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Taking care of people.
O U R D I V E R S I T Y, E Q U I T Y A N D I N C L U S I O N S U R V E Y S AY S :
95%
Feel that we treat each
other with respect
94%
Feel that they are an accepted
member of their team
91%
Believe that Kinaxis leadership
is committed to DEI
Protecting the planet.
Carbon neutral for 2021
Strengthening corporate
sustainability
25,975 trees planted
21.48 hectares reforested
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Committed to a sustainable, socially responsible futureKinaxis aims to constantly improve our environmental, social and governance (ESG) performance. Making the world a better place is central to our culture, people and product. Our ESG strategy is overseen from the very top, by the Nominating and Governance Committee of our Board, extends throughout the organization as one of our core strategic pillars, and focuses on four core commitments: protecting the planet, taking care of people, giving back and building trust. Our concurrent planning approach helps our customers improve their sustainability by reducing wasted product, delivering critical goods when and where needed, reducing carbon output and helping to enable a circular economy. Kinaxis' ESG performance is being
recognized by key rating agencies.
Kinaxis has received top marks from several key ESG rating
agencies, including our recent Triple A designation from
MSCI, and our inclusion in Sustainalytics’ 2023 Top-Rated ESG
Companies list, in the software category.
We encourage you to read our Global Impact Report for 2022.
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A leader in supply chain planningEveryday volatility and uncertainty demand quick action. Kinaxis® (TSX:KXS) delivers 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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11
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62
Financial Highlights
Letter to Shareholders
Planning.AI – the next chapter of advanced analytics
MPO – Kinaxis’ evolution from supply chain planning to supply
chain management
Consolidated Financial Statements, Years Ended December 31, 2022 and 2021
Management’s Discussion and Analysis for the Year Ended December 31, 2022
3
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. Even as we have
continued to make significant strategic investments in the growth of our business, our operations have continued to
generate significant cash.
US$ Millions
366.9
250.7
224.2
191.5
150.7
213.3
174.5
148.9
Margin
28% 30% 24% 16% 22%
233.4
225.8
212.6 213.1
181.5
118.9
97.2
79.4
57.7 53.8
41.7
39.9
Total Revenue
SaaS Revenue
Adjusted EBITDA
Cash, Cash Equivalents
and ST Investments - 12/31
2018
2019
2020
2021
2022
1 Adjusted EBITDA is a non-IFRS measure. For reconciliation of Adjusted EBITDA to profit, please see "Management's Discussion & Analysis"
44
Annual Recurring Revenue (ARR)2
Our ARR 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. Such amounts are
determined solely by reference to the underlying contracts, and are normalized for the varying revenue recognition
treatments 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.
47% more ARR added in 2022
US$ Millions
$53 million
274
279
$36 million
221
185
ARR | YOY Growth
Constant Currency1
2020
17%
15%
2021
19%
21%
2022
24%
26%
2 For ARR, annualized subscription amounts are determined solely by reference to the underlying contracts, and are normalized 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
Remaining Performance Obligation (RPO)
Our RPO represents revenue that we expect to recognize in the future related to firm performance obligations that are
unsatisfied (or partially unsatisfied) on December 31, 2022, for our signed multi-year contracts. It is a good indicator of our
secured business at a moment in time.
$598.3
$549.7
24% v Q4 2021
30% v Q4 2021
$483.8
$423.5
US$ Millions
600
500
400
300
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
SaaS RPO
Total RPO
66
Letter to
Shareholders
7
Quite simply, 2022 was a phenomenal year for Kinaxis. Our SaaS revenue, the primary driver of our business, grew 22% and our Adjusted EBITDA1 margin (our key profitability metric) was 22% of revenue. Adding these two figures together, we exceeded Rule of 402 performance for the year – a test widely-used by investors to identify elite performance by software companies. If we eliminate the negative impacts of fluctuations in certain foreign currencies we sell in, the results were even better. Our constant currency1 estimates showed 28% SaaS revenue growth and an Adjusted EBITDA1 margin of 23%, both significantly beating the initial outlook we communicated for 2022. I couldn’t be prouder of the team for their remarkable efforts in 2022.A spotlight on supply chainEver since the pandemic began over three years ago, we have seen a sharp increase in demand for our products. The widespread disruption in supply chains shone a spotlight on legacy approaches to planning that aren’t sufficiently agile, connected, fast or accurate enough to serve modern supply chains and business. CEOs, CFOs and boards of massive corporations have seen how their mission-critical supply chains were built on siloed applications, disconnected functional teams, batch processing of time-sensitive data, and the use of offline tools like Excel for any meaningful scenario analysis when situations changed – as they always do. We solve all these issues with our modern, real-time concurrent planning approach. 8
Now that the worst of the pandemic seems to be behind us, we frequently get asked whether that means demand will subside. My answer is no. Business leaders can’t “unsee” what the spotlight revealed. Disruption and change, whether big or small, rare or recurring, are inevitable. To be prepared, digital end-to-end supply chain transformation must happen. As a result, in a difficult economic environment that has seen many software companies including some competitors laying off staff and predicting slower growth, we continue to forecast further acceleration in 2023 – acceleration that will be delivered profitably.Making progress on key growth initiativesAs I discussed in this letter last year, we are in the very early stages of several exciting growth strategies that have increased our total addressable market by a factor of nearly 10, compared to three years ago. Let me review our progress.40% of new customer wins from the mid-marketIncluding two acquisitions we made in 2022, we grew our customer base by 40% over the year, giving us a solid foundation for future expansion. Looking just at organic growth, we won approximately 25% more new customers than in 2021 – a tremendous accomplishment. I am particularly pleased that roughly 40% of these new wins came from mid-market customers, a significant growth opportunity for us that we only started to address a couple years ago. We are also beginning to sell to smaller companies globally through relationships with over 25 value-added resellers (VARs) who serve as our first truly indirect channel to market. We look forward to seeing how this growth vector develops over the next couple years.A bellwether account in retailWe’ve also expanded our opportunity by adding retail as our seventh targeted vertical market. After substantial product work, we are proving ourselves in a new bellwether account in an important segment of the retail market and will take a focused approach to new opportunities in 2023. Retail represents one of the largest markets we serve, so we are excited to make progress.Solution extension partners qualifying Kinaxis into more dealsIn 2020, we introduced our first solution extension partners. This group takes advantage of our open architecture to develop tightly integrated, domain-specific applications or delivers digital inputs to leverage the power of our unique concurrent planning approach. Today, we have roughly 15 partners who add value to RapidResponse to help our customers solve challenges across their supply chain through more effective planning, sourcing, manufacturing, deliveries or returns. While we earn revenue directly through subscriptions to these applications, many also help us qualify into We opened our new headquarters in Kanata in January 2022. It was built to
conform to the WELL Building Standard, which focuses on seven concepts
of health and well-being (air, water, nourishment, light, fitness, comfort,
and mind) and how they influence and impact human behaviors.
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opportunities where we wouldn’t have previously. We fully expect further growth in these important partnerships.Recent acquisitions to create even more avenues for growthWe added two more growth vectors via acquisition in 2022. First, we bought a small company that was developing a planning solution for a niche supply chain function that we know customers need. We will launch the first version of this product midway through 2023. Second, we purchased MPO, a company based in the Netherlands, that extends Kinaxis’ unique concurrent planning approach beyond the loading dock – where our activities typically ended – to plan and track the transportation of finished goods right to end customers’ doors and back, if any returns are necessary, to ensure orders are concluded perfectly. Currently, we’re selling MPO as both a standalone product and as an integrated component of RapidResponse, as we see strong demand for both opportunities. We will deepen product integration more fully over time for a truly seamless end-to-end experience.Proudly, a “build first” companyWhile we are excited about our acquisitions, Kinaxis proudly remains a “build first” company. Our unparalleled history of innovation in our field has been the primary source of our success to date and we fully expect that to continue ahead. Our latest product launch, the award-winning Planning.AI, is now available to customers 1. Adjusted EBITDA and constant currency metrics are non-IFRS measures. They are not recognized, defined or standardized measures under IFRS and might
not be comparable to similar financial measures presented by other issuers. Adjusted EBITDA and other non-IFRS financial measures reported by Kinaxis and
reconciliations to the most comparable IFRS financial measure are defined and disclosed under the headings Non-IFRS Measures and Reconciliation of Non-IFRS
Measures in our annual management’s discussion and analysis which sections are incorporated by reference herein and are available on SEDAR (www.sedar.com).
2. Rule of 40 calculated as the sum of SaaS revenue growth and adjusted EBITDA margin results.
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and comprises Demand.AI and Supply.AI. The former creates a truer picture of demand by incorporating internal data and outside-in external signals to improve demand and supply plans and deliver insight across all planning horizons using machine learning-based sensing and forecasting. Supply.AI drives costs out of the supply chain by using multiple analytical approaches to solve a wider variety of business problems and balance trade-offs incorporating cost, revenue, on-time delivery, capacity and more. You can read more about Planning.AI and our MPO product later in this annual report.Committed to a sustainable, socially responsible futureI’m very proud that all these achievements have been won while simultaneously moving our ESG program forward. We continue to fully offset our Scope 1, 2 and 3 carbon emissions annually, and remain focused on removing waste from our customers’ supply chains, including through investigation of new functionality that will help support “greener” decision-making. I am thrilled with our recent Triple A designation from leading ESG rating agency, MSCI, and our inclusion in Sustainalytics’ 2023 Top-Rated ESG Companies list, in the software category. More acceleration aheadAs pleased as I am with Kinaxis’ performance in 2022, we expect even more for 2023, when we see SaaS revenue growth accelerating to between 25% and 27%. As of December 31, 2022, 86% of this SaaS revenue guidance is already in our committed backlog of signed business. We typically aim for a result near 80%, so this provides exceptionally strong visibility. We will grow our sales team in 2023 to meet the expanded opportunity we see in front of us, all while continuing to deliver a solid Adjusted EBITDA1 result, which is expected to be between 13% and 15% of revenue.I continue to believe we are in the early days of what will be a global transformation of supply chain management solutions. We fully intend to take advantage of our leadership position to deliver maximum value to shareholders. As always, we thank you, our shareholders, for your belief in Kinaxis’ opportunity and team.Sincerely, John Sicard, President and Chief Executive Officer, Kinaxis Inc. Planning.AI – the next chapter of
advanced analytics
Supply chain planners and leaders are trapped, struggling to find the balance between making an accurate decision,
or making a fast one. All while the success or failure of their business is on the line. But it doesn’t have to be this way.
