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A N N U A L R E P O R T
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A leader in
supply chain planning
Carbon neutral for 2020
Kinaxis’ 2020 Scope 1, 2 and 3 emissions have been measured and offset with Carbonzero
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Carbon neutral and committed to stay that wayKinaxis has made sustainability one of our six core strategic pillars. When it comes to our environmental footprint, Kinaxis’ priority is to reduce carbon emissions from business operations, and we continue to expand programs to achieve that goal. In 2021, for the first time Kinaxis measured and disclosed our Scope 1, 2 and 3 greenhouse gas emissions and purchased quality offsets to achieve carbon neutrality for 2020. You can read more in our Global Impact Report for 2021. For the long term, Kinaxis is fully committed to reducing our Scope 1 to 3 emissions and will continue to offset any emissions that remain after our reduction efforts.Everyday volatility and uncertainty demand quick action. Kinaxis® (TSX:KXS) delivers cloud-based software-as-a-service (SaaS) solutions that enable the agility to make fast, confident decisions across integrated business planning and the digital supply chain. People can plan better, live better and change the world. Trusted by innovative brands, we combine human intelligence with AI and concurrent planning to help companies plan for any future, monitor risks and opportunities, and respond at the pace of change. Powered by an extensible cloud-based platform, Kinaxis delivers industry-proven applications so everyone can know sooner, act faster and remove waste. Table of
Contents
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62
Financial Highlights
Letter to Shareholders
Expanding the Opportunity with Mid-market Companies
Consolidated Financial Statements, Years Ended December 31, 2021 and 2020
Management’s Discussion and Analysis for the Year Ended December 31, 2021
Financial Highlights
Kinaxis customers sign multi-year subscription agreements for our RapidResponse® supply chain planning platform.
The business model provides a predictable, recurring revenue base that has grown rapidly over time as we have added
new customers across seven vertical markets and expanded deployments with our existing customers. Our operations
continue to generate significant cash.
US$ Millions
250.7
224.2
191.5
150.7
133.3
17% SaaS revenue growth
233.4
212.6 213.1
181.5
158.5
174.5
148.9
118.9
100.8 97.2
Margin
30% 28% 30% 24% 16%
57.7 53.8
40.1 41.7
39.9
Total Revenue
Subscription/SaaS Revenue
Adjusted EBITDA
Cash, Cash Equivalents
and ST Investments - EoY
2017
2018
2019
2020
2021
1 Adjusted EBITDA is a non-IFRS measure. For reconciliation of Adjusted EBITDA to profit, please see "Management's Discussion & Analysis"
2 Results for 2018 and after reflect change to IFRS 15 standard
3
4
4
Annual Recurring Revenue (ARR)3
Remaining Performance Obligation (RPO)
Our ARR is the total annualized value of recurring subscription amounts (ultimately recognized as SaaS, Subscription
Our RPO represents revenue that we expect to recognize in the future related to firm performance obligations that are
term licenses and Maintenance & support revenue) of all subscription contracts at a point in time. Such amounts are
unsatisfied (or partially unsatisfied) on December 31, 2021, for our signed multi-year contracts. It is a good indicator of our
determined solely by reference to the underlying contracts, normalizing for the varying revenue recognition treatments
secured business at a moment in time.
under IFRS for cloud-based versus on-premise subscription amounts. We believe that ARR provides an excellent indication
of the current growth of our subscription business at a moment in time.
US$ Millions
$24M, or 15%
$40M, or 21%
$26M, or 17%
$36M, or 19%
185
183
159
159
221
225
US$ Millions
500
400
300
$483.8
27% v Q4 2020
$423.5
20% v Q4 2020
$381.3
$353.5
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Total RPO
SaaS RPO
2019
2020
Q1'21
Q2'21
Q3'21
Q4'21
Constant Fx
Total ARR
3 For ARR, annualized subscription amounts are determined solely by reference to the underlying contracts, normalizing for the varying revenue recognition
treatments under IFRS 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. ARR is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Accordingly, non-IFRS measures and
industry metrics should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.
5
6
6
Letter to
Shareholders
4 For ARR, annualized subscription amounts are determined solely by reference to the underlying contracts, normalizing for the varying
revenue recognition treatments under IFRS 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. ARR is not a recognized measure under IFRS and does
not have a standardized meaning prescribed by IFRS. Accordingly, non-IFRS measures and industry metrics should not be considered in
isolation nor as a substitute for analysis of our financial information reported under IFRS.
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If I had to sum up 2021 in a single word, it would be “acceleration.” Our customer wins and related metrics, our total addressable market, the value we create for customers, and our environmental, social and governance initiatives all rapidly accelerated throughout the year. We fully anticipate further acceleration in 2022 as we ramp up strategic investments to build our team and capabilities to meet an unprecedented opportunity that sits directly in front of us. Accelerating customer wins, ARR and pipelineWhile we met or exceeded all our financial targets in 2021, the real story of the year was told by some other key operating metrics. We more than doubled the number of new customer wins compared to 2020 by adding more incredible global brands to our installed base. This success, combined with robust expansion activity amongst existing customers, resulted in record bookings of incremental subscription business and, in turn, 21% growth in annual recurring revenue4 over 2020. Meanwhile, the pipeline of new opportunities we continue to work on grows steadily. All these developments point towards 23% to 25% SaaS revenue growth in 2022 – a significant acceleration over 17% growth in 2021 – and total revenue growth of 34 to 38% for the year.Accelerating TAM growthPart of the reason for this momentum is due to ongoing efforts to expand our total addressable market. Our supply chain planning platform, RapidResponse, has long been meeting the needs of enterprise-class manufacturers across six vertical markets around the world. We had identified 2,000 targets amongst that base. Recent efforts have seen us enter the retail market, focus on addressing the needs of mid-market and smaller customers, and add value-added reseller partners, or VARs, to complement our own internal sales efforts. The result is a much larger total addressable market approaching 20,000 potential customers. While we entered the retail market in 2020 via acquisition, we spent 2021 integrating our joint products and will be proactively targeting new retail customers for the first time in 2022. Mid-market customers have always made up some portion of our customer base, but we only started proactive efforts to attract these companies in 2021. As a result, in the year approximately 45% of our new customers wins came from this group. Mid-market manufacturers represent a huge opportunity, and we knew we would need help addressing the market, so we have enlisted 20 VARs globally to help us sell. We fully expect that number to grow substantially over time. VARs are focused on certain mid-market company opportunities and on geographies where we don’t have direct sales teams.Accelerating value creationRapidStartPart of the reason for our success expanding into the mid-market in 2021 was RapidStart, a RapidResponse package that combines foundational planning elements we call Planning One, configured for industry best practices in a way that allows companies to accelerate their initial deployment to achieve concurrent planning in as little as 12 weeks. This simplified first step is extremely attractive to smaller companies, though we have also found many new enterprise-class customers choose RapidStart to start their broader digital transformations. One-third of all new customers in 2021 chose to implement RapidResponse using RapidStart. 5 Gartner, Magic Quadrant for Supply Chain Planning Solutions,
February 2021. This report was previously titled the Magic Quadrant for
Supply Chain Planning System of Record from 2010-2018, and Magic
Quadrant for Sales and Operations Planning Systems of Differentiation
from 2015-2019. Gartner does not endorse any vendor, product or
service depicted in its research publications, and does not advise
technology users to select only those vendors with the highest ratings or
other designation. Gartner research publications consist of the opinions
of Gartner's research organization and should not be construed
as statements of fact. Gartner disclaims all warranties, express or
implied, with respect to this research, including any warranties of
merchantability or fitness for a particular purpose. Gartner and Magic
Quadrant are registered trademarks of Gartner, Inc. and/or its affiliates
in the U.S. and internationally and are used herein with permission. All
rights reserved.
The Gartner content described herein, (the "Gartner Content")
represent(s) research opinion or viewpoints published, as part of a
syndicated subscription service, by Gartner, Inc. ("Gartner"), and are
not representations of fact. Gartner Content speaks as of its original
publication date (and not as of the date of this annual report) and
the opinions expressed in the Gartner Content are subject to change
without notice.
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Accelerating investments for an unprecedented opportunityAs these past couple of years have demonstrated, ongoing disruption continues to be the only constant in supply chains. As we exit pandemic protocols, we continue to see supply chains at the forefront of boardroom conversations and the news. The need for resilience has never been more apparent and demands transformation towards true end-to-end concurrent planning. Kinaxis has never been more relevant or better positioned to serve the needs of our markets. We have good visibility into accelerated SaaS revenue growth of 23 to 25% for 2022 and total revenue growth between 34% and 38%. We are responding to this unprecedented acceleration and market indicators by continuing to invest to grow our market share, further distance our offerings from the competition and be fully prepared to absorb our success. Sincerely,John Sicard, President and Chief Executive Officer, Kinaxis, Inc.Solution extension partnersThroughout 2021 we also continued to have success with our solution extension partners, who extend the value of our open RapidResponse platform with software they have developed. For example, one new partner offers visibility and collaboration in transportation networks, and another helps companies assess the impact of supplier risk and provides mitigation recommendations. We earned revenue from selling subscriptions to our partners’ applications and, more significantly, won new business for RapidResponse thanks to the new capabilities that qualified us into deals where we wouldn’t have otherwise. We have a robust and growing pipeline of opportunities with customers for these product extensions as well as for new software vendors looking to join the partner program.Ongoing innovationAs planned, we released our new AI-enabled Command and Control Center in 2021 and have started receiving orders for this exciting new dashboard that serves as a control tower to get visibility into, manage and solve priority planning items while allowing automation of the simplest tasks. Similarly, our new machine-learning-enabled Demand Sensing application has seen encouraging initial uptake.Kinaxis was named a Leader in the 2021 Gartner® Magic Quadrant for Supply Chain Planning Solutions™- our seventh such recognition, consecutively. We were positioned for our completeness of vision and ability to execute.5 Accelerating our ESG effortsWe have also accelerated our efforts around managing key environmental, social and governance (ESG) factors that impact our business and people, and the world around us. We established four core ESG commitments, aligned them to support six United Nations Sustainable Development Goals, and reported progress against Sustainability Accounting Standards Board metrics for Software and IT Services companies. All details can be found in Kinaxis' recently released 2021 Global Impact Report.As explained in the report, during 2021 we calculated our first greenhouse gas emissions inventory and purchased quality offsets to achieve carbon neutrality for 2020. We are fully committed to maintaining carbon neutrality for Scope 1 to 3 emissions ahead. In 2021, for key roles we required that 30% of candidates presented and 25% of candidates interviewed must be from underrepresented groups. Our annual employee engagement survey revealed that 95% of Kinaxis employees feel that the company treats them with respect, and that 91% of us believe that company leadership is committed to diversity, equity and inclusion. Kinaxis is only at the beginning of an ESG journey, but we are proud of our early success. Sustainability has been elevated to a key pillar in our corporate strategy so we can ensure constant monitoring and improvement. Expanding the
Opportunity with
Mid-market
Companies
Kinaxis and RapidResponse are not just for large
enterprise-level businesses. While we have traditionally
focused our outbound efforts on the enterprise market
(companies with >$1.5 billion in revenue), for years
we have welcomed customers from a wide variety of
industries and in all sizes. Seeing the great opportunity to
help more companies, for the first time we have started
targeting mid-market businesses ($500 million – $1.5
billion in revenue). As a result, in 2021, 45% of our new
customer wins were from the mid-market.
We estimate that this broader focus opens 4,000 new
opportunities for the Kinaxis sales team across our seven
vertical markets and where we have direct sales efforts
Planning One
CONTROL TOWER ESSENTIALS
OPERATIONAL
PLANNING
DEMAND
PLANNING
SUPPLY
PLANNING
INVENTORY
MANAGEMENT
KINAXIS RAPIDRESPONSE® PLATFORM
today. While many of our account executives have opportunities with mid-market companies, we have also added a new
team that focuses exclusively on sales to these organizations. We’ve also just started working with value-added resellers,
who have an opportunity to target approximately 12,000 smaller organizations in our seven core markets. Altogether,
Kinaxis’ target market now includes over 19,000 diverse companies.
RapidStart
Some of our success amongst mid-market companies has been the result of our RapidStart package, a RapidResponse
Adding value to fuel rapid growth
offering that combines foundational planning elements we call Planning One, configured for industry best practices in
a way that accelerates initial deployment times to as little as 12 weeks. This simplified first step is extremely attractive
to smaller companies that can benefit from our industry experience and that lack the resources to engage in a more
personalized initial implementation that can take months longer to complete.
The value that RapidResponse provides our mid-market customers is very similar to how we help the largest companies in
our installed base. Some issues, though, like dealing with rapid growth and transitioning from systems that rely extensively
on spreadsheets, can be even more acute at the mid-market stage. Extreme Networks and Ribbon Communications are
just a couple examples of mid-market companies addressing some very real supply chain challenges and opportunities
with RapidResponse.
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12-week RapidStart delivery program• Predefined applications and resources• Minimal configuration: focus on data validation, on-boarding supply chain team• Scalable approach to support enhancements and global rolloutRapidStart is a RapidResponse offering that combines foundational planning elements, called Planning One, with a market-leading 12-week delivery programSome New Mid-market Customers in 2021Life Sciences and Pharmaceuticals• Mölnlycke Health Care ABConsumer Products• Boston Beer Corporation• Edwards Limited• High Liner Foods Incorporated• Jamieson Wellness Inc.• Johnson Outdoors Extreme Networks
Ribbon Communications
Before
With Kinaxis
Before
With Kinaxis
•
•
•
•
Reactive planning rendered the company unable to
repsond quickly to short-term changes in demand
Company doubled in size over nine months, making
data sharing onerous and unsustainable at scale
Supply planning process was disconnected from
global demand
Reliance on dozens of disparate Excel files meant many
versions of the “truth”
•
•
•
•
Proactive planning based on data-driven scenario
modeling
Standardized processes to make the same information
available to all supply chain planning teams, wherever
they are
Continuous and concurrent planning across demand
and supply
Effectively eliminated reliance on Excel files for
planning operations
•
•
•
•
Extensive manual data entry and the manipulation
of more than 1,200 line items meant it took days to
develop forecasts
Inflexible forecasting inhibited proactive planning and
fast response to market changes
Unconsolidated data sources delayed understanding
of potential impacts to supply and demand plans
Data syncing issues made running real-time S&OP
meetings virtually impossible
•
•
•
•
Ability to build forecasts in hours instead of days
Customers receive real-time feedback on order change
requests
Immediate, end-to-end “what if” analysis and the
impact on the business
Rapid collaborative change management and the
ability to simultaneously plan, monitor and respond
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DELIVERING REAL VALUE20% inventory reductionRespond to change in real timeDrastically decreased manual forecsting effortThe most significant value we have seen from using RapidResponse is the time savings. Before we used to spend days manually entering data into our enterprise resource planning tool and various Excel spreadsheets to generate our forecasts. Now in RapidResponse we complete the same task within hours while providing more in-depth analysis.”DELIVERING REAL VALUESingle view of the entire supply chainConsistent information available worldwideInstant notice of any changes for proactive planningWe’ve doubled in size, and because of RapidResponse, we haven’t had to bring on a lot of new resources to manage our expanded supply chain.” Consolidated Financial
Statements, Years Ended
December 31, 2021 and 2020
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Consolidated Financial Statements of
Kinaxis Inc.
Years ended December 31, 2021 and 2020
(In thousands of USD)
KPMG LLP
150 Elgin Street, Suite 1800
Ottawa ON K2P 2P8
Canada
Tel 613-212-5764
Fax 613-212-2896
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Kinaxis Inc.
Opinion
We have audited the consolidated financial statements of Kinaxis Inc. (the “Entity”), which
comprise:
the consolidated statements of financial position as at December 31, 2021 and
December 31, 2020
the consolidated statements of comprehensive income (loss) for the years then ended
the consolidated statements of changes in shareholders’ equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of significant
accounting policies
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects,
the consolidated financial position of the Entity as at December 31, 2021 and December 31,
2020, and its consolidated financial performance and its consolidated cash flows for the
years then ended in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Our responsibilities under those standards are further described in the
“Auditors’ Responsibilities for the Audit of the Financial Statements” section of our
auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
17
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
KPMG Canada provides services to KPMG LLP.
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Page 2
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements for the year ended December 31, 2021.
These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
We have determined the matter described below to be the key audit matter to be
communicated in our auditors’ report.
Allocation of
the Transaction Price
Obligations in Contracts with Customers
to Multiple Performance
Description of the matter
We draw attention to Notes 2(f) and 3(b) to the financial statements. The Entity’s contracts
with customers often include the delivery of multiple products and services, which are
generally capable of being distinct and accounted for as separate performance obligations.
The accounting for a contract or contracts with a customer that contain multiple performance
obligations requires the Entity to allocate the contract or contracts’ transaction price to the
identified distinct performance obligations. The allocation of the transaction price requires
significant judgment and estimates relating to the determination of the standalone selling
price (“SSP”) for each distinct performance obligation. The methodology used to determine
the SSP depends on the nature of the products and services and how they are priced in
contracts with customers. This allocation affects the amount and timing of revenue
recognized for each performance obligation.
Why the matter is the key audit matter
We identified the allocation of the transaction price to multiple performance obligations in
contracts with customers as a key audit matter. There was a significant risk of material
misstatement relating to the methodology used to determine the SSP for each distinct
performance obligation within a contract or contracts with a customer. In addition, significant
auditor judgment was required to evaluate the results of our audit procedures due to the
significant judgments and estimates associated with the determination of the SSP.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the
following:
We evaluated the methodology used to determine the SSP by comparing it to pricing
patterns in customer contracts, historical methodologies used by the Entity, and general
practices in the Entity’s industry.
