Kinaxis Inc

TSX:KXS

Earnings Call Transcript 2021-Q4

[Operator]

Good morning ladies

and gentlemen.

Welcome

to

Kinaxis,

Incorporated

Fiscal

2021

Fourth

Quarter

Results

Conference

Call.

At

this

time,

all

participants

are

in

a

listen-only

mode.

Following

the

presentation,

we

will

conduct

a

question-and-answer

session.

Instructions

will

be

provided

at

that

time

for

you

to

queue

up

for

questions.

I'd

like

to

remind

everyone

that

this

call

is

being

recorded

today,

Wednesday,

March

2, 2022.

I

will

now

turn

the conference

over

to

Rick

Wadsworth,

Vice

President

of

Investor

Relations

at

Kinaxis,

Incorporated.

Please

go

ahead,

Mr.

Wadsworth.

[Rick Wadsworth, Vice President-Investor Relations, Kinaxis, Inc.]

Thanks,

operator.

Good

morning

and

welcome

to

the

Kinaxis

earnings

call.

Today,

we will

be

discussing

our

fourth

quarter

and

year-end

results,

which

we

issued

after

close

of

markets

yesterday.

With

me

on

the call

are

John

Sicard,

our

President

and

Chief

Executive

Officer;

and

Blaine

Fitzgerald,

our

Chief

Financial

Officer.

Before

we

get

started,

I

want to

emphasize

that

some

of the

information

discussed

on

this

call

is

based

on

information

as

of

today,

March

2, 2022,

and

contains

forward-looking

statements

that

involve

risks

and

uncertainties.

Actual

results

may

differ

materially

from

those

set

forth

in

such

statements.

For

a

discussion

of

these

risks

and

uncertainties,

you

should

review

the

forward-looking

statements

disclosure

in

the

earnings

press

release

as

well

as

in

our

Kinaxis'

filings.

During

this

call,

we

will

discuss

IFRS

results

and

non-IFRS

financial

measures.

The

reconciliation

between

IFRS

results

and

non-IFRS

financial

measures

is

available

in our

earnings

press

release

and

in

our

MD&A,

both

of

which

can

be

found

on

the

Investor

Relations

section

of our

website,

kinaxis.com,

and

on

SEDAR.

Participants

are

advised

that

the

webcast

is

live

and

is

also

being

recorded

for

playback

purposes.

An

archive

of

the

webcast

will

be

made

available

on

the

IR

section

of

our

website.

Neither

this

call

nor

the

webcast

archive

may

be

re-recorded

or

otherwise

reproduced

or

distributed

without

prior

written

permission

from

Kinaxis.

To

begin our

call,

John

will

discuss

the

highlights

per

quarter

as

well

as

recent

business

developments

followed

by

Blaine,

who

review

our

financial

results

and

outlook.

Finally,

John

will

make

some

closing

remarks

for

opening

up

the

line

for

questions.

We

have

a

presentation

to

accompany

today's

call,

which

can

be

downloaded

from

the

Investor

Relations

home

page

of

our

website

kinaxis.com.

We'll

let

you

know

when

they

change

slides.

I'll now turn the call over to John.

[John Sicard]

Thank

you,

Rick.

Good

morning,

everyone,

and

thank

you

for

joining

us

today.

I'll

be

starting

on

slide

4.

I'm

pleased

to

report

that

Kinaxis

had

a

strong

end

to

our

fiscal

year,

both

in

our

financial

results

and

key

operating

metrics.

For

Q4,

we

achieved

SaaS

revenue

growth

of

18%

to

$46.9

million.

Total

revenue

growth

of

25%

to

$68.5

million

and

an

adjusted

EBITDA

margin of

16%.

For

the

year,

we

hit

all

of

our

financial

targets,

including

those

we

raised

within

the

year.

Turning

to

slide

5,

we

are

thrilled

with

the

continuation

of

accelerated

momentum

Kinaxis

is

experiencing.

In

Q4

and

for

the

full

year,

we

achieved

a

record

high

level

of

incremental

subscription

bookings.

And

in

Q4

also

set

a

new

all-time

high

for

new

customer

wins.

In

fact,

we

more

than

doubled

the

number

of

new

customer

wins

for

the

full

year

compared

to

2020. We

were

incredibly

humbled

to

welcome

some

globally

recognized

brands

across

multiple

vertical

markets

and

geographies.

And

I'm

happy

to

highlight

just

a

few

of

them

for

you

here

today.

In

life

sciences,

we

earned

the

trust

of

Cardinal

Health,

Lupin

Limited

and

we're

particularly

pleased

and

proud

to

be

working

with

BioNTech.

In

consumer

products

we

added

Boston

Beer,

Edwards

Limited,

High

Liner

Foods,

Jamieson

Wellness

and

Robert

Bosch.

In

automotive,

we

welcomed

Mazda

Motor

Europe

to

our

ever

growing

list

of

iconic

customers

in

that

market.

In

high-tech

and

right

here

in

Canada

Rogers

Communications joined

us.

And

in

the

industrial

sector,

we

won

BP

International

Limited,

our

second

bellwether

account

in

oil

and

gas.

There

are

so

many

other

names

I

hope

to

be

able

to

share

with

you

in the

future.

But

these

few

shared

with

you

today

demonstrate

that

accelerated

momentum

is

upon

us.

And

in

fact,

as

maintained,

it

has

maintained

pace

in

the

opening

weeks

of

2022,

as

we

continue

to

add

major

global

brands

to

the

Kinaxis

family

of

customers.

Our

success

through

2021

in

winning

new

customers,

combined

with

expansion

from

our

installed

base,

has

resulted

in

very

strong

annual

recurring

revenue.

At

year-end

ARR

was

recorded

at

$225

million

in

constant

currency. And

our

backlog

of

business

recorded

at

a

very

healthy

$484

million.

Add

to

that

a

four

quarter

rolling

pipeline

that

continues

to

grow,

and

we

have

confident

visibility

into

SaaS

revenue

growth

of

23%

to

25%

for

2022.

Our

recent

initiatives

to

expand

into

mid-market

opportunities

and

accelerate

time

to

value

for

new

customers

have

been

very

successful.

Year-to-date

we

saw

roughly

55%

to

45%

split

between

new

enterprise

customers

and

midmarket

or

smaller

customers.

RapidStart

was

chosen

as

the

initial

implementation

approach

by

roughly

one

third

of

all

new

customers

and

this

is

a

trend

we

believe

will

persist.

As

we

exit

pandemic

protocols,

we

continue

to

see

supply

chains

at

the

forefront

of

boardroom

conversations

and

in

the

news.

The

need

for

supply

chain

resilience

has

never

been

more

apparent

and

demands

for

transformation

towards

true

end-to-end

concurrent

planning.

Kinaxis

simply

has

never

been

more

relevant

nor

better

positioned

to

serve

the

needs

of

our

markets.

We

are

responding

to

this

accelerated

momentum

and

responding

to

market

indicators

by

continuing

to

invest,

to

grow

our

market

share

and

enhance

our

platform

and

service

offerings

to

further

distance

ourselves

from

the

competition.

I'll

now

ask

Blaine

to

discuss

results

of

our

Q4

and

the

year.

Blaine?

[Blaine Fitzgerald, Chief Financial Officer, Kinaxis, Inc.]

Thank

you,

John,

and

good

morning.

As

a

reminder,

unless

noted

otherwise,

all

figures

reported

on

today's

call

are

in

US

dollars

under

IFRS.

You

move

on

to

slide

6,

total

revenue

in

the

fourth

quarter

was

up

25%

to

$68.5

million.

SaaS

revenue

grew

18%

to

$46.9

million,

driven

by

record

new

customer

wins

in

recent

quarters

and

the

expansion

of

existing

customer

subscriptions. Subscription

term

license

revenue

was

$1.4

million

versus

$1.9

million

in

Q4 of

2020.

Fluctuations

in

this

revenue

item

are

generally

tied

to

the

normal

renewal

cycle

of

our

customer-hosted

software

subscription

and

will

vary

period

to period

as

a

result.

Our

professional services

activity

was

strong

again,

resulting

in

$17

million

in

revenue

or

50%

growth

over

the

corresponding

quarter

of

2020. The

rapid

growth

reflects

accelerating

new

customer

wins

in

recent

periods

and

expansion

of

our

service

offerings.