Planners can have accuracy AND speed for the ultimate in supply chain agility.
Kinaxis’ award-winning Planning.AI is the next big leap in the use of advanced analytics for supply chain planning.
It combines the speed of heuristics, the accuracy of optimization and the intelligence of machine learning – automatically
detecting when to use each approach – all working concurrently to solve a single problem in a way no other vendor can.
Planning.AI
HEURISTICS
PLANNING.AI
SUPPLY.AI + DEMAND.AI
MACHINE
LEARNING
OPTIMIZATION
Heuristics
FOR SPEED
Leverage best-in-class
techniques to get a
“good enough” answer in
the fastest time possible
Machine learning
FOR INTELLIGENCE
Analyze trends to make
predictive choices
based on a planner’s
previous activities
Optimization
FOR ACCURACY
Use various solvers
or optimizers to get
the most accurate
answer possible in a
slower timeframe
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When applied to today’s most complex supply planning challenges, Planning.AI first applies heuristics to a problem, then
runs those results through an optimizer or solver. That significantly narrows the scope of what the optimizer must solve for,
dramatically reducing the time it takes to get an answer while still preserving the required accuracy. Kinaxis’ first two use
cases for Planning.AI are Demand.AI and Supply.AI.
Demand.AI
Supply.AI
Demand.AI leverages machine learning to gain insights
Supply.AI drives costs out of the supply chain. It balances
from vast amounts of internal and external data then
trade-offs, incorporating cost, revenue, on-time delivery,
uses additional analytical approaches as appropriate
capacity and more using new modeling approaches
to improve sensing and forecasting across short- and
and analytical solvers. Harness existing master data.
long-term horizons. Planners can create highly accurate
Leverage flexible business objectives. Plan at any level
demand forecasts while leveraging analytics, insights, and
of granularity. Supply.AI can solve a wide variety of
exception-based workflows to prioritize high value-add
business problems, including could-be-built to maximize
work. Demand.AI unearths the true drivers of demand
margin by determining what products to build and how
from both internal and external signals, allowing for
given available supplies and uncommitted capacity,
improved starting points for consensus demand and
and common blend, which lets you make the best use
supply plans.
of available APIs and select the optimal processing
techniques to maximize total demand satisfied.
Celestica has been focused on getting the most value out
of customers’ supply materials that had been deemed excess or
obsolete. Left unused, these materials simply represent extra cost to
their customers, so Celestica is using Supply.AI to ask, “What could be built?”
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We expect Planning.AI to help us better support our customers by quickly and accurately determining the best combination of products that could be built using projected on-hand inventory. This will help reduce customers’ excess and obsolete materials and significantly improve our planning flexibility in RapidResponse.”MARY SIMPKINS, SCM PROCESS & APPLICATIONS CONSULTANT, CELESTICA
MPO – Kinaxis’ evolution from supply chain
planning to supply chain management
Flex
Flex is the manufacturing partner of choice
that helps a diverse customer base design
and build products that improve the
world. Through the collective strength of a
global workforce across 30 countries and
responsible, sustainable operations, Flex
delivers technology innovation, supply chain,
and manufacturing solutions to diverse
industries and end markets.
170K EMPLOYEES
10K SUPPLY CHAIN PROFESSIONALS
16K SUPPLIERS IN GLOBAL NETWORK
100+ FACILITIES ACROSS
30 COUNTRIES
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Kinaxis’ supply chain planning activities have typically stopped at the loading dock. Our flagship RapidResponse platform helps our customers plan to deliver the right supplies into production to ensure that the right amount of finished product is available to meet demand at the right time, in the right place, in the most effective and efficient way. However, in 2022 we took our first step into supply chain execution when we purchased MPO, a SaaS company based in the Netherlands, that can extend our unique concurrent planning approach to plan and track the transportation of finished goods right to end customers’ doors and back (if any returns are necessary), to ensure orders are concluded perfectly. This broadened scope is the beginning of Kinaxis’ evolution to become an end-to-end supply chain management vendor. A key joint customerOne element in Kinaxis’ decision to buy MPO was that our long-time customer, Flex, was using MPO as their transport order management vendor. A few years ago, Flex identified a need for a more modern, unified transport its order management approach to replace regional solutions. Existing systems weren’t supporting proactive decision-making nor collaboration across geographically dispersed teams. The company put out a request for proposal for a new transport management solution and chose MPO.
The challenge
As one of the largest supply chain solutions organizations worldwide, Flex manages design, manufacturing and
distribution. An ambitious participant in the circular economy, it also handles repair, mid-life and end-of-life activities that
support environmental sustainability. Most of Flex’s customers have highly complex supply chains and, when they partner
with Flex, gain access to the global organization’s network.
“Our focus is on making sure the balance of power sits with our customers, rather than with the multitude of partners
they could be dealing with in their networks,” said David O’Brien, Senior Director, Business Development. “We’re customer-
focused and we’re partner- and carrier-agnostic.”
The solution
MPO’s platform includes capabilities for control tower, supply chain visibility, order management, transportation
management and returns management. For Flex, the MPO platform enables omnichannel order fulfillment for B2B, B2C,
and D2C brand owners, across the Americas, EMEA and APAC on a single, unified cloud platform. In essence, the MPO
platform serves as an orchestration solution that optimizes all activity from the receipt of the order all the way through to
the point of final delivery.
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EXTENDING CONCURRENT PLANNING THROUGH TRANSPORTATION OF FINISHED GOODSCustomer Order PlanningReal-time inventory analytics into availabilityOptimized, dynamic allocationShipment Order PlanningSplit, consolidate, merge orders in transitService Order PlanningReal-time alerts, milestones, in-app management 15
“That optimization enables us to draw a relationship between customer orders, final shipments, and all service actions” says O’Brien, who also appreciates the MPO platform’s flexibility and how it configures extremely complex business rules. “Customers come to us with a lot of challenging projects that they were handling manually or using spreadsheets,” O’Brien explains. “Our system can be configured to deal with many complex situations, such as enrichment to orders before they're transmitted to the carriers.” This capability aligns well with Flex’s overarching goal of shifting power away from carriers/providers and giving it back to its customers. “A lot of big players control the freight, and our customers can’t always aggregate their orders and optimize their businesses,” says O’Brien. “We try to position ourselves to be able to help them, and our technology platform helps us do that.”For instance, if one component (such as a lithium ion battery) of a larger item is subject to “dangerous goods” regulations – and needs to be separated and shipped via a different mode – Flex has those parameters configured and automated in the MPO system. “It’s seamless in that it examines the order, applies all the rules and then releases the final shipments,” says O’Brien.As Flex operates in the critical parts management arena, it works within tight timeframes that can be as slim as two to four hours. Along the way, the company is measuring every leg of the journey and anticipating potential risks for a particular order, the shipments and required services. Using MPO, the company’s global teams can collaborate to ensure that those deadlines are met.“We can share information in real-time with our customers, sites, partners, and supply base. We’re using data to ‘look around the corners’ in the supply chain, to see what’s coming next and how we can manage that,” says O’Brien.A lot of big players control the freight, and our customers can’t always aggregate their orders and optimize their businesses. We try to position ourselves to be able to help them, and our technology platform helps us do that.” DAVID O’BRIEN, SENIOR DIRECTOR, BUSINESS DEVELOPMENT, FLEX Consolidated Financial
Statements, Years Ended
December 31, 2022 and 2021
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Kinaxis Inc.
Consolidated Financial Statements
for the years ended December 31, 2022 and 2021
(In thousands of USD)
17
KPMG LLP
150 Elgin Street, Suite 1800
Ottawa ON K2P 2P8
Canada
Tel 613-212-5764
Fax 613-212-2896
INDEPENDENT AUDITOR’S 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, 2022 and
December 31, 2021
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, 2022 and
December 31, 2021, and its consolidated financial performance and its consolidated cash
flows for the years then ended in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
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
“Auditor’s Responsibilities for the Audit of the Financial Statements” section of our
auditor’s 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.
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, 2022.
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 matters described below to be the key audit matters to be
communicated in our auditor’s report.
Allocation of the transaction price to multiple performance obligations in
contracts with customers
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.
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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.
Evaluation of the acquisition-date fair value of the intangible assets related
to the MP Objects B.V. business combination
Description of the matter
We draw attention to Notes 2(f) and 4 to the financial statements. On August 15, 2022, the
Entity acquired 100% of the outstanding shares of MP Objects B.V. (“MPO”) and all wholly
owned subsidiaries in a business combination. The Entity paid cash consideration of
$33,828 thousand and contingent consideration of 86,335 shares of the Entity that had a
fair value at the date of acquisition of $9,972 thousand. The acquisition-date fair value of
the customer relationships and technology (“intangible assets”) is valued at $7,600
thousand and $8,400 thousand, respectively. The Entity 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.
Why the matter is the key audit matter
We identified the evaluation of the acquisition-date fair value of the intangible assets as a
key audit matter. This matter represented an area of significant risk of material
misstatement due to the magnitude of the balances and the high degree of subjectivity
and estimation uncertainty in determining the fair value of intangible assets. In addition,
significant auditor judgment and specialized skills and knowledge were required in
evaluating the results of our audit procedures due to the sensitivity of the fair value of the
intangible assets to minor changes in the significant assumptions.
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 appropriateness of the future revenues and expenses, customer attrition
rates, and technology migration rate assumptions by considering historical financial
results, industry data, and assessing against comparable companies.
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Page 4
We involved valuation professionals with specialized skills and knowledge, who assisted
in:
evaluating the appropriateness of the valuation methodology used by the Entity to
calculate the acquisition-date fair value of the intangible assets, and
evaluating the Entity's discount rates by comparing against discount rate ranges that
were independently developed using publicly available market and industry data.
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 auditor’s 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 auditor’s 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
auditor’s report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s 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 auditor’s 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 as issued by
the International Accounting Standards Board, 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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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.
Auditor’s 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 auditor’s 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 auditor’s report to the related
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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 auditor’s 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 auditor’s 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 auditor’s 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 auditor’s report is Anuj Madan.