Page 3
For a selection of new customer contracts with multiple performance obligations, we
examined the key terms and assessed the allocation of the transaction price to each distinct
performance obligation based on its respective SSP derived from the underlying
methodology.
Other Information
Management is responsible for the other information. Other information comprises:
the information included in Management’s Discussion and Analysis filed with the
relevant Canadian Securities Commissions.
the information, other than the financial statements and the auditors’ report thereon,
included in a document likely to be entitled “Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit
and remain alert for indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with
the relevant Canadian Securities Commissions as at the date of this auditors’ report. If,
based on the work we have performed on this other information, we conclude that there is
a material misstatement of this other information, we are required to report that fact in the
auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon,
included in a document likely to be entitled “Annual Report” is expected to be made available
to us after the date of this auditors’ report. If, based on the work we will perform on this other
information, we conclude that there is a material misstatement of this other information, we
are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance
for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB), and for such internal control as
management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
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Page 4
Page 5
In preparing the financial statements, management is responsible for assessing the Entity’s
ability to continue as a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends
to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial
reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Entity's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Entity's
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditors’ report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’
report. However, future events or conditions may cause the Entity to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the group Entity to express an opinion on the
financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
Determine, from the matters communicated with those charged with governance, those
matters that were of most significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe these matters in
our auditors’ report unless law or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our auditors’ report because the adverse consequence of doing so
would reasonably be expected to outweigh the public benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditors’ report is Anuj Madan.
Ottawa, Canada
March 1, 2022
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22
Kinaxis Inc.
Consolidated Statements of Financial Position
As at December 31
(Expressed in thousands of USD)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Trade and other receivables (note 5)
Prepaid expenses
Investment tax credits recoverable (note 20)
Non-current assets:
Property and equipment (note 6)
Right-of-use assets (note 7)
Contract acquisition costs (note 8)
Unbilled receivables (note 5)
Other receivables
Deferred tax assets (note 20)
Investment tax credits recoverable (note 20)
Intangible assets (note 9)
Goodwill (note 10)
2021
2020
$
203,220
30,168
89,247
10,282
–
332,917
52,093
53,578
19,691
512
1,096
6,000
3,616
10,778
39,988
187,352
$
182,958
30,180
82,883
9,264
1,109
306,394
30,746
15,722
16,484
2,013
752
2,308
980
13,023
39,988
122,016
$
520,269
$
428,410
Liabilities and Shareholders’ Equity
Current liabilities:
Trade payables and accrued liabilities (note 11)
Deferred revenue (note 12)
Provisions (note 13)
Lease obligations (note 14)
$
Non-current liabilities:
Lease obligations (note 14)
Deferred tax liabilities (note 20)
Shareholders’ equity:
Share capital (note 15)
Contributed surplus
Accumulated other comprehensive loss
Retained earnings
43,328
99,239
716
2,526
145,809
53,233
9
53,242
195,414
54,739
(597)
71,662
321,218
$
33,030
94,275
–
4,554
131,859
12,065
2,729
14,794
173,104
35,846
(20)
72,827
281,757
$
520,269
$
428,410
Kinaxis Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31
(Expressed in thousands of USD, except share and per share data)
Revenue (note 17)
Cost of revenue
Gross profit
Operating expenses:
Selling and marketing
Research and development
General and administrative
Other income (expense):
Foreign exchange loss
Net finance and other income (expense)
Profit before income taxes
Income tax expense (recovery) (note 20):
Current
Deferred
Profit (loss)
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to
profit or loss:
Foreign currency translation
differences - foreign operations
Total comprehensive income (loss)
Basic earnings (loss) per share
Weighted average number of basic
Common Shares (note 16)
Diluted earnings (loss) per share
Weighted average number of diluted
Common Shares (note 16)
2021
2020
$
250,726
$
224,189
86,755
163,971
59,078
57,424
45,550
162,052
1,919
(558)
(264)
(822)
1,097
3,466
(1,204)
2,262
(1,165)
70,131
154,058
52,630
47,420
33,232
133,282
20,776
(196)
890
694
21,470
5,714
2,026
7,740
13,730
$
$
$
(577)
(1,742)
(0.04)
$
$
328
14,058
0.51
27,248,193
26,716,027
(0.04)
$
0.49
27,248,193
28,138,911
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
On behalf of the Board of Directors:
(signed) John (Ian) Giffen Director
(signed) Elizabeth Rafael Director
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24
Kinaxis Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31
(Expressed in thousands of USD)
Accumulated
other
Contributed comprehensive
loss
surplus
Share
capital
Retained
earnings
Total equity
Balance, December 31, 2019 $
140,961
$
30,392
$
(348)
$
59,097
$
230,102
Profit
Other comprehensive income
Total comprehensive income
Share options exercised
Restricted share units vested
Share-based payments
Total shareholder transactions
–
–
–
27,187
4,956
–
32,143
–
–
–
(6,807)
(4,956)
17,217
5,454
–
328
328
–
–
–
–
13,730
–
13,730
–
–
–
–
13,730
328
14,058
20,380
–
17,217
37,597
Balance, December 31, 2020 $
173,104
$
35,846
$
(20)
$
72,827
$
281,757
Loss
Other comprehensive loss
Total comprehensive loss
Share options exercised
Restricted share units vested
Share-based payments
Total shareholder transactions
–
–
–
14,221
8,089
–
22,310
–
–
–
(3,459)
(8,089)
30,441
18,893
–
(577)
(577)
–
–
–
–
(1,165)
–
(1,165)
–
–
–
–
(1,165)
(577)
(1,742)
10,762
–
30,441
41,203
Balance, December 31, 2021 $
195,414
$
54,739
$
(597)
$
71,662
$
321,218
See accompanying notes to consolidated financial statements.
Kinaxis Inc.
Consolidated Statements of Cash Flows
For the years ended December 31
(Expressed in thousands of USD)
Cash flows from operating activities:
Profit (loss)
Items not affecting cash:
Depreciation of property and equipment and
right-of-use assets (note 19)
Amortization of intangible assets (note 19)
Share-based payments (note 15)
Net finance expense (income)
Income tax expense (note 20)
Investment tax credits recoverable (note 20)
Change in operating assets and liabilities (note 21)
Interest received
Interest paid
Income taxes received (paid)
Cash flows used in investing activities:
Acquisition of businesses, net of cash acquired (note 4)
Purchase of property and equipment (note 6)
Purchase of short-term investments
Redemption of short-term investments
Cash flows from financing activities:
Payment of lease obligations (note 14)
Common shares issued on exercise of stock options
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effects of exchange rates on cash and cash equivalents
2021
2020
$
(1,165)
$
13,730
18,164
2,245
24,343
634
2,262
(1,527)
5,523
428
(1,050)
281
50,138
(800)
(33,833)
(71,599)
71,599
(34,633)
(4,911)
10,762
5,851
21,356
182,958
(1,094)
14,335
1,227
17,217
(890)
7,740
(2,089)
10,492
1,761
(674)
(3,379)
59,470
(61,767)
(14,439)
(110,616)
110,558
(76,264)
(3,742)
20,380
16,638
(156)
182,284
830
Cash and cash equivalents, end of year
$
203,220
$
182,958
See accompanying notes to consolidated financial statements.
25
26
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
1. Corporate information:
Kinaxis Inc. (“Kinaxis” or the "Company") is incorporated under the Canada Business Corporations
Act and domiciled in Ontario, Canada. The address of the Company’s registered office is 3199
Palladium Drive, Ottawa, Ontario. The consolidated financial statements of the Company as at and
for the years ended December 31, 2021 and 2020 comprise the Company and its subsidiaries.
Kinaxis is a leading provider of cloud-based subscription software that enables its customers to
improve and accelerate analysis and decision-making across their supply chain operations. Kinaxis is
a global enterprise with registered offices in the United States, Japan, Hong Kong, The Netherlands,
South Korea, United Kingdom, Singapore, France, Ireland, Germany, India, and Canada.
2. Basis of preparation:
(a) Statement of compliance:
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”), and includes the accounts of Kinaxis Inc. and its wholly-owned subsidiaries,
outlined in note 25.
The consolidated financial statements were authorized for issue by the Board of Directors on
March 1, 2022.
(b) Comparative figures:
Certain comparative figures have been reclassified to conform to the current period presentation.
(c) Measurement basis:
The consolidated financial statements have been prepared on the historical cost basis except for
certain financial instruments measured at fair value. Historical cost is generally based on the fair
value of the consideration given in exchange for assets.
(d) Presentation currency:
These consolidated financial statements are presented in United States dollars (“USD”) which is
the functional currency of the Company and its subsidiaries unless otherwise stated. Tabular
amounts are presented in thousands of USD.
(e) Foreign currency:
Foreign currency transactions
The financial statements of the Company are measured using USD as the functional currency.
The functional currency of the Company’s significant wholly-owned subsidiaries is outlined in note
25. Transactions in currencies other than the functional currency are translated at the rates of
exchange prevailing at the dates of the transactions. At the end of each reporting period,
monetary items denominated in foreign currencies are translated to the functional currency at the
rates prevailing at that date. Exchange differences on monetary items are recognized in profit or
2. Basis of preparation (continued):
(e) Foreign currency (continued):
loss in the period in which they arise. Non-monetary items carried at fair value that are
denominated in foreign currencies are translated to the functional currency at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the rates at the date of the transaction.
Foreign operations
The consolidated financial statements include the accounts of the Company’s wholly-owned
subsidiaries. Assets and liabilities have been translated into USD using exchange rates prevailing
at the end of each reporting period. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during that period, in
which case the exchange rates at the dates of the transactions are used. Exchange differences
arising, if any, are recognized in other comprehensive income and accumulated in shareholders’
equity.
(f) Use of estimates and judgments:
The preparation of the consolidated financial statements in accordance with IFRS requires
management to make judgments, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, revenue, expenses and
disclosure of contingent assets and liabilities. Actual results may differ from these estimates.
Estimates and judgments include, but are not limited to, allocation of the transaction price to
multiple performance obligations in contracts with customers, revenue recognition on fixed price
contracts, recognition of deferred tax assets, valuation of trade and other receivables, valuation of
share-based payments, valuation of contingent consideration, and valuation of acquired
intangible assets. Estimates and assumptions are reviewed periodically and the effects of
revisions are recorded in the consolidated financial statements in the period in which the
estimates are revised and in any future periods affected.
The continuing uncertainty around the novel coronavirus (“COVID-19”) pandemic required the
use of judgments and estimates in the preparation of the consolidated financial statements for the
year ended December 31, 2021. The future impact of COVID-19 uncertainties could generate, in
future reporting periods, a significant impact to the reported amounts of assets, liabilities, revenue
and expenses in these and any future consolidated financial statements. Examples of accounting
estimates and judgments that may be impacted by the pandemic include, but are not limited to:
revenue recognition; impairment of property and equipment, right-of-use assets, intangible assets
and goodwill; allowance for expected credit losses; and provisions.
Allocation of the transaction price to multiple performance obligations in contracts with customers
Contracts with customers often include promises to deliver multiple products and services.
Determining whether such bundled products and services are considered i) distinct performance
obligations that should be separately recognized, or ii) non-distinct and therefore should be
27
28
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
2. Basis of preparation (continued):
(f) Use of estimates and judgments (continued):
combined with another good or service and recognized as a combined unit of accounting may
require judgment. In general, the Company’s professional services are capable of being distinct
as they could be performed by third party service providers and do not involve significant
customization of the licensed software.
The allocation of the transaction price requires significant judgment and estimates relating to the
determination of the standalone selling price (“SSP”) for each distinct performance obligation. The
methodology used to determine the SSP depends on the nature of the products and services and
how they are priced in contracts with customers. This allocation affects the amount and timing of
revenue recognized for each performance obligation. In order to determine the SSP of promised
products or services, the Company conducts a regular analysis to determine whether various
products or services have an observable SSP. If the Company does not have an observable SSP
for a particular product or service, then SSP for that particular good or service is estimated using
reasonably available information and maximizing observable inputs with approaches including
historical pricing, cost plus a margin, adjusted market assessment, and the residual approach.
The Company uses a range of amounts to estimate SSP when it sells each of the products and
services separately and needs to determine whether there is a discount that needs to be
allocated based on the relative SSP of the various products and services. In general, SSP for
maintenance and support bundled in on-premise and hybrid subscription arrangements is
established as a percentage of the subscription license fee as supported by third party evidence
and internal analysis of similar vendor contracts. SSP for hosting and professional services is
established based on observable prices for the same or similar services when sold separately, or
estimated using a cost plus margin approach.
Revenue recognition on fixed price contracts
For professional services contracts billed on a fixed price basis, revenue is recognized over time
based on the proportion of services performed. The Company determines this based on the
actual labour hours incurred relative to the total forecasted hours. This requires the Company to
estimate the labour hours required to complete the contract at the reporting date, the uncertainty
inherent in which will not be resolved until the contract is completed.
Recognition of deferred tax assets
The recognition of deferred tax assets requires the Company to assess future taxable income
available to utilize deferred tax assets related to deductible or taxable temporary differences. The
Company considers the nature and carry-forward period of deferred tax assets, the Company’s
recent earnings history and forecast of future earnings in performing this assessment. The actual
deferred tax assets realized may differ from the amount recorded due to factors having a negative
impact on operating results of the Company and lower future taxable income.
2. Basis of preparation (continued):
(f) Use of estimates and judgments (continued):
Valuation of trade and other receivables
The recognition of trade and other receivables and loss allowances requires the Company to
assess credit risk and collectability. The Company considers historical trends and any available
information indicating a customer could be experiencing liquidity or going concern problems and
the status of any contractual or legal disputes with customers in performing this assessment.
Valuation of share-based payments
The Company uses the Black-Scholes valuation model to determine the fair value of equity
settled stock options and the Monte Carlo valuation model to determine the fair value of
performance share units. Estimates are required for inputs to these models, including the
expected life of the option, volatility, forfeiture rate, expected dividend yield and the risk free
interest rate. Variation in actual results for any of these inputs will result in a different value of the
stock option or performance share unit realized from the original estimate. The assumptions and
estimates used are further outlined in note 15.
Valuation of contingent consideration
The Company measures the contingent consideration payable in a business combination at the
estimated fair value at each reporting date. The fair value is estimated based on the range of
possible outcomes and the Company’s assessment of the likelihood of each outcome.
Valuation of acquired intangible assets
The Company estimates the fair value of customer relationships and technology acquired in a
business combination based on the income approach. The income approach is a valuation
technique that calculates the fair value of an intangible asset based on the present value of future
cash flows that the asset can be expected to generate over its remaining useful life. This
valuation involves significant subjectivity and estimation uncertainty, including assumptions
related to the future revenues attributable to acquired customer relationships or technology,
customer attrition rates, technology migration rate, future expenses, and discount rates.
3. Significant accounting policies:
(a) Basis of consolidation:
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the
date that control ceases. The accounting policies of subsidiaries have been changed when
necessary to align them with the policies adopted by the Company. All intercompany
transactions, balances, revenues and expenses between the Company and its subsidiaries have
been eliminated.
29
30
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
3. Significant accounting policies (continued):
(b) Revenue recognition:
3. Significant accounting policies (continued):
(b) Revenue recognition (continued):
Revenue is recognized upon transfer of control of products or services to customers at an amount
that reflects the transaction price the Company expects to receive in exchange for the products or
services. The Company’s contracts with customers often include the delivery of multiple products
and services, which are generally capable of being distinct and accounted for as separate
performance obligations. The accounting for a contract or contracts with a customer that contain
multiple performance obligations requires the Company to allocate the contract or contracts’
transaction price to the identified distinct performance obligations.
The Company’s hosted software-as-a-service (“SaaS”) application, which allows customers to
use hosted software over the contract period without taking possession of the software, is
provided on a subscription basis, and revenue is recognized ratably over the contract period,
commencing on the date an executed contract exists and the customer has the right-to-use and
access to the platform.
On-premise, fixed term subscription licenses and hybrid software subscriptions (where the
customer has the option to take the hosted software on-premise) provide the customer with a
right-to-use the software as it exists when made available to the customer. Revenue from distinct
on-premise subscription licenses is recognized upfront at the point in time when the software is
made available to the customer and the right to use the software has commenced. On-premise
subscription licenses and hybrid subscriptions are bundled with software maintenance and
support services and/or hosting over the term. The license component and maintenance and
support/hosting components are each allocated revenue using their relative estimated SSP.
Revenue allocated to the bundled maintenance and support and hosting is recognized ratably
over the term of the maintenance and support services. Professional services are provided for
implementation and configuration of software licenses and SaaS, as well as ongoing technical
services and training.
Professional services are typically billed on a time and material basis and revenue is recognized
over time as the services are performed. For professional services contracts billed on a fixed
price basis, revenue is recognized over time based on the proportion of services performed.
Maintenance and support services provided to customers on legacy perpetual software licenses
is recognized ratably over the term of the maintenance and support services.
The Company recognizes an asset for the incremental costs of obtaining a contract with a
customer if it expects the costs to be recoverable, and has determined that certain sales incentive
programs meet the requirements to be capitalized. Capitalized contract acquisition costs are
amortized consistent with the pattern of transfer to the customer for the goods and services to
which the asset relates. The amortization period includes specifically identifiable contract
renewals where there is no substantive renewal commission. The expected customer renewal
period is estimated based on the historical life of our customers, which the Company has
determined to be six years. The Company applies the practical expedient available under IFRS
15 and does not capitalize incremental costs of obtaining contracts if the amortization period is
one year or less.
The timing of revenue recognition often differs from contract payment schedules, resulting in
revenue that has been earned but not billed. These amounts are included in unbilled receivables.