Generally,

this

revenue

item

varies

from

quarter-to-quarter

based

on the

number,

size

and

timing

of

customer

projects

underway,

as

well

as the

proportion

of

work

assumed

by

partners.

Maintenance

and

support

revenue

for

the

quarter

was

$3.2

million,

in

line

with

recent

project

periods,

but

up

72%

from

Q4

2020,

which

was

largely

due

to

an

adjustment

made

to

this

revenue

item

in

the

comparative

period.

We

continue

to

be

pleased

with

the

diversity

and

strength

of

our

total

revenue

base.

For

the

quarter

and

year-to-date,

our

10 largest

customers

accounted

for

26%

and

25%

of

our

total

revenues,

respectively,

with

no

individual

customer

accounting

for

greater

than

10%

of

total

revenues.

Fourth

quarter

gross

profit

increased

by

26%

to

$43.9

million,

as

a

result

of

our

revenue

growth.

Gross

margin

in

the

quarter

was

64%,

compared

to

63%

in

Q4

2020.

Adjusted

EBITDA was

up

85%

to

$11.3

million

or

a

margin

of 16%,

compared

to

11%

in

the

fourth

quarter

last

year.

Our

loss

in

the

quarter

was

$2.9

million,

compared

to

$1.6

million

in

Q4

2020.

Q4

cash

flow

from

operating

activities

was

at approximate

level

with

the

comparable

period

at

$3.2

million.

At

December

31, 2021,

cash

and

cash

equivalents

and

short-term

investments

totaled

$233.4

million,

compared

to

$213.1

million

at

the

end

of

2020.

We

remain

pleased

with

our

outstanding

track

record

of

cash

generation.

Move

to

slide

7. Full

year

2020 results

included

total

revenue

of

$250.7

million,

up

12%

from

2020. SaaS

revenue

of

$174.5

million,

up

17%;

subscription

term

licenses

revenue

of

$6.1

million,

a

decrease

of

66%,

which

is

simply

a

reflection

of

2021

being

the

low

point

of

the

normal

three-year

cycle

of

customer-hosted

subscription

renewals.

Adjusted

EBITDA

margin

of

16%

compared

to

24%

in

2020,

reflecting

the

natural

dip

and

subscription

term

license

revenue

and

the

significant

strategic

investments

we

made

in

2020

and

2021,

which

are

now

resulting

in

acceleration

across

our

business.

A

loss

of $1.2

million

compared

to

a

profit

of

$13.7

million,

reflecting

the

same

items

as

for

adjusted

EBITDA,

plus

higher

share-based

compensation

and

depreciation

expense.

Finally,

cash

flow from

operating

activities

was

$50.1

million,

compared

to

$59.5

million

in

2020.

As

John mentioned

at

the

beginning

of

the

call,

we

are

very

pleased

to

have

met

or

exceeded

all

aspects

of

our

initial

and

increased

guidance

for

the

year.

Ultimately,

though,

our

focus

in

2021

was

on

growing

our

incremental

subscription

bookings.

In

that

respect,

2021

was

our

most

successful

year

by

some

measure,

as

reflected

in

some

key

operating

metrics.

Looking

at slide

8,

let's

look

at

the

most

important

metric

first,

annual

recurring

revenue,

or

ARR.

Including

currency effects,

our

ARR

grew

$36

million

to

$221

million

or 19%

compared

to

an

increase

last

year

of

$26

million

or

17%

growth.

Our

currency

movements

[indiscernible]



(00:11:43) some

even

stronger

underlying

growth.

We

are

very

pleased

that

our

ARR on

a

constant-currency basis

grew $40

million

in 2021

to

$225

million

or

21%

growth

compared

to

an

increase

last

year

of

only

$24

million

or

15%

growth.

This

dramatic

improvement

is

a

reflection

of

the

unprecedented

strength

we

have

experienced

all

year

winning

new

accounts

and

of

success,

winning

incremental

business

from

our

installed

base.

I'll

remind

you

that

growth

rate

for

SaaS

portion

of

ARR

is

higher

than

for

total

ARR.

So

we

have

full

confidence

that

we

can

grow

SaaS

revenue

by

23%

to

25%

in

2022.

I'll

also

note

that

an

unusual

number

of

the

contracts

we

signed

in

the

fourth

quarter

included

provisions

that

build

in

meaningful

expansion

of

the

subscription

amounts

throughout

2022 and

2023.

Our

ARR

at

year-end

is

conservative

and

that

it

does

not

yet

reflect

its

guaranteed

growth.

Including

those

amounts

would

have resulted

in

even

higher

ARR

growth

rates.

Moving

to slide

9,

our

remaining

performance

obligations,

or

RPO,

is

very

strong

at

$484 million,

up

27%

from

December

31, 2020.

Of

that

total,

$424

million

relates

to

SaaS

business,

which

is

up

20%.

Further

details

on

our

RPO

can

be

found

in

the

revenue

notes

to

our

financials.

The

RPO

growth

reflects

the

record

level

of

incremental

subscription

bookings

in

2021

from

new

and

existing

customers,

but

also

reflects

the

fact

that

more

renewals

happen

to

be

scheduled

for

Q4

than

in

recent

quarters,

as

we

indicated

would

be

the

case

on

our

last

call.

While

RPO

is a

valuable

metric,

remember

that

is

impacted

by

the

normal

schedule

of

existing

customer

contract

renewals

and

their

duration

among

other

factors.

ARR

is

a

more

specific

indicator

of

momentum

in

winning

new

subscription

business,

which

in

turn

drives

future

revenue

growth.

Of

the

2021

RPO

amount,

approximately

$217

million

will

be

recognized

as

revenue

in 2022,

of

which

approximately

$179

million

relates

to

SaaS

business.

This

guaranteed

backlog

of

SaaS

business

provides

us

over

80%

coverage

of

our

2022

SaaS

revenue

outlook

at

the

midpoint,

which

has

been

a

typical

target

for

us.

Go

on

to

slide 10.

With

respect

to

our

outlook,

we're

pleased

to

be

able

to

provide

you

with

initial

guidance

for

fiscal

2022.

We

expect

total

annual

revenue

to

be

between

$335 million

and

$345

million,

representing

approximately

36%

growth

at

the

midpoint.

SaaS

revenue

is

expected

to

grow

between

23%

and

25%

over

our

2021

level. Subscription

term

license

revenue

will

hit

the

peak

of

its

three-year

cycle

in

2022. So

we're

expecting

between

$30 million

and

$32

million.

The

growth

in this

amount

since

the

last

peak

of

$26

million

in

2019

largely

reflects

expansion

activity

within

the

on-premise

customer

pool.

Roughly

two-thirds

of

this

revenue

will

be

recognized

in

the

first

quarter,

just

less

than

one

quarter

of

the

amount

in

Q3

and

the

remainder

in

Q4.

I

should

add

that

due

to the

growth

in

this

item,

maintenance

and support

revenue

will

also

grow

by

$2

million

in

2022.

Finally,

for

2022,

we

expect

our

adjusted

EBITDA

margin

to

be

between

15%

and

18%.

The market

for

supply

chain

planning

and

our

own

unique differentiation

within

it

have

never

been

stronger.

So

we

decided

to

continue

to

invest

aggressively

in

all

aspects

of

the

business.

R&D,

sales

and

marketing,

professional

services,

customer

care

and

G&A

were

necessary

to

support

greater

scale.

As

momentum

behind

digitalization

of

supply

chains

continues

to

pick

up

pace,

we

will

make

sure

that

we

have

all

the resources

available

to

meet

the opportunity

and

extend

our

lead.

Looking

at

other

financial

targets

for

2022,

we're

aiming

for

a

gross

margin

in

the

63%

to

65%

range.

Sales

and marketing,

and

research

and

development

to

be

approximately

22%

to

24%

of

revenue

each

and

G&A

could

be

in

the

16%

to

18%

range.

We

expect

CapEx

will

be

between $23

million

and $28

million,

mostly

related

to

expansions

to

our

data

center

capacity

to

support

our

growing

customer

base.

We've

seen our

best

from 2020

and

2021

pay

off,

and

we

see

plenty

of

opportunity

for

continued

growth.