Ottawa, Canada
March 1, 2023
23
24
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 gain (loss)
Net finance and other income (expense)
Change in fair value of contingent consideration (note 4)
Profit before income taxes
Income Tax Expense (recovery) (note 20):
Current
Deferred
Profit (loss)
2022
2021
$
366,889 $
250,726
131,102
86,755
235,787
163,971
79,446
74,147
54,273
207,866
59,078
57,424
45,550
162,052
27,921
1,919
1,499
1,240
826
3,565
(558)
(264)
—
(822)
31,486
1,097
3,892
7,514
11,406
20,080
3,466
(1,204)
2,262
(1,165)
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to profit:
Foreign currency translation differences - foreign operations
441
(577)
Total comprehensive income (loss)
Basic earnings (loss) per share
Weighted average number of basic Common Shares (note 16)
Diluted earnings (loss) per share
$
$
$
20,521 $
(1,742)
0.73 $
(0.04)
27,667,100
27,248,193
0.70 $
(0.04)
Weighted average number of diluted Common Shares (note 16)
28,609,603
27,248,193
See accompanying notes to consolidated financial statements.
25
Kinaxis Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31
(Expressed in thousands of USD)
Share
capital
Contributed
surplus
Accumulated
other
comprehensive
loss
Retained
earnings
Total equity
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
Profit
Other comprehensive income
Total comprehensive income
Share options exercised
Restricted share units vested
Performance share units vested
Share based payments
Total shareholder transactions
—
—
—
38,791
10,091
417
—
49,299
—
—
—
(9,076)
(10,091)
(417)
29,974
10,390
—
441
441
—
—
—
—
—
20,080
—
20,080
—
—
—
—
—
20,080
441
20,521
29,715
—
—
29,974
59,689
Balance, December 31, 2022
$
244,713 $
65,129 $
(156) $
91,742 $
401,428
See accompanying notes to consolidated financial statements.
26
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)
Change in fair value of contingent consideration (note 4)
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 business, net of cash acquired (note 4)
Purchase of property and equipment and intangible assets (note 7 and 9)
Purchase of short-term investments
Redemption of short-term investments
Cash flows from financing activities:
Payment of lease obligations (note 14)
Lease incentive received (note 14)
Proceeds from exercise of stock options
2022
2021
$
20,080 $
(1,165)
21,496
3,564
26,238
(1,013)
(826)
11,406
(3,975)
(49,123)
2,546
(1,841)
(4,034)
24,518
(36,738)
(18,249)
(80,314)
60,314
(74,987)
(6,733)
3,858
29,715
26,840
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
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effects of exchange rates on cash and cash equivalents
(23,629)
21,356
203,220
182,958
(4,244)
(1,094)
Cash and cash equivalents, end of year
$
175,347 $
203,220
See accompanying notes to consolidated financial statements.
27
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(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, 2022 and 2021
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, Romania
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, 2023.
(b) Comparative figures:
Certain comparative figures have been adjusted for the year ended December 31, 2021. Prepaid expenses
previously reported as current assets have been classified as non-current assets. This adjustment was not
considered material and did not affect the Company’s consolidated revenue or consolidated profit.
(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. 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 USD at the rates prevailing at that date. Exchange differences on monetary items are recognized in
profit or loss in the period in which they arise. Non-monetary items carried at fair value that are denominated in
28
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
2. Basis of preparation (continued):
(e) Foreign currency (continued):
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 professional services
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.
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 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
29
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
2. Basis of preparation (continued):
(f) Use of estimates and judgments (continued):
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 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.
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.
30
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
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.
(b) Revenue recognition:
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,
with revenue primarily 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. For certain contracts, a
component of consideration is recognized on a unit basis in accordance with transaction volume.
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
31
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(b) Revenue recognition (continued):
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.
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.
32
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(c) Financial instruments (continued):
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
Contingent consideration
FVTPL
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.
(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.
33
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(f) Property and equipment (continued):
Property and Equipment
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
Rate
3 to 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.
(g) Leases:
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
34
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(g) Leases (continued):
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.
(h) Employee benefits:
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:
Expenditures on research activities is recognized in profit or loss as incurred. Development costs for internally
developed software, are recorded as an intangible asset if the criteria for capitalization is met. Expenditures
relating to preliminary or post implementation project activities for internally developed software are expensed
as incurred. Internally developed software recorded as an intangible asset will be amortized on a straight-line
basis over the length of its useful life, which is typically three to five years.
(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.
No government grants were received in 2022. 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.
35
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(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.
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 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,
36
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(m) Share-based payments (continued):
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 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.
37
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(p) Acquired intangible assets (continued):
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 nine years and the useful life for technology is
four to 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.
(q) Goodwill:
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.
38
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
4. Business combinations:
On February 11, 2022, the Company acquired 100% of the outstanding shares of a supply chain solutions company in
exchange for cash. The acquired company is a provider of algorithm-driven supply chain planning software modules.
The operating results of the acquired company have been consolidated into the Company’s results subsequent to the
acquisition date. The Company incurred acquisition-related costs of $199 which have been recorded in general and
administrative expense.
The purchase price consists of cash consideration of $3,144, adjusted for the acquired company’s closing cash at the
date of acquisition and subject to post-closing working capital adjustments, resulting in total consideration of $3,084.
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
Right-of-use assets
Intangible assets:
Technology
Customer relationships
Trade payables and accrued liabilities
Deferred revenue
Lease obligation
Deferred tax liability
Goodwill
Total consideration
$
$
65
423
82
550
350
(82)
(407)
(82)
(239)
660
2,424
3,084
The trade and other receivables included gross contractual amounts of $381, all of which has been fully collected.
The goodwill is primarily attributable to the expected synergies that will result from the value of integrating the
acquired company’s intellectual property to the Company’s future product direction, and the relevant industry and
technical knowledge of the assembled workforce. The goodwill is not deductible for tax purposes.
Since the date of acquisition, the acquisition has not had a significant impact on revenue and net earnings for the
year ended December 31, 2022. Pro forma results of operations for this acquisition have not been presented because
they are not material to our consolidated results of operations.
39
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
4. Business combinations (continued):
On August 15, 2022, the Company acquired 100% of the outstanding shares of MP Objects B.V. (“MPO”) and all
wholly owned subsidiaries. MPO offers a natively unified cloud platform for Multi-Party Orchestration, which
optimizes order, inventory, and transportation across dynamic, multi-party networks. The Company incurred
acquisition-related costs of $1,688 which have been recorded in general and administrative expense.
The purchase price consists of cash consideration of $33,828 and contingent consideration of 86,335 shares of the
Company that had a fair value at the date of acquisition of $9,972. This fair value was remeasured to $9,146 at
December 31, 2022. The contingent consideration will be paid to the selling shareholders upon the delivery of
specific contracted backlog within the first six and twelve month intervals or upon achieving an agreed trailing twelve
month revenue target. The consideration was adjusted for the acquired company’s closing cash at the date of
acquisition and post-closing working capital adjustments, resulting in total consideration of $44,731.
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
Trade payables and accrued liabilities
Deferred revenue
Lease obligations
Deferred tax liability
Goodwill
Total consideration
$
1,040
1,753
230
195
95
1,470
8,400
7,600
(1,008)
(531)
(1,470)
(2,875)
14,899
29,832
$
44,731
The trade and other receivables include gross contractual amounts of $986, of which $696 has been fully collected.
Accounts receivable are discussed further in note 5.
The goodwill is primarily attributable to the expected synergies that will result from the value of integrating the
acquired company’s intellectual property to the Company’s future product direction, and the relevant industry and
technical knowledge of the assembled workforce. The goodwill is not deductible for tax purposes.
Since the date of acquisition, the acquisition has not had a significant impact on revenue and net earnings for the
year ended December 31, 2022. Pro forma results of operations for this acquisition have not been presented because
they are not material to our consolidated results of operations.
40
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
5. Trade and other receivables:
Trade accounts receivable
Unbilled receivables
Taxes receivable
Other
Loss allowance
There were no trade accounts receivable written off in 2022 (2021 – $nil).
The following table presents changes in unbilled receivables:
$
2022
121,669 $
30,623
1,830
3,847
157,969
(312)
2021
71,118
15,413
217
2,499
89,247
—
$
157,657 $
89,247
2022
2021
Balance, beginning of year
$
15,925 $
15,813
Amounts transferred to trade accounts receivable
Amounts written off
Revenue in excess of billings
(10,353) $
—
32,296
(13,752)
(288)
14,152
Balance, end of year
$
37,868 $
15,925
The following table presents current and non-current unbilled receivables:
Current
Non-current
$
2022
30,623 $
7,245
2021
15,413
512
41
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
6. Contract acquisition costs:
2022
2021
Balance, beginning of year
$
19,691 $
16,484
Additions
Amortization
Effects of movements in exchange rates
13,232
(7,439)
(592)
9,713
(6,359)
(147)
Balance, end of year
$
24,892 $
19,691
Amortization of contract acquisition costs is recorded in selling and marketing expense.
7. Property and equipment:
Cost
Land
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
December 31,
2021
Additions
Dispositions
Effects of
exchange
rates
December 31,
2022
$
18 $
— $
— $
— $
67,920
3,735
3,731
23,657
9,073
861
906
4,109
(10,552)
(505)
(83)
(2,935)
(1,023)
(25)
(33)
(266)
18
65,418
4,066
4,521
24,565
Total cost
$
99,061 $
14,949 $
(14,075) $
(1,347) $
98,588
Accumulated depreciation
2021 Depreciation
Dispositions
December 31,
Effects of
exchange
rates
December 31,
2022
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
$
38,411 $
2,954
900
4,703
10,556 $
658
1,271
2,004
(10,549) $
(505)
(83)
(2,911)
(595) $
(25)
38
(91)
37,823
3,082
2,126
3,705
Total accumulated depreciation
$
46,968 $
14,489 $
(14,048) $
(673) $
46,736
42
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
7. Property and equipment (continued):
Cost
Land
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
December 31,
2020
Additions
Dispositions
Effects of
exchange
rates
December 31,
2021
$
18 $
— $
54,187
3,234
1,154
8,476
14,881
529
2,603
15,820
— $
—
—
—
(450)
— $
(1,148)
(28)
(26)
(189)
18
67,920
3,735
3,731
23,657
Total cost
$
67,069 $
33,833 $
(450) $
(1,391) $
99,061
Accumulated depreciation
2020 Depreciation
Dispositions
December 31,
Effects of
exchange
rates
December 31,
2021
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
$
29,340 $
2,317
567
4,099
9,601 $
659
339
1,153
— $
—
—
(450)
(530) $
(22)
(6)
(99)
38,411
2,954
900
4,703
Total accumulated depreciation
$
36,323 $
11,752 $
(450) $
(657) $
46,968
Carrying value
Land
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
Total property and equipment
December 31,
2022
December 31,
2021
$
18 $
27,595
984
2,395
20,860
18
29,509
781
2,831
18,954
$
51,852 $
52,093
There were no proceeds associated with asset dispositions in 2022 (2021 – $nil). Additions in 2022 include $95 (2021
– $nil) of property and equipment acquired through business combinations, as outlined in note 4.
