A N N U A L R E P O R T
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Powering the world’s most
admired supply chains
D ES IGN
PLAN
RETURN
ORCHESTRATION
SOURCE
D ELI VER
MAK E
Trademarks, trade names and service marks
This annual report 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, the company’s 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 annual report, other than those that belong to Kinaxis, are
the property of their respective owners.
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End-to-end supply chain orchestration powered by AISupply chains are under pressure from all sides. Kinaxis helps companies respond with unparalleled agility using supply chain orchestration, a process that incorporates AI and coordinates all parts of the supply chain from end-to-end.With orchestration, our customers can balance the most challenging demands - controlling costs, building resilience, driving efficiencies, and being sustainable - all in one place, transforming supply chains into a strategic business driver.Kinaxis’ software is trusted by renowned global brands to provide the agility and predictability needed to navigate today’s volatility and disruption. Table of Contents
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Financial Highlights
Letter to Shareholders
Kinaxis' Long History and Exciting
Future with AI
Financial Statements for the Years
Ended December 31, 2023 and 2022
Management’s Discussion and
Analysis for the Year Ended
December 31, 2023
Financial Highlights
Kinaxis’ customers typically sign multi-year subscription agreements for our RapidResponse® supply chain
orchestration platform. The business model provides a predictable, recurring revenue base that has grown rapidly
over time as we have added new customers across multiple 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. In 2024, we achieved SaaS revenue growth of
24% while generating 18% Adjusted EBITDA1 and free cash flow margins.
US$ Millions
427
366.9
250.7
224.2
191.5
24% SaaS
revenue growth
174.5
148.9
118.9
265.1
213.3
18% free cash flow margin
293
233.4
225.8
212.6 213.1
Adjusted EBITDA1 Margin
30% 24% 16% 22% 18%
79.9 74.9
57.7
53.8
39.9
Total Revenue
Subscription/SaaS Revenue
Adjusted EBITDA1
Cash, Cash Equivalents
and ST Investments - EoY
2019
2020
2021
2022
2023
1.
Adjusted EBITDA is a non-IFRS financial measure and Adjusted EBITDA margin expresses Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA and Adjusted EBITDA margin are not
recognized, defined or standardized measures under International Financial Reporting Standards (IFRS) and might not be comparable to similar financial measures presented by other issuers. Adjusted
EBITDA represents profit adjusted to exclude the change in the fair value of contingent consideration (i.e. the impact of our formerly outstanding redeemable preferred shares), our equity compensation
plans, non-recurring items, income tax expense, depreciation and amortization, foreign exchange loss (gain) and net¬ finance (income) expense. We use Adjusted EBITDA to provide readers with a
supplemental measure of our operating performance and to highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. Adjusted EBITDA
margin expresses Adjusted EBITDA as a percentage of revenue.
Our definitions of Adjusted EBITDA and Adjusted EBITDA margin will likely differ from that used by other companies (including our peers) and therefore comparability may be limited. Non-IFRS
measures should not be considered a substitute for, or in isolation from, measures prepared in accordance with IFRS. Non-IFRS measures should be read in conjunction with our annual consolidated
financial statements and the related notes as at and for the year ended December 31, 2023. Readers should not place undue reliance on non-IFRS measures and should instead view them in
conjunction with the most comparable IFRS financial measures. Adjusted EBITDA and other non-IFRS financial measures reported by Kinaxis and reconciliations to the most comparable IFRS financial
measure can be found under the headings Non-IFRS Measures and Reconciliation of Non-IFRS Measures in our annual management’s discussion and analysis (MD&A) which sections are incorporated
by reference herein and are available on SEDAR+ (www.sedarplus.ca).
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Annual Recurring Revenue (ARR)2
Remaining Performance Obligation (RPO)
Our ARR is the total annualized value of recurring subscription amounts (ultimately recognized as SaaS,
Our RPO represents revenue that we expect to recognize in the future related to firm performance obligations that
Subscription Term Licenses and Maintenance & Support revenue) for all subscription contracts at a point in time.
are unsatisfied (or partially unsatisfied) on December 31, 2023, for our signed multi-year contracts. While the value
Such amounts are determined by reference to the underlying contracts, and are normalized for the varying revenue
in a period is influenced by several factors, including seasonality, the timing of contract renewals, average contract
recognition treatments under IFRS for cloud-based versus on-premise subscription amounts. We believe that ARR
terms, and others, when looked at over three to five years (our typical contract terms) it is one view of growth in our
is a good indicator of the growth in our subscription business at a moment in time. We ended 2023 with an ARR
business over time. For example, we have experienced a 25% cumulative average growth rate in our total RPO from
balance of $322 million, representing 18% growth over 2022.