Our

ongoing

investment

in

strategic

initiatives,

as

reflected

in

our

guidance

for

2022,

demonstrates

our

high

level

of

confidence

that

we

are

moving

in

the

right

direction

as

we

build

for

the

long-term.

With

that,

I

will

turn

the

call

back

over

to

John.

[John Sicard]

Thank

you,

Blaine.

Let

me

reiterate

a

few

important

points

before

we

move

to

the

Q&A

portion

of

the

call.

First

and

foremost,

the

quality

and

quantity

of

customers

that

continues

to

join

the

Kinaxis

family

is

beyond

humbling.

For

both

investors

and

our

end

markets,

our

blue

chip

customer

base

continues

to

represent

the

biggest

proof

point

of

our

entirely

unique

differentiator,

concurrent

planning.

Secondly,

key

strategies

that

we

have

recently

put

in

place,

including

our

decision

to

proactively

target

the

mid-market

and

to

accelerate

time

to

value

with

RapidStart,

are

working.

New

customer

wins

have

hit

record

levels

and

thanks

to

the

proven

value

and

stickiness

of

RapidResponse,

we

expect

each

to

grow

with

us

for

a

very

long

time.

Third,

we

have

exceptional

visibility

into

2022

that

will

deliver

greatly

accelerated

SaaS

revenue

growth

as

reflected

by

expansion

in

our

ARR

and

RPO

numbers I've

shared

today.

Finally,

our

confidence

in

the

market's

demand

for

our

flavor

supply

chain

transformation

remains

very

high

and

we

will

continue

to

invest

to

ensure

we

are

ready

to

absorb

success.

We

see

tremendous

opportunities

to

capture

more

market

share

and

enhance

our

platform

and

service

offerings

to

distance

ourselves

even

further

from

the

competition.

Momentum

in

the

business

is

at

an

unprecedented

level,

and

we

intend

to

take

full

advantage

of

that.

As

always,

thank

you

for

taking

the

time

to

join

us

on

the

call.

And

with

that,

I'll

turn

the

line

over

to

the

operator

for

Q&A.

[Operator]

Thank

you.

We

will

now

begin

the

question-and-answer

session.

[Operator Instructions]



Our

first

question

comes

from

Thanos

Moschopoulos

from

BMO

Capital

Markets.

Please

go

ahead.

[Thanos Moschopoulos, Analyst, BMO Capital Markets Corp. (Canada)]

Good

morning.

John,

you

mentioned

the

one

with

BP,

which

is

interesting,

since that's

obviously

a

non-traditional

vertical.

Anything

you

can

tell

us

about

that

use

case,

whether

we're

talking

about upstream

or

downstream

and

just

in

general

in

terms

of

the

pipeline

and

opportunity

you're

seeing

in

the

oil

and

gas?

[John Sicard]

It's

a

great

observation,

Thanos. And

we

are

seeing

some

interest,

some

general

interest

from

that

sector.

As

I

mentioned,

this

was

our

second

bellwether

for

that.

I'll

call

it

a

sub-vertical

of

industrial.

And

we're

generally

in

the

upstream

of

that

– of those

use cases.

So, obviously,

not

in

the

refinement

or

the

exploratory

side

of

their

supply

chain.

But

we

do

see

it

as

a

very

interesting

sub-segment

of

the

industrial

market,

and

you

may

very

well

hear

some

other

names

as

the

year

progresses.

[Thanos Moschopoulos, Analyst, BMO Capital Markets Corp. (Canada)]

Okay.

Great.

Can

you

update

us

on

the

competition?

So

I

assume

in

enterprise,

it's

probably

the usual

suspects,

but

as

you

go

into

the

mid-market,

is

it

a

different

characters

to some

extent,

or

what

are

you

seeing?

[John Sicard]

We're

–

there

hasn't really

been

a

meaningful

change.

We

continue

to

see SAP

as

the

traditional

incumbent.

We

see

Blue

Yonder

and

o9

from

time

to

time.

I

would

say

the

Gartner

Magic

Quadrant

has

done

an

exceptional

job

at

showing

where

the

gaps

are

between

the

competitors.

And

I

will

say

we

are

certainly

looking

forward

to

the

release

of

the

2022

MQ,

I'm

told

is

imminent.

We

shall

see.

But

I

think

the

Gartner

does

an

exceptional

job

at

highlighting

the

differences

between

competitors.

But

again,

I'll

say,

we

have

not

in

the

field

seen

any

meaningful

shift

in

one

direction

or

the

other.

[Thanos Moschopoulos, Analyst, BMO Capital Markets Corp. (Canada)]

Okay.

And

then finally

on

M&A,

you

announced

a

small

tuck-in

an

opportunity

to

call

out

there.

And

then in

general,

any

commentary on

M&A pipeline

will

be

helpful?

Thanks.

[John Sicard]

Yeah.

Thanks

for

that.

Yeah.

So

we

are

–

I

think,

I've

said

this

on

prior

calls

being

a

lot

more

thoughtful

about

filling

white

space

and

what

I

would

call

technical

gaps

that

we

might

see

opportunities

for.

And

so,

at

the

same

time,

our

approach

to

RapidResponse

as

a

platform

and

really

driving

other

companies

to

build

their

own

intellectual

property

on

top

of

RapidResponse

is

also,

part

and

parcel

of

that

strategy.

So,

as

far

as

it

relates

to

this

little

tuck-in

that

we

did,

for

competitive

reasons

we're

not

going

to

go

into

much

detail

here.

While

companies

come

with

a

product

– this

company

comes

with

a

small

product

and

more

so,

significant

expertise

in

an

area

that

we

are

strategically

focused

on.

We

won't

be

commenting

too

much

on

exactly

what

that

area

is,

but

essentially

it

was

a

$3

million

to

$4

million

acquisition,

all

cash,

approximately

10 people

in

North

America.

And

more

to

come

on

what

we'll

be

doing

from

a

roadmap

perspective.

[Thanos Moschopoulos, Analyst, BMO Capital Markets Corp. (Canada)]

Great, thanks,

John.

I'll

pass

the

line.

[John Sicard]

Thanks,

Thanos.

[Operator]

The

next

question

comes

from

Daniel

Chan

from

TD

Securities.

Please

go

ahead.

[Daniel Chan, Analyst, TD Securities, Inc.]

Hi,

good

morning.

You

talked

about

the

recent

wins

having

some

expansions

throughout the

next

couple of

years.

Can

you

just

help

quantify

how

much

those

expansions

are

over

the

current

ARR

and

whether

they're

in

the

current

guidance

and

in

the

current

RPO?

[John Sicard]

Yeah,

great,

great

question.

So,

number

one,

we

don't

disclose

how

much

the

amount

of,

I

guess,

ramping

that's

involved,

but

it's

a

significant

amount.

We

would have

had

– I

mean

if

I

think

about

our

ARR

growth

that

we've

been

including

that

amount,

we

would

have had

an

all-time

high

with

our

ARR

growth,

which

is

a

great

sign.

It

will

be

spending between

mostly

in

2022

and

2023,

more

the

back

half

of

2022.

We

included,

obviously,

the

2022

amount

that

we

know

is

already

committed

as

part

of

our

forecast.

So

all

the

information

is

included

in

our

guidance

at

this

stage,

but

we

are

really

pleased.

I

mean,

it's

a –

I

don't

like

to

always

point

to

RPO.

Our

RPO

is

partially

increasing

at

the

rate

it

was,

because

we

have

a

lot

of

faith

that

was

put

into

us

by

some

new

customers.

They've

decided

they

want

to keep

growing

with

us

there

in

the

future

and

that

was

a

great

sign

and

a

great

testament

to

the

success

we've

had

in

2021.

[Daniel Chan, Analyst, TD Securities, Inc.]

Okay.

Thanks.

And

then

I was

wondering if

we

get

some

color

on

the

record

number

of

new

customers

that

you've

won,

whether

most

of

those

were

competitive

displacements

or

largely

greenfield, whether

they

were

mid-market

or

enterprise?

Anything will

be

helpful.

[John Sicard]

Yeah.

So

they're, I

would

say,

that

largely

competitive

replacement,

frankly.

And

I

think

what

we're

seeing

in

the

market

now

more

than

ever

is

that

we're

hearing

the

term

resilience

quite

often,

right.

A

lot

of

organizations

are

driving

towards

a

more

resilient

supply

chain.