43
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
8. Right-of-use assets:
Offices
Data centres
Total right-of-use assets
Offices
Data centres
Total right-of-use assets
December 31,
2021
Additions Depreciation
Effects of
exchange
rates
December 31,
2022
45,236 $
8,342
7,281 $
547
(3,876) $
(3,131)
(618) $
(244)
48,023
5,514
53,578 $
7,828 $
(7,007) $
(862) $
53,537
December 31,
2020
Additions Depreciation
Effects of
exchange
rates
December 31,
2021
7,317 $
8,405
41,795 $
3,096
(3,581) $
(2,831)
(295) $
(328)
45,236
8,342
15,722 $
44,891 $
(6,412) $
(623) $
53,578
$
$
$
$
Additions in 2022 include $1,552 (2021 – $nil) of right-of-use assets acquired through business combinations, as
outlined in note 4. During 2021, the Company recorded additions of $41,552 for new leased office space in Ottawa,
Canada.
9.
Intangible assets:
The estimated useful life of customer relationships is three to nine years and the estimated useful life of technology
is four to seven years.
December 31,
2021
Additions Amortization
Effect of
exchange
rates
December 31,
2022
Customer relationships
Technology
Internally developed software
$
2,370 $
8,408
—
7,950 $
8,950
3,395
(1,186) $
(2,245)
(133)
334 $
428
—
9,468
15,541
3,262
Total intangible assets
$
10,778 $
20,295 $
(3,564) $
762 $
28,271
Customer relationships
Technology
Total intangible assets
$
$
December 31,
2020
Additions Amortization
Effect of
exchange
rates
December 31,
2021
3,087 $
9,936
— $
—
(717) $
(1,528)
— $
—
2,370
8,408
13,023 $
— $
(2,245) $
— $
10,778
44
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
9.
Intangible assets (continued):
In 2022, the Company began developing software to be used internally to support its strategy in utilizing the public
cloud to deliver its SaaS product. The qualifying internal and external development costs associated with this
software asset have been capitalized as an intangible asset and consist primarily of consultant fees and
compensation costs of internal staff performing the development activity. The amortization period for the intangible
asset began once the asset became available for use. It is amortized on a straight-line basis over its useful life which
has been determined to be five years.
10. Goodwill:
Balance, beginning of year
Acquisitions (note 4)
Effect of foreign exchange
Balance, end of year
2022
39,988 $
32,256
1,070
2021
39,988
—
—
73,314 $
39,988
$
$
The annual impairment test of goodwill was performed as of December 31, 2022 and did not result in an impairment
loss.
11. Trade payables and accrued liabilities:
Trade accounts payable
Accrued liabilities
Taxes payable
12. Deferred revenue:
2022
10,403 $
27,024
2,680
2021
10,584
26,299
6,445
40,107 $
43,328
$
$
2022
2021
Balance, beginning of year
$
99,239 $
94,275
Deferred revenue from acquisition (note 4)
Recognition of deferred revenue
Amounts invoiced and revenue deferred
938
(101,118)
134,408
—
(91,157)
96,121
Balance, end of year
$
133,467 $
99,239
45
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
13. Provisions:
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. The
remaining provision as of December 31, 2022 is $296.
14. Lease obligations:
The Company’s leases are for office space and data centres with lease terms ranging from two to twenty 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
2022
2021
$
$
6,991 $
49,977
2,526
53,233
56,968 $
55,759
The following table presents the contractual undiscounted cash flows for lease obligations as at December 31, 2022:
Less than one year
One to five years
More than five years
Total undiscounted lease obligations
The following table presents payments for lease obligations:
Principal payments
Interest payments
Variable lease payments
Short-term lease payments
Total cash outflow for leases
Lease incentives received
Net cash outflow for leases
$
8,614
18,369
43,400
$
70,383
$
2022
6,733 $
1,841
1,775
513
10,862
(3,858)
2021
4,911
1,050
1,624
480
8,065
—
$
7,004 $
8,065
46
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
15. Share capital:
Authorized
The Company is authorized to issue an unlimited number of Common Shares.
Issued Common Shares
2022
2021
Shares
Amount
Shares
Amount
Shares outstanding, beginning of year
27,462,834 $
195,414
27,085,922 $
173,104
Shares issued from exercised options
Shares issued from vested RSUs
Shares issued from vested PSUs
492,631
93,388
3,776
38,791
10,091
417
291,680
85,232
—
14,221
8,089
—
Shares outstanding, end of year
28,052,629 $
244,713
27,462,834 $
195,414
Stock option plans
The Company has outstanding stock options issued under its 2012 Stock Option Plan. No further options may be
granted under the 2012 plan. 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, 2022, there were 715,727 stock options available for grant
under the Plans.
The following table presents changes in stock options outstanding:
2022
Weighted
average
exercise price
Shares
2021
Weighted
average
exercise price
Shares
Options outstanding, beginning of year
2,143,375 $
76.56
2,228,456 $
68.82
Granted
Exercised
Forfeited
194,646
(492,631)
(125,064)
125.04
60.32
149.26
275,973
(291,680)
(69,374)
108.61
36.89
126.21
Options outstanding, end of year
1,720,326 $
75.53
2,143,375 $
76.56
Options exercisable, end of year
1,028,146 $
59.91
1,150,389 $
58.44
47
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
15. Share capital (continued):
The following table presents information about stock options outstanding at December 31, 2022:
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
contractual
life
2.41 $
2.39
1.91
3.35
4.11
2.72
Weighted
average
exercise
price
22.61
47.18
80.31
99.87
122.58
154.24
Weighted
average
exercise
price
22.61
45.88
78.49
98.64
126.68
154.21
Number
exercisable
46,850 $
677,716
179,723
56,482
22,750
44,625
Number
outstanding
46,850
772,848
328,972
277,225
200,931
93,500
1,720,326
2.67 $
75.96
1,028,146 $
59.91
The per share weighted-average fair value of stock options granted during 2022 was $42.82 (year ended December
31, 2021 – $32.77) on the date of grant using the Black Scholes option-pricing model with the following weighted-
average assumptions:
Expected dividend yield
Risk-free interest rate
Expected life
Estimated volatility
Share Unit Plan
2022
0%
2.75%
3 to 5 years
41%
2021
0%
0.53%
3 to 5 years
39%
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. In June 2022, 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
1,250,000. At December 31, 2022, there were 1,579,703 share units available for grant under the Share Unit Plan.
48
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
15. Share capital (continued):
The following table presents changes in share units outstanding:
2022
2021
RSU
PSU
DSU
RSU
PSU
DSU
Units outstanding, beginning of year
96,583
31,640
65,441
78,305
—
55,928
Granted
Exercised
Forfeited
200,865
(93,388)
(23,321)
52,209
(3,776)
(8,695)
9,954
—
—
106,001
(85,232)
(2,491)
31,640
—
—
9,513
—
—
Units outstanding, end of year
180,739
71,378
75,395
96,583
31,640
65,441
Each restricted share unit (“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
2022 was $120.84 per unit (year ended December 31, 2021 – $118.49) using the fair value of a Common Share at
time of grant.
Each performance share unit (“PSU”) entitles the participant to receive up to two Common Shares based on 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 vesting periods. The weighted-average grant date fair value
of the PSUs granted during 2022 was $164.68 per unit (December 31, 2021 – $129.74). 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
Risk-free interest rate
Performance measurement period
Estimated volatility
Correlation coefficient to Industry Index
2022
0%
1.40%
2 to 3 years
41%
0.53
2021
0%
0.51%
2 to 3 years
41%
0.52
Each deferred share unit (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 the 2022 was $116.07 per unit (year ended December 31, 2021 – $110.36) using the fair value of a Common
Share at time of grant.
49
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
15. Share capital (continued):
Share-based payments expense
The Company estimates a forfeiture rate, based on an analysis of actual forfeitures, to determine share-based
payments expense. The following table presents share-based payments expense:
Stock options
Restricted share units
Performance share units
Deferred share units
The following table presents share-based payments expense by function:
Cost of revenue
Selling and marketing
Research and development
General and administrative
16. Earnings per share:
2022
2021
$
8,438 $
12,888
3,757
1,155
11,759
9,875
1,659
1,050
$
26,238 $
24,343
$
2022
2021
3,624 $
6,191
4,980
11,443
2,001
4,950
6,334
11,058
$
26,238 $
24,343
The following table summarizes the calculation of the weighted average number of basic and diluted common
shares:
2022
2021
Issued Common Shares at beginning of year
27,462,834
27,085,922
Effect of shares issued from exercise of options
Effect of shares issued from vesting of restricted share units
Effect of shares issued from vesting of performance share units
189,588
10,902
3,776
157,367
4,904
—
Weighted average number of basic Common Shares
27,667,100
27,248,193
Effect of share options on issue
Effect of share units on issue
701,616
240,887
—
—
Weighted average number of diluted Common Shares
28,609,603
27,248,193
For 2022, 373,309 share options and no share units outstanding (2021 – all share options and share units) were
excluded from the weighted average number of diluted common shares as their effect would have been anti-dilutive.