2021 to 2023 and 26% growth in SaaS RPO over that time.
US$ Millions
ANNUAL
QUARTERLY
322
274
285
293
274
322
304
$350
$300
$250
221
$200
185
$150
$100
$50
$0
FY ‘20
17%
FY ‘21
19%
FY ‘22
24%
FY ‘23
18%
Q4 '22
24%
Q1 '23
23%
Q2 '23
22%
Q3 '23
18%
Q4 '23
18%
2.
Annual Recurring Revenue (ARR) is the total annualized value of recurring subscription amounts (ultimately recognized as SaaS, Subscription term licenses and Maintenance and support revenue)
of all subscription contracts at a point in time. Annualized subscription amounts are determined solely by reference to the underlying contracts, normalizing for the varying revenue recognition
treatments under IFRS for cloud-based versus on-premise subscription amounts. It excludes one-time fees, such as for non-recurring professional services, and assumes that customers will renew the
contractual commitments on a periodic basis as those commitments come up for renewal, unless such renewal is known to be unlikely at period end. We believe that this key performance indicator
provides a more current indication of our performance in the growth of our subscription business than other metrics.
US$ Millions
800
600
400
Total RPO: 25% 3-year CAGR
SaaS RPO: 26% 3-year CAGR
$741.0
24% v Q4 2022
$598.3
$549.7
$700.6
27% v Q4 2022
Q4 ‘20
Q1 ‘21
Q2 ‘21
Q3 ‘21
Q4 ‘21
Q1 ‘22
Q2 ‘22
Q3 ‘22
Q4 ‘22 Q1 ‘23 Q2 ‘23 Q3 ‘23 Q4 ‘23
Total RPO
SaaS RPO
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Letter to
Shareholders
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3.
Gartner, Magic Quadrant for Supply Chain Planning Solutions, P. Orup Lund, T.
Payne, J. Suleski, J. Graham, C. Thomson, A. Salley, May 2, 2023. The Gartner
content described herein, (the "Gartner Content") represent(s) research opinion or
viewpoints published, as part of a syndicated subscription service, by Gartner, Inc.
("Gartner"), and are not representations of fact. Gartner Content speaks as of its
original publication date (and not as of the date of this document) and the opinions
expressed in the Gartner Content are subject to change without notice.
Strong results in a challenging 2023 Once again in 2023, Kinaxis delivered strong annual SaaS growth balanced with profitability that came in above expectations. SaaS revenue grew by 24% and our adjusted EBITDA¹ margin for the full year was 18%. We had record free cash flow of over $75 million, more than 70% higher than ever before, and representing 18% of our revenue for the year. These results are particularly impressive considering a difficult economic backdrop in 2023 that caused companies to delay decisions, require more senior levels of approvals, and reduce project scope to meet compressed budgets. As a result, our Annual Recurring Revenue2 growth rate, a leading indicator of future SaaS growth, slowed somewhat to a still impressive 18%. Overall, we are proud of 2023 results and our ongoing efforts to help people unlock the full potential of the world’s supply chains.Record new customer winsIn 2023, we won a record number of new customers, including a record number of mid-market customers (companies with revenue between $500 million and $1.5 billion), a growth strategy we initiated just over three years ago. We also won a record number of smaller customers ($250 million to $500 million in revenue) through our value-added reseller channel, which is just over a year old. Together, over 40% of new wins came from mid-market or smaller customers. The vast majority of the new customers we won in the second half of the year were deployed in public cloud environments, either Google Cloud Platform or Microsoft Azure, another successful new strategy that is intended to help us scale as we continue to rapidly grow the customer base.You would recognize many of the new customers we won in 2023, including ExxonMobil, Volvo, Brooks Sports, Peloton, Brown-Forman (distillers and marketers of Jack Daniels and Finlandia Vodka), and Brita, amongst others. Overall, we have more than doubled our customer base in the last three years. Our customers are “sticky”, too, with between 95% and 100% staying with us year over year -- an impressive retention rate. Building on established product leadership and creating expansion opportunitiesKinaxis was once again named a leader in the 2023 Gartner® Magic Quadrant™ for Supply Chain Planning Solutions3. Among the 20 vendors evaluated, Kinaxis was positioned furthest for Completeness of Vision and highest on Ability to Execute. While we’re thrilled with this ongoing recognition, and proud of our 60%-plus win rate against our three core competitors, we continue to improve RapidResponse, our supply chain orchestration solution. In 2023 we announced the following new capabilities:• Enterprise Scheduling is an innovative scheduling tool that allows companies to orchestrate production across sites and create a comprehensive, feasible and efficient manufacturing schedule, regardless of plant layout. 9