And

obviously,

the

conditions

the

planet

finds

itself

in, you

would

see

that

how

that

makes

a

lot

of

sense.

And

resilience

isn't

a

competence,

it's

an

outcome

of

one.

And

we

believe

the

competence

that

brings

about

resilience

is

agility.

And,

obviously,

with

agility

comes

concurrent

planning.

And

so,

the

customer

wins,

I

would

say,

by

and

large

are

an offset

of

a

traditional

approach

with

a –

what

I

might

call

a

legacy

software

package

that

they're

replacing

and

moving

towards

concurrent

planning.

Blaine,

you

might

comment

on

the

split

between

enterprise

and

mid-market.

[Blaine Fitzgerald, Chief Financial Officer, Kinaxis, Inc.]

Yeah.

As

we

mentioned

in

the

script,

we

were

at

around

55%

to

45%,

the

55%

being

enterprise

and

45%

mid-market,

which

actually

changes

the

way

that

we

have

on

competitive

dynamics,

because

you can

imagine

that

with

enterprise,

it's

a

very,

very

competitive

scenario

in

place

where

we're

[indiscernible]



(00:25:35)

generally

another

solution

in

that

situation.

With

mid-market

it's

not

as

much

that

what

we

would

see

it

as

competitive

displacement,

but

it

is

a

very

competitive

arena

that

we're

fighting

with

other

companies

to

win

those,

those

companies,

so.

[Daniel Chan, Analyst, TD Securities, Inc.]

Okay,

thanks. And

then

last

one

for

me.

Professional

services

revenues

coming

in

much

stronger

than

expected.

What's

driving

that

considering

we

were

expecting

most

pro-serve to

go

to

your

SI

partners?

[Blaine Fitzgerald, Chief Financial Officer, Kinaxis, Inc.]

Yeah.

Great

question,

and

I'll

maybe just

start

that,

you're

absolutely

right.

The

majority

of

the

services

are

going

to

our

partners

and

our ecosystem.

We

have

less

than

30%

of

the

total

revenue

that's,

that's

going

for

pro-serve.

But

at

the

same

time,

this

is

a

situation

where

we're

in

a

great

position

and

everyone's

in

a

great

position

in

terms

of

everyone

is

in

high

demand.

We're

in

high

demand.

Our

partners are

in

high

demand.

We

simply

just

we

– seemed

to

be

a

little

bit

ahead

of

some

of

our

partners

in

terms

of

being

able

to

fulfill

and

deploy

the

requests

that

are

coming

in

right

now.

And

so

although

our

partners

are –

and

we

want

our

long-term

to

be

even

less

than

that

30%

number

or

20%

number

or

10%,

we

want

to

have

a

smaller

market,

smaller

portion

of

the

total

professional

services

ecosystem

revenue

that's

out

there.

For

the

time

being

because

demand

is

so

high

everyone

is

trying

to do

whatever

they

can

to

keep

up

with

this

demand,

and

we

just

simply

happen

to

be

in

a

great

position.

I'll let John add on that.

[John Sicard]

Yeah,

no,

we

are

monitoring

the

bench

strength

of

our

partner

alliance

very,

very

carefully.

And

it's

hot

in

every

geography,

in

every

vertical.

And

as

Blaine

said,

we're

responding

to

the

demand

being

put

upon

us

and

the

speed

at

which

our

customers

are

driving

these

transformations.

So

our

thesis

has

not

changed

whatsoever.

We

continue

to

sign

partners

as

– in

fact,

we

signed

a

record

level

number

of

partners

in

2021.

So

we're

continuing

along

that

path.

It's

a

situation

right

now

where

the

demand

for

transformation

projects

outpaces

pretty

much

the

environment's

capacity

to

deliver

it.

And

so

everyone

is

exceptionally

busy

and

we're

working

very

hard

with

the

partner

alliance, who

is

part

of

our

investment

thesis

for

2022,

is

investing

heavily

in

partner

enablement,

to

accelerate

partner

enablement

just

to

keep

up

with

the

demand.

[Daniel Chan, Analyst, TD Securities, Inc.]

That's

great.

Thank

you.

[Operator]

The

next

question comes

from

Robert

Young

from

Canaccord

Genuity.

Please

go

ahead.

[Robert Young, Analyst, Canaccord Genuity Corp.]

Hi.

Hi.

Good

morning.

Maybe

I'll

just

continue

on

that

last

line.

The

EBITDA

margin

guidance

for

2022

is, I think,

maybe

a

little bit

lower

than

expected.

And

so

I'm

curious

if

that's

reactive

on

the

professional

services,

or

are

you

just

trying

to

pull

people

into

the

business,

is

that,

is

that

where

the

impact

on

EBITDA

margins

are?

Or

is

this

– I think

in the

script you had

said

it

was

reacting

to

the

demand

that

you're

seeing

out

there

and

expanding.

So

is this

more

go

to

market

sales

expansion,

is

it

R&D,

if

you

could

just

give

a

little

more

color

and

maybe

some

idea

of

whether

this

is

professional

services

driven

or

not?

[John Sicard]

All

right.

Great question.

And

I

think

the

first

answer

is

nothing

we're

doing

is

reactive

at

this

stage,

it's

intentional.

And

I'll

just go

back

to

what

happened

in 2020.

We

made

some

intentional

investments.

We

had –

as

a

result,

we

had

some

great

situations

that

came

out

where

we

had

five

quarters

in

a

row

now

of

new

name

account

customers

that

we've

won.

We

just

had

a

highest

incremental

bookings

ever.

We

have

highest

gross

bookings

ever,

expanded

our

TAM

during

that

period

of

time.

We're

going to

be

talking

about

36%

year-over-year

total

revenue

growth

that

we're

expecting

in

2022.

So

right

now,

we've

seen

that

the

investments

we're

making

are

working.

And

I'll

be

very

candid

and

say

that

we

are

a

30%

to

35%

adjusted

EBITDA

company

in

the

long-term.

When

we

want

to

do

that,

we'll

do

that.

Today,

what

we're

trying

to

do is

grow

that

pie

as

big

as

we

can

so

we

can

share

it

with

our investors

in

the

future.

And

so

we're

investing

in

professional

services

like

you

said.

They're

screaming

and

it's

not

us.

It's

like

us

and

our

partners

are

screaming for

support

because

there

are

so

many

customers

that

are

asking

for

this

service

right

now.

Sales

and

marketing.

As

you

can

imagine,

sales and

marketing,

we

are

trying

to

keep

up

with

the

pipeline

and

as

the

pipeline

keeps

on

growing

and

growing

and

growing,

we

need

to

make

sure

that

we

have

some

experienced

AEs

and

RVPs

that

can

help

them

along

the

way,

and

they've

done

fantastic

jobs

over the

last

year.

Our

data

centers.

We

see

the

pipeline.

We

see

the

potential

customer

growth

that

we're

expecting.

We

need

to

make

sure

that

we

have

those

data

centers

up

and

running

in

advance.

And

so,

part of

that

is

hitting

us

as

well,

and

that's

hitting

our

gross

margins,

particularly.

Our

customer

support,

another

great

example

of

an

area

where

we

need

to

have

people

who

are

onboarded

and

ready

to

go

to

be

able

to support

this

bigger

customer

base

that's

been

growing quite

rapidly.

And

then

the

other

piece

to

remember

is

as

we

made

a

big

investment

in

R&D

last

year.

And

we

did

that

because

the

opportunity

is

growing.

We're

continuing

to

maintain

that

R&D

growth

because

we

are

no

longer

a

company

that

is

thinking

that

we're

going

to

have

200 customers

for

the

rest

of

our

life,

it's going

to

be

2,000 customers

at

some

point

and

we

need

to

make

sure

that

our

platform

is

able

to

support

that

rapid

scaling

growth.

And

I

think

we're

going

in

the

right

direction. And

it's

a

great

position

to

be

in

when

you

say,

okay,

if

we

do

this,

this

is

going to

be

the

result.

And

that's

exactly

what

happened

in

2021,

and

in

fact,

it

probably

was

a

little bit

better

than

we

were

expecting.

[Robert Young, Analyst, Canaccord Genuity Corp.]

Okay.

Thanks.

Thanks

for

all

that

color.

My

next

question

will just

be

around

RapidStart.

I

think

if

there

was

one-third.