50
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
17. Revenue:
The following table presents revenue of the Company:
SaaS
Subscription term license
Professional services
Maintenance and support
2022
2021
$
213,306 $
38,810
98,613
16,160
174,463
6,118
57,640
12,505
$
366,889 $
250,726
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, 2022:
SaaS
Maintenance and support
Subscription term license
18. Personnel expenses:
Salaries including bonuses
Benefits
Commissions
Share-based payments
2023
2024
2025 and
thereafter
$
230,147 $
16,181
6,057
173,670 $
13,995
193
145,921 $
12,081
—
Total
549,738
42,257
6,250
$
252,385 $
187,858 $
158,002 $
598,245
$
2022
2021
158,414 $
24,300
12,710
26,238
128,890
20,105
10,000
24,343
$
221,662 $
183,338
51
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
19. Depreciation and amortization:
The following table presents 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
2022
$
11,217 $
3
2,660
7,616
2021
9,461
3
3,047
5,653
$
21,496 $
18,164
The following table presents amortization expense of intangible assets by function:
Cost of revenue
General and administrative
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
2022
2,345 $
1,219
2021
1,528
717
3,564 $
2,245
$
$
2022
2021
$
3,892 $
3,466
Origination and reversal of temporary differences
7,514
(1,204)
$
11,406 $
2,262
52
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
20. Income tax expense (continued):
A reconciliation of the income tax expense to the expected amount using the Company’s Canadian tax rate is as
follows:
Canadian tax rate
2022
2021
26.50 %
26.50 %
Expected Canadian income tax expense
$
8,393 $
291
Increase (reduction) in income taxes resulting from:
Permanent differences
Change in estimates related to prior years
Change in unrecognized deferred tax assets/liabilities
Foreign tax rate differences
Future tax rate differential
Other
3,083
(681)
—
(25)
252
384
2,880
(1,015)
295
78
(71)
(196)
$
11,406
$
2,262
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 on 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,
2021
Recognized in
profit and
loss
$
(918) $
(857) $
(3,044)
799
(4,760)
(2,724)
577
9,415
7,196
(550)
(1,304)
141
(1,695)
648
75
(1,275)
(4,111)
864
Recognized
to goodwill
Recognized in
equity
December 31,
2022
— $
—
—
2
(4,367)
—
—
1,211
40
— $
—
—
—
—
—
(1,159)
—
—
(1,775)
(4,348)
940
(6,453)
(6,443)
652
6,981
4,296
354
$
5,991 $
(7,514) $
(3,114) $
(1,159) $
(5,796)
During 2022, the Company recorded $111 of current tax expense directly in equity (2021 – $890) 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, 2022 was $41,729 (2021 – $31,771).
53
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
20. Income tax expense (continued):
Deferred tax assets (liabilities)
Tax effect on 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 in
equity
December 31,
2021
$
(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
21. Statement of cash flows:
The following table presents changes in operating assets and liabilities:
Trade and other receivables
Prepaid expenses
Contract acquisition costs
Trade payables and accrued liabilities
Deferred revenue
Provisions
22. Credit facility:
$
2022
2021
(75,128) $
(5,632)
(5,416)
1,677
35,796
(420)
(6,782)
(1,100)
(3,407)
8,790
7,306
716
$
(49,123) $
5,523
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, 2022. As part of the acquisition of Rubikloud Technologies, Inc. in 2020,
a Standby Letter of Credit has been issued against this facility in the amount of CAD$1.4 million.
The facility is secured by a general security agreement representing a first charge over the Company’s assets. 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
54
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(a) Fair value of financial instruments (continued):
are considered to be Level 1 financial instruments. The fair value of the contingent consideration has been
determined by applying a discounted cash flow technique on the expected future value of shares to be issued
and has been recorded as a Level 3 liability as the inputs are not observable and there is no market based
activity. 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. In 2022, there have
been no transfers of fair value measurements between Level 1, Level 2 and Level 3 financial instruments.
Reconciliation of Level 3 financial instruments
The following table shows a reconciliation from the opening balance to the closing balance for all Level 3
financial instruments:
Balance, December 31, 2021
Assumed in a business combination
Net change in fair value (unrealized)
Balance, December 31, 2022
Sensitivity of Level 3 financial instruments
Contingent
Consideration
Other income
(expense)
$
$
— $
— $
9,972
(826)
—
826
9,146 $
826 $
Accumulated
other
comprehensive
income (loss)
—
—
—
—
There are no unobservable inputs which, if changed by 10% would significantly impact the fair value of the
contingent consideration.
(b) Credit risk:
The following table presents maximum exposure to credit risk for net trade accounts receivable by geographic
region:
United States
Europe
Asia
Canada
$
2022
77,174 $
35,828
4,678
3,677
2021
41,031
20,153
4,658
5,276
$
121,357 $
71,118
55
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(b) Credit risk (continued):
The following table presents aging of net trade accounts receivable:
Current
Past due:
0 – 30 days
31 – 60 days
Greater than 60 days
2022
2021
$
91,360 $
57,431
19,355
6,126
4,516
8,351
1,040
4,296
$
121,357 $
71,118
At December 31, 2022, no customer individually accounted for greater than 10% of total trade accounts
receivable (December 31, 2021 – one customer). For 2022, no customer individually accounted for greater than
10% of revenue (2021 – 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, 2022, the
Company wrote off $nil unbilled receivables that were deemed not collectible (2021 – $288). As at December 31,
2022, the Company has recorded a loss allowance of $312 (2021 – $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, 2022, the Company had cash and cash equivalents and short-term investments totaling
$225,823 (2021 – $233,388). Further, the Company has a credit facility as disclosed in note 22. The Company’s
trade payables and accrued liabilities are generally due within three months or less.
56
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(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, 2022, if the Canadian dollar had strengthened 5% against the U.S. dollar, with all other
variables held constant, pre-tax profit for the year would have been $7,619 lower (2021 – $6,783 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 profit.
The summary quantitative data about the Company’s exposure to currency risk is as follows:
December 31, 2022
In thousands of local currency
USD
CAD
EUR
GBP
JPY
Trade receivables
Unbilled receivables
Other receivables
Trade payables
Accrued liabilities
$
95,743 $
27,016
732
(1,853)
(13,258)
1,473 $
—
810
(5,808)
(9,859)
14,194 $
1,174
1,041
(1,324)
(1,623)
4,813 $
729
224
(714)
(193)
418,603
191,212
3,927
(193,204)
(110,587)
$
108,380 $
(13,384) $
13,462 $
4,859 $
309,951
December 31, 2021
In thousands of local currency
USD
CAD
EUR
GBP
JPY
Trade receivables
Unbilled receivables
Other receivables
Trade payables
Accrued liabilities
$
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
57
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(d) Market risk (continued):
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. The Company believes that interest rate risk is low as the majority of
investments are made in fixed rate instruments. As of December 31, 2022, the Company has not drawn on the
revolving demand credit facility as disclosed in note 22.
24. Segmented information:
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 management software and
solutions.
Geographic information
The following table presents external revenue on a geographic basis:
United States
Europe
Asia
Canada
The following table presents property and equipment on a geographic basis:
Canada
United States
Asia
Europe
$
2022
2021
218,110 $
99,645
40,727
8,407
147,115
62,461
33,719
7,431
$
366,889 $
250,726
$
2022
32,798 $
10,368
4,745
3,941
2021
34,789
10,486
3,915
2,903
$
51,852 $
52,093
58
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
24. Segmented information (continued):
The following table presents right-of-use assets on a geographic basis:
Canada
Asia
United States
Europe
The following table presents intangible assets on a geographic basis:
Europe
Canada
$
2022
42,217 $
6,833
2,658
1,829
2021
45,955
3,713
3,155
755
$
53,537 $
53,578
2022
15,787 $
12,484
2021
—
10,778
28,271 $
10,778
$
$
25. Related party transactions:
Details of the Company’s significant subsidiaries at December 31, 2022 and 2021 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
Kinaxis Japan K.K.
Kinaxis UK Limited
Sales
Sales
Support
Sales
Sales
State of Delaware, USA USA
EUR
The Netherlands
INR
India
JPY
Japan
GBP
United Kingdom
Ownership interest
2021
2022
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.
Compensation of key management personnel
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:
59
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
25. Related party transactions (continued):
Salary and other short-term benefits
Share-based payments
26. Capital management:
2022
7,399 $
14,770
2021
7,377
17,123
22,169 $
24,500
$
$
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, 2022. 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.
27. Contingencies and commitments:
a)
Lease agreements:
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)
Intellectual property:
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.
60
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(Expressed in thousands of USD, except share and per share amounts)
27. Contingencies and commitments (continued):
c) Litigation:
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, 2022, 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.
d) Commitments:
During 2022, the Company contracted to purchase cloud data services for a minimum purchase commitment of
$100.0 million over a seven-year term.
61
Management’s Discussion
and Analysis for the Year
Ended December 31, 2022
62
Kinaxis Inc.
Management’s discussion and analysis
for the year ended December 31, 2022
March 1, 2023
63
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,
2022. This MD&A has been prepared with an effective date of March 1, 2023.
This MD&A for the year ended December 31, 2022 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, 2022. 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. 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 and ratios
This MD&A makes reference to certain non-IFRS measures and ratios such as “Adjusted profit”, “Adjusted EBITDA” and
“Adjusted diluted earnings per share”. These non-IFRS measures and ratios 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 be
used in isolation from measures prepared in accordance with IFRS. These non-IFRS measures and ratios 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, 2022. Readers should not place undue reliance on non-IFRS measures and ratios 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 and ratios” 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 expectations about the benefits of our acquisitions
our anticipated cash needs;
64
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 and strategy;
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;
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 pandemics 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 and
professional services revenue based on trends in customer behavior, 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.
65
MANAGEMENT’S DISCUSSION AND ANALYSIS
•
•
•
•
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.
•
There is an increased expectation by various stakeholders to address social and environmental challenges,
including climate change, human rights, racism and inequality, and to demonstrate exemplary governance in
managing Environmental, Social and Governance risks. An inability to manage this risk can can result in higher
costs for capital, regulatory compliance and disclosures.
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.
• We are subject to fluctuations in currency exchange rates.
•
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.
66
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, including ransomware and cyberattacks, 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.
The outcome of any litigation, arbitration or other dispute resolution proceedings that we may engage in from
time to time is inherently uncertain. We may become defendants in legal proceedings where we are unable to
assess our exposure and this could result in significant liabilities in the event of an adverse judgment or decision.
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
•
•
Future pandemics 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 and may experience significant fluctuations in response
to numerous factors, many of which are beyond our control.
• We may issue and sell additional securities to finance our operations or issue securities to directors, officers,
employees and consultants of the Company in connection with security based compensation arrangements.
