News Release

Q3 SaaS revenue growth of 28% and adjusted EBITDA⁽¹⁾ of 26%

OTTAWA, Oct. 31, 2019 /CNW/ - Kinaxis® (TSX: KXS), the leader in empowering people to make confident supply chain decisions, today reported results for its third quarter ended September 30, 2019. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

Q3 2019 total revenue increased 29% to $47.1 million with SaaS revenue growing by 28% to $31.2 million. Adjusted EBITDA⁽¹⁾ was up 29% to $12.1 million (26% of revenue) and profit grew 70% to $4.5 million from $2.7 million. Both adjusted EBITDA and profit reflected the impact of a one-time charge of $2.5 million related to a previously disclosed and now amicably resolved arbitration proceeding. Excluding this charge, adjusted EBITDA and profit were $14.6 million and $6.3 million, respectively.

"As expected, our success in the second quarter winning some very large new customers, such as British American Tobacco, Honda, Yamaha Motors, Teva Pharmaceuticals and others has led to faster SaaS revenue growth in Q3. Bookings were strong again in the third quarter, such that our backlog has grown further and provides excellent visibility into the remainder of 2019. We are increasing all aspects of our guidance, with higher expectations for SaaS, term license and total revenue, as well as a higher EBITDA target for the year," said John Sicard, President and Chief Executive Officer.

Q3 2019 Highlights

Analysis of Q3 2019 vs Q3 2018 Financial Highlights
Revenue: Growth in total revenue of 29% was driven primarily by 28% growth in SaaS revenue, which resulted from contracts secured with new customers, as well as expansion of existing customer subscriptions. Subscription term license revenue growth depends on the timing of renewals, expansions and new engagements for on-premise and hybrid subscription arrangements, and will vary substantially quarter to quarter.

Gross profit margin: Growth in gross profit margin to 71% resulted from the growth in SaaS revenue, partly offset by an increase in costs of revenue, such as related headcount, partner and third-party costs, and higher depreciation costs associated with the expansion of data center capacity.

Profit and adjusted EBITDA: The 70% increase in profit and 29% increase in adjusted EBITDA was due to an increase in revenue and gross profit, partly offset by an increase in operating expenses, including investments to support the company's long-term strategic growth initiatives and a one-time charge of $2.5 million related to a previously disclosed arbitration proceeding. Excluding this charge, adjusted EBITDA and profit were $14.6 million and $6.3 million, respectively.

Cash from operating activities: The 41% decrease in cash from operating activities was largely due to fluctuations in operating assets and liabilities including a smaller decrease in trade and other receivables compared to Q3 2018, partly offset by higher profit. At September 30, 2019, cash, cash equivalents and short-term investments grew by $20.7 million to $202.2 million from $181.5 million at December 31, 2018.

Financial Guidance
Kinaxis is pleased to update its 2019 fiscal year financial targets, as follows:

This guidance 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.

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 September 30, 2019.

This press release, along with the financial statements and MD&A for the three and nine months ended September, 2019, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call tomorrow, November 1, 2019, to discuss these results. John Sicard, Chief Executive Officer, and Richard Monkman, 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.

Please call the conference telephone number five to ten minutes prior to the start time. An operator will register your name and organization.

About Kinaxis Inc.
Eliminating volatility in your supply chain is impossible, but managing it is not. Trusted by top brands, Kinaxis® gives people the confidence to know they are making the best supply chain planning decisions to maximize business performance. We solve complex business problems in easy-to-understand ways by combining human and machine intelligence to plan for any future, monitor risks and opportunities and respond at the pace of change. With the support of our community of supply chain experts and using our unique concurrent planning technique and single integrated planning platform, customers can realize higher revenue, lower costs and fewer risks. For more Kinaxis news, follow us on LinkedIn, Twitter or Facebook.

Non-IFRS Measures
This news release contains non-IFRS measures, specifically, Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA.  We use Adjusted profit and Adjusted diluted earnings per share, which remove the impact of our share based compensation plans, to measure our performance as these measurements better align the reporting of our results and improve comparability against our peers. 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 profit, Adjusted diluted earnings per share and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA 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 profit and 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, 2019, as well as 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 2019 annual total revenue, annual SaaS and Subscription term license revenue and annual Adjusted EBITDA margin, is subject to certain assumptions, 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 current customer retention levels; and
• with respect to Adjusted EBITDA, our ability to contain expense levels while expanding our business.

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, 2019, under the heading "Risk Factors" in our Annual Information Form dated March 29, 2018, 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.