I

think

that

seems

to

me

to

be

lower,

I

might

be

wrong

on

that,

but

is

that

a

normalization

of

the

business,

are

you

seeing

the

core

larger

enterprise

sort

of

go

back

to

a

more

normal

deployment

with

more

customization,

and

RapidStart's

driving

channel

and

mid-market?

Maybe

you

guys can

talk

about

that

dynamic,

if

that's

the

case.

[John Sicard]

Sure.

Absolutely.

So,

yeah,

this

quarter,

we're going

to

see

quarter-to-quarter

fluctuations.

We've

seen

quarters

where

it

was

half

and half.

We've

seen

some

quarters

where

RapidStart

was

being

picked

up

by

mid-market

over

enterprise,

I'd

say,

in

this

past

quarter,

we

were

surprised

to

see

the

enterprise

companies,

some

enterprise

companies

moving

in

that

direction

as

well.

But

we

are

going

to

see

some

fluctuations

quarter-over-quarter.

The

key

here

is

–

for

us

anyways,

is

just

to

be

able

to offer

unmatched

deployment

speed

for

any

size,

any

size

company.

And

in

that

regard,

RapidStart

has

been

an

absolute

success.

If

you

think

about

it,

it's

relatively

new.

And

so,

we're

thrilled

to

see

the

adoption

and

the

uptake.

And

then

I

also

wanted

to clarify

one

thing

that

in

some

cases,

we

are

signing

long-term

agreements

that's

obviously

building

our

ARR

and

RPO

numbers.

We're

– and

it's

a,

an

enterprise

class

kind

of

a

deal

structure

where

the

first

phase

is

still

a

RapidStart.

It

just

doesn't

stop

there,

right.

So –

and

so

that

to

some

degree,

is

coloring

those

numbers

a

bit.

So

in

any

case,

I

would

say,

the

RapidStart

methodology

was

a

great

decision.

It's

actually –

it's

working

exactly

as

expected.

And

frankly,

without

it,

some

of

the

deals

that

we

closed,

we

wouldn't have

been

qualified

for

without

having

a

RapidStart,

RapidValue

go

live

in

12

weeks

or

less

kind

of

an

approach.

[Robert Young, Analyst, Canaccord Genuity Corp.]

All right. Is

that

dynamic

what's

driving

that

guaranteed

expansion

that

you

talked

about?

[John Sicard]

Well,

certainly,

our

land

and

expand

strategy

is

always

– it's

been

omnipresent,

as

long

as

we've

known

each

other,

Rob,

right?

And

it

continues

to

be

so.

We've

had

many

cases

where

customers

who

started

with

a

RapidStart

12-week

deployment

has –

they've already

expanded.

You

see

them

expanding

one

quarter

later

and

they're

already

saying,

okay,

this

is

great,

let's

keep

moving.

Let's

expand

from

here.

And

so,

the

expansion

model

is

definitely

baked

into

the

model

here.

We

certainly

don't

get

any

future

stake

revenue

because

of

RapidStart.

That's

another

very

important

statement

to

make.

The

fact

that

we

are

deploying

this

Rapid Time

to

value,

reducing

the

friction

to

making

a

decision,

getting

live

inside

of

12

weeks

by

no

means

does

that

mean

that

Kinaxis

is

forfeiting

any

future

stake

opportunity.

It's

quite

the

contrary. We're

looking

at

the

expansion

as

soon

as

we

hit

that

go

live.

[Robert Young, Analyst, Canaccord Genuity Corp.]

Okay.

Last

question,

just

on

the

sub-term,

a

lot

bigger

than

I

expected.

And

I've

always

assumed

that

to

be

a

flat

or

maybe

slightly

declining

business

with

expansion. So,

is

that

entirely

what's

going

on

here?

You

had

the

new

name

in

Q4

that

you're

talking

to

– last

quarter,

you

were

talking

about.

So

is

this

sub-terms

outdrawn

by

expansion?

Or

is

there

new

wins?

Is

there

some

other

dynamic

that's

causing

the

growth

this

quarter? And

then

I'll

pass

the

line.

[John Sicard]

A

great question

and

[indiscernible]



(00:36:06)

It

is

technically

an

expansion. It's

the

number

of

companies

coming

together

that

fall

under

one

umbrella.

And

so

we've

– that

has

expanded.

We,

obviously, jump

into

it

and

go

a

little

bit up

the

question,

which

is

we

gave

guidance

of

23%

to

25%

SaaS

growth.

If

we

weren't

expecting

that,

we

would

have

the

increase

that

we

got

in

subscription

term

license

revenue,

where

we

thought

it

might

have

been

more

on

the

SaaS

side,

which

would

have

provided

us

with

the

opportunity

to

give

you

maybe

a

higher

guidance

than

we

have

at

this

point.

So

we're

very

pleased

that

we're

still

getting

the

subscription

term

license

revenue.

It

does

come

from

expansion.

It's

an

interesting

scenario

where

we

had

a

lot

of

great

things

happening in

Q4,

and

that

expansion

was

one

of

the

ones

that

was

a

nice

surprise.

[Operator]

Our

next

question

comes

from

Paul

Treiber

from

RBC

Capital

Markets.

Please

go

ahead.

[Paul Treiber, Analyst, RBC Capital Markets]

Thanks

very

much,

and good

morning.

Just

a

follow-up

question

about

your

comment

on

expansions, I

mean,

you

mentioned

it

on

– for

term

license.

But

just

in

regards

to

the

renewals

in

the

quarter,

how

has

gross

expansion

been

tracking

in

2021?

Have

you

seen

an

expansion

versus

historical

rates? And

then

also

do

you

see

an

improvement

in

local

retention

and

ultimately

net

dollar

expansion

this

year?

[John Sicard]

Yeah.

Great

question.

So, we

currently

provide

disclosure

or

guidance

that

we're

over

100%

interim.

But

I

will

give

you

a little

bit

of

color

on

that.

It

is

definitely

going

up

into

the

right.

It's

higher

than

we've

seen

for

– a

large

part

of

that

is

driven

because

the

revenue

expansion

that

we've

seen

over

2021

is

some

of

the

strongest

we've

ever

seen.

Our

renewal

expansion

was

extremely

strong

in

2021.

When

we

think

about

the

logo

retention

numbers,

we've

talked

about

this

before.

For

enterprise

type

customers,

you

should

expect

somewhere

in

the

range

of

95%

to

100%.

We're

right

in

the

middle

of

that,

despite

the

fact

that

we

also

had

mid-market

and

we

have

even

smaller

customers

in

mid-market.

So

we

are

very

strong

on

the

logo

retention,

I'll say.

[Paul Treiber, Analyst, RBC Capital Markets]

Thanks.

That's

helpful.

A

high-level

question

in

terms

of

the

overall

demand

environment,

meaning

obviously,

your

comments

are

very positive

about

the

demand

environment.

But

just,

there's

a

number

of

other

digital

transformation

initiatives

that

large

enterprises

are

going

through

right

now.

And

also

supply

chains

have

been

disrupted.

Based

on

the

feedback

from

partners

and

customers,

how

do

you

see

supply

chain

transformation

ranking

among

all

the

digital

transformation

initiatives

out

there?

[John Sicard]

Yeah.

It's

a

great,

great

question.

And

I've

spent –

I've

had

probably

between 80

and 90

now,

one

on

one

conversations

with

chief

supply

chain

officers

all

over

the

world,

call

them

interviews,

if

you

will,

as

part

of

our

process

here.

And

it

is

absolutely

at

the

forefront.

I

mean

boards

are

asking

their

CEOs,

what

are

you

going

to

do

next

time?

And

if

it

isn't

a

pandemic,

it's

the

inflationary

impacts

globally

to

profit

margin,

or

it's

a

war

or

a

stuck

vote,

a

deep

freeze

in

Texas.

There's

this

appreciation

that

the

only

constant

in

all

of

supply

chain

is

disruption.

And

if

anything

boards

have

realized

that

supply

chains haven't

proven

to

be

as

resilient

as

they

should

be

to

absorb

these

types

of

things,

I

will

say

this,

and

this

is

a

narrative

that

is

really,

really

well

received.

This

is

not

a

technical

problem.

And

many

people

think

it

has

to

do

with

digital

transformation.

I

would

[ph]



master

(00:40:23) that

that's

secondary.