Sales or issuances of substantial amounts of our securities, or the perception that such issuances or sales could
occur, may adversely affect prevailing market prices for our securities issued and outstanding from time to time.
These risks are described in further detail in the section entitled “Risk Factors” in our most recently filed Annual
Information Form.
67
MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview
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 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, managers, 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 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 management requirement,
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 depending 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. For certain contracts, a component of consideration is recognized on a unit basis in
accordance with transaction volume. 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.
68
MANAGEMENT’S DISCUSSION AND ANALYSIS
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. 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, 2022, our SaaS revenue was $58.8 million and $213.3 million (three
months and year ended December 31, 2021 – $46.9 million and $174.5 million), subscription term license revenue was
$9.1 million and $38.8 million (three months and year ended December 31, 2021 – $1.4 million and $6.1 million) and total
revenue was $98.5 million and $366.9 million (three months and year ended December 31, 2021 – $68.5 million and
$250.7 million). For the three months and year ended December 31, 2022 our Adjusted EBITDA was 21% of revenue
(three months and year ended December 31, 2021 – 16%). Our ending cash, cash equivalents and short-term investment
balance was $225.8 million (December 31, 2021 – $233.4 million).
For the three months and year ended December 31, 2022 our ten largest customers accounted for 24% of our total
revenues (three months and year ended December 31, 2021 – 26% and 25%) with no customer accounting for greater
than 10% of total revenues (three months and year ended December 31, 2021 – no customers).
Growth strategy
Increasing revenues through new customer wins is one of our highest organizational priorities. Our sales cycle can be
lengthy, up to 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.
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.
69
MANAGEMENT’S DISCUSSION AND ANALYSIS
We are headquartered in Ottawa, Ontario. We have subsidiaries located in the United States, France, Germany, Romania,
Ireland, the United Kingdom, Hong Kong, South Korea, and Singapore, and subsidiaries and offices in Tokyo, Japan, the
Netherlands and Chennai, India. We continue to expand our operations internationally. For the three months and year
ended December 31, 2022 62% of our revenues were derived from North American customers (three months and year
ended December 31, 2021 – 59% and 62%) and our remaining revenues were derived from European and Asian
customers.
On February 11, 2022, we acquired 100% of the outstanding shares of a supply chain solutions company in exchange for
total consideration of $3.1 million in cash. The acquired company is a provider of algorithm-driven supply chain planning
software modules.
On August 15, 2022, the Company acquired 100% of the outstanding shares of MP Objects B.V. (“MPO”) and all wholly
owned subsidiaries in exchange for total consideration of $33.8 million in cash and contingent consideration of 86,335
shares of the Company that had a fair value at the date of acquisition of approximately $10.0 million. MPO offers a
natively unified cloud platform for Multi-Party Orchestration, which optimizes order, inventory, and transportation across
dynamic, multi-party networks.
Key performance indicators
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 (ARR) 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, 2022 is $274 million, an increase of 24% year-over-year or 26% on a constant
currency basis. We calculate constant currency growth rates by applying the applicable prior period exchange rates to
current period results.
70
MANAGEMENT’S DISCUSSION AND ANALYSIS
$259
$274
$221
$232
$241
$185
s
n
o
i
l
l
i
M
$300
$250
$200
$150
$100
$50
$0
FY20
FY21
Q1’22
Q2’22
Q3’22
FY22
Year-over-year growth
17%
Year-over-year growth in
constant currency
15%
19%
21%
22%
24%
21%
25%
25%
30%
24%
26%
Remaining Performance Obligation
Remaining Performance Obligation (RPO) 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, 2022, RPO amounts to $598 million, including $550 million in SaaS revenue (December 31, 2021 –
$484 million and $423 million).
s
n
o
i
l
l
i
M
$600
$500
$400
$300
$200
$100
$0
$484
$381
$598
FY20
FY21
FY22
SaaS
non-SaaS
71
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 our products 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.
Maintenance and support revenue is comprised of fees for the implied maintenance and support component for on-
premise and hybrid subscriptions.
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 and internally developed software, 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, in absolute dollars, 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 our supply chain management solutions. 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.
72
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, Romania, 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.
73
MANAGEMENT’S DISCUSSION AND ANALYSIS
Results of operations
Summary of results
The following table sets forth a summary of our results of operations:
Three months ended December 31,
2022
2021
2022
Year ended December 31,
2021
2020
(In thousands of USD, except earnings per share)
Statement of Operations
Revenue ................................................................ $
Cost of revenue ......................................................
Gross profit ...........................................................
Operating expenses ...............................................
Foreign exchange gain (loss) ..................................
Net finance and other income (expense) ..............
Change in fair value of contingent consideration ..
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)
.................. $
Note:
98,483 $
37,217
61,266
54,511
6,755
1,648
891
(1,367)
7,927
(635)
8,562 $
17,487 $
21,116 $
0.31 $
0.30 $
0.61 $
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 $
366,889 $
131,102
235,787
207,866
27,921
1,499
1,240
826
31,486
11,406
20,080 $
45,492 $
79,446 $
0.73 $
0.70 $
1.59 $
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
(1) Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share are non-IFRS measures and ratios. See “Non-IFRS measures and ratios”.
For a reconciliation of these measures to the closest IFRS measure, where a comparable IFRS measure exists, see “Reconciliation of non-IFRS
measures and ratios” below.
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
As at
December 31, 2020
Total assets ....................................................................... $
Total non-current liabilities ...............................................
648,273 $
56,838
520,269 $
53,242
428,410
14,794
Reconciliation of non-IFRS measures and ratios
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 and ratios: Adjusted profit, Adjusted diluted earnings
per share and Adjusted EBITDA. We believe that securities analysts, investors and other interested parties frequently use
non-IFRS measures and ratios in the evaluation of performance. Management also uses non-IFRS measures and ratios 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.
74
MANAGEMENT’S DISCUSSION AND ANALYSIS
Adjusted profit and Adjusted diluted earnings per share
Adjusted profit represents profit adjusted to exclude the change in the fair value of contingent consideration, our equity
compensation plans and other non-recurring items. The other 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 and ratios better align
with our performance and improve comparability against our peers.
Adjusted EBITDA
Adjusted EBITDA represents profit adjusted to exclude the change in the fair value of contingent consideration, our equity
compensation plans, other non-recurring items, income tax expense (recovery), 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,
2022
2021
Year ended December 31,
2021
2022
(In thousands of USD)
2020
Profit (loss) .............................................................. $
Change in fair value of contingent consideration ..
Share-based compensation ....................................
Non-recurring other items ......................................
Adjusted profit ........................................................ $
Income tax expense (recovery) ..............................
Depreciation and amortization ...............................
Foreign exchange loss (gain) ..................................
Net finance expense (income) ................................
Adjusted EBITDA ..................................................... $
Adjusted EBITDA as a percentage of revenue ........
8,562 $
1,367
7,558
—
17,487 $
(635)
6,761
(1,648)
(849)
3,629
21,116 $
21.4%
(2,919) $
—
6,633
716
4,430 $
(32)
6,557
194
128
6,847
11,277 $
16.5%
$
$
$
20,080
(826)
26,238
—
45,492
11,406
25,060
(1,499)
(1,013)
33,954
79,446
21.7%
(1,165) $
—
24,343
(7,190)
15,988 $
2,262
20,409
558
634
23,863
39,851 $
15.9%
13,730
—
17,217
—
30,947
7,740
15,562
196
(694)
22,804
53,751
24.0%
75
MANAGEMENT’S DISCUSSION AND ANALYSIS
Revenue
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD)
SaaS ........................................... $
Subscription term license .........
Professional services .................
Maintenance and support ........
58,839 $
9,131
26,156
4,357
98,483
46,855
1,442
17,036
3,173
68,506
26%
533%
54%
37%
44%
$
213,306 $
38,810
98,613
16,160
366,889
174,463
6,118
57,640
12,505
250,726
22%
534%
71%
29%
46%
Total revenue for the three months and year ended December 31, 2022 was $98.5 million and $366.9 million, an increase
of $30.0 million and $116.2 million compared to the same periods in 2021. This growth in our revenue was due to a 26%
and 22% increase in SaaS revenue in the three months and year ended December 31, 2022, as well as a substantial
increase in subscription term license revenue and an increase in professional services revenue. The increase in total
revenue was partially offset by the negative impact of currency exchange conversion on foreign denominated revenue
resulting from the strengthening USD.
SaaS revenue
SaaS revenue for the three months and year ended December 31, 2022 was $58.8 million and $213.3 million, an increase
of $12.0 million and $38.8 million compared to the same periods in 2021. These increases were due to contracts secured
with new customers, as well as expansion of existing customer subscriptions. These increases were partially offset by the
negative impact of converting SaaS revenue for subsidiaries reporting in foreign currencies to USD.
Subscription term license revenue
Subscription term license revenue for the three months and year ended December 31, 2022 was $9.1 million and $38.8
million, an increase of $7.7 million and $32.7 million compared to the same periods in 2021. 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 and expansions with
existing customers.
Professional services revenue
Professional services revenue for the three months and year ended December 31, 2022 was $26.2 million and $98.6
million, an increase of $9.1 million and $41.0 million compared to the same periods in 2021. The increases were due to
significant deployment activity driven by new subscription customers and expansion engagements with our existing
customers. Professional services revenue varies quarter to quarter due to the size, timing and scheduling of customer
engagements and the level of partner-led engagements.
Maintenance and support revenue
Maintenance and support revenue for the three months and year ended December 31, 2022 was $4.4 million and $16.2
million, an increase of $1.2 million and $3.7 million compared to the same periods in 2021, mostly driven by expansion of
existing on-premise customers, as well as contracts with new customers.
76
MANAGEMENT’S DISCUSSION AND ANALYSIS
Cost of revenue
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
(In thousands of USD)
Cost of revenue ......................... $
Gross profit ...............................
Gross margin .............................
Software(1)
.........................
Professional services .........
$
37,217
61,266
62%
80%
13%
24,619
43,887
64%
81%
12%
$
51%
40%
$
131,102
235,787
64%
81%
18%
86,755
163,971
65%
82%
11%
Note:
(1)
Software gross margin corresponds to SaaS, subscription term license and maintenance and support revenue.