Amounts billed in accordance with customer contracts, but not yet earned, are recorded and
presented as part of deferred revenue.
The Company has elected to apply the practical expedient to not adjust the total consideration
over the contract term for the effect of a financing component if the period between the transfer of
services to the customer and the customer’s payment for these services is expected to be one
year or less.
(c) Financial instruments:
Financial assets and financial liabilities are recognized when the Company becomes a party to
the contractual provisions of the instrument.
Trade receivables without a significant financing component are initially measured at the
transaction price. All other financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or issue of financial assets
and financial liabilities (other than financial assets and financial liabilities at fair value through
profit or loss (“FVTPL”)) are added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognized immediately in profit or loss.
Financial assets
All financial assets are recognized and de-recognized on trade date.
The Company determines the classification of its financial assets on the basis of both the
business model for managing the financial assets and the contractual cash flow characteristics of
the financial asset. Financial assets are not reclassified subsequent to their initial recognition
unless the Company changes its business model for managing financial assets.
A financial asset is measured at amortized cost if it is held within a business model whose
objective is to hold assets to collect contractual cash flows, and its contractual terms give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
31
32
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
3. Significant accounting policies (continued):
(c) Financial instruments (continued):
The Company’s financial assets are classified as follows:
Financial asset
Classification under IFRS 9
Cash and cash equivalents
Short-term investments
Trade and other receivables
Unbilled receivables
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Subsequent to initial recognition, financial assets at amortized cost are measured using the
effective interest method, less any impairment. Interest income is recognized by applying the
effective interest rate except for short-term receivables where the interest revenue would be
immaterial. Interest income, foreign exchange gains and losses, impairment, and any gain or loss
on de-recognition are recognized in profit or loss.
Impairment of financial assets
The Company measures a loss allowance based on the lifetime expected credit losses. Lifetime
expected credit losses are estimated based on factors such as the Company’s past experience of
collecting payments, the number of delayed payments in the portfolio past the average credit
period, observable changes in national or local economic conditions that correlate with default on
receivables, financial difficulty of the borrower, and it becoming probable that the borrower will
enter bankruptcy or financial re-organization.
Financial assets are written off when there is no reasonable expectation of recovery.
Financial liabilities
The Company determines the classification of its financial liabilities at initial recognition. The
Company’s financial liabilities are classified as follows:
Financial liability
Classification under IFRS 9
Trade payables and accrued liabilities
Amortized cost
Amortized cost
Financial liabilities at amortized cost are measured using the effective interest rate method.
De-recognition of financial liabilities
The Company de-recognizes financial liabilities when the Company’s obligations are discharged,
cancelled or they expire.
3. Significant accounting policies (continued):
(d) Cash and cash equivalents:
Cash and cash equivalents include cash investments in interest-bearing accounts and term
deposits which can readily be redeemed for cash without penalty or are issued for terms of three
months or less from the date of acquisition.
(e) Short-term investments:
Short-term investments consist of term deposits and guaranteed income certificates held with
Schedule 1 Canadian banks for maturity terms of three to six months from the date of acquisition.
Investments are measured at amortized cost. The carrying amount of these investments
approximates fair value due to the short-term maturity of these instruments.
(f) Property and equipment:
Property and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditures that are directly attributable to the acquisition of
the asset. The assets are depreciated over their estimated useful lives using the straight-line
method as this most closely reflects the expected pattern of consumption of the future economic
benefits. Depreciation methods, useful lives and residual values are reviewed at each financial
year end and adjusted prospectively, if appropriate.
Property and equipment
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
Rate
5 years
3 to 5 years
3 to 5 years
Shorter of useful life or remaining term of lease
At the end of each reporting period, the Company reviews the carrying amounts of its property
and equipment to determine whether there is any indication of impairment. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (the “cash-generating unit”, or “CGU”).
If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognized immediately in profit or loss.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs
to sell.
33
34
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
3. Significant accounting policies (continued):
3. Significant accounting policies (continued):
(g) Leases:
(h) Employee benefits:
At inception of a contract, the Company assesses whether a contract is, or contains, a lease
based on whether the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration.
The Company has elected to apply the practical expedient to account for each lease component
and any non-lease components as a single lease component.
The Company recognizes a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured based on the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use assets are depreciated to the earlier of the end of the useful life of the right-of-
use asset or the lease term using the straight-line method as this most closely reflects the
expected pattern of consumption of the future economic benefits. The lease term includes periods
covered by an option to extend if the Company is reasonably certain to exercise that option. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the
Company uses its incremental borrowing rate as the discount rate. Variable lease payments that
do not depend on an index or rate are not included in the measurement of the lease liability.
The lease liability is measured at amortized cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising from a change in an index
or rate, if there is a change in the Company’s estimate of the amount expected to be payable
under a residual value guarantee, or if the Company changes its assessment of whether it will
exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
The Company has elected to apply the practical expedient not to recognize right-of-use assets
and lease liabilities for short-term leases that have a lease term of 12 months or less and leases
of low-value assets. The lease payments associated with these leases are recognized as an
expense on a straight-line basis over the lease term.
The Company offers a defined contribution plan to its employees which is a post-employment
benefit plan under which an entity pays fixed contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution pension plans are recognized as an employee benefit expense in profit or loss in the
periods during which services are rendered by employees.
(i) Provisions:
A provision is recognized if, as a result of a past event, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of
the discount is recognized as finance cost.
A provision for onerous contracts is recognized when the expected benefits to be derived by the
Company from a contract are lower than the unavoidable cost of meeting its obligations under the
contract. The provision is measured at the present value of the lower of the expected cost of
terminating the contract and the expected net cost of continuing with the contract. Before a
provision is established, the Company recognizes any impairment loss on the assets associated
with that contract.
(j) Research and development expense:
Research and development costs are expensed as incurred unless the criteria for capitalization
are met. No research or development costs have been capitalized to date.
(k) Government assistance:
Government assistance is recognized when there is reasonable assurance that it will be received
and that compliance with all related conditions has been achieved. When the government
assistance relates to an expense item, it is recognized as a reduction of the related expense to
match the government assistance on a systematic basis to the costs that it is intended to
subsidize.
During 2021, the Company received $7,906 of non-refundable government grants relating to the
COVID-19 pandemic. The grants are offset against cost of revenue and operating expenses.
(l)
Income taxes:
Current and deferred income taxes are recognized as an expense or recovery in profit or loss,
except when they relate to items that are recognized outside profit or loss (whether in other
comprehensive income or directly in equity), in which case the tax is also recognized outside of
profit or loss.
35
36
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
3. Significant accounting policies (continued):
3. Significant accounting policies (continued):
(l)
Income taxes (continued):
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from, or paid to, the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted, by the
reporting date, in the countries where the Company operates and generates taxable income.
Deferred income tax
Deferred income tax assets and liabilities are recorded for the temporary differences between
transactions that have been included in the consolidated financial statements or income tax
returns. Deferred income taxes are provided for using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary differences between
the tax and financial statement bases of assets and liabilities and for certain carry-forward items.
Deferred income tax assets are recognized only to the extent that, in the opinion of management,
it is probable that the deferred income tax assets will be realized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the reporting date. Deferred income tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the
enactment or substantive enactment. Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis.
Uncertain tax positions
The Company periodically evaluates the positions taken in its tax returns with respect to
situations in which applicable tax rules may be subject to interpretations. The Company
establishes provisions related to tax uncertainties where appropriate, based on an estimate of the
amount that ultimately will be paid to the tax authorities.
Investment tax credits
Investment tax credits relating to scientific research and experimental development expenditures
are recorded in the fiscal period the qualifying expenditures are incurred based on management’s
interpretation of applicable legislation in the Income Tax Act of Canada. Credits are recorded
provided there is reasonable assurance that the tax credit will be realized. Credits claimed are
subject to review by the Canada Revenue Agency.
Credits claimed in connection with research and development activities are accounted for using
the cost reduction method. Under this method, assistance and credits relating to the acquisition of
equipment is deducted from the cost of the related assets, and those relating to current
(l)
Income taxes (continued):
expenditures, which are primarily salaries and related benefits, are included in the determination
of profit or loss as a reduction of the related research and development expenses.
(m) Share-based payments:
The Company uses the fair value based method to measure share-based compensation for all
share-based awards made to employees and directors. The grant date fair value of equity-settled
share-based payment awards granted to employees is generally recognized as an expense, with
a corresponding increase in equity, over the vesting period of the awards. The grant date fair
value is determined using the Black-Scholes model for option grants and the Monte Carlo model
for performance share unit grants. The market value of the Company’s shares on the date of the
grant is used to determine the fair value of restricted and deferred share units issued. Each
tranche of an award is considered a separate award with its own vesting period and grant date
fair value. The amount recognized as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such
that the amount ultimately recognized is based on the number of awards that meet the related
service and non-market performance conditions at the vesting date. For share-based payment
awards with non-vesting (i.e. performance) conditions, the grant date fair value of the share-
based payment is measured to reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
Where the terms of an equity-settled transaction award are modified, the minimum expense
recognized is the expense as if the terms had not been modified and if the original terms of the
award are met. An additional expense is recognized for any modification that increases the total
fair value of the share-based payment transaction, or is otherwise beneficial to the employee as
measured at the date of modification.
(n) Earnings per share:
Basic earnings per share is calculated by dividing profit or loss by the weighted average number
of common shares outstanding during the reporting period. Diluted earnings per share is
calculated similar to basic earnings per share except the weighted average number of common
shares outstanding is adjusted for the effects of all dilutive potential common shares, which are
comprised of additional shares from the assumed exercise of stock options or vesting of share
units. Options and share units that have a dilutive impact are assumed to have been exercised or
vested on the later of the beginning of the period or the date granted.
(o) Business combinations:
The Company accounts for business combinations using the acquisition method. Goodwill arising
on acquisitions is measured as the fair value of the consideration transferred less the net
recognized amount of the estimated fair value of identifiable assets acquired and liabilities
37
38
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
3. Significant accounting policies (continued):
(o) Business combinations (continued):
3. Significant accounting policies (continued):
(q) Goodwill:
assumed, all measured as of the acquisition date. Transaction costs that the Company incurs in
connection with a business combination are expensed as incurred.
The Company uses its best estimates and assumptions to reasonably value assets acquired and
liabilities assumed at the acquisition date as well as contingent consideration, where applicable,
and these estimates are inherently uncertain and subject to refinement. As a result, during the
measurement period, which may be up to one year from the acquisition date, the Company may
record adjustments to the assets acquired and liabilities assumed with a corresponding offset to
goodwill. Upon conclusion of the measurement period or final determination of the values of
assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are
recorded in profit or loss.
(p) Acquired intangible assets:
The Company’s intangible assets consist of customer relationships and technology acquired in a
business combination. These intangible assets are recorded at their fair value at the acquisition
date. The Company uses the income approach to value acquired technology and customer
relationships intangible assets, which are the two material intangible asset categories reported in
the financial statements.
The income approach is a valuation technique that calculates the fair value of an intangible asset
based on the present value of future cash flows that the asset can be expected to generate over
its remaining useful life. The discounted cash flow (“DCF”) is the methodology used, which is a
form of the income approach that begins with a forecast of the annual cash flows a market
participant would expect the subject intangible asset to generate over a discrete projection period.
The future cash flows for each of the years in the discrete projection period are then converted to
their present value equivalent using a rate of return appropriate for the risk of achieving the
intangible assets’ projected cash flows, again, from a market participant perspective. The present
value of the future cash flows are then added to the present value of the residual value of the
intangible asset (if any) at the end of the discrete projection period to arrive at a conclusion with
respect to the estimated fair value of the subject intangible asset. After initial recognition,
intangible assets are measured at cost less any accumulated amortization and impairment
losses.
Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated
useful lives. The estimated useful life for customer relationships is three to six years and the
useful life for technology is seven years. Amortization methods, useful lives and residual values
are reviewed at each financial year end and adjusted prospectively if appropriate.
Intangible assets with finite useful lives are tested for impairment whenever there is an indication
that the asset may be impaired. An impairment loss is recognized if the recoverable amount of
the asset is less than the carrying amount. The recoverable amount is the higher of fair value less
costs to sell and value in use.
Goodwill arises from a business combination as the excess of the consideration transferred over
the identifiable net assets acquired. After initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to the cash-generating unit that is
expected to benefit from the related business combination. The Company as a whole has been
assessed as a single CGU. The CGU is tested for impairment annually on December 31 and
whenever there is an indication that the CGU may be impaired. The impairment testing
methodology is based on a comparison between the recoverable amount (higher of fair value less
costs to sell and value-in-use of the CGU) and the net asset carrying value (including goodwill). If
the recoverable amount of the CGU is less than the carrying amount of the CGU, the impairment
loss is first allocated to reduce the carrying amount of any goodwill allocated to the CGU and then
to the other assets of the CGU. An impairment loss is recognized immediately in profit or loss.
Any impairment loss in respect of goodwill is not reversed.
4. Business combinations:
Prana Consulting, Inc.
On January 31, 2020, the Company acquired 100% of the outstanding shares of Prana Consulting,
Inc. and all of its subsidiaries (“Prana”) in exchange for cash and contingent consideration. Prana
provides consulting services for implementation of the Company’s software. The operating results of
Prana have been consolidated into the Company’s results subsequent to the acquisition date. The
Company incurred acquisition-related costs of $204 which have been recorded in general and
administrative expense.
The purchase price consists of cash consideration of $3,206 and contingent consideration with an
estimated fair value of $800, resulting in total consideration of $4,006. The contingent consideration
arrangement consisted of additional payments to the selling shareholder for attainment of specific
revenue and team retention metrics in the year following the acquisition. Contingent consideration of
$1,000 was paid in February 2021.
The following table presents the purchase price allocation at the acquisition date:
Assets acquired and liabilities assumed:
Cash and cash equivalents
Trade and other receivables
Land
Customer relationships
Trade payables and accrued liabilities
Goodwill
Total consideration
$
625
701
18
750
(1,747)
347
3,659
$
4,006
39
40
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
4. Business combinations (continued):
5. Trade and other receivables:
The trade and other receivables comprise gross contractual amounts of $636, which have been fully
collected.
The goodwill is attributable mainly to the skills and technical talent of Prana’s work force and the
synergies expected to be achieved from integrating Prana into the Company’s existing professional
services business. The entire goodwill is deductible for tax purposes.
Rubikloud Technologies, Inc.
On July 2, 2020, the Company acquired 100% of the outstanding shares of Rubikloud Technologies,
Inc. and all of its subsidiaries (“Rubikloud”) in exchange for cash. Rubikloud is a provider of artificial
intelligence solutions that automate supply chain prescriptive analytics and decision-making in the
retail and consumer packaged goods industries. The operating results of Rubikloud have been
consolidated into the Company’s results subsequent to the acquisition date. The Company incurred
acquisition-related costs of $1,009 which have been recorded in general and administrative expense.
The purchase price consists of cash consideration of $60,000, adjusted for Rubikloud’s closing cash
and indebtedness at the date of acquisition and subject to post-closing working capital adjustments,
resulting in a total consideration of $60,358.
The following table presents the purchase price allocation at the acquisition date:
Assets acquired and liabilities assumed:
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Contract acquisition costs
Property and equipment
Right-of-use assets
Intangible assets:
Technology
Customer relationships
Deferred tax assets
Trade payables and accrued liabilities
Deferred revenue
Lease obligation
Goodwill
Total consideration
$
1,172
1,077
153
81
322
3,298
10,700
2,800
8,929
(556)
(649)
(3,298)
24,029
36,329
$
60,358
The trade and other receivables comprise gross contractual amounts of $452, which have been fully
collected.
The goodwill is primarily attributable to the expected synergies that will result from integrating
Rubikloud’s offerings with RapidResponse to enhance its demand planning capabilities, and the
assembled workforce. The goodwill is not deductible for tax purposes.
Trade accounts receivable
Unbilled receivables
Taxes receivable
Investment tax credits receivable
Other
$
2021
71,118
15,413
217
–
2,499
$
2020
67,288
13,800
–
211
1,584
$
89,247
$
82,883
There were no trade accounts receivable written off in 2021 (2020 – $nil).
The following table presents changes in unbilled receivables:
Balance, beginning of year
$
15,813
$
14,129
2021
2020
Amounts transferred to trade accounts receivable from the
balance at the beginning of year
Amounts written off
Revenue in excess of billings, net of amounts transferred to trade
accounts receivable
Balance, end of year
Current
Non-current
(13,752)
(288)
14,152
15,925
15,413
512
$
$
(13,654)
–
15,338
15,813
13,800
2,013
$
$
Unbilled receivables of $288 were written off in 2021 (2020 – $nil).
6. Property and equipment:
Cost
December 31,
2020
Additions Dispositions
Effects of
exchange December 31,
2021
rates
Land
Computer equipment
Computer software
Office furniture and
equipment
Leasehold improvements
$
18
54,187
3,234
1,154
8,476
$
–
14,881
529
2,603
15,820
$
–
–
–
$
$
–
(1,148)
(28)
–
(450)
(26)
(189)
18
67,920
3,735
3,731
23,657
Total cost
$
67,069
$ 33,833
$
(450)
$ (1,391)
$
99,061
41
42
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
6. Property and equipment (continued):
6. Property and equipment (continued):
Accumulated depreciation
2020 Depreciation Dispositions
December 31,
Effects of
exchange December 31,
2021
rates
Computer equipment
Computer software
Office furniture and
equipment
Leasehold improvements
Total accumulated
depreciation
$
29,340
2,317
$ 9,601
659
$
–
–
$
(530)
(22)
$
38,411
2,954
567
4,099
339
1,153
–
(450)
(6)
(99)
900
4,703
$
36,323
$ 11,752
$
(450)
$
(657)
$
46,968
Cost
December 31,
2019
Additions Dispositions
Effects of
exchange December 31,
2020
rates
Land
Computer equipment
Computer software
Office furniture and
equipment
Leasehold improvements
$
–
42,647
2,942
848
5,361
$
$
18
10,825
275
335
3,326
–
(14)
–
(37)
(300)
$
–
729
17
8
89
$
18
54,187
3,234
1,154
8,476
There were no proceeds associated with asset dispositions in 2021 (2020 – $nil). Additions for the
year ended December 31, 2020 include $340 of property and equipment acquired through business
combinations, as outlined in note 4.