The

primary

dialog

that

we're

hearing,

the

primary

narrative

that

we're

hearing

from

practitioners

is

that

what's

wrong with

current

supply

chains

is

the

technique,

not

the

technology.

It's

not

a

technological

discussion

at

first,

it's

one

of

the

technique.

So,

I

do

think

this

is

absolutely

at

the

forefront.

We're

being

asked

now

from

some

customers

to

do

inflationary

scenario

management

like –

and

again,

inflation

occurs

in

different

geographies

at

different

rates

and

will

see

recovery

of

inflation

at

different

rates

in

different

geographies.

And

these

companies

are

running

daily

scenarios

to

try

to

understand

what

the

implications

are

of

that

disruption.

So,

I

think

again,

as

I

said

earlier,

I

have

just

maybe

in

previous

quarters,

you

would

have

heard me

say,

I'm

not

quite

ready

to

call

this

systemic

momentum.

Maybe

I

am

now

and

again,

Q4,

the

success

that

we

experienced

and

as

I

just

said

earlier,

the

success

that

we've

experienced

in

the

first

eight

weeks

of

2022,

the

momentum

is –

the

pace

is

maintaining

itself

here.

So

I

would

say

this

is

at

the

forefront

of

enterprise

discussions

and

what

boardrooms

are

talking

about.

[Blaine Fitzgerald, Chief Financial Officer, Kinaxis, Inc.]

And

maybe

I'll

just add,

there

is

an

interesting

article

or

an

update

from

the

forecast

from

Gartner

in

January

of

this

year

on

application

software.

And

they

made

a

statement

saying

that

they

expected

that

their

modeling

growth

rates

to

increase

the

most

now

within

supply

chain

management

sector

in

2022.

That's

just

another

testament

to the

fact

that

we're

in

this

renaissance

that

we're

going

through.

We're

going

through

this

push

that

is

we're

in

the

process

of

land

grab,

get

as

many

customers

because

it's

at

the

forefront

of

everyone

thinking

right

now,

they

need

to

figure

out

their

supply

chains.

[Paul Treiber, Analyst, RBC Capital Markets]

Just

a

final

question

for

me

and

maybe

the

punch

line

here

is,

in

terms

of

win

rates,

I

mean,

you

talked

a

lot

about

pipeline.

How

is

the

pipeline

converting

through

the

funnel

compared

to

your

historical? Are

customers

closing

at

a

faster

pace

or not

pace

but

probability,

than

what

they

historically

have?

[John Sicard]

Paul,

I

don't know,

you

can't

see

my

smile

here,

but

you

must

be

like,

just

give

me

a

slow

pitch

right

now,

your

new

tossing

it

up.

So

these

are

great

questions.

Our

pipeline

is

obviously

growing,

but

the

other

big factor

that

you

have

to

look

at

is,

what

our

conversion

rate.

So

it

is

great

that

you

asked

that

question

and

our

conversion

rates

are

going

up,

up,

up,

conversion

rates,

win

rates,

we

were

at

a

board

meeting

yesterday, we

were

looking

at

wind

rates

and

how

they

changed

over the

last

four

years,

and

it's

like

up

into

the

right.

Our

conversion

rates

of

Q4

was

one

of

the

strongest

and

we

know,

we

went

into

Q4

going –

our

pipeline

is

really

good.

But

to

get

the

number

that

we

want,

we

got

that

pretty

high

conversion

rate

and

then it

converted even

higher

than

we

were

expecting,

which

is

a

great

sign.

So,

all

I've

to

say

is

that

you're

making

me

very

happy

with

your

questions.

And

we

are

– conversion

rates

are

doing

great.

Our

win

rates

are

doing

great.

Our

pipeline

is

growing

and

those

are

all

the things

that you'd

want

as

a

CFO

right

now.

[Paul Treiber, Analyst, RBC Capital Markets]

Great.

I'll

pass the

line.

[Operator]

The

next

question

comes

from

Stephanie

Price

from

CIBC.

Please

go

ahead.

[Stephanie Price, Analyst, CIBC World Markets, Inc.]

Hi,

good

morning.

Just

curious

on

inflation

and

how

much

inflation

is

factored

into

the

margin guide

here?

Just

think

about

talent

acquisition

and

retention

specifically.

[John Sicard]

Sure.

All

right.

We're

like

every

other

company

around

the

world.

We're

getting

hit

by

some

of

the

inflation

issues

that are

happening.

We've

included

increases

in

salaries

and

benefits

within

our

guidance.

So

that's

already

baked

in.

And

we

do

see

that

there

is

going

to be

a

situation

at

some

point

where,

I

think,

because

we're

in

an

area

that

a

lot

of

people

are

seeing

more

often

supply

chain,

that

I

think

we

will

benefit

on

the

attrition

that

some

of

the

other

companies

may

have

and

they

may

be

attracted to

our

area.

We

are

seeing

some

attrition

issues in

our

area

as

well.

I

think

they're

lower

than what

we're

seeing

throughout

the

rest

of

the

industries.

But

I

think

we're

also

in

a

great

position

there.

And

more

people

talk

about

supply

chain

and

the

issues

of

supply

chain

have

the

more

time,

the

more

chance

it

will

get

people

attracted

to

our

business,

so.

[Stephanie Price, Analyst, CIBC World Markets, Inc.]

Thanks. And

then

just

sticking

on,

on

the

margin

guide, maybe

you

could

talk

a

little

bit

more

about

the

investments

that

you're

making.

I

understand

that

it's

kind

of

broad-based,

but

where

specifically

should

we

kind

of think

about?

[John Sicard]

I

think

like

the,

there

are

certain

things

that

we

need

to

do

purely

because

of

what

we're

seeing

in

the

current

environment is

demand.

But

I

would

say,

sales

and

marketing

is

the

one

that

you

should

really

focus

on.

We

have

an

exceptional

sales

team

and

they're,

they're

very,

very

efficient.

We

do

look

at

our

sales

efficiency. We

compare

ourselves

to

our

peers.

We

believe

we're

best-in-class

in

that

self-sufficiency

metric.

And

we're

looking

at

where

it's

going

to be

with

respect

to

2022.

And

we think

that

we'll

be

in

a

very,

very

strong

position.

So

sales

and

marketing

is

where

I

would

say

that

people

should

focus and

if

they

understand

the

efficiency

metric,

which

you

can

actually

calculate,

we

look

at

the

next

12

months ARR

growth

divided

by

the

last

12 months

sales

and

marketing.

And

then,

you

can

see

the –

that

you'll

see

the

trend

going

up

into

the

right

over

the

next

year,

I

believe,

based

on

our

ARR

projections

that

we

have

baked

in.

So

it's

a

nice

place

to

be.

[Stephanie Price, Analyst, CIBC World Markets, Inc.]

Great,

thank

you very

much.

[Operator]

The

next

question

comes

from

Richard

Tse

from

National

Bank

Financial.

Please

go

ahead.

[Richard Tse, Analyst, National Bank Financial, Inc.]

Morning.

This

is

[indiscernible]



(00:46:58) calling

in

for

Richard. Just

wanted

to

ask

about

the

CapEx. We

noticed

there

was

a

ramp

in

PP&E.

From

the

looks

of

it,

it

seems

like

it's

related

to

the

new

offices.

Just

wondering

if

I

think

is

correct. And

also

of

your

guidance

for

2020,

how

much –

is

there

any

sort

of the

office

expenses

basically

baked

into

that?

[John Sicard]

Yes.

I

caught

most

of

that.

I

think

you

asked

with

the

Q4

ramp

in

CapEx.

Majority

that

does

relate

to

our

headquarters

that

have

been

basically

complete

at

this

stage. We

got

to

say

that

we're

100%

on

all

levels.

And

it

came

in,

funnily

enough,

a

little

bit

below

our

budget,

which

never

happens,

right.

And

then

for

our

guidance

just

to

make

sure

I

understand

your

question

correctly,

were

you

asking

about

what

our

guidance

was?

Did

it

bake

in

the

CapEx

analysis?

Is

that

you were

asking?

No.

I

was

just

asking

on

the

CapEx,

you

guys

have

guidance

of

$23

million

to

$28

million.

So

how

is –

was

there

incremental

basically

office-related

CapEx

there?

Is

that

all

related

to

the

data

center,

et

cetera?

[John Sicard]

Yeah.