2021 to
2022
%
51%
44%
Cost of revenue for the three months and year ended December 31, 2022 was $37.2 million and $131.1 million, increases
of $12.6 million and $44.3 million compared to the same periods in 2021 as we invest in the business and support our
growing customer base. The areas of increases were headcount and related compensation costs, partner and third-party
provider costs, IT costs, depreciation and the absence of non-refundable government grants we claimed in the prior year.
Gross margin for the three months and year ended December 31, 2022 was 62% and 64%, compared to 64% and 65% for
the same periods in 2021. Gross margin is driven by a mix of software and professional services gross margins. Overall
gross margin decreased in part because professional services revenue was a higher percentage of total revenue in 2022.
Software gross margin for the three months and year ended December 31, 2022 was 80% and 81%, compared to 81% and
82% for the same periods in 2021. The gross margin percentage for software for the three months and year ended
December 31, 2022 is lower compared to the same periods in 2021 due primarily to the negative impact of a
strengthening USD on conversion of foreign denominated SaaS revenue offset by the higher gross margin realized on
subscription term license revenue. Professional services gross margin for the three months and year ended December 31,
2022 was 13% and 18%, compared to 12% and 11% for the same periods in 2021. The higher professional services gross
margin was due to an increase in headcount utilization and economies of scale as related revenues increased in the
period.
Selling and marketing expenses
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD)
Selling and marketing................ $
As a percentage of revenue ......
21,213 $
22%
16,960
25%
25%
$
79,446 $
22%
59,078
24%
34%
Selling and marketing expenses for the three months and year ended December 31, 2022 were $21.2 million and $79.4
million, an increase of $4.3 million and $20.4 million compared to the same periods in 2021. The increases were due to
higher headcount and related compensation costs and marketing program costs as we aim to expand our customer base
during this sustained global shift to digital supply chain solutions. In addition, last year we benefited from non-refundable
government grants during the pandemic recognized as an offset to salary costs. These cost increases in 2022 were slightly
mitigated by a strengthening USD on foreign denominated expenses.
77
MANAGEMENT’S DISCUSSION AND ANALYSIS
Research and development expenses
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD)
Research and development ...... $
As a percentage of revenue ......
19,494 $
20%
16,465
24%
18%
$
74,147 $
20%
57,424
23%
29%
Research and development expenses for the three months and year ended December 31, 2022 were $19.5 million and
$74.1 million, an increase of $3.0 million and $16.7 million compared to the same periods in 2021. The increases were
due to higher headcount and related compensation costs and public cloud development environment costs incurred in
the current year. In addition, last year we benefited from non-refundable government grants during the pandemic
recognized as an offset to salary costs. These cost increases in 2022 were partially offset by the positive impact of a
strengthening USD on foreign denominated expenses. Our investment in headcount supports ongoing programs to drive
further innovation in our RapidResponse platform and ensure sustainable market leadership.
General and administrative expenses
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD)
General and administrative ...... $
As a percentage of revenue .....
13,804 $
14%
13,183
19%
5%
$
54,273 $
15%
45,550
18%
19%
General and administrative expenses for the three months and year ended December 31, 2022 were $13.8 million and
$54.3 million, an increase of $0.6 million and $8.7 million compared to the same periods in 2021. The increases were due
to higher headcount and related compensation costs, IT costs and depreciation. In addition, last year we benefited from
non-refundable government grants during the pandemic recognized as an offset to salary costs. These cost increases
were partially offset by the positive impact of a strengthening USD on foreign denominated expenses. The increase in
general and administrative expenses reflects investments in corporate infrastructure and capability to support our global
expansion and growth strategy.
78
MANAGEMENT’S DISCUSSION AND ANALYSIS
Other income and expense
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD)
Other income (expense):
Foreign exchange gain (loss) . $
1,648 $
(194)
—(1)
$
1,499 $
(558)
—(1)
Net finance and other
income (expense) ..................
Change in fair value of
contingent consideration ......
Total other income (expense) ....
891
(1,367)
1,172
(36)
—(1)
—
(230)
—(1)
—(1)
1,240
826
3,565
(264)
—(1)
—
(822)
—(1)
—(1)
Note:
(1)
The percentage change has been excluded as it is not meaningful.
Total other income (expense) for the three months and year ended December 31, 2022 was $1.2 million and $3.6 million,
compared to $(0.2) million and $(0.8) million for the same periods in 2021. The increase in other income (expense) for the
three months and year ended December 31, 2022 was due to an increase in foreign exchange gain (loss) and interest
income compared to the same periods in 2021 and offset by a decrease in the fair value of contingent consideration for
the three months ended December 31, 2022 and includes a net increase in the fair value of the contingent consideration
for the year ended December 31, 2022. The increase in foreign exchange gains in three months and year ended
December 31, 2022 was driven by gains realized on USD denominated assets held in our foreign subsidiaries.
Income taxes
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD)
Income tax expense (recovery) . $
(635) $
(32)
—(1)
$
11,406 $
2,262
—(1)
Note:
(1)
The percentage change has been excluded as it is not meaningful.
Income tax recovery for the three months ended December 31, 2022 was $0.6 million compared to a nominal amount for
the same period in 2021. The decrease in income tax expense was due to lower non-deductible share-based payments,
and adjustments to filed positions recorded in the period. This decrease is offset by a higher tax expense due to foreign
tax rate changes on higher profit in the period and differentials to the statutory Canadian tax rate.
Income tax expense for the year ended December 31, 2022 was $11.4 million compared to an income tax expense of $2.3
million for the same period in 2021. The increase in income tax expense was primarily due to an increase in profit before
tax of the Company and adjustments to filed positions recorded in the period. This was also driven by a decrease in
unrecognized deferred tax assets, as all deferred tax assets have been recognized in 2022.
79
MANAGEMENT’S DISCUSSION AND ANALYSIS
Profit
Three months ended December 31,
2022
2021
2021 to
2022
%
Year ended December 31,
2022
2021
2021 to
2022
%
(In thousands of USD except earnings per share)
.......................
....................
Profit (loss) ................................ $
Adjusted profit(2)
Adjusted EBITDA(2)
Basic earnings (loss) per share . $
Diluted earnings (loss) per
share ......................................... $
Adjusted diluted earnings per
share(2)
...................................... $
8,562 $
17,487
21,116
0.31 $
(2,919)
4,430
11,277
(0.11)
—(1)
295%
87%
0.30 $
(0.11)
0.61 $
0.16
$
$
$
$
20,080 $
45,492
79,446
0.73 $
(1,165)
15,988
39,851
(0.04)
—(1)
185%
99%
0.70 $
(0.04)
1.59 $
0.56
Notes:
(1)
The percentage change has been excluded as it is not meaningful.
(2) Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share are non-IFRS measures and ratios. See “Non-IFRS measures and ratios”.
For a reconciliation of these measures to the closest IFRS measure, where a comparable IFRS measure exists, see “Reconciliation of non-IFRS
measures and ratios”.
Profit for the three months and year ended December 31, 2022 was $8.6 million and $20.1 million or $0.31 and $0.73 per
basic share and $0.30 and $0.70 per diluted share, compared to a loss of $2.9 million and $1.2 million or $0.11 and $0.04
per basic and $0.11 and $0.04 diluted share for the same periods in 2021
The improved profitability reflects revenue growth being realized in profit as we continued to grow the business over the
year. The 45% and 47% increases in revenue for the three months and year ended December 31, 2022 were driven
primarily by new customers additions and expansion of our existing customer subscriptions related to the sustained
global shift to digitized supply chain solutions. Cost of revenues increased to support this revenue, while operating
expenses remained consistent or decreased as a percentage of sales, which further supported profitability this year.
Adjusted EBITDA for the three months and year ended December 31, 2022 was $21.1 million and $79.4 million, an
increase of $9.8 million and $39.6 million compared to the same periods in 2021. These increases also reflect the
realization of revenue growth in profit as the business grows from the addition of new customers and expansion of
services to existing customers. Adjusted EBITDA highlights the growth in our core business operations because compared
to profit, it excludes the impact of higher expenses recognized in 2022 for income taxes, depreciation and amortization,
and stock compensation.
80
Key balance sheet items
MANAGEMENT’S DISCUSSION AND ANALYSIS
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
Total assets ....................................................................... $
Total liabilities ...................................................................
648,273 $
246,845
520,269
199,051
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, 2022
As at
December 31, 2021
(In thousands of USD)
Trade accounts receivable ................................................ $
Unbilled receivables ..........................................................
Taxes receivable ................................................................
Other .................................................................................
Loss allowance ..................................................................
Total trade and other receivables .....................................
121,669 $
30,623
1,830
3,847
(312)
157,657
71,118
15,413
217
2,499
—
89,247
Trade accounts receivable at December 31, 2022 were $121.7 million, an increase of $50.6 million compared to
December 31, 2021 due to growth in revenue and variances in the timing of billings and collections. The aging of trade
receivables is generally current or within 30 days past due and overdue amounts do not reflect any significant 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, 2022 were $30.6 million,
an increase of $15.2 million compared to December 31, 2021 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 well as an increase in unbilled professional services.
Property and equipment
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
Land ................................................................................... $
Computer equipment .......................................................
Computer software ...........................................................
Office furniture and equipment ........................................
Leasehold improvements ..................................................
Total property and equipment .........................................
18 $
27,595
984
2,395
20,860
51,852
18
29,509
781
2,831
18,954
52,093
Property and equipment at December 31, 2022 was $51.9 million, a decrease of $0.2 million compared to December 31,
2021. The decrease was due to regular depreciation, partly offset by additions to leasehold improvements for the new
head offices in Ottawa and Chennai.
81
MANAGEMENT’S DISCUSSION AND ANALYSIS
Right-of-use assets & lease obligations
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
Right-of-use assets ............................................................ $
53,537 $
53,578
Lease obligations:
Current ...........................................................................
Non-current ....................................................................
6,991
49,977
56,968
2,526
53,233
55,759
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, 2022 were $53.5 million, consistent with December 31, 2021. Lease obligations at December 31, 2022 were
$57.0 million, an increase of $1.2 million compared to December 31, 2021. The increase in lease obligations was due to
the additions of new office leases in Chennai and from the MPO acquisition, and were offset by the impact of the
strengthening of the USD on foreign denominated lease obligations.