7. Right-of-use assets:
December 31,
2020
Additions Depreciation
Effects of
exchange December 31,
2021
rates
Offices
Data centres
$
7,317
8,405
$ 41,795
3,096
$ (3,581)
(2,831)
$
(295)
(328)
$
45,236
8,342
Total cost
$
15,722
$ 44,891
$ (6,412)
$
(623)
$
53,578
December 31,
2019
Additions Depreciation
Effects of
exchange December 31,
2020
rates
Offices
Data centres
$
1,987
6,684
$ 7,034
3,779
$ (1,780)
(2,323)
$
76
265
$
7,317
8,405
Total cost
$
51,798
$ 14,779
$
(351)
$
843
$
67,069
Total cost
$
8,671
$ 10,813
$ (4,103)
$
341
$
15,722
Accumulated depreciation
2019 Depreciation Dispositions
December 31,
Effects of
exchange December 31,
2020
rates
Computer equipment
Computer software
Office furniture and
equipment
Leasehold improvements
Total accumulated
depreciation
$
20,641
1,490
$ 8,420
835
$
(14)
–
$
293
(8)
$
29,340
2,317
262
3,701
305
672
(37)
(300)
37
26
567
4,099
$
26,094
$ 10,232
$
(351)
$
348
$
36,323
Carrying value
Land
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
Total property and equipment
December 31,
2021
December 31,
2020
$
18
29,509
781
2,831
18,954
$
18
24,847
917
587
4,377
$
52,093
$
30,746
During 2021, the Company recorded additions of $41,552 for new leased office space in Ottawa,
Canada. Additions for the year ended December 31, 2020 include $3,298 of right-of-use assets
acquired through business combinations, as outlined in note 4.
8. Contract acquisition costs:
Balance, beginning of year
$
16,484
$
15,497
Additions
Amortization
Effects on movements in exchange rates
9,713
(6,359)
(147)
7,090
(6,229)
126
Balance, end of year
$
19,691
$
16,484
2021
2020
Amortization of contract acquisition costs is recorded in selling and marketing expense.
43
44
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
9. Intangible assets:
12. Deferred revenue:
December 31,
2020
Additions
Amortization
December 31,
2021
$
3,087
9,936
$
$
13,023
$
–
–
–
$
(717)
(1,528)
$
2,370
8,408
$
(2,245)
$
10,778
December 31,
2019
Additions
Amortization
December 31,
2020
$
$
–
–
–
$
3,550
10,700
$
(463)
(764)
$
3,087
9,936
$
14,250
$
(1,227)
$
13,023
Customer relationships
Technology
Customer relationships
Technology
10. Goodwill:
2021
2020
Balance, beginning of year
$
39,988
$
–
Acquisition of Prana Consulting, Inc. (note 4)
Acquisition of Rubikloud Technologies, Inc. (note 4)
–
–
3,659
36,329
Balance, end of year
$
39,988
$
39,988
The annual impairment test of goodwill was performed on December 31, 2021 and did not result in an
impairment loss.
11. Trade payables and accrued liabilities:
Trade accounts payable
Accrued liabilities
Taxes payable
$
2021
10,584
26,299
6,445
$
2020
5,896
22,131
5,003
$
43,328
$
33,030
Balance, beginning of year
$
94,275
$
83,673
2021
2020
Amounts invoiced and revenue deferred
Recognition of deferred revenue included in the balance at the
beginning of year
Balance, end of year
13. Provisions:
96,121
93,347
(91,157)
(82,745)
$
99,239
$
94,275
In 2021, the Company recorded a provision of $716 for the estimated future variable lease payments
for office space which the Company has ceased using. These costs have been recorded in general
and administrative expense.
14. Lease obligations:
The Company’s leases are for office space and data centres with lease terms ranging from 2 to 20
years. These leases contain no renewal options or a renewal option for one, two, or five years. The
Company has included renewal options in the lease term when it is reasonably certain to exercise the
renewal option.
Current
Non-current
Total lease obligations
2021
2020
$
2,526
53,233
$
4,554
12,065
$
55,759
$
16,619
The following table presents the contractual undiscounted cash flows for lease obligations as at
December 31, 2021:
Less than one year
One to five years
More than five years
Total undiscounted lease obligations
$
4,261
20,982
45,374
$
70,617
Interest expense on lease obligations for 2021 was $1,050 (2020 – $674). The expense relating to
variable lease payments not included in the measurement of lease obligations was $1,624 (2020 –
$1,077). This consists of variable lease payments for operating costs, property taxes, and insurance.
Expenses relating to short-term leases were $480 (2020 – $543) and expenses relating to leases of
low value assets were not material. Total cash outflow for leases was $8,065 (2020 – $6,036),
including $4,911 (2020 – $3,742) of principal payments on lease obligations.
45
46
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
15. Share capital:
Authorized
15. Share capital (continued):
The following table presents information about stock options outstanding at December 31, 2021:
The Company is authorized to issue an unlimited number of Common Shares.
Issued Common Shares
2021
2020
Shares
Amount
Shares
Amount
Shares outstanding, beginning of period 27,085,922
$ 173,104
26,403,004
$ 140,961
Shares issued from exercised options
Shares issued from vested restricted
291,680
14,221
618,531
27,187
share units
85,232
8,089
64,387
4,956
Shares outstanding, end of period
27,462,834
$ 195,414
27,085,922
$ 173,104
Stock option plans
Options outstanding, beginning of
period
Granted
Exercised
Forfeited
275,973
(291,680)
(69,374)
Options outstanding, end of period
2,143,375
Options exercisable, end of period
1,150,389
2021
Weighted
average
Shares exercise price
2020
Weighted
average
Shares exercise price
2,228,456
$
68.82
2,228,738
$
44.24
108.61
36.89
126.21
$
$
76.56
58.44
626,999
(618,531)
(8,750)
112.85
32.94
71.34
2,228,456
932,258
$
$
68.82
40.73
Range of
exercise prices
$1 to $30
$30 to $60
$60 to $90
$90 to $120
$120 to $150
$150 to $180
Options outstanding
Options exercisable
Weighted
average
remaining
outstanding contractual life
Number
39,375
686,023
914,754
261,223
47,000
195,000
2.32
3.58
2.39
4.22
3.44
3.67
Weighted
average
exercise
price
$
15.27
45.63
72.50
105.08
135.21
164.44
Number
exercisable
39,375
653,023
400,366
–
11,000
46,625
Weighted
average
exercise
price
$
15.27
45.19
69.85
–
134.95
164.41
2,143,375
3.13
$
76.56
1,150,389
$
58.44
The Company has outstanding stock options issued under its 2010 and 2012 stock option plans. No
further options may be granted under the 2010 and 2012 stock option plans. In June 2017, the
Company adopted a new Canadian Resident Stock Option Plan and a new Non-Canadian Resident
Stock Option Plan (“the Plans”). Stock options granted under the Plans have an exercise price equal
to the stock’s TSX price at the date of grant and the maximum term of these options is five years.
Options are granted periodically and typically vest over four years.
In June 2021, Kinaxis shareholders voted to approve an amendment to the Plans to increase the
maximum number of shares reserved for issue by 500,000. At December 31, 2021, there were
785,309 stock options available for grant under the Plans.
In 2021, the Company granted 275,973 options (2020 – 626,999) and recorded share-based
compensation expense of $11,759 (2020 – $10,308) related to the vesting of options granted in 2021
and previous years. The per share weighted-average fair value of stock options granted during 2021
was $32.77 (2020 – $30.77) on the date of grant using the Black Scholes option-pricing model with
the following weighted-average assumptions: exercise price is equal to the price of the underlying
share, expected dividend yield of 0% (2020 – 0%), risk-free interest rate of 0.53% (2020 – 0.71%),
expected life of three to five years (2020 – three to five years), and estimated volatility of 39% (2020 –
35%). The forfeiture rate is estimated at 15% (2020 – 15%) based upon an analysis of actual
forfeitures.
Share Unit Plan
In June 2021, Kinaxis shareholders voted to approve an amendment to the Company’s Share Unit
Plan to increase the maximum number of shares reserved for issue by 500,000. At December 31,
2021, there were 560,715 share units available for grant under the Share Unit Plan.
47
48
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
15. Share capital (continued):
16. Earnings per share:
In 2021, the Company granted 106,001 restricted share units (“RSU”) (2020 – 81,970). At December
31, 2021, there were 96,583 RSUs outstanding (2020 – 78,305). Each RSU entitles the participant to
receive one Common Share. The RSUs generally vest over time in three equal annual tranches. The
weighted-average grant date fair value of the RSUs granted during 2021 was $118.49 per unit (2020
– $94.04) using the fair value of a Common Share at time of grant. The Company recorded share-
based compensation expense of $9,875 (2020 – $6,009) related to the RSUs.
In 2021, the Company granted 9,513 deferred share units (“DSU”) (2020 – 10,842). At December 31,
2021, there were 65,441 DSUs outstanding (2020 – 55,928). Each DSU entitles the participant to
receive one Common Share. The DSUs vest immediately as the participants are entitled to the
shares upon termination of their service. The fair value of the DSUs granted during 2021 was $110.36
per unit (2020 – $83.00) using the fair value of a Common Share at time of grant. The Company
recorded share-based compensation of $1,050 (2020 – $900) related to the DSUs.
In 2021, the Company granted 31,640 performance share units (“PSU”) (2020 – nil) that vest based
upon the Company’s total shareholder return relative to the total shareholder return of the
constituents of the S&P Software & Services Select Industry Index over two- and three-year
performance based vesting periods. At December 31, 2021, there were 31,640 PSUs outstanding.
The weighted-average grant date fair value of the PSUs granted during 2021 was $129.74 per unit.
The PSUs were valued using a Monte Carlo pricing model based on the fair value of a Common
Share at time of grant and the following assumptions: expected dividend yield of 0%, risk-free interest
rate of 0.51%, performance measurement period of 2 to 3 years, estimated volatility of 41%, and
correlation coefficient to the S&P Software & Services Select Industry Index of 0.52. The Company
recorded share-based compensation expense of $1,659 (2020 – $nil) related to the PSUs.
The following table presents the share-based payments expense by function:
Cost of revenue
Selling and marketing
Research and development
General and administrative
$
2021
2,001
4,950
6,334
11,058
$
2020
1,693
5,218
3,058
7,248
$
24,343
$
17,217
The following table summarizes the calculation of the weighted average number of basic and diluted
common shares:
2021
2020
Issued Common Shares, beginning of year
27,085,922
26,403,004
Effect of shares issued from exercise of options
Effect of shares issued from vesting of restricted share units
157,367
4,904
309,329
3,694
Weighted average number of basic Common Shares
27,248,193
26,716,027
Effect of share options on issue
Effect of share units on issue
–
–
1,200,057
222,827
Weighted average number of diluted Common Shares
27,248,193
28,138,911
For 2021, all options and share units outstanding (2020 – 271,500 options) were excluded from the
weighted average number of diluted common shares as their effect would have been anti-dilutive.
17. Revenue:
SaaS
Professional services
Maintenance and support
Subscription term licenses
2021
2020
$ 174,463
57,640
12,505
6,118
$ 148,873
45,899
11,527
17,890
$ 250,726
$ 224,189
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, 2021:
2022
2023
2024 and
thereafter
Total
SaaS
Maintenance and support
Subscription term licenses
$ 178,858
14,353
23,474
$ 132,735
10,466
–
$ 111,871
12,007
30
$ 423,464
36,826
23,504
$ 216,685
$ 143,201
$ 123,908
$ 483,794
49
50
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
18. Personnel expenses:
20. Income tax expense (continued):
Salaries including bonuses
Benefits
Commissions
Share-based payments
2021
2020
$ 128,890
20,105
10,000
24,343
$ 102,423
15,993
8,706
17,217
$ 183,338
$ 144,339
19. Depreciation and amortization:
The following table presents the depreciation expense of property and equipment and right-of-use
assets by function:
Cost of revenue
Selling and marketing
Research and development
General and administrative
$
2021
9,461
3
3,047
5,653
$
2020
8,649
4
2,755
2,927
$
18,164
$
14,335
The following table presents the amortization expense of intangible assets by function:
Cost of revenue
General and administrative
2021
1,528
717
2,245
$
$
2020
764
463
1,227
$
$
20. Income tax expense:
The income tax amounts recognized in profit and loss are as follows:
Current tax expense
Current income tax
Deferred tax expense
2021
2020
$
3,466
$
5,714
Origination and reversal of temporary differences
(1,204)
2,026
$
2,262
$
7,740
A reconciliation of the income tax expense to the expected amount using the Company’s Canadian
tax rate is as follows:
Canadian tax rate
2021
2020
26.50%
26.50%
Expected Canadian income tax expense
$
291
$
5,689
Increase (reduction) in income taxes resulting from:
Permanent differences related to share-based payments
Other permanent differences
Change in estimates related to prior years
Change in unrecognized deferred tax assets/liabilities
Foreign tax rate differences
Other
2,793
87
(1,015)
295
78
(267)
1,971
232
(298)
4
40
102
$
2,262
$
7,740
The following tables present tax effects of temporary differences and carry-forwards, as well as
movements in the deferred tax balances:
Deferred tax assets (liabilities)
Tax effect of investment tax credits
Property and equipment
Right-of-use assets and liabilities
Contract acquisition costs
Intangible assets
Reserves and accruals
Share-based payments
Net operating loss carryforwards
Other
December 31,
2020
Recognized
in profit
and loss
Recognized December 31,
2021
in equity
$
$
$
(508)
(3,916)
309
(4,471)
(3,333)
1,107
2,294
8,100
(3)
$
(410)
872
490
(289)
609
(530)
1,913
(904)
(547)
–
–
–
–
–
–
5,208
–
–
(918)
(3,044)
799
(4,760)
(2,724)
577
9,415
7,196
(550)
$
(421)
$
1,204
$
5,208
$
5,991
During 2021, the Company recorded $890 of current tax recovery directly in equity (2020 – $nil)
related to tax deductions on share-based payments.
Deferred tax liabilities have not been recognized for temporary differences associated with
investments in subsidiaries as the Company is able to control the timing of the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the
foreseeable future. The aggregate amount of these temporary differences at December 31, 2021 was
$31,771 (2020 – $21,215).
51
52
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
21. Statement of cash flows:
The following table presents changes in operating assets and liabilities:
United States
Europe
Canada
Asia
20. Income tax expense (continued):
Deferred tax assets (liabilities)
Tax effect of investment tax credits
Property and equipment
Right-of-use assets and liabilities
Contract acquisition costs
Intangible assets
Reserves and accruals
Share-based payments
Net operating loss carryforwards
Other
Balance at
December 31,
2019
Recognized
in profit
and loss
Balance at
December 31,
2020
$
(431)
(3,541)
121
(3,666)
–
186
1,329
–
(941)
$
(77)
(375)
188
(805)
(3,333)
921
965
8,100
938
$
(508)
(3,916)
309
(4,471)
(3,333)
1,107
2,294
8,100
(3)
$
(6,943)
$
6,522
$
(421)
Trade and other receivables
Prepaid expenses
Contract acquisition costs
Trade payables and accrued liabilities
Deferred revenue
Provisions
22. Credit facility:
$
2021
(6,782)
(1,100)
(3,407)
8,790
7,306
716
$
2020
(591)
(2,516)
(775)
6,459
7,915
–
$
5,523
$
10,492
The Company has a CAD$20.0 million revolving demand credit facility which bears interest at bank
prime per annum and has not been drawn as at December 31, 2021. As part of the acquisition of
Rubikloud, a Standby Letter of Credit has been issued against this facility in the amount of CAD$1.4
million.
In addition to providing a general security agreement representing a first charge over the Company’s
assets, the Company must meet certain financial covenants as specified in the facility agreement.
The Company was in compliance with these financial covenants as at December 31, 2021 and
continues to be at the time of approval of these consolidated financial statements. In the event that
the Company’s aggregate borrowings under the revolving facility exceed CAD$5.0 million, a
borrowing limit applies that is based principally on the Company’s accounts receivable.
23. Financial instruments:
(a) Fair value of financial instruments:
The carrying amounts of short-term investments, trade and other receivables, unbilled
receivables, and trade payables and accrued liabilities approximate fair value due to the short-
term maturity of these instruments and are considered to be Level 1 financial instruments. Short-
term investments consist of term deposits and guaranteed income certificates held with Schedule
1 Canadian banks for maturity terms of three to six months from the date of acquisition.
(b) Credit risk:
The following table presents maximum exposure to credit risk for trade accounts receivable by
geographic region:
$
2021
41,031
20,153
5,276
4,658
$
2020
46,935
16,849
1,584
1,920
$
71,118
$
67,288
2021
2020
$
57,431
$
53,190
8,351
1,040
4,296
9,093
3,105
1,900
$
71,118
$
67,288
The following table presents aging of trade accounts receivable:
Current
Past due:
0 – 30 days
31 – 60 days
Greater than 60 days
At December 31, 2021, one customer individually accounted for greater than 10% of total trade
accounts receivable (December 31, 2020 – two customers). For 2021, no customer individually
accounted for greater than 10% of revenue (2020 – no customers).