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to reaching important milestones and launching new product capabilities specific to the retail market.I mentioned winning ExxonMobil in 2023. In 2022 we won Castrol, a BP company. In recent years we have also won other large oil and gas companies, and we have more opportunities ahead. While many of the initial implementations relate to the consumer lubricants businesses of these giants, there is significant interest in Kinaxis covering more products and processes. We look forward to the opportunity. Committed to a sustainable, socially responsible futureI remain very proud of our ESG program. We continue to fully offset our Scope 1, 2 and 3 carbon emissions, and remain focused on removing waste from customers’ supply chains with our new Sustainable Supply Chain application. At Kinaxis we describe our culture as People Matter Here, so nothing makes me happier than 92% of our surveyed team saying that their manager respects and is committed to diversity and inclusion. We have focused our charitable commitments to Women Who Code, a global non-profit empowering diverse women to excel in technology careers, and the Ellen MacArthur Foundation, an organization committed to creating a circular economy designed to eliminate waste and pollution. Rating agencies are recognizing our accomplishments: MSCI gave us a Triple A designation; Sustainalytics included us in the 2023 Top-Rated ESG Companies list in the software category; and Institutional Investor awarded us Best ESG Program in the Technology, Media and Telecommunications sector in Canada. A global transformation is underwayI continue to believe we are in the early days of what will be a multi-year, global transformation to full supply chain orchestration, which will enable companies of every size, type and maturity level to manage their end-to-end ecosystem, creating agility, transparency, intelligence and trust. Kinaxis’ proprietary concurrency technique crosses time horizons, business processes and organizational boundaries to keep supply chains in sync. A recent study we performed with IDC showed that 83% of supply chains can’t respond to disruptions in 24 hours, but 97% of respondents were optimistic that better orchestration tools would have an impact on supply chain performance. • Our new Supply Chain Execution application, a result of our MPO acquisition in 2022, includes transportation management, order management and returns management. It empowers businesses to drive supply chain orchestration from plan through delivery across all time horizons.• Aligned with growing global requirements, our Sustainable Supply Chain allows companies to include environmental factors as a key part of supply chain decisions by embedding carbon emission factors, including Scope 3 emissions, into RapidResponse scenarios. • Demand.AI enhancements use advanced artificial intelligence (AI) to allow companies to better understand how both internal and external factors are influencing demand for their products and to have the opportunity to take advantage of these changes quickly. • Key enhancements to demand planning meet the unique needs of the retail industry, and a new Replenishment Planning capability enables retailers to better manage replenishment parameters across their supply chain. It provides insight into items at stores and distribution centers to get restocked in a timely manner while helping to minimize excess inventory.We continue to embed AI across our platform and it represents the largest part of our patent portfolio (including both pending and issued patents). We are excited about the opportunities to use new generative AI technology and already have early initiatives underway with customers starting to test them.All the new capabilities we’ve introduced offer opportunities for both higher competitive win rates and greater expansion within our growing existing customer base. While we have traditionally focused more on winning new customers, at the beginning of 2023 we created a new account team to exclusively target our existing customers, who represent significant opportunities for expansion. New vertical marketsAs I mentioned in this letter last year, we won a bellwether account in our newest vertical market: retail. We’re proud to be able to name that customer: HAVI, a strategic supply chain partner for the world’s largest quick service restaurants and for other industries. We grew our retail customer footprint further in 2023 and are expecting acceleration in 2024 thanks On the path towards higher
profitability
To meet this opportunity, in recent periods we have
reinvested in our sales team, launched exciting new
product capabilities, and enabled RapidResponse
on public cloud platforms. Consequently, we are
now in a strong position to increase our focus on
profitability and steadily return over the mid-term
to a business model with an aim to consistently
deliver an Adjusted EBITDA1 margin of at least
Kinaxis’ Long
History and
Exciting Future
with AI
25%, normalizing for cyclical fluctuations in our
Artificial intelligence (AI) is the science
subscription term license revenue.
of computers mimicking human
intelligence to solve problems. This science
We aim to continue to make progress towards that
encompasses many disciplines to improve
goal in 2024 while also delivering another year of
speed, precision and elegance in decision-
strong SaaS revenue growth. Eighty-eight percent
making by finding patterns in enormous
of our 2024 SaaS revenue guidance was in our
volumes of data. Examples of the fields are
committed backlog of signed business at the end of
machine learning (including deep learning),
2023.