Contract acquisition costs
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
Contract acquisition costs ................................................. $
24,892 $
19,691
Contract acquisition costs are capitalized and amortized over the expected life of the customer upon commencement of
the related revenue being recognized. 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, 2022 were $24.9 million, an increase
of $5.2 million compared to December 31, 2021. This increase was due to commissions incurred in the period, partly
offset by regular amortization.
Deferred revenue
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
Deferred revenue .............................................................. $
133,467 $
99,239
Deferred revenue at December 31, 2022 was $133.5 million, an increase of $34.2 million compared to December 31,
2021. 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 contracts secured with new customers and expansion of existing customers subject 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.
82
MANAGEMENT’S DISCUSSION AND ANALYSIS
Summary of quarterly results
The following table summarizes selected results for the eight most recent completed quarters:
Dec 31,
2022
Sep 30,
2022
Jun 30,
2022
Mar 31,
2022
Dec 31,
2021
Sep 30,
2021
Jun 30,
2021
Mar 31,
2021
Three months ended
(In thousands of USD)
Revenue:
SaaS ................................................................... $ 58,839 $ 54,038 $ 51,109 $ 49,320 $ 46,855 $ 44,731 $ 42,301 $ 40,576
12,027
Professional services .........................................
Maintenance and support ................................
Subscription term licenses ................................
17,036
14,576
21,458
23,474
26,156
25,613
25,386
14,001
1,442
3,856
3,927
3,132
1,997
3,173
2,059
4,357
9,131
5,827
3,066
3,134
4,020
378
620
98,483
37,217
61,266
54,511
6,755
1,648
891
(1,367)
7,927
(635)
89,498
34,395
55,103
52,857
2,246
393
723
2,193
5,555
3,927
80,800
31,024
49,776
52,031
(2,255)
623
(14)
—
98,108
28,466
69,642
48,467
21,175
(1,165)
(360)
68,506
24,619
43,887
46,608
(2,721)
(194)
(36)
—
—
(1,646)
19,650
(2,951)
986
7,128
(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
8,562 $
1,628 $
(2,632) $ 12,522 $
(2,919) $
200 $
3,088 $
(1,534)
1,367
7,558
—
(2,193)
6,174
—
—
—
6,503
6,003
—
—
—
6,633
716
—
6,501
—
—
5,902
(7,906)
—
5,307
—
................................................ $ 17,487 $
5,609 $
3,871 $ 18,525 $
4,430 $
6,701 $
1,084 $
3,773
(635)
6,761
(1,648)
(849)
3,629
3,927
6,324
(393)
(662)
9,196
986
6,061
(623)
81
7,128
5,914
1,165
417
(32)
6,557
194
128
6,505
14,624
6,847
1,310
4,784
(547)
136
5,683
916
4,598
443
108
68
4,470
468
262
6,065
5,268
7,149 $
9,041
0.11 $
(0.06)
............................................. $ 21,116 $ 14,805 $ 10,376 $ 33,149 $ 11,277 $ 12,384 $
0.01 $
(0.11) $
(0.10) $
0.31 $
0.46 $
0.06 $
0.30 $
0.06 $
(0.10) $
0.44 $
(0.11) $
0.01 $
0.11 $
(0.06)
0.61 $
0.20 $
0.14 $
0.65 $
0.16 $
0.24 $
0.04 $
0.13
Note:
(1) Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share are non-IFRS measures and ratios. See “Non-IFRS measures and ratios”.
For a reconciliation of these measures to the closest IFRS measure, where a comparable IFRS measure exists, see “Reconciliation of non-IFRS
measures and ratios”.
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 62% to 71% of revenue, with fluctuations due to the change in revenue mix between subscription term
license and professional services compared to SaaS, our main contributor 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.
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Cost of revenue .................................................
Gross profit ........................................................
Operating expenses ...........................................
Foreign exchange gain (loss) .............................
Net finance and other income (expense) ..........
Change in fair value of contingent
consideration .....................................................
Profit (loss) before income taxes ......................
Income tax expense (recovery) .........................
Profit (loss) ........................................................ $
Change in fair value of contingent
consideration .....................................................
Share-based compensation ...............................
Non-recurring item ............................................
Adjusted profit(1)
Income tax expense (recovery) .........................
Depreciation and amortization .........................
Foreign exchange loss (gain) .............................
Net finance expense (income) ..........................
Adjusted EBITDA(1)
Basic earnings (loss) per share .......................... $
Diluted earnings (loss) per share ....................... $
Adjusted diluted earnings per share(1)
.............. $
MANAGEMENT’S DISCUSSION AND ANALYSIS
Liquidity and capital resources
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.
As at
December 31, 2022
As at
December 31, 2021
(In thousands of USD)
Cash and cash equivalents ................................................ $
Short-term investments ....................................................
175,347 $
50,476
225,823
203,220
30,168
233,388
Cash and cash equivalents decreased by $27.9 million to $175.3 million at December 31, 2022. Short-term investments
increased by $20.3 million to $50.5 million at December 31, 2022. Total cash, cash equivalents and short-term
investments decreased by $7.6 million to $225.8 million at December 31, 2022.
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 in 2020, 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, 2022 was $340.6 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 $189.8 million and
finance our longer-term growth.
Cash flow
The following table provides a summary of cash inflows and outflows by activity:
Three months ended December 31,
Year ended December 31,
2022
2021
2022
2021
(In thousands of USD)
Cash inflow (outflow) by activity
Operating activities ............................................................ $
Investing activities ..............................................................
Financing activities .............................................................
Effects of exchange rates ...................................................
Net cash inflows (outflows) ..................................................
Less: Net purchase of short-term investments ....................
(2,327) $
3,238 $
(28,245)
4,575
(1,420)
(27,417)
20,000
(11,464)
1,166
(102)
(7,162)
—
24,518 $
(74,987)
26,840
(4,244)
(27,873)
20,000
50,138
(34,633)
5,851
(1,094)
20,262
—
Net cash inflows (outflows) excluding short-term investing
(7,417)
(7,162)
(7,873)
20,262
Cash provided by operating activities
Cash used by operating activities for the three months ended December 31, 2022 was $2.3 million compared to $3.2
million cash generated for the same period in 2021. The decrease was due to a net increase in operating assets and
liabilities compared to the same period in 2021, offset by the higher profit in the three months ended December 31,
2022. Cash generated by operating activities for the year ended December 31, 2022 was $24.5 million compared to $50.1
million for the same period in 2021. The decrease was due to a net increase in operating assets and liabilities, partially
offset by higher profit, depreciation, share based payments and income tax expense in 2022.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
Cash used in investing activities
Cash used in investing activities for the three months ended December 31, 2022 was $28.2 million compared to $11.5
million for the same period in 2021. The increase was due to an increase in the purchase of short-term investments,
partially offset by a decrease in purchases of property and equipment. Cash used in investing activities for the year ended
December 31, 2022 was $75.0 million compared to $34.6 million for the same period in 2021. The increase was due to
the two acquisitions in 2022 and an increase in the purchase of short-term investments, partially offset by a decrease in
purchases of property and equipment.
Cash provided by financing activities
Cash provided by financing activities for the three months and year ended December 31, 2022 was $4.6 million and $26.8
million compared to $1.2 million and $5.9 million for the same periods in 2021. The increase for the three months ended
December 31, 2022 was due to proceeds from stock options exercised, and for the year ended December 31, 2022, the
increase was due to proceeds from stock options exercised and lease incentives received.
Contractual obligations
Our lease commitments are primarily for office premises and secure data center facilities with expiry dates that range
from March 2023 to February 2037. The largest lease commitment relates to our 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.
In 2022, we contracted to purchase cloud data services for a minimum purchase commitment of $100.0 million over a
seven-year term.
The following table summarizes our contractual obligations as at December 31, 2022, including commitments relating to
leasing contracts:
Less than
1 year
1 to
3 years
3 to
5 years
More than
5 years
Total
amount
(In thousands of USD)
Commitments
Lease agreements .................................. $
Cloud services agreements ....................
Financial obligations
Trade payables and accrued liabilities ...
Total contractual obligations ................. $
7,919 $
8,795 $
6,436 $
26,736 $
6,706
18,125
40,000
35,000
49,886
99,831
40,107
—
—
—
40,107
54,732 $
26,920 $
46,436 $
61,736 $
189,824
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
More than
5 years
Total
amount
(In thousands of USD)
Commitments
Lease agreements .................................. $
Financial obligations
Trade payables and accrued liabilities ...
Total contractual obligations ................. $
9,475 $
13,215 $
7,362 $
31,546 $
61,598
43,328
—
—
—
43,328
52,803 $
13,215 $
7,362 $
31,546 $
104,926
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2022 and 2021 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.
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.
Market risk
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.
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 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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2022.
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, 2022 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, 2022, 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 recorded, 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 quarter and based on the evaluation have concluded that the disclosure controls and
procedures are effectively designed.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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 and effectiveness 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, 2022, management assessed the design and effectiveness of our ICFR and concluded
that our ICFR is appropriately designed and there are no material weaknesses that have been identified. There were no
significant changes to our ICFR for the year ended December 31, 2022.
Outstanding share information
As at December 31, 2022, 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, 2022 and as of March 1, 2023 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,
2021
Net issued
Number
outstanding at
December 31,
2022
Net issued
Number
outstanding at
March 1, 2023
27,462,834
2,143,375
96,583
65,441
31,640
589,795
(423,049)
84,156
9,954
39,738
28,052,629
1,720,326
180,739
75,395
71,378
6,215
(7,715)
(1,065)
—
—
28,058,844
1,712,611
179,674
75,395
71,378
Our outstanding common shares increased by 589,795 shares in of 2022 due to the exercise of 492,631 stock options and
vesting of 97,164 restricted and performance share units.
Our outstanding stock options decreased by 423,049 options in 2022 due to the grant of 194,646 options less 492,631
options exercised and 125,064 options forfeited. Each option is exercisable for one common share.
Our outstanding restricted share units increased by 84,156 units in 2022 due to the grant of 200,865 units less 93,388
units vested and 23,321 units forfeited. Our outstanding deferred share units increased by 9,954 units in 2022 due to
9,954 units granted. Our outstanding performance share units increased by 39,738 units in 2022 due to 52,209 units
granted less 3,776 units vested and 8,695 units forfeited. 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.
88