaxis also said it would buy back up to 5 per cent of its stock over the next year.
“The entire board is focused on adding value,” Mr. Courteau said. “We’ve taken a number of decisive actions over the last six months, which have benefited Kinaxis and will add value to the company in the near and midterm to the benefit of all shareholders.”
The changes include the impending retirement of chief executive officer John Sicard at the end of 2024 and the unexpected departure of chief sales officer Claire Rychlewski, announced in August. A search for a new CEO is continuing. Kinaxis in May announced its first staff cut since going public 10 years ago.
Kinaxis has been a stalwart of Canada’s software scene for 40 years, boasting blue-chip clients such as Volvo AB and Pfizer Inc. PFE-N But revenue growth has slowed in the past two years. Like other vendors to large enterprises, Kinaxis has been hurt by higher interest rates and economic uncertainty, as clients throttle or stretch out spending. Some analysts believe Kinaxis didn’t invest in or execute on sales growth as effectively as it could have.
Kinaxis reported revenue of US$121.5-million for the quarter ended Sept. 30, up 12 per cent from the same period a year earlier, slightly below analyst expectations, while revenue from subscription software of US$78.6-million was up 16 per cent, slightly ahead of analyst forecasts.
The company’s adjusted operating earnings came in at US$30-million, up 32 per cent year-over-year and well ahead of analyst expectations of US$24.5-million. The adjusted earnings, which are a non-GAAP measure (meaning not in accordance with generally accepted accounting principles), excluded US$3.2-million Kinaxis spent on what it called business transformation activities, financial advice and shareholder communications.
Annualized recurring revenue stood at US$347-million at quarter’s end, up 12 per cent year-over-year, compared with 16-per-cent growth in the two preceding quarters. Profit was US$6.8-million, down from US$7.4-million a year earlier.
The results were “a continuation of what we’ve seen in the last year,” said National Bank of Canada Financial Markets analyst Richard Tse. “The broad market is still a bit challenging” for enterprise software vendors. “I don’t think this is specific to Kinaxis.” Otherwise, he said, Kinaxis had been “diligent” in pursuing savings and revenue growth as “they wait to see the market turn.”