As always, we thank you, our shareholders, for your
belief in Kinaxis’ opportunity and team. We remain
well positioned to take advantage of the ongoing
renaissance in modern supply chain management to
deliver value to our shareholders.
Sincerely,
optimization, genetic algorithms, robotic
process automation, generative AI (such as
ChatGPT), and decision management.
Patents by Solution Area
AI can generate recommendations, predict
and surface insights, provide speed and
scale, automate processes, and enhance
productivity, all capabilities we can apply
across supply chains.
Kinaxis’ use of AI4 goes back years and
represents the biggest single category in
our patent portfolio. AI is a key element in a
number of our offerings.
• Demand.AI empowers planners with
highly accurate demand forecasts across
all horizons using machine-learning based
forecasting and sensing, while leveraging
analytics, insights, and exception-based
workflows to prioritize high value-add
work. It incorporates the true drivers of
demand using both internal and external
signals, such as weather patterns, major
events or social media sentiment.
• Supply.AI balances trade-offs
incorporating cost, revenue, on-time
delivery, capacity and more using new
modeling approaches and analytical
and how given available supplies and
uncommitted capacity, and common
blend, which lets you make the best use
of available APIs and select the optimal
processing techniques to maximize total
demand satisfied.
• The Self-Healing Supply Chain examines
supply chain design assumptions, such
as lead times and production yields,
compares those with actual performance
and then closes the gap automatically
through machine learning.
AI truly became a household term in
November 2022 when generative AI became
part of the public consciousness thanks to
ChatGPT. Demands to use AI instantly sped
up: an IBM Institute for Business Value study5
found 66% of CEOs felt pressure from their
boards to accelerate AI adoption; a Workday
study6 noted that 80% of decision-makers said
that AI is essential to remaining competitive,
so 94% are investing in it.
In 2024, Kinaxis will be talking more about
solvers. Supply.AI can solve a wide variety
new capabilities we’re developing with
AI/Machine
Learning
of business problems. Examples include
could-be-built to maximize margin by
determining what products to build
generative AI that will help users learn
about RapidResponse, create resources
like dashboards, scorecards and workbooks
faster, and ultimately solve complex supply
chain problems with greater efficiency and
effectiveness than ever before.
John Sicard,
President and Chief Executive Officer,
Kinaxis Inc.
AI and Machine Learning represent the biggest category
in our portfolio of pending and issued patents.
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4.. See https://www.kinaxis.com/en/artificial-intelligence
5. See https://www.ibm.com/downloads/cas/1V2XKXYJ
6. See https://blog.workday.com/en-us/2023/workday-research-ai-iq-study-reveals-artificial-intelligence-adoption-barriers-business-leaders.html
5 Principles for
Implementing AI
in Supply Chains
Kinaxis has established five
principles for successfully
implementing AI in supply
chains.
FIRST PRINCIPLE:
AI should augment humans
AI’s capabilities are nothing short of amazing,
from producing creative marketing copy, to
complex legal research, to songs, paintings and
more, and it’s due to the ability of AI to process
data and learn from patterns far beyond the
cognitive capacity of humans. However, machines
cannot provide what Kinaxis calls the 3 C’s:
context, collaboration and conscience. Models
cannot derive meaning from context, critical in
so many areas, nor can they work together to
solve problems like sustainability or human rights
in supply chains. This complementarity is why
AI should augment humans, not replace them.
The same Workday study5 showed that 93% of
decision makers believe in the importance of
keeping the human in the loop when AI is making
significant decisions.
SECOND PRINCIPLE:
The expert fusion of AI, heuristics
and optimization is key
AI can also model problems at scale to produce
more precise recommendations, such as greater
demand forecast accuracy or better predictions
of on-time delivery. Precision is also a benefit of
optimization, a field of AI familiar to many in supply
chains to make the best use of resources within
constraints to accomplish an optimal solution with
a specific objective, such as minimizing costs. But
here scale can be a challenge: optimizing a supply
network can involve millions of interdependent
variables, slowing even the best solution by several
hours. Instead, some turn to heuristics, a problem-
solving model that utilizes a practical solution,
or best practice, to produce a quick and feasible
course of action good enough for the situation.