The Company measures a loss allowance based on the lifetime expected credit losses. Lifetime
expected credit losses are estimated based on factors such as the Company’s past experience of
collecting payments, the number of delayed payments in the portfolio past the average credit
period, observable changes in national or local economic conditions that correlate with default on
receivables, financial difficulty of the borrower, and it becoming probable that the borrower will
enter bankruptcy or financial re-organization. Financial assets are written off when there is no
reasonable expectation of recovery. During the year ended December 31, 2021, the Company
53
54
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(b) Credit risk (continued):
23. Financial instruments (continued):
(d) Market risk (continued):
wrote off $288 of unbilled receivables that were deemed not collectible (2020 – $nil). As at
December 31, 2021, the Company has not recorded a loss allowance (2020 – $nil).
The Company invests its excess cash in short-term investments with the objective of maintaining
safety of principal and providing adequate liquidity to meet all current payment obligations and
future planned capital expenditures with the secondary objective of maximizing the overall yield of
the investment. The Company manages its credit risk on short-term investments by dealing only
with major Canadian banks and investing only in instruments that management believes have
high credit ratings. Given these high credit ratings, the Company does not expect any
counterparties to these investments to fail to meet their obligations.
The Company’s exposure to credit risk is limited to the carrying amount of financial assets.
(c) Liquidity risk:
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they
fall due.
The Company’s approach to managing liquidity risk is to ensure, as far as possible, that it will
always have sufficient liquidity to meet liabilities when due. The Company also manages liquidity
risk by continuously monitoring actual and budgeted expenses. Furthermore, the Board of
Directors reviews and approves the Company’s operating and capital budgets, as well as any
material transactions out of the ordinary course of business, including acquisitions or other major
investments or divestitures.
At December 31, 2021, the Company had cash and cash equivalents and short-term investments
totaling $233,388 (2020 – $213,138). Further, the Company has a credit facility as disclosed in
note 22. The Company’s trade payables and accrued liabilities are generally due within 3 months
or less.
(d) Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest
rates, will affect the Company’s income or the value of its holdings of financial instruments.
Currency risk
A portion of the Company’s revenues and operating costs are realized in currencies other than its
functional currency, such as the Canadian dollar, Japanese Yen, Euro, and Great British Pound.
As a result, the Company is exposed to currency risk on these transactions. Additional earnings
volatility arises from the translation of monetary assets and liabilities denominated in foreign
currencies at the rate of exchange on each date of the Consolidated Statements of Financial
Position, the impact of which is reported as a foreign exchange gain or loss.
The Company is also subject to currency risk on its income tax expense due to foreign exchange
impacts resulting from translating financial results to local currency for Canadian tax reporting
purposes.
The Company’s objective in managing its currency risk is to minimize its exposure to currencies
other than its functional currency. The Company does so by matching foreign denominated
assets with foreign denominated liabilities.
The Company is mainly exposed to fluctuations between the U.S. dollar and the Canadian dollar.
For the year ended December 31, 2021, if the Canadian dollar had strengthened 5% against the
U.S. dollar, with all other variables held constant, pre-tax income for the year would have been
$6,783 lower (2020 – $4,442 lower). Conversely, if the Canadian dollar had weakened 5%
against the U.S. dollar with all other variables held constant, there would be an equal, and
opposite impact, on pre-tax income.
The summary quantitative data about the Company’s exposure to currency risk is as follows:
December 31, 2021
In thousands of local currency
Trade receivables
Unbilled receivables
Other receivables
Trade payables
Accrued liabilities
December 31, 2020
In thousands of local currency
Trade receivables
Unbilled receivables
Other receivables
Trade payables
Accrued liabilities
Interest rate risk
USD
CAD
EUR
GBP
JPY
60,018
12,838
626
(7,612)
(12,552)
1,204
–
1,564
(1,974)
(11,895)
4,431
652
286
(231)
(981)
1,412
1,058
–
(539)
(1,216)
365,154
46,998
–
(47,267)
(123,780)
53,318
(11,101)
4,157
715
241,105
USD
CAD
EUR
GBP
JPY
58,386
12,760
75
(1,350)
(9,634)
179
13
970
(1,115)
(11,627)
680
11
443
(61)
(656)
4,934
5
–
(1,159)
(631)
122,257
103,923
–
(203,337)
(115,036)
60,237
(11,580)
417
3,149
(92,193)
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate due to changes in market interest rates. The Company believes that interest rate risk is
low as the majority of investments are made in fixed rate instruments. As of December 31, 2021,
the Company has not drawn on the revolving demand credit facility.
55
56
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
24. Segmented information:
25. Related party transactions:
The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision
maker. The CEO evaluates the performance of the Company and allocates resources based on the
information provided by the Company’s internal management system at a consolidated level. The
Company has determined that it has only one operating segment: the design, development,
marketing and sale of supply chain planning software and solutions.
Geographic information
The following table presents external revenue on a geographic basis:
United States
Europe
Asia
Canada
2021
2020
$ 147,115
62,461
33,719
7,431
$ 139,762
50,128
29,548
4,751
$ 250,726
$ 224,189
Details of the Company’s significant subsidiaries at December 31, 2021 and 2020 are as follows:
Name of subsidiary
Principal
activity
Place of incorporation
and operation
Functional
currency
Kinaxis Corp.
Kinaxis Europe B.V.
Kinaxis India Private Limited Support
Kinaxis Japan K.K.
Kinaxis UK Limited
Sales
Sales
Sales
Sales
State of Delaware, USA USD
EUR
The Netherlands
INR
India
JPY
Japan
GBP
United Kingdom
Ownership interest
2020
2021
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Balances and transactions between the Company and its subsidiaries, which are related parties of
the Company, have been eliminated on consolidation and are not disclosed in this note.
During the year, the Company did not enter into any transactions with related parties other than key
management personnel, as described below.
The following table presents total property and equipment on a geographic basis:
Compensation of key management personnel
Canada
United States
Asia
Europe
$
2021
34,789
10,486
3,915
2,903
$
2020
16,800
6,044
4,710
3,192
$
52,093
$
30,746
The following table presents total right-of-use assets on a geographic basis:
Canada
United States
Asia
Europe
$
2021
45,955
3,155
3,713
755
$
2020
6,413
2,220
5,843
1,246
$
53,578
$
15,722
The Company defines key management personnel as being the Board of Directors, the CEO and his
direct reports. The remuneration of key management personnel during the year were as follows:
Salary and other short-term benefits
Share-based payments
26. Capital management:
2021
2020
$
7,377
17,123
$
6,034
16,403
$
24,500
$
22,437
The Company’s capital is composed of its shareholders’ equity. The Company’s objective in
managing its capital is to ensure financial stability and sufficient liquidity to increase shareholder
value through organic growth and investment in sales, marketing and product development. The
Company’s senior management is responsible for managing the capital through regular review of
financial information to ensure sufficient resources are available to meet operating requirements and
investments to support its growth strategy. The Board of Directors is responsible for overseeing this
process. In order to maintain or adjust its capital structure, the Company could issue new shares,
repurchase shares, approve special dividends or issue debt.
The Company has access to a revolving demand credit facility which bears interest at bank prime per
annum which has not been drawn as at December 31, 2021. The terms of the facility require the
Company to meet certain financial covenants which are monitored by senior management to ensure
compliance, as outlined in note 22.
57
58
Kinaxis Inc.
Notes to Consolidated Financial Statements
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
For the years ended December 31, 2021 and 2020
(Expressed in thousands of USD, except share and per share amounts)
27. Contingencies:
28. Subsequent event:
On February 11, 2022, the Company acquired 100% of the outstanding shares of a supply chain
software solutions company in exchange for cash. The acquired company is a provider of algorithm-
driven supply chain planning software modules.
The cash consideration is based on a purchase price of $3,144, adjusted for the acquired company’s
closing cash and indebtedness at the date of acquisition and subject to post-closing working capital
adjustments.
The financial effects of this transaction have not been recognized at December 31, 2021. At the time
the financial statements were authorized for issue, the Company has not yet completed the initial
accounting for the acquisition. In particular, the fair value assessment of the assets acquired and
liabilities assumed is incomplete. It is not yet possible to provide detailed information about each
class of net assets and any contingent liabilities of the acquired entity, or about the goodwill that may
be recognized.
a)
In the normal course of business, the Company and its subsidiaries enter into lease agreements
for facilities or equipment. It is common in such commercial lease transactions for the Company
or its subsidiaries as the lessee to agree to indemnify the lessor and other related third parties for
liabilities that may arise from the use of the leased assets. The maximum amount potentially
payable under the foregoing indemnities cannot be reasonably estimated. The Company has
liability insurance that relates to the indemnifications described above.
b) The Company includes standard intellectual property indemnification clauses in its software
license and service agreements. Pursuant to these clauses, and subject to certain limitations, the
Company holds harmless and agrees to defend the indemnified party, generally the Company’s
business partners and customers, in connection with certain patent, copyright or trade secret
infringement claims by third parties with respect to the Company’s products. The term of the
indemnification clauses is generally for the subscription term and applicable statutory period after
execution of the software license and service agreement. In the event an infringement claim
against the Company or an indemnified party is successful, the Company, at its sole option,
agrees to do one of the following: (i) procure for the indemnified party the right to continue use of
software; (ii) provide a modification to the software so that its use becomes non-infringing; (iii)
replace the software with software which is substantially similar in functionality and performance;
or (iv) refund the residual value of the software license fees paid by the indemnified party for the
infringing software. The Company believes the estimated fair value of these intellectual property
indemnification clauses is minimal.
Historically, the Company has not made any significant payments related to the above-noted
guarantees and indemnities and accordingly, no liabilities have been accrued in the consolidated
financial statements.
c) The Company is involved in litigation with a competitor, whereby the competitor has made certain
allegations concerning patent infringement. The Company will accrue a liability if the Company
determines that it is more likely than not that a present obligation exists that will result in an
outflow of resources and the amount of the obligation can be reliably estimated. Significant
judgment is required in both the determination of probability and the determination as to whether
an amount of an obligation is reliably estimable. The Company has assessed that its defense
against these allegations will more likely than not be successful and a present obligation does not
exist. At December 31, 2021, the Company has not recorded a liability regarding these
allegations.
The Company is required to apply judgment with respect to any potential loss or range of loss in
connection with litigation. The outcome of litigation and claims is intrinsically subject to
considerable uncertainty.
59
60
Management’s Discussion
and Analysis for the Year
Ended December 31, 2021
61
62
Management's Discussion and Analysis
Unless the context requires otherwise, all references in this management’s discussion and analysis (the
“MD&A”) to “Kinaxis”, “we”, “us”, “our” and the “Company” refer to Kinaxis Inc. and its subsidiaries as
constituted on December 31, 2021. This MD&A has been prepared with an effective date of March 1, 2022.
This MD&A for the year ended December 31, 2021 should be read in conjunction with our annual audited
consolidated financial statements and the related notes thereto as at and for the year ended December 31, 2021. The
financial information presented in this MD&A is derived from our annual audited consolidated financial statements
prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). This MD&A contains forward-looking statements that involve risks,
uncertainties and assumptions, including statements regarding anticipated developments in future financial periods
and our future plans and objectives. There can be no assurance that such information will prove to be accurate, and
readers are cautioned not to place undue reliance on such forward-looking statements. See “Forward-Looking
Statements”.
This MD&A includes certain trademarks, trade names and service marks which are protected under applicable
intellectual property laws and are the property of Kinaxis. Solely for convenience, our trademarks, such as “Kinaxis”
and “RapidResponse”, may appear without the ® or ™ symbol, but such references are not intended to indicate, in
any way, that we will not assert our rights to these trademarks, trade names and service marks to the fullest extent
under applicable law. Trademarks used in this MD&A, other than those that belong to Kinaxis, are the property of
their respective owners.
All references to $ or dollar amounts in this MD&A are to U.S. currency unless otherwise indicated.
Additional information relating to Kinaxis Inc., including the Company’s most recently completed Annual
Information Form, can be found on SEDAR at www.sedar.com.
Non-IFRS Measures
This MD&A makes reference to certain non-IFRS measures such as “Adjusted profit”, “Adjusted EBITDA” and
“Adjusted diluted earnings per share”. These non-IFRS measures are not recognized, defined or standardized measures
under IFRS. Our definition of Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share will likely
differ from that used by other companies and therefore comparability may be limited.
Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share should not be considered a substitute
for or in isolation from measures prepared in accordance with IFRS. These non-IFRS measures should be read in
conjunction with our annual audited consolidated financial statements and the related notes thereto as at and for the
year ended December 31, 2021. Readers should not place undue reliance on non-IFRS measures and should instead
view them in conjunction with the most comparable IFRS financial measures. See the reconciliations of Adjusted
profit, Adjusted EBITDA and Adjusted diluted earnings per share to the most comparable IFRS financial measure in
the “Reconciliation of Non-IFRS Measures” section of this MD&A.
Forward-Looking Statements
This MD&A contains forward-looking statements that relate to our current expectations and views of future
events. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “will”,
“could”, “expect”, “anticipate”, “aim”, “estimate”, “plan”, “seek”, “believe”, “potential”, “predict”, “ongoing”,
“continue”, “is/are likely to” or the negative of these terms, or other similar expressions intended to identify forward-
looking statements.
Forward-looking statements are intended to assist readers in understanding management’s expectations as of the
date of this MD&A and may not be suitable for other purposes. We have based these forward-looking statements on
our current expectations and projections about future events and financial trends that we believe may affect our
financial condition, results of operations, business strategy and financial needs. These forward-looking statements
include, among other things, statements relating to:
•
•
our expectations about our revenue, expenses and operations;
our anticipated cash needs;
KINAXIS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2021
DATED: March 1, 2022
63
64
Management's Discussion and Analysis
Management's Discussion and Analysis
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to protect, maintain and enforce our intellectual property rights, including our ability to defend
against third party claims;
third party claims of infringement or violation of, or other conflicts with, intellectual property rights by us;
our plans for and timing of expansion of our solutions and services;
our future growth plans;
the acceptance by our customers and the marketplace of new technologies and solutions;
our ability to attract new customers and develop and maintain existing customers;
our ability to attract and retain our people;
our expectations with respect to advancement in our technologies;
our competitive position and our expectations regarding competition;
regulatory developments and the regulatory environments we operate in;
anticipated trends and challenges in our business and the markets we operate in;
expansion of our partnerships;
completion of our new building and opportunities related to it;
expectations relating to a hybrid office/work-from-home approach and results on the Company’s carbon
footprint;
anticipated trends, standards and challenges in our business and the markets we operate in; and
expected impact of COVID-19 on the Company’s future operations and performance.
Forward-looking statements are based on certain assumptions and analyses made by us in light of our experience
and perception of historical trends, current conditions and expected future developments and other factors we believe
are appropriate. Expected future developments include growth in our target market, an increase in our subscription
revenue and decrease in maintenance and support revenue based on trends in customer behaviour, increasing sales
and marketing expenses, research and development expenses and general and administrative expenses based on our
business plans and our continued ability to realize on the benefits of tax credits in the near term. Although we believe
that the assumptions underlying the forward-looking statements are reasonable, they may prove to be incorrect.
Whether actual results, performance or achievements will conform to our expectations and predictions is subject
to a number of known and unknown risks and uncertainties, including those set forth below under the heading “Risks
and Uncertainties”. These risks and uncertainties could cause our actual results, performance, achievements and
experience to differ materially from the future expectations expressed or implied by the forward-looking statements.
In light of these risks and uncertainties, readers should not place undue reliance on forward-looking statements.
All of the forward-looking statements in this MD&A are qualified by these cautionary statements and other
cautionary statements or factors contained herein. There is no assurance that the actual results or developments will
be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Kinaxis.
The forward-looking statements made in this MD&A relate only to events or information as of the date of this
MD&A and are expressly qualified in their entirety by this cautionary statement. We do not assume any obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
unless we are required by law to do so.
Risks and Uncertainties
We are exposed to risks and uncertainties in our business, including the risk factors set forth below:
Strategic risks
•
If we’re unable to develop new products and services, sell our solutions into new markets or further penetrate our
existing markets, our revenue will not grow as expected.
•
•
•
•
•
If we do not adequately scale our operations to meet and sustain our growth objectives, it could affect our ability
to remain competitive and adversely affect our business.
If we do not maintain the compatibility of our solutions with third party applications that our customers use in
their business processes, demand for our solutions could decline.
If we’re unable to assess and adapt to rapid technological developments, it could impair our ability to remain
competitive.
If we fail to protect our intellectual property and proprietary rights adequately, our business could be adversely
affected.
If a third party makes an assertion that we’re infringing its intellectual property, it could subject us to costly and
time-consuming litigation or expensive licenses which could harm our business.
• We participate in highly competitive markets, and our failure to compete successfully would make it difficult for
us to add and retain customers and would reduce or impede the growth of our business.
•
If we’re unable to retain our key employees, or effectively compete for talent, our business would be harmed and
we might not be able to implement our business plan successfully.
• Our growth depends on the continued development of our direct sales force.
• As we increase our emphasis on our partner ecosystem, we may encounter new risks, such as dependence on
partners for a material portion of our revenue and potential channel conflict.
• Mergers or other strategic transactions involving our competitors or customers could weaken our competitive
position, which could harm our results of operations.
• We may not receive significant revenue as a result of our current research and development efforts.
• Our business may suffer if we do not develop widespread brand awareness cost-effectively.
• Our strategy includes pursuing acquisitions and our potential inability to successfully integrate newly-acquired
companies or businesses may adversely affect our financial results.