Sorry.

It's

–

it

is

almost

all

related

to

data

centers.

There

are

some

small

amounts

that

relate

to

offices.

We

are

in

the

process

of

moving

our

building

in

India.

So

we've

a

smaller

bid

up

amount

that

we

will

have,

but

the

majority of

this

has

to

do

with

the

data

centers.

Okay.

And

then,

I'm

sorry,

I

heard

a

bit

of

it,

but

I heard

that

you

said

for

the

subscription

term

license

[indiscernible]



(00:48:39)

two-thirds

would

be

recognized

in

the

first

quarter,

both

the

breakup

for

the

rest

of

the

quarters

again?

[John Sicard]

No.

A

100%

of

that

amount

in

Q1.

Okay.

[John Sicard]

100%

of

the – sorry,

I shouldn't

have

said

that.

Two-thirds

of

it

will

come

in

Q1

of

the

total

amount

that

we

guided

to. There'll

be

very

little

amount

in

Q2

and

then

other

amounts

in

Q3

and

Q4.

Okay.

And

then –

and just

one

question

about

whether

there's

been

any

change

in

the

competitive

environment

including

pricing.

[John Sicard]

Yes.

So

on

the

competition

side,

we

really

haven't

seen

any

meaningful

shift.

We

continue

to

see SAP

as

the

typical

incumbent

especially

in

larger

enterprise.

I'd

say

as

it

relates

to

pricing

that

I

wouldn't

say

competitive

pressures

isn't

necessarily

where

we're

focused,

but

RapidStart

and

the

ability

to

lower

the

friction

of

getting

started

is

where

we

have

focused

our

attention

there

and

that

has

worked

in

our

favor.

So

this

certainly

helps

with

mid-market

companies

that

are

looking

for

an

extremely

aggressive

timeline

to

value.

And

so

not

only

is

the

pricing

and

the

timing

of

RapidStart

beneficial

there.

It

certainly

increases

our

win

rate,

I'd

say

that.

Okay.

Thanks.

Congrats

on

the

quarter

and

I'll

pass

the

line.

[John Sicard]

Thank

you.

[Operator]

And

our

next

question

comes

from

Christian

Sgro

from

Eight

Capital.

Please

go

ahead.

[Christian Sgro, Analyst, Eight Capital]

Hi,

good

morning.

I

wanted

to

ask you

about the

current

pipeline.

Maybe

we

could

ignore

geography.

I'm

more

curious

on

what

you're

seeing

from

the

different

verticals.

Now,

which

do

you think

could

be

your

strongest

key

verticals

this

year?

[John Sicard]

Yeah, it's

interesting,

as

we

were

just

at

a

board

meeting,

and

I'm

describing

to

the

board

the

what

the

pie

chart

looks

like

by

vertical,

and

I

have

to

tell

you,

all

six

verticals

are

on

the

board

in

very

meaningful

ways.

We

don't

necessarily

see

any

out

weighting.

That

said,

just

looking

at

the

general

pipeline,

we

continue

to

see

high

tech

electronics

and

life

sciences

as

predominant

drivers

of

subscription

revenue.

But

as

you

just heard

during the

opening

remarks,

I

think

I

mentioned

five

or

six

consumer

packaged

goods

companies

in

that

list.

And

I

think

on

prior

calls,

I've

said,

we

are

starting

to

see

that

area

warm

up

for

us.

And

so

that

has

actually

manifested, as

I

said

it

in

previous

calls,

it's

manifested

in

some

significant

net

new

names

there.

And

so that's, I

would

say,

high

tech

electronic

CPG,

life

sciences

tend

to

be

the

warmest.

But

as

I

noted

with

Mazda

in

the

automotive

sector,

there

has

been

some

wins

in

the

aerospace

and

defense

sector,

which

we're

not

able

to

share.

But

I'd

say

all

the

verticals

are

warming

up.

And

the

pipeline

itself,

I

don't

see

any

concentration

issues

geographically.

I

don't

see

concentration

issues

from

a

vertical

perspective.

And

I

feel

a

little

bit

like

a

broken

record

because

I

feel like

I

say

that

every

quarter.

But

it's

the

– I'm

saying

it

because

that's

what

the

charts

are

telling

me.

So

we're

really,

really

happy

with

not

only

the

strength

and

size,

but

the

distribution

of

the

pipeline.

[Christian Sgro, Analyst, Eight Capital]

That's

very

helpful.

I've

got

a

second

question

here

on

the

partner

channel.

I

wanted to

ask

about

Planning

One

program

with

bar

partners.

So

maybe

a

two-parter.

First,

I

was

curious

what

will

Kinaxis'

level

of engagement be

with

these

bar

partners

and

only

think

of

things

like

sales

and

support?

And

then the

second

question

is

just

some

of

the

traction

you're

seeing

what

you're

hearing

from

your partners

today.

[John Sicard]

And

so,

I

think

I

mentioned

this

earlier

that

our

thesis

around

the

alliance

partnerships

remains

very,

very

strong.

It's

working.

Our

partners

are

as

busy

as

we

are.

We're

doing

our

best

to

leverage bench

strength

where

we

can

find

it,

and

all

of

us,

partners

and

us,

obviously

hiring

to

serve

the

demand.

The bar

program

is

quite

new.

We

announced

that

in

2022,

I'm

happy

to

say

that

in

a

very

short

period of

time,

we've

signed

up,

I

want

to

say

it's

close

to

20,

if

not

20 bar

partners

around

the

world.

We're

working

right

now

on

getting

them

ready

for

success,

if

you

will, and

onboarding

them

and

the

enablement

side.

And

you're

absolutely

right

to

call

on

RapidStart

is

the

foundation.

The

Planning

One

is

a

product,

leveraging

RapidStart

as

a

deployment

methodology

is,

obviously,

where

we

think

we

can

get

the

most

leverage.

So

stay

tuned

on

that.

As

I

said,

it's

a

relatively

new

program

for

us.

But

I

would

say

the

number

of

hours

that

we've

signed

to

date

has

outpaced

our

expectations.

And

so,

we're

investing

right

now

where

this

is

again

part

of

the

investment

thesis

in

preparing

for

success

is

to

make

sure

that

we

don't

just

sign bars

and

name

only,

they

have

to

be

successful

and

they

have

to

be

properly

on

boarded.

And

for

that,

we

have

to

make

investments.

[Christian Sgro, Analyst, Eight Capital]

Okay.

That's

all

helpful

color. Thanks

for

taking

my

questions.

[John Sicard]

Thank

you.

[Operator]

In

the

interest

of

time,

we

ask

that

you

ask

one

question

from

now

on.

And

our

next

questioner

will

be

Paul

Steep

from

Scotiabank.

Please

go

ahead.

[Paul Steep, Analyst, Scotia Capital, Inc.]

Great.

I'll

make

my

quick

one

two

parts,

just

a

clarification,

and

a

first

one.

Blaine,

can

you

just

confirm

that

in

terms

of

how

you

think

about

deploying

capital

on

investments,

I

guess,

haven't

changed

how

you're

thinking

about

that

in

terms

of

data

center,

right?

In

terms

of

the

build,

the

build

profile,

you're

still

looking

one

to

two

year

out

when

you're

doing

it,

if

we

sort

of

read

into

the

growth

of

that?

And

then

the

second

follow-up

quickly

would

just

be

on

the

term

license,

how

should

we

think

about

the

drop

down

of

that

over

a

three-year

period?

Should

it

mirror

what

we

saw

the

last

go

round?

Thanks

guys.

[Blaine Fitzgerald, Chief Financial Officer, Kinaxis, Inc.]

Great.

So

that'd

be,

the

answer

to

the

first

question, yes,

is

the

answer.

We're

not

changing beyond

our

capital

deployment.

But

the

second

question,

with

respect

to

how

we

should see

subscription

term

license

over

the

next

three

years,

again,

we've

seen

subscription

term

license

historically

before

Q4

and

what

you

will see

in 2022.

Nearly

– what, like,

no

renewals

and

limited

expansion.

But

obviously,

we

saw

some

as

new

name

accounts

in

Q4

and

then

some

expansion

you're

going

to

see

in

2022.

So

what

I

would

expect

is

you'll

see

a

similar

drop-off

in

2023

compared

to

what

you

saw

again

the

three

years

prior

to

that

and

the

same

thing

in

2024.

But

all

of that

is

dependent

on

what

happens

with

expansion

in

our

subscription

term

license

revenue

area.

And

I

don't

expect

it

to

go

up

to

change.

But

at

this

stage, I

wasn't

expecting

to

have

the

increases

we've

seen

over

the

past

two

quarters.

[Paul Steep, Analyst, Scotia Capital, Inc.]

Understood.

Thanks.

[Operator]

The

next

question

comes

from

Nick

Agostino

from

Laurentian

Bank

Securities.

Please

go

ahead.

[Nick Agostino, Analyst, Laurentian Bank Securities, Inc.]

Yes.

Good

morning.

Yes.

My

one

question

is

with

regards

to

the

big

events

–

event,

if

you

will, Big

Ideas

event that

you

guys

hosted

last

year in

October,

obviously

well

attended. And

my

question

is

how

much

of

that

event

itself

is

contributing

to

the

pipeline

growth

you

guys

are

talking

about

on

this

call?

And

maybe

how

much

of

that

event

has

led to

deals

that

are

being

baked

into

the

guidance

for

2022?

Or

is

the

answer

nothing but

you

walk

away

with

prospects

that

maybe

you

think

are

contributing

to

2023

and 2024?

Thank

you.

[John Sicard]

Yeah.

It's

a

great

question,

Nick.

And

we

were

actually

quite

thrilled

and

surprised

at

how

much

these

virtual

events

have

driven

from

an

interest

and

ultimately,

in

some

cases,

real

pipeline

development.

We

track

exactly

who

is –

these

are,

I

won't

say,

by

invitation,

but

they're

by

registration.

And

so

we

know

with

absolute

precision,

who

is

attending.

And

that

gets

mapped

to

our

TAM.

We

know

exactly

which

accounts

are

joining

in

on

these

virtual

events

like

Big

Ideas.

And

so

that

gives

us

an

opportunity

to

warm

up

prospects

that

we

know

are

in

our

sweet

spot.

So

it's –

I

can't

tell

you,

I

know

with

absolute

precision

what

the

percentage

of

pipeline

of

individuals

that

attended

Big

Ideas,

but

it

is

definitely

not

zero.

That

is

for

sure.

And

we've

other

events

that

we're

doing

and

you'll

see

more

during

2022.

We

are

hosting

an

in-person

connections

event

and

certainly

hope

to

see

our

analyst

community

attending

that

in

early

May.

And

so

we're

going

to

continue with

the

virtual

programs

as

well

because,

as

you

saw,

we

had

thousands

of people

tuning

in

to

hear

our

story

and

to understand

what

makes

us

so

[ph]



elevated (00:59:15).

And

so

I

think,

part

of

a

big

ideas

is

absolutely

fueling

the

pipeline

and

part

of

it

is

coming

from

the

likes

of

a

Gartner

and

a

recognition

that

the

concurrency

is

truly

a

breakthrough

technique.

[Nick Agostino, Analyst, Laurentian Bank Securities, Inc.]

Okay,

thank

you.

[Operator]

Our

next

question

comes

from

Suthan

Sukumar

from

Stifel.

Please

go

ahead.

[Suthan Sukumar, Analyst, Stifel Financial Corp.]

Morning,

gents,

and

congrats

on

an

impressive

quarter.

I

had

a

question

earlier

on

market

opportunity.

It

really

sounds

like

you

guys

are

seeing

some

really

strong,

broad-based

demand

globally

really in

the

market

today.

Do

you

see

an

opportunity

for

more

geographic

expansion

to

really

increase

your

presence

in

the

market

that

may

not

be

served

today

or

you

see

yourselves

well

positioned

with

your

current

footprint

than

your

partner

reach?

[John Sicard]

I

love

this

question

because

I

mean,

the

answer

is

an

unequivocal

yes.

Just

like,

whether

it's

geography

or

other

verticals

and

as

the

call

started

with

Thanos

pointing

out

oil

and

gas,

where

you

might

not

have

thought

of

Kinaxis

being

a

viable

fit.

And

I

always

say

the

same

thing.

Are

we

going

to

break

into

this

vertical

or

that

vertical

or

[indiscernible]



(01:00:38) or

forestry?

Yes,

it's

a

matter

of

time.

And

so,

the

same

is

true

for

geographies.

Now

that

said,

part

of

our

thesis,

and

I

think

part

of

what

makes

Kinaxis

able

to

grow

while

simultaneously

providing

responsible

profit

and

cash

flow

is

that

we're

hyper

focused.

We're

razor-focused

on

the

verticals

and

the

TAM

that

we

see

before

us.

And

I'm

just

not

a

believer

in

bifurcating

our

energy

across

too

many

geographies

and

too

many

verticals

simultaneously

and

failing

at

all

of

them.

So

the

answer

is

yes. We

think

about that

a

lot

about

geographies and

verticals. And

we

think

more

so

on

verticals than

the

geographies where

we're

already strong,

frankly, if

I'm

going to

be

frank

about

that.

But

you

will

see

continued

expansion

as

we

progress

as

a company.

Part

of

that

is

the

investment,

the investments

we're

making

in

R&D.

You'll

see

us

entering

the

retail sector,

for

example,

in

earnest

during 2022

based

on

the

investments

that

we're making.

We

already

have

retail customers

and

we

have

retail

[indiscernible]

(01:01:50).

And

at

some point

in

the future,

I

hope

you'll

be

able

to describe

exactly

who they

are.

But again,

these

take investment and

you'll

see

us continue

to do

that

for

many years

to

come.

[Suthan Sukumar, Analyst, Stifel Financial Corp.]

Okay. Perfect.

Thanks for

taking

my

question.

[John Sicard]

Thank

you.

[Operator]

The

next

question

comes

from

Matt –

excuse

me,

Martin

Toner

from

ATB

Capital

Markets.

Please

go

ahead.

[Martin Toner]

You've

talked

about

the

acute

reasons

for

professional

service

growth

being

higher

than

subscription

and

higher

as a

overall

percent

has

been

in

the

recent

past.

Is

there

anything

structural

about

that?

[John Sicard]

I

don't

see

anything

other

than

just

pure

accelerated

demand.

When

you

have

a

certain

collected

bench

strength

between

your

partner

alliance

group

and

Kinaxis

and

obviously

our

own

bench.

And

the

combined

market

demand

that's

driving

the

need

for

service

in

an

accelerated

pace

that's

what

this

is

coming

from.

We

have

customers

asking

us

for

sustainment

services

at

a

record

pace.

Again,

a

lot

of

this

is

a

reaction,

manufacturers

are

reacting

to

the

volatility

they're

experiencing

in

the

market

and

that

is

driving

a

need

to

accelerate

the

value

of

concurrency.

And

so,

when

you

look

at

the

demand,

the

capacity

required

to

fulfill

that

demand.

Well,

the

truth

of

the

matter

is

we're

seeing

a

demand

that's

outpacing

the

collective

capacity

at

a

rate

that

we.

Well,

it's

a

great

problem

to

have,

but

it's

a

problem.

And

it's

not

just

ours,

it's

our

alliance

partners

are

tapping

and

they're

hiring

as

fast

as

they

can.

And

again,

this

is

a

reason

for

our

investment

thesis

for

2022.

We're

not

going

to

be

timid.

We

are

not

going

to

be

timid

in

the

face

of

this

momentum

and

nor

will

our

partners.

We're

going

to

seize

the

day.

And

so

it's

a

great

problem

to have,

but

it's

a

problem.

And

so

we're

working

on

it

every

single

day.

[Martin Toner]

Great

answer.

Thank you

very

much.

[Operator]

This

concludes

our

question-and-answer

session.

I'd

like

to

turn

the

conference

back

over

to

Rick

Wadsworth

for

any

closing

remarks.

[Rick Wadsworth, Vice President-Investor Relations, Kinaxis, Inc.]

Thanks,

operator,

and

thank

you

all

for

participating

on

our

call

today.

We

appreciate

your

questions

and

your

ongoing

interest

in

support

of

Kinaxis.

We

look

forward

to

speaking

with

you

again

when

we

report

our

first

quarter

results.

Goodbye

for

now.

[Operator]

Conference

is

now

concluded.

Thank

you

for

attending

today's

presentation.

You

may

now

disconnect.