Various mathematical models can offer speed,
precision, and elegance, but with trade-offs.
Generative AI is not the right approach to all
classic supply chain problems. Instead, a fusion
of methods, like machine learning and heuristics,
can “warm start” an optimization model and speed
up the ability to solve it, creatively combining
the strengths of each approach to achieve an
equilibrium of speed, precision and elegance.
THIRD PRINCIPLE:
Concurrency amplified by AI is
a breakthrough in supply chain
management
Supply chains connect many functions across a
company and beyond, which is why optimizing one
link doesn’t optimize the entire chain. For example,
AI can greatly increase the accuracy of forecasts,
but we want more than highly-efficient silos as
ultimately demand needs to be aligned with supply.
The power of AI on its own is not enough.
The real breakthrough is not from AI but with
concurrency, which integrates AI in the workflow
to align decision-making across the supply chain
for faster response. We want AI for its ability
to predict with greater precision, speed, and
elegance, and we need concurrency to connect
supply chains across functions for better, faster
response, no matter what the conditions are and
to absorb the volatility we cannot predict from
inevitable disruptions.
FOURTH PRINCIPLE:
The power of AI must be
democratized
We will always need data scientists to explore
new ways to apply AI, but empowering supply
chain practitioners to adopt it themselves will
extend its reach. The best solutions require only
an understanding of company data and business,
not technical proficiency in AI or data science. So
while Workday’s survey5 found 72% of leaders
feel their organizations lack the skills necessary
to fully implement AI, applying AI doesn’t have to
involve diving into the deep end. If solutions are
designed for someone with supply chain context
FIFTH PRINCIPLE:
Explainability is essential for AI
adoption
The value of AI is limited when the speed, precision,
and elegance are delivered in black boxes that
even the data scientists who constructed them
cannot unpack. Lack of explainability is a barrier
to adoption, because if you are personally held
responsible for a forecast, it can be hard to trust
a “machine.” One approach to overcoming this
aversion is state-of-the-art techniques that make
black box AI models more understandable. For
example, tools like a SHAP diagram (SHapley
Additive exPlanations) can be surfaced in demand
sensing to help a planner see how adding a signal
like weather affects predictions. We need to arm
users with the information they need to explain
their decisions, embedded in solutions they can
understand.
The opportunity for
AI in supply chains
is massive
Supply chains have never needed more help,
and AI has never been more ready, so the
time is now. As Kinaxis continues to ramp
up its use of AI, it will be built on a human-
centered approach that amplifies the power
of concurrency to drive the most intelligent
and business knowledge, they can “consume” the
supply chains on the planet. When AI is
results of a model without knowing how to build it.
embedded across the end-to-end supply
Democratizing AI in this way ensures its use.
chain, expertly fusing the best techniques
available, we can reimagine what is possible
in our supply chains.
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Consolidated Financial
Statements, for the Years
Ended December 31, 2023
and 2022
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Kinaxis Inc.
Consolidated Financial Statements
for the years ended December 31, 2023 and 2022
(In thousands of USD)
KPMG LLP
150 Elgin Street, Suite 1800
Ottawa, ON K2P 2P8
Canada
Telephone 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, 2023 and December 31,
2022
the consolidated statements of comprehensive income 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 material accounting
policy information
(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, 2023 and December 31, 2022, and
its consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with IFRS Accounting 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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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, 2023.
These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matter described below to be the key audit matter to be communicated in
our 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(a) 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 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.
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.
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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 IFRS Accounting 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.
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.
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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 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 consequences of doing so would reasonably be expected to outweigh the
public interest 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
February 28, 2024
21
22
Kinaxis Inc.
Consolidated Statements of Financial Position
As at December 31
(Expressed in thousands of USD)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Trade and other receivables (note 5)
Prepaid expenses
Non-current assets:
Unbilled receivables (note 5)
Other receivables
Prepaid expenses
Investment tax credits recoverable (note 20)
Deferred tax assets (note 20)
Contract acquisition costs (note 6)
Property and equipment (note 7)
Right-of-use assets (note 8)
Intangible assets (note 9)
Goodwill (note 10)
Liabilities and Shareholders’ Equity
Current liabilities:
Trade payables and accrued liabilities (note 11)
Deferred revenue (note 12)
Provisions (note 13)
Contingent consideration (note 23)
Lease obligations (note 14)
Non-current liabilities:
Lease obligations (note 14)
Deferred tax liabilities (note 20)
Shareholders’ equity:
Share capital (note 15)
Contributed surplus
Accumulated other comprehensive gain (loss)
Retained earnings
December 31,
2023
December 31,
2022
$
174,844 $
118,118
156,609
14,810
464,381
3,155
972
1,130
8,362
1,184
27,438
40,300
47,109
23,394
74,556
227,600
175,347
50,476
157,657
13,660
397,140
7,245
971
2,395
7,591
1,065
24,892
51,852
53,537
28,271
73,314
251,133
Kinaxis Inc.