• Efforts to reduce climate change could affect our sales and financial results.
• We may need to raise additional funds to pursue our growth strategy or continue our operations, and we may be
unable to raise capital when needed or on acceptable terms.
Financial risks
•
If we’re unable to attract new customers or sell additional products to our existing customers, our revenue growth
and profitability will be adversely affected.
• We derive a significant portion of our revenue from a relatively small number of customers, and our growth
depends on our ability to retain existing customers and add new customers.
• We encounter long sales cycles, particularly with our larger customers, which could have an adverse effect on the
amount, timing and predictability of our revenue.
• We rely significantly on recurring revenue, and if recurring revenue declines or contracts are not renewed, our
future results of operations could be harmed.
• Downturns or upturns in new sales will not be immediately reflected in operating results and may be difficult to
discern.
• Our quarterly results of operations may fluctuate. As a result, we may fail to meet or exceed the expectations of
investors or securities analysts which could cause our share price to decline.
• We may incur operating losses in the future.
• Downturns in general economic and market conditions and reductions in IT spending may reduce demand for our
solutions, which could negatively affect our revenue, results of operations and cash flows.
65
66
• We are subject to fluctuations in currency exchange rates.
Overview
Management's Discussion and Analysis
Management's Discussion and Analysis
•
If we experience significant fluctuations in our rate of anticipated growth and do not balance our expenses with
our revenue forecasts, our results could be harmed.
Operational risks
• Our solutions are complex and customers may experience difficulty in implementing or upgrading our products
successfully or otherwise achieving the benefits attributable to our products.
•
Security and privacy breaches could delay or interrupt service to our customers, harm our reputation or subject
us to significant liability and adversely affect our business and financial results. Our ability to retain customers
and attract new customers could be adversely affected by an actual or perceived breach of security or privacy
relating to customer information.
• We enter into service level agreements with all our customers. If we do not meet these contractual commitments,
we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription services
or face contract terminations, which could adversely affect our revenues.
•
If our productivity is impacted as a result of remote work, we may incur additional costs to address such issues
and our financial condition and results may be adversely impacted.
• Events that are out of our control, such as a geopolitical crisis, widespread outbreak of an illness or other health
issue, a natural disaster or terrorist attack could negatively affect various aspects of our business.
•
Interruptions or delays in the services provided by third parties could impair the delivery of our solutions and our
business could suffer.
• We may experience service failures or interruptions due to defects in the software, infrastructure, third party
components or processes that comprise our existing or new solutions, any of which could adversely affect our
business.
• The use of open source software in our products may expose us to additional risks and harm our intellectual
property.
• Because our long-term success depends, in part, on our ability to continue to expand the sales of our solutions to
customers located outside North America, our business will be susceptible to risks associated with international
operations.
Regulatory and compliance risks
•
Privacy and security concerns, including evolving laws and regulations in these areas, could adversely affect our
business and operating results.
• Current and future accounting pronouncements and other financial reporting standards might negatively impact
our financial results.
• We are subject to taxation in various jurisdictions and the taxing authorities may disagree with our tax positions.
Other risks
•
Impacts related to the COVID-19 pandemic are expected to continue to pose risks to our business for the
foreseeable future, may heighten many of the risks and uncertainties identified herein, and could have a material
adverse impact on our business, operations or financial performance in a manner that is difficult to predict.
• The market price of our common shares may be volatile.
• We may issue additional common shares in the future which may dilute our shareholders’ investments.
These risks are described in further detail in the section entitled “Risk Factors” in our most recently filed Annual
Information Form.
Kinaxis® is a leading provider of cloud-based subscription software that enables its customers to improve and
accelerate analysis and decision-making across their supply chain operations. We combine human intelligence with
artificial intelligence (AI) and our unique concurrent planning technique to help companies plan for the future, monitor
risks and opportunities and respond at the pace of change. Our industry-proven applications and extensible, cloud-
based RapidResponse® platform empowers planners, business leaders and information technology (IT) professionals
to know sooner, act faster and remove waste so they can make decisions that improve the bottom line, make better use
of resources and facilitate better work-life balance.
We serve the needs of Global Fortune 100, Fortune 500 and other large and mid-size companies, primarily
focusing on companies with revenues over US$250 million across seven vertical markets: high technology and
electronics manufacturing, aerospace and defense, industrial products, life sciences and pharmaceuticals, automotive,
consumer products and retail. Customers are primarily global enterprises with complex supply chain networks and
significant unresolved supply chain challenges. Our customers include many leading organizations like Merck & Co.,
Ford Motor Company, Proctor & Gamble and Schneider Electric, and tend to select RapidResponse as a purpose-built
solution to holistically address an end-to-end supply chain planning requirement (concurrent planning), rather than
using bundled solutions from enterprise resource planning (ERP) vendors like Oracle or SAP. We believe this market
is growing because of several factors, including the increased complexity and globalization of supply chains,
outsourcing, a diversity of data sources and systems, competitive pressures and a growing awareness of the criticality
of creating truly agile supply chains, as highlighted by the COVID-19 crisis.
Recurring Revenue Model
We sell our product using a subscription-based model, with the product being delivered from the cloud in the vast
majority of cases, from locations we manage within leased third-party data center facilities. Revenue from product
delivered from the cloud is recorded as Software as a Service (“SaaS”) revenue. Certain customers have licensed our
subscription product on an on-premise basis or have retained the option to take the hosted software on-premise as a
hybrid subscription. Under IFRS 15, for on-premise and hybrid customers, the deemed software component for the
applicable subscription term is recognized as “subscription term license revenue” upon initiation or renewal of the
subscription contract term, with the remaining maintenance and support component and hosting services for hybrid
subscriptions recognized ratably over the term as “maintenance and support revenue”.
Our subscription customers generally enter into three to five year agreements which are paid annually in advance.
SaaS and on-premise subscription agreements are generally subject to price increases upon renewal reflecting both
inflationary increases and the additional value provided by our solutions. In addition to the expected increase in SaaS
and subscription term license revenue from price increases over time, existing customers may subscribe for additional
applications, users or sites during the terms of their agreements. Our subscription fee generally depends on the size of
our customer, the number of applications deployed, the number of users and the number of licensed manufacturing,
distribution and inventory sites. The average annual contract value fluctuates from period to period d epending on the
number and size of new customer arrangements and the extent to which we are successful in expanding adoption of
our products by existing customers. We also provide professional services for implementation and configuration of
the product, as well as ongoing technical services and training. Professional services are typically billed on a time and
material basis.
Our subscription model results in a high proportion of recurring revenue, which includes SaaS and maintenance
and support revenue (see “Significant Factors Affecting Results of Operations – Revenue”). While the underlying
contracts for on-premise subscription agreements are typically structured in the same manner as for our cloud-
delivered customers, including contracted, recurring annual payments, under IFRS 15 for on-premise customers we
are required to separately report revenue as two components: the deemed software component and the maintenance
and support component. The deemed software component for the entire term of these on-premise subscriptions is
recognized as revenue upon contract term commencement or renewal (as a subscription term license). The amount
and timing of any recurring subscription term license revenue from on-premise subscription agreements is subject to
the timing and length of the renewal term of the agreement.
67
68
Management's Discussion and Analysis
Management's Discussion and Analysis
Due to the growth in the market and the increasing need for solutions, we expect competition in the industry from
new entrants and larger incumbent vendors to increase. In addition to this increased competitive pressure, changes in
the global economy, most notably due to COVID-19 in recent periods, may have an impact on the timing and ability
of these enterprises to make buying decisions, which may have an impact on our performance.
We are headquartered in Ottawa, Ontario. We have subsidiaries located in the United States, France, Germany,
Ireland, the Netherlands, the United Kingdom, Hong Kong, South Korea, and Singapore, and subsidiaries and offices
in Tokyo, Japan and Chennai, India. We continue to expand our operations internationally. For the three months and
year ended December 31, 2021, 59% and 62% of our revenues were derived from North American customers (three
months and year ended December 31, 2020 – 62% and 64%) and our remaining revenues were derived from European
and Asian customers.
We believe the power of the subscription model is only fully realized when a vendor has high retention rates.
High customer retention rates generate a long customer lifetime and a very high lifetime value of the customer. Our
annual net revenue retention rates remain over 100%, which includes sales of additional applications, users and sites
to existing customers.
The recurring nature of our revenue provides high visibility into future performance, and upfront payments result
in cash flow generation in advance of revenue recognition. Typically, approximately 80% of our expected annual SaaS
revenue is recognized from customer contracts that are in place at the beginning of the year and this continues to be
our target model going forward. However, this also means that agreements with new customers or agreements with
existing customers purchasing additional applications, users or sites in a quarter may not contribute significantly to
revenue in the current quarter. For example, a new customer who enters into an agreement late in a quarter will
typically have limited contribution to the revenue recognized in that quarter.
Strong Financial Track Record
We have established a consistent financial track record of strong revenue growth, solid earnings performance and
cash generation. Our SaaS revenue growth is driven both by contracts with new customers and expansion of our
solution within our existing customer base. More than 50% of SaaS revenue growth has been derived from new
customers. Subscription term license revenue is generally driven by the timing of renewals of the underlying on -
premise customer contracts. Our combined net revenue retention from both SaaS and on-premise subscriptions is
greater than 100%, reflecting our longer term contract structure and strong renewal history.
For the three months and year ended December 31, 2021, our SaaS revenue was $46.9 million and $174.5 million
(three months and year ended December 31, 2020 – $39.8 million and $148.9 million); subscription term license
revenue was $1.4 million and $6.1 million (three months and year ended December 31, 2020 – $1.9 million and $17.9
million) and total revenue was $68.5 million and $250.7 million (three months and year ended December 31, 2020 –
$54.9 million and $224.2 million). For the three months and year ended December 31, 2021, our Adjusted EBITDA
was 16% of revenue (three months and year ended December 31, 2020 – 11% and 24%). Our ending cash, cash
equivalents and short-term investment balance was $233.4 million (December 31, 2020 – $213.1 million).
For the three months and year ended December 31, 2021, our ten largest customers accounted for 26% and 25%
of our total revenues (three months and year ended December 31, 2020 – 31% and 27%) with no customer accounting
for greater than 10% of total revenues.
Growth Strategy
Increasing revenues through new customer wins is one of our highest organizational priorities. Our sales cycle
can be lengthy, as much as 18 months. We generally target very large organizations with significant internal processes
for adoption of new systems. We currently pursue a revenue growth model that includes both direct sales through our
internal sales force, as well as indirect sales supported by our system integrator, value added reseller and other service
partners.
We continue to invest in our partnerships both from a sales and product implementation perspective. We work
with global and regional system integrators, which are able to positively influence the decision-making process at
major target customers and help customers realize end-to-end supply chain optimization by implementing our
industry-leading concurrent planning solution. Such partners include Accenture, Deloitte, EY, Genpact, mSE
Solutions, Argon Groupe and Cognizant. Our referral partners direct new opportunities to us under a business
arrangement. We regard Value Added Resellers as an extension of our sales force that resells and supports
RapidResponse in select markets, with a focus on mid-market companies. Finally, we work with solution extension
partners, such as 4flow, OCYO Consulting and PlanetTogether to provide additional applications on our platform, and
project44, LevaData and Blume Global to provide additional data streams and signaling to increase the value that
customers gain from RapidResponse. These partners, which we work with under revenue sharing agreements, deliver
digital inputs or domain-specific applications that leverage the power of concurrent planning and extend the
capabilities of the platform.
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70
Key Performance Indicators
Remaining Performance Obligation
Management's Discussion and Analysis
Management's Discussion and Analysis
We use a number of key performance indicators to assess the performance of our business including Annual
Recurring Revenue (ARR) and Remaining Performance Obligation (RPO). These financial measures do not have any
standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other
issuers and cannot be reconciled to a directly comparable IFRS measure. We evaluate our performance by comparing
our actual results to budgets, forecasts and prior period results. Our key performance indicators may be calculated in
a manner different than similar key performance indicators used by other companies.
Annual Recurring Revenue
Annual Recurring Revenue is the total annualized value of recurring subscription amounts (ultimately recognized
as SaaS, Subscription Term Licenses and Maintenance & 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 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 at period end. We believe that this measure provides a more current indication of our performance
in the growth of our subscription business than other metrics.
The Company’s ARR at December 31, 2021 is $221 million, an increase of 19% year-over-year or 21% on a
constant currency basis. We calculate constant currency growth rates by applying the applicable prior period exchange
rates to current period results.
s
n
o
i
l
l
i
M
$250
$200
$150
$100
$50
$0
Year-over-
year growth
Year-over-
year growth in
constant
currency
$185
$191
$159
$200
$207
$221
FY19
21%
FY20
17%
Q1'21
18%
Q2'21
24%
Q3'21
23%
FY21
19%
21%
15%
17%
23%
23%
21%
Remaining Performance Obligation represents the minimum contracted revenue expected to be recognized in the
future related to performance obligations that are unsatisfied or partially unsatisfied at period end. Our business model
continues to focus on delivering long-term value to our customers. As a result, we typically enter into three to five-
year agreements with our customers. RPO is not necessarily indicative of future revenue growth and is influenced by
several factors, including seasonality, the timing of renewals, average contract terms, foreign currency exchange rates
and fluctuations in new business growth. RPO is also impacted by acquisitions.
As at December 31, 2021, RPO amounts to $484 million, including $423 million in SaaS revenue (December 31,
2020 – $381 million and $353 million).
$339
$381
$484
s
n
o
i
l
l
i
M
$500
$400
$300
$200
$100
$0
FY19
FY20
FY21
SaaS
non-SaaS
Significant Factors Affecting Results of Operations
Our results of operations are influenced by a variety of factors, including:
Revenue
Our revenue consists of SaaS revenue, subscription term license revenue, professional services revenue and
maintenance and support revenue.
SaaS revenue is comprised of subscription fees for provision of RapidResponse as software as a service in our
hosted, cloud environment. This includes hosting services and maintenance and support for the solution over the term
of the contract when the product is provided from the cloud under a SaaS arrangement.
Professional services revenue is comprised of fees charged to assist organizations to implement and integrate our
solution and train their staff to use and deploy our solution. Professional service engagements are contracted on a time
and materials basis including billable travel expenses and are billed and recognized as revenue as the service is
delivered. In certain circumstances, we enter into arrangements for professional services on a fixed price basis; in
these cases, revenue is recognized by reference to the stage of completion of the contract.
Subscription term license revenue is comprised of fees for the implied software component for on-premise and
hybrid subscriptions, which is recognized as revenue upon term commencement. Hybrid subscription refers to the
option of certain customers to take the hosted software on-premise.
71
72
Maintenance and support revenue is comprised of fees for the implied maintenance and support component for
on-premise and hybrid subscriptions as well as a small amount of maintenance and support for certain legacy
customers who licensed our software on a perpetual basis prior to our conversion to a SaaS model in 2005.
Results of Operations
The following table sets forth a summary of our results of operations:
Management's Discussion and Analysis
Management's Discussion and Analysis
Cost of revenue
Cost of revenue consists of personnel, travel and other overhead costs related to implementation teams supporting
initial deployments, training services and subsequent stand-alone engagements for additional services. Cost of revenue
also includes personnel and overhead costs associated with our customer support team, amortization related to
acquired technology, depreciation related to our computer hardware and leased data center facilities where we
physically host our SaaS solution, and network connectivity costs for the provisioning of hosting services under SaaS
arrangements.
Selling and marketing expenses
Selling and marketing expenses consist primarily of personnel and related costs for our sales and marketing teams,
including salaries and benefits, contract acquisition costs including commissions earned by sales personnel and partner
referral fees, partner programs support and training, and trade show and promotional marketing costs.
We plan to continue to invest in sales and marketing by expanding our domestic and international selling and
marketing activities, building brand awareness, developing partners, and sponsoring additional marketing events. We
expect that in the future, selling and marketing expenses will continue to increase.
Research and development expenses
Research and development expenses consist primarily of personnel and related costs for the teams responsible for
the ongoing research, development and product management of RapidResponse. These expenses are recorded net of
any applicable scientific research and experimental development investment tax credits (“investment tax credits”)
earned for expenses incurred in Canada against eligible projects. We only record non-refundable tax credits to the
extent there is reasonable assurance we will be able to use the investment tax credits to reduce current or future tax
liabilities. As the Company has an established history of profits, we do expect to realize the benefit of these tax credits
in the near term. Further, we anticipate that spending on research and development will also be higher in absolute
dollars as we expand our research and development and product management teams.
General and administrative expenses
General and administrative expenses consist primarily of personnel and related costs associated with
administrative functions of the business including finance, human resources and internal information system support,
as well as legal, accounting and other professional fees and amortization related to customer relationships. We expect
that, in the future, general and administrative expenses will continue to increase in absolute dollars as we invest in our
infrastructure and we incur additional employee-related costs and professional fees related to the growth of our
business and international expansion.
Foreign exchange
Our presentation and functional currency is USD with the exception of our subsidiaries in South Korea (Korean
Won), Japan (Japanese Yen), the Netherlands, France, Germany and Ireland (Euro), the United Kingdom (British
Pound) and India (Indian Rupee). We derive most of our revenue in USD. Our head office and a significant portion
of our employees are located in Ottawa, Canada, and as such approximately half of our expenses are incurred in
Canadian dollars.
Three months ended
December 31,
2021
(In thousands of USD, except earnings per share)
2020
2021
Year ended
December 31,
2020
Statement of Operations
Revenue ........................................................
Cost of revenue
........................................
Gross profit ...................................................
Operating expenses .......................................
Foreign exchange loss ...................................
Net finance and other income (expense) .......
Profit (loss) before income taxes ..................