Consolidated Statements of Comprehensive Income
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:
Foreign exchange gain (loss)
Net finance and other income
Change in fair value of contingent consideration (note 23)
Profit before income taxes
$
691,981 $
648,273
Income tax expense (recovery) (note 20):
$
39,700 $
137,598
—
—
5,805
183,103
45,985
8,065
54,050
307,327
44,339
1,360
101,802
454,828
40,107
133,467
296
9,146
6,991
190,007
49,977
6,861
56,838
244,713
65,129
(156)
91,742
401,428
Current
Deferred
Profit
Other comprehensive income:
Items that are or may be reclassified subsequently to profit:
Foreign currency translation differences - foreign operations
Change in net unrealized gain on cash flow hedges
Total comprehensive income
Basic earnings per share
Weighted average number of basic Common Shares (note 16)
Diluted earnings per share
2023
2022
$
426,971 $
366,889
168,074
131,102
258,897
235,787
102,719
81,707
60,369
244,795
79,446
74,147
54,273
207,866
14,102
27,921
(1,236)
8,821
(1,951)
5,634
1,499
1,240
826
3,565
19,736
31,486
11,037
(1,361)
9,676
3,892
7,514
11,406
10,060
20,080
1,075
441
1,516
441
—
441
11,576 $
20,521
0.36 $
0.73
28,321,874
27,667,100
0.35 $
0.70
$
$
$
See accompanying notes to consolidated financial statements.
On behalf of the Board of Directors:
(signed) John (Ian) Giffen
Director
(signed) Elizabeth (Betsy) Rafael
Director
See accompanying notes to consolidated financial statements.
$
691,981 $
648,273
Weighted average number of diluted Common Shares (note 16)
29,149,535
28,609,603
23
24
Kinaxis Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31
(Expressed in thousands of USD)
Accumulated other comprehensive income (loss)
Share
capital
Contributed
surplus
Cash flow
hedges
Currency
translation
adjustments
Total
Retained
earnings
Total equity
Balance, December 31, 2021
$
195,414 $
54,739 $
— $
(597) $
(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
—
—
—
—
—
—
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) $
(156) $
91,742 $
401,428
Profit
Other comprehensive income
Total comprehensive income
Share options exercised
Restricted share units vested
Performance share units vested
Share-based payments
Shares issued for contingent consideration
Shares repurchased (note 15)
Total shareholder transactions
—
—
—
41,545
10,676
2,628
—
11,097
(3,332)
62,614
—
—
—
(9,991)
(10,676)
(2,628)
35,788
—
(33,283)
(20,790)
—
441
441
—
—
—
—
—
—
—
—
1,075
1,075
—
1,516
1,516
10,060
—
10,060 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10,060
1,516
11,576
31,554
—
—
35,788
11,097
(36,615)
41,824
Balance, December 31, 2023
$
307,327 $
44,339 $
441 $
919 $
1,360 $
101,802 $
454,828
See accompanying notes to consolidated financial statements.
Kinaxis Inc.
Consolidated Statements of Cash Flows
For the years ended December 31
(Expressed in thousands of USD)
Cash flows from operating activities:
Profit
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 income
Change in fair value of contingent consideration (note 23)
Income tax expense (note 20)
Investment tax credits recoverable
Change in operating assets and liabilities (note 21)
Interest received
Interest paid
Income taxes 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, 9)
Purchase of short-term investments
Redemption of short-term investments
Cash flows from (used in) financing activities:
Payment of lease obligations (note 14)
Lease incentives received
Repurchase of shares (note 15)
Proceeds from exercise of stock options
2023
2022
$
10,060 $
20,080
20,880
5,404
34,507
(8,842)
1,951
9,676
(771)
5,369
7,853
(1,640)
(5,090)
79,357
—
(2,299)
(205,679)
140,666
(67,312)
(6,974)
—
(36,615)
31,554
(12,035)
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
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effects of exchange rates on cash and cash equivalents
10
(23,629)
175,347
203,220
(513)
(4,244)
Cash and cash equivalents, end