Income tax expense (recovery) .....................
Profit (loss) ...................................................
Adjusted profit(1) ...........................................
Adjusted EBITDA(1) .....................................
Basic earnings (loss) per share ......................
Diluted earnings (loss) per share ...................
Adjusted diluted earnings per share(1) ...........
$ 68,506
24,619
43,887
46,608
(2,721)
(194)
(36)
(2,951)
(32)
$ (2,919)
$ 4,430
$ 11,277
$ (0.11)
$ (0.11)
$ 0.16
$ 54,945
20,104
34,841
38,326
(3,485)
(364)
(91)
(3,940)
(2,354)
$ (1,586)
$ 3,400
$ 6,095
$ (0.06)
$ (0.06)
$ 0.12
$ 250,726
86,755
163,971
162,052
1,919
(558)
(264)
1,097
2,262
$ (1,165)
$ 15,988
$ 39,851
$ (0.04)
$ (0.04)
$ 0.56
$ 224,189
70,131
154,058
133,282
20,776
(196)
890
21,470
7,740
$ 13,730
$ 30,947
$ 53,751
$ 0.51
$ 0.49
$ 1.10
2019
$ 191,549
53,850
137,699
105,247
32,452
(226)
3,037
35,263
11,932
$ 23,331
$ 36,698
$ 57,727
$ 0.89
$ 0.87
$ 1.36
Note:
(1) Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share are non-IFRS measures. See “Non-IFRS Measures”. For a
reconciliation of these measures to the closest IFRS measure, where a comparable IFRS measure exists, see “Reconciliation of Non-IFRS
Measures” below.
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
As at
December 31, 2019
Total assets ...............................................................
Total non-current liabilities.......................................
$ 520,269
53,242
$ 428,410
14,794
$ 350,743
13,910
73
74
Reconciliation of Non-IFRS Measures
Revenue
Management's Discussion and Analysis
Management's Discussion and Analysis
To supplement our consolidated financial statements, which are prepared and presented in accordance with IFRS,
we provide investors with the following non-IFRS financial measures: Adjusted profit and Adjusted diluted earnings
per share and Adjusted EBITDA. We believe that securities analysts, investors and other interested parties frequently
use non-IFRS measures in the evaluation of performance. 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 and Adjusted diluted earnings per share
Adjusted profit represents profit adjusted to exclude our equity compensation plans and non-recurring items. The
non-recurring item during the three months ended December 31, 2021 of $0.7 million relates to the provision for future
variable lease payments for our former head office space which is no longer in use. The non-recurring items during
the year ended December 31, 2021 of $7.2 million relate to non-refundable government grants related to the pandemic
of $7.9 million net of the $0.7 million provision for future variable lease payments. Adjusted diluted earnings per
share represents diluted earnings per share calculated using Adjusted profit. We use Adjusted profit and Adjusted
diluted earnings per share as these measures better align with our performance and improve comparability against our
peers.
Adjusted EBITDA
Adjusted EBITDA represents profit adjusted to exclude our equity compensation plans, non-recurring items and
income tax expense, depreciation and amortization, foreign exchange loss (gain), and net finance expense (income).
We use Adjusted EBITDA to provide readers 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 have reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as
follows:
Three months ended
December 31,
2021
2021
2020
(In thousands of USD)
Year ended
December 31,
2020
2019
Profit (loss) ...................................................
Share-based compensation ............................
Non-recurring item .......................................
Adjusted profit ..............................................
Income tax expense (recovery) .....................
Depreciation and amortization ......................
Foreign exchange loss ...................................
Net finance expense (income) .......................
Adjusted EBITDA ........................................
Adjusted EBITDA as a percentage of
revenue .........................................................
$ (2,919)
6,633
716
$ 4,430
(32)
6,557
194
128
6,847
$ 11,277
$ (1,586)
4,986
–
$ 3,400
(2,354)
4,494
364
191
2,695
$ 6,095
$ (1,165)
24,343
(7,190)
$ 15,988
2,262
20,409
558
634
23,863
$ 39,851
$ 13,730
17,217
–
$ 30,947
7,740
15,562
196
(694)
22,804
$ 53,751
$ 23,331
13,367
–
$ 36,698
11,932
11,908
226
(3,037)
21,029
$ 57,727
16.5%
11.1%
15.9%
24.0%
30.1%
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended December
31,
2021
2020
2020 to
2021
%
(In thousands of USD)
SaaS....................................................
Professional services ..........................
Subscription term license ...................
Maintenance and support....................
$ 46,855 $ 39,815
11,334
1,948
1,848
54,945
17,036
1,442
3,173
68,506
18%
50%
(26%)
72%
25%
$ 174,463 $ 148,873
45,899
17,890
11,527
224,189
57,640
6,118
12,505
250,726
17%
26%
(66%)
8%
12%
Total revenue for the three months ended December 31, 2021 was $68.5 million, an increase of $13.6 million
compared to the same period in 2020. The increase was due to an 18% increase in SaaS revenues and a 50% increase
in professional services revenue.
Total revenue for the year ended December 31, 2021 was $250.7 million, an increase of $26.5 million compared
to the same period in 2020. The increase was due to a 17% increase in SaaS revenue and a 26% increase in professional
services revenue, partially offset by a 66% decrease in subscription term license revenue, related to the normal cycle
of on-premise customer renewals.
SaaS revenue
SaaS revenue for the three months and year ended December 31, 2021 was $46.9 million and $174.5 million, an
increase of $7.0 million and $25.6 million compared to the same periods in 2020. This increase was due to contracts
secured with new customers, as well as expansion of existing customer subscriptions.
Professional services revenue
Professional services revenue for the three months and year ended December 31, 2021 was $17.0 million and
$57.6 million, an increase of $5.7 million and $11.7 million compared to the same periods in 2020. Professional
services revenue has increased due to an increase in deployment activity due to growth in SaaS subscriptions and due
to expanded service offerings. Professional services revenue varies quarter to quarter due to the size, timing and
scheduling of customer engagements and the level of partner-led engagements.
Subscription term license revenue
Subscription term license revenue for the three months and year ended December 31, 2021 was $1.4 million and
$6.1 million, a decrease of $0.5 million and $11.8 million compared to the same periods in 2020. Generally,
subscription term license revenue varies quarter to quarter due to the timing of renewals and expansions for on-premise
and hybrid subscription arrangements. The current period fluctuations reflect the normal cycle of such renewals.
Maintenance and support revenue
Maintenance and support revenue for the three months and year ended December 31, 2021 was $3.2 million and
$12.5 million, an increase of $1.3 million and $1.0 million compared to the same periods in 2020.
75
76
Cost of Revenue
Research and Development Expenses
Management's Discussion and Analysis
Management's Discussion and Analysis
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2020
2021
(In thousands of USD)
Cost of revenue ..................................
Gross profit ........................................
Gross margin ......................................
Software(1) ..................................
Professional services ..................
$ 24,619 $ 20,104
34,841
63%
81%
(5%)
43,887
64%
81%
12%
22%
26%
$ 86,755 $ 70,131
154,058
69%
85%
7%
163,971
65%
82%
11%
2020 to
2021
%
24%
6%
Note:
(1) Software gross margin corresponds to SaaS, subscription term license and maintenance and support revenue.
Cost of revenue for the three months and year ended December 31, 2021 was $24.6 million and $86.8 million, an
increase of $4.5 million and $16.6 million compared to the same periods in 2020. The increase was due to higher
headcount and related compensation costs, partner and third-party provider costs, and depreciation costs. For the year
ended December 31, 2021, the increase in cost of revenue was partially offset by amounts claimed for non-refundable
government grants.
Gross margin for the three months and year ended December 31, 2021 was 64% and 65%, compared to 63% and
69% for the same periods in 2020. Gross margin is driven by a mix of software and professional services gross margins.
Software gross margin was 81% and 82% for the three months and year ended December 31, 2021, compared to 81%
and 85% for the same periods in 2020. The software gross margin for the year ended December 31, 2021 was lower
due to the factors discussed relating to cost of revenue and due to a lower proportion of subscription te rm license
revenue. Subscription term license revenue carries a higher gross margin than revenue recognized ratably over the
term. Professional services gross margin was 12% and 11% for the three months and year ended December 31, 2021,
compared to -5% and 7% for the same periods in 2020. The professional services gross margin increased for the three
months and year ended December 31, 2021 due to an increase in headcount utilization as revenues increased in the
period.
Selling and Marketing Expenses
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2021
2020
2020 to
2021
%
(In thousands of USD)
Selling and marketing .........................
As a percentage of revenue ................
$ 16,960 $ 15,521
28%
25%
9%
$ 59,078 $ 52,630
23%
24%
12%
Selling and marketing expenses for the three months ended December 31, 2021 were $17.0 million, an increase
of $1.4 million compared to the same period in 2020. The increase was due to higher headcount and related
compensation costs, travel costs, and marketing programs. Selling and marketing expenses for the year ended
December 31, 2021 were $59.1 million, an increase of $6.4 million compared to the same period in 2020. The increase
was due to higher headcount and related compensation costs and marketing programs, partially offset by lower travel
costs and by amounts claimed for non-refundable government grants.
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2021
2020
2020 to
2021
%
(In thousands of USD)
Research and development .................
As a percentage of revenue ................
$ 16,465 $ 13,822
25%
24%
19%
$ 57,424 $ 47,420
21%
23%
21%
Research and development expenses for the three months and year ended December 31, 2021 were $16.5 million
and $57.4 million, an increase of $2.6 million and $10.0 million compared to the same periods in 2020. The increase
was due to higher headcount and related compensation costs and public cloud service provider costs. Our investment
in headcount supports ongoing programs to drive further innovation in our RapidResponse platform and ensure
sustainable market leadership. For the three months ended December 31, 2021, the increase in research and
development expenses was partially offset by a higher amount of investment tax credits claimed. For the year ended
December 31, 2021, the increase was partially offset by amounts claimed for non-refundable government grants.
General and Administrative Expenses
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2021
2020
2020 to
2021
%
(In thousands of USD)
General and administrative .................
As a percentage of revenue ................
$ 13,183 $ 8,983
16%
19%
47%
$ 45,550 $ 33,232
15%
18%
37%
General and administrative expenses for the three months and year ended December 31, 2021 were $13.2 million
and $45.6 million, an increase of $4.2 million and $12.3 million compared to the same periods in 2020. General and
administrative expenses include $1.0 million of accelerated depreciation of right-of-use assets and leasehold
improvements for our former head office which is no longer in use, as well as a provision of $0.7 million for future
variable lease payments on the same office space. The remaining increase in general and administrative expenses was
due to higher headcount and related compensation costs, and legal and compliance costs. The increase in general and
administrative expenses reflects investments in corporate infrastructure and capability to support our global expansion
and growth strategy. For the year ended December 31, 2021, the increase was partially offset by amounts claimed for
non-refundable government grants.
77
78
Other Income and Expense
Profit
Management's Discussion and Analysis
Management's Discussion and Analysis
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2021
2020
2020 to
2021
%
Other income (expense):
Foreign exchange loss ................
Net finance and other income
(expense) ....................................
Total other income (expense) .............
$ (194)
$ (364)
(47%)
$ (558)
$ (196)
185%
(36)
(230)
(91)
(455)
(60%)
(49%)
(264)
(822)
890
694
–(1)
–(1)
(In thousands of USD)
Note:
(1) The percentage change has been excluded as it is not meaningful.
Total other expense for the three months ended December 31, 2021 was $0.2 million compared to $0.5 million
for the same period in 2020. The lower expense was due to a lower foreign exchange loss during the period.
Total other expense for the year ended December 31, 2021 was $0.8 million compared to other income of $0.7
million for the same period in 2020. The expense was due to lower interest rates earned on cash and short-term
investments, higher interest expense on lease obligations, and higher foreign exchange losses.
Income Taxes
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2021
2020
2020 to
2021
%
(In thousands of USD)
Income tax expense (recovery) ...........
$ (32)
$ (2,354)
(99%)
$ 2,262
$ 7,740
(71%)
Income tax recovery for the three months ended December 31, 2021 was a nominal amount, compared to a
recovery of $2.4 million for the same period in 2020. The decrease in income tax recovery was due to a lower loss
before tax, higher non-deductible share-based compensation, and adjustments to filed positions recorded in the period,
partially offset by benefits for share-based payments. Income tax expense for the year ended December 31, 2021 was
$2.3 million, a decrease of $5.5 million compared to the same period in 2020. The decrease in income tax expense
was due to lower profit before tax and lower benefits for share-based payments, partially offset by higher non-
deductible share-based payments and adjustments to filed positions recorded in the period.
Three months ended
December 31,
2021
2020
2020 to
2021
%
Year ended
December 31,
2021
2020
2020 to
2021
%
(In thousands of USD except earnings per share)
Profit (loss) .........................................
Adjusted profit(1) ................................
Adjusted EBITDA(1) ...........................
Basic earnings (loss) per share ...........
Diluted earnings (loss) per share ........
Adjusted diluted earnings per share(1)
$ (2,919)
4,430
11,277
$ (0.11)
$ (0.11)
$ 0.16
$ (1,586)
3,400
6,095
$ (0.06)
$ (0.06)
$ 0.12
84%
30%
85%
$ (1,165)
15,988
39,851
$ (0.04)
$ (0.04)
$ 0.56
$ 13,730
30,947
53,751
$ 0.51
$ 0.49
$ 1.10
–(2)
(48%)
(26%)
Note:
(1) Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share are non-IFRS measures. See “Non-IFRS Measures”. For a
reconciliation of these measures to the closest IFRS measure, where a comparable IFRS measure exists, see “Reconciliation of Non-IFRS
Measures” above.
(2) The percentage change has been excluded as it is not meaningful.
Loss for the three months ended December 31, 2021 was $2.9 million or $0.11 per basic and diluted share,
compared to a loss of $1.6 million or $0.06 per basic and diluted share for the same period in 2020. The higher loss
was due to a lower income tax recovery, partially offset by a lower operating loss. Loss for the year ended December
31, 2021 was $1.2 million or $0.04 per basic and diluted share, compared to profit of $13.7 million or $0.51 per basic
share and $0.49 per diluted share for the same period in 2020. The decrease in profit was due to a decr ease in
subscription term license revenue related to the normal cycle of on-premise customer renewals, and an increase in cost
of revenue and operating expenses, primarily higher headcount and related compensation costs. The decrease in profit
was partially offset by higher total revenue, lower income tax expense, and non-refundable government grants.
Adjusted EBITDA for the three months ended December 31, 2021 was $11.3 million, an increase of $5.2 million
compared to the same period in 2020. The increase in Adjusted EBITDA was due to an increase in SaaS and
professional services revenue, partly offset by an increase in cost of revenue and operating expenses. Adjusted
EBITDA for the year ended December 31, 2021 was $39.9 million, a decrease of $13.9 million compared to the same
period in 2020. The decrease in Adjusted EBITDA was due to a decrease in subscription term license revenue and an
increase in cost of revenue and operating expenses, partially offset by an increase in SaaS and professional services
revenue.
79
80
Key Balance Sheet Items
Right-of-use assets & Lease obligations
Management's Discussion and Analysis
Management's Discussion and Analysis
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
Total assets ..............................................................
Total liabilities .........................................................
$ 520,269
199,051
$ 428,410
146,653
An analysis of the key balance sheet items driving the change in total assets and liabilities is as follows:
Trade and other receivables
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
Trade accounts receivable........................................
Unbilled receivables ................................................
Taxes receivable ......................................................
Income tax credits receivable ..................................
Other ........................................................................
Total trade and other receivables .............................
$ 71,118
15,413
217
–
2,499
89,247
$ 67,288
13,800
–
211
1,584
82,883
Trade accounts receivable at December 31, 2021 were $71.1 million, an increase of $3.8 million compared to
December 31, 2020 due to variances in the timing of billings and collections on receivables. The aging of trade
receivables is generally current or within 30 days past due and overdue amounts do not reflect any credit issues. The
balance at any point in time is impacted by the timing of the annual subscription billing cycle for each customer and
when new customer contracts are secured. Unbilled receivables at December 31, 2021 were $15.4 million, an increase
of $1.6 million compared to December 31, 2020 due to renewals and expansion of on-premise or hybrid subscription
agreements resulting in recognition of subscription term license revenue in advance of invoicing under the respective
agreements.
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
Right-of-use assets ..................................................
$ 53,578
$ 15,722
Lease obligations:
Current .................................................................
Non-current ..........................................................
2,526
53,233
55,759
4,554
12,065
16,619
The right-of-use assets and lease obligations relate to our leases for office space and data centres. Right-of-use
assets at December 31, 2021 were $53.6 million, an increase of $37.9 million compared to December 31, 2020. Lease
obligations at December 31, 2021 were $55.8 million, an increase of $39.1 million compared to December 31, 2020.
The increase in right-of-use assets and lease obligations is due to the addition of the new head office in Ottawa (refer
to “Contractual Obligations” section) and expansion of the Montreal data centre during the period.
Contract acquisition costs
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
Contract acquisition costs .......................................
$ 19,691
$ 16,484
Contract acquisition costs are capitalized and amortized over the expected life of the customer upon
commencement of the related revenue. Contract acquisition costs consist of sales commissions paid to employees and
third-party referral fees. Variable compensation plans are determined on an annual basis and may differ in how they
correlate to revenue from year to year. Contract acquisition costs at December 31, 2021 were $19.7 million, an increase
of $3.2 million compared to December 31, 2020. This increase was due to commissions incurred in the period, partly
offset by regular amortization.
Property and equipment
Deferred revenue
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
Land ........................................................................
Computer equipment ..............................................
Computer software .................................................
Office furniture and equipment ...............................
Leasehold improvements ........................................
Total property and equipment .................................
$ 18
29,509
781
2,831
18,954
52,093
$ 18
24,847
917
587
4,377
30,746
Property and equipment at December 31, 2021 was $52.1 million, an increase of $21.3 million compared to
December 31, 2020. The increase is primarily due to leasehold improvements for the new head office in Ottawa. We
also invested in computer equipment to expand our data center capacity. Additions were partly offset by regular
depreciation.
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
Deferred revenue ....................................................
$ 99,239
$ 94,275
Deferred revenue at December 31, 2021 was $99.2 million, an increase of $5.0 million compared to December
31, 2020. We generally bill our customers annually in advance for SaaS agreements resulting in initially recording the
amount billed as deferred revenue which is subsequently drawn down to revenue over the agreement term. The change
in deferred revenue was due to variances in the timing of billings for new and existing customer contracts. There was
no deferred revenue relating to subscription term periods beyond one year.
81
82
Summary of Quarterly Results
Liquidity and Capital Resources
Management's Discussion and Analysis
Management's Discussion and Analysis
The following table summarizes selected results for the eight most recent completed quarters to December 31, 2021.
Three months ended
December
31, 2021
September
30, 2021
June 30,
2021
March 31,
2021
December
31, 2020
September
30, 2020
June 30,
2020
March 31,
2020
Revenue:
SaaS ..............................................
Professional services .....................
Subscription term licenses ............
Maintenance and support .............
$ 46,855
17,036
1,442
3,173
$ 44,731
14,576
1,997
3,132
$ 42,301
14,001
620
3,134
$ 40,576
12,027
2,059
3,066
$ 39,815
11,334
1,948
1,848
$ 39,322
11,492
1,035
3,267
$ 35,741
12,400
10,003
3,229
$ 33,995
10,673
4,904
3,183
Cost of revenue .................................
Gross profit .......................................
Operating expenses ...........................
Foreign exchange gain (loss) .............
Net finance and other income
(expense) ...........................................
Profit (loss) before income taxes .......
Income tax expense (recovery) ..........
68,506
24,619
43,887
46,608
(2,721)
(194)
(36)
(2,951)
(32)
64,436
21,847
42,589
41,557
1,032
547
(69)
1,510
1,310
60,056
19,783
40,273
35,825
4,448
(443)
(1)
4,004
916
57,728
20,506
37,222
38,062
(840)
(468)
(158)
(1,466)
68
54,945
20,104
34,841
38,326
(3,485)
(364)
(91)
(3,940)
(2,354)
55,116
18,557
36,559
35,754
805
124
156
1,085
354
61,373
15,634
45,739
30,618
15,121
(5)
152
15,268
6,264
52,755
15,836
36,919
28,584
8,335
49
673
9,057
3,476
Profit (loss) ........................................
$ (2,919)
$ 200
$ 3,088
$ (1,534) $ (1,586)
$ 731
$ 9,004
$ 5,581
Share-based compensation ................
Non-recurring item ............................
Adjusted profit(1) ................................
6,633
716
$ 4,430
6,501
–
$ 6,701
5,902
(7,906)
$ 1,084
5,307
–
$ 3,773
4,986
–
$ 3,400
4,732
–
$ 5,463
3,723
–
$ 12,727
3,776
–
$ 9,357
Income tax expense (recovery) ..........
Depreciation and amortization ...........
Foreign exchange loss (gain) .............
Net finance income (loss) ..................
(32)
6,557
194
128
6,847
1,310
4,784
(547)
136
5,683
916
4,598
443
108
6,065
68
4,470
468
262
5,268
(2,354)
4,494
364
191
2,695
354
4,500
(124)
(59)
4,671
6,264
3,627
5
(152)
9,744
3,476
2,941
(49)
(673)
5,695
Adjusted EBITDA(1) .........................
$ 11,277
$ 12,384
$ 7,149
$ 9,041
$ 6,095
$ 10,134
$ 22,471
$ 15,052
Basic earnings (loss) per share ..........
Diluted earnings (loss) per share .......
Adjusted diluted earnings per share(1)
$ (0.11)
$ (0.11)
$ 0.16
$ 0.01
$ 0.01
$ 0.24
$ 0.11
$ 0.11
$ 0.04
$ (0.06)
$ (0.06)
$ 0.13
$ (0.06)
$ (0.06)
$ 0.12
$ 0.03
$ 0.03
$ 0.20
$ 0.34
$ 0.32
$ 0.46
$ 0.21
$ 0.20
$ 0.34
Note:
(1) Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share are non-IFRS measures. See “Non-IFRS Measures”. For a
reconciliation of these measures to the closest IFRS measure, where a comparable IFRS measure exists, see “Reconciliation of Non-IFRS
Measures” above.
Our quarterly revenue has generally trended upwards over the past eight quarters, primarily due to sales of new
subscriptions for RapidResponse as well as new customer deployment activity. Subscription term license revenue
varies quarter to quarter due to the timing of new contracts, expansions and renewals for on-premise and hybrid
subscription arrangements.
Cost of revenue has increased as we continue to invest in personnel to support the growth in our business. Gross
margin has ranged from 63% to 75% of revenue, with fluctuations due to the varying subscription term license revenue
in each quarter and increases in cost of revenue. Operating expenses have increased for the majority of the periods
presented primarily due to the addition of personnel in connection with the expansion of our business.
Our primary source of cash flow is sales of subscriptions for our software and sales of professional services. Our
approach to managing liquidity is to ensure, to the extent possible, that we always have sufficient liquidity to meet
our liabilities as they come due. We do so by continuously monitoring cash flow and actual operating expenses
compared to budget.
Cash and cash equivalents .......................................
Short-term investments ............................................
As at
December 31, 2021
As at
December 31, 2020
(In thousands of USD)
$ 203,220
30,168
233,388
$ 182,958
30,180
213,138
Cash and cash equivalents increased $20.3 million to $203.2 million at December 31, 2021. Short-term
investments remained consistent at $30.2 million. Total cash, cash equivalents and short-term investments increased
$20.3 million to $233.4 million at December 31, 2021.
In addition to the cash, cash equivalents and short-term investment balances, we have a $20.0 million CAD
revolving demand facility available to meet ongoing working capital requirements. As part of the acquisition of
Rubikloud, a Standby Letter of Credit has been issued against this facility in the amount of $1.4 million CAD. Our
principal cash requirements are for working capital and capital expenditures. Excluding deferred revenue, working
capital at December 31, 2021 was $287.1 million. Given the ongoing cash generated from operations and our existing
cash and credit facilities, we believe there is sufficient liquidity to meet our current contractual obligations of $104.9
million and finance our longer-term growth.
The following table provides a summary of cash inflows and outflows by activity:
Three months ended
December 31,
Year ended December 31,
2021
2020
2021
2020
(In thousands of USD)
Cash inflow (outflow) by activity
Operating activities .....................................................
Investing activities ......................................................
Financing activities .....................................................
Effects of exchange rates ............................................
Net cash inflows (outflows) ........................................
Net purchase (redemption) of short-term investments
Net inflows (outflows) from cash and short-term
investments .................................................................
Cash provided by operating activities
$ 3,238
(11,464)
1,166
(102)
(7,162)
–
$ 3,200
(2,136)
1,381
657
3,102
10
$ 50,138 $ 59,470
(76,264)
16,638
830
674
58
(34,633)
5,851
(1,094)
20,262
–
(7,162)
3,112
20,262
732
Cash generated by operating activities for the three months ended December 31, 2021 was $3.2 million,
comparable to $3.2 million for the same period in 2020. The lower income tax recovery, higher depreciation, and
higher share-based payments were offset by a higher net increase in operating assets and liabilities during the period.
Cash generated by operating activities for the year ended December 31, 2021 was $50.1 million, compared to $59.5
million for the same period in 2020. The decrease was due to lower profit and a lower net increase in operating assets
and liabilities, partially offset by higher share-based payments.
83
84
Cash used in investing activities
Recent Developments
Management's Discussion and Analysis
Management's Discussion and Analysis
Cash used in investing activities for the three months ended December 31, 2021 was $11.5 million, compared to
$2.1 million for the same period in 2020. The increase was due to more purchases of property and equipment. Cash
used in investing activities for the year ended December 31, 2021 was $34.6 million, compared to $76.3 million for
the same period in 2020. The decrease is primarily due to the acquisition of Prana and Rubikloud that took place in
2020, partially offset by more purchases of property and equipment in 2021.
Cash provided by financing activities
Cash provided by financing activities for the three months ended December 31, 2021 was $1.2 million,
comparable to $1.4 million for the same period in 2020. Cash provided by financing activities for the year ended
December 31, 2021 was $5.9 million, compared to $16.6 million for the same period in 2020. The decrease was due
to fewer proceeds from stock options exercised and higher lease obligation payments.
Contractual Obligations
Our lease commitments are primarily for office premises and secure data center facilities with expiry dates that
range from July 2022 to February 2037. The largest lease commitment relates to a new head office in Ottawa, Canada,
the lease of which commenced September 2021 and expires in 2037. Given the ongoing cash generated from
operations and our existing cash and credit facilities, we believe there is sufficient liquidity to meet our contractual
obligations.
The following table summarizes our contractual obligations as at December 31, 2021, including commitments
relating to leasing contracts:
Less than
1 year
1 to
3 years
3 to
5 years
(In thousands of USD)
More than
5 years
Total
amount
On February 11, 2022, we acquired 100% of the outstanding shares of a supply chain software solutions company
in exchange for cash. The acquired company is a provider of algorithm-driven supply chain planning software
modules.
The cash consideration is based on a purchase price of $3.1 million, adjusted for the acquired company’s closing
cash and indebtedness at the date of acquisition and subject to post-closing working capital adjustments.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, other than variable payments related to operating leases with terms
of twelve months or less (which have been included in the disclosed obligations under “Liquidity and Capital
Resources – Contractual Obligations”), that have, or are likely to have, a current or future material effect on our
consolidated financial position, financial performance, liquidity, capital expenditures or capital resources.
Transactions with Related Parties
We did not have any transactions during the three months and year ended December 31, 2021 and 2020 between
the Company and a related party outside the normal course of business.
Financial Instruments and Other Instruments
We recognize financial assets and liabilities when we become party to the contractual provisions of the instrument.
On initial recognition, financial assets and liabilities are measured at fair value plus transaction costs directly
attributable to the financial assets and liabilities, except for financial assets or liabilities at fair value through profit
and loss, whereby the transactions costs are expensed as incurred. The carrying amounts of our financial instruments
approximate fair value due to the short-term maturity of these instruments.
Commitments
Lease agreements .................................
Financial Obligations
Trade payables and accrued liabilities ..
Total Contractual Obligations ..........
43,328
43,328
$ 52,803
$ 13,215
$ 7,362
$ 31,546
$ 104,926
$ 9,475
$ 13,215
$ 7,362
$ 31,546
$ 61,598
Credit risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. Our credit risk is primarily attributable to trade and other receivables.
The nature of our subscription-based business results in payments being received in advance of the majority of
the services being delivered, as a result, our credit risk exposure is low.
We invest our excess cash in short-term investments with the objective of maintaining safety of principal and
providing adequate liquidity to meet all current payment obligations and future planned capital expenditures with the
secondary objective of maximizing the overall yield of the investment. We manage our credit risk on investments by
dealing only with major Canadian banks and investing only in instruments that we believe have high credit ratings.
Given these high credit ratings, we do not expect any counterparties to these investments to fail to meet their
obligations.
The following table summarizes our contractual obligations as at December 31, 2020, including commitments
relating to leasing contracts:
Less than
1 year
1 to
3 years
3 to
5 years
(In thousands of USD)
More than
5 years
Total
amount
Commitments
Lease agreements .................................
Financial Obligations
Trade payables and accrued liabilities ..
Total Contractual Obligations ..........
$ 6,664
$ 15,538
$ 7,092
$ 32,762
$ 62,056
Market risk
33,030
33,030
$ 39,694
$ 15,538
$ 7,092
$ 32,762
$ 95,086
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect
our income or the value of our holdings of financial instruments.
a) Currency risk
A portion of our revenues and operating costs are realized in currencies other than our functional currency, such
as the Canadian dollar, Japanese Yen, Euro, and British Pound. As a result, we are exposed to currency risk on these
transactions. Also, additional earnings volatility arises from the translation of monetary assets and liabilities,
investment tax credits recoverable and deferred tax assets and liabilities denominated in foreign currencies at the rate
85
86
Management's Discussion and Analysis
Management's Discussion and Analysis
of exchange on each date of our consolidated statements of financial position; the impact of which is reported as a
foreign exchange gain or loss or as income tax expense for deferred tax assets and liabilities.
Our objective in managing our currency risk is to minimize exposure to currencies other than our functional
currency. We do not engage in hedging activities. We manage currency risk by matching foreign denominated assets
with foreign denominated liabilities.
b)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to
changes in market interest rates. We believe that interest rate risk is low for our financial assets as the majority of
investments are made in fixed rate instruments. We do have interest rate risk related to our credit facilities. The rates
on our Revolving Facility are variable tied to Royal Bank prime rate and Royal Bank US base rate. No amounts have
been drawn as at December 31, 2021.
Capital management
Our capital is composed of shareholders’ equity which includes our common shares. Our objective in managing
our capital is financial stability and sufficient liquidity to increase shareholder value through organic growth and
investment in sales, marketing and product development. Our senior management team is responsible for managing
the capital through regular review of financial information to ensure sufficient resources are available to meet
operating requirements and investments to support our growth strategy. The Board of Directors of Kinaxis (the
“Board”) is responsible for overseeing this process. In order to maintain or adjust our capital structure, we could issue
new shares, repurchase shares, approve special dividends or issue debt.
Critical Accounting Policies and Estimates
See our annual consolidated financial statements for the year ended December 31, 2021 and the related notes
thereto for a discussion of the accounting policies and estimates that are critical to the understanding of our business
operations and the results of our operations.
Contingencies
We are involved in litigation with a competitor, whereby the competitor has made certain allegations concerning
patent infringement. We will accrue a liability if we determine that it is more likely than not that a present obligation
exists that will result in an outflow of resources and the amount of the obligation can be reliably estimated. Significant
judgment is required in both the determination of probability and the determination as to whether an amount of an
obligation is reliably estimable. We have assessed that our defense against these allegations will more likely than not
be successful and a present obligation does not exist. At December 31, 2021, we have not recognized a liability
regarding these allegations.
We are required to apply judgment with respect to any potential loss or range of loss in connection with litigation.
The outcome of litigation and claims is intrinsically subject to considerable uncertainty.
Controls and Procedures
Disclosure Controls and Procedures
The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for
establishing and maintaining our disclosure controls and procedures. We maintain a set of disclosure controls and
procedures designed to provide reasonable assurance that information required to be publicly disclosed is re corded,
processed, summarized and reported on a timely basis. Our CEO and CFO have evaluated the design and effectiveness
of our disclosure controls and procedures at the end of the financial year and based on the evaluation have concluded
that the disclosure controls and procedures are effective.
Internal Controls over Financial Reporting
Our internal controls over financial reporting (“ICFR”) are designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with IFRS. Our management is responsible for establishing and maintaining adequate ICFR. Management, including
our CEO and CFO, does not expect that our ICFR will prevent or detect all errors and all fraud or will be effective
under all future conditions. A control system is subject to inherent limitations and even those systems determined to
be effective can provide only reasonable, but not absolute, assurance that the control objectives will be met with
respect to financial statement preparation and presentation.
National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian
Securities Administrators requires our CEO and CFO to certify that they are responsible for establishing and
maintaining ICFR and that those internal controls have been designed and are effective in providing reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with
IFRS. Our CEO and CFO are also responsible for disclosing any changes to our internal controls during the most
recent period that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting. Our management under the supervision of our CEO and CFO has evaluated the design of our ICFR
based on the Internal Control – Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations
of the Treadway Commission. As at December 31, 2021, management assessed the effectiveness of our ICFR and
concluded that our ICFR is effective and there are no material weaknesses that have been identified. There were no
significant changes to our ICFR for the year ended December 31, 2021.
Outstanding Share Information
As of December 31, 2021, our authorized capital consists of an unlimited number of common shares with no
stated par value. Changes in the number of common shares, options, restricted share units, deferred share units and
performance share units outstanding for the year ended December 31, 2021 and as of March 1, 2022 are summarized
as follows:
Class of Security
Common shares
Stock options
Restricted Share Units
Deferred Share Units
Performance Share Units
Number
outstanding at
December 31,
2020
27,085,922
2,228,456
78,305
55,928
̶
Number
outstanding at
December 31,
2021
Net issued
376,912
(85,081)
18,278
9,513
31,640
27,462,834
2,143,375
96,583
65,441
31,640
Net issued
15,148
(5,000)
(6,372)
̶
(3,776)
Number
outstanding at
March 1, 2022
27,477,982
2,138,375
90,211
65,441
27,864
Our outstanding common shares increased by 376,912 shares in 2021 due to the exercise of 291,680 stock options
and vesting of 85,232 restricted and performance share units.
Our outstanding stock options decreased by 85,081 options in 2021 due to the grant of 275,973 options less
291,680 options exercised and 69,374 options forfeited. Each option is exercisable for one common share.
Our outstanding restricted share units increased by 18,278 units in 2021 due to the grant of 106,001 units less
85,232 units vested and 2,491 units forfeited. Our outstanding deferred share units increased by 9,513 units in 2021
due to units granted. Our outstanding performance share units increased by 31,640 units in 2021 due to units granted.
Upon vesting, each share unit can be paid out or settled in cash, an equivalent number of common shares, or a
combination thereof, as elected by the Compensation Committee of the Board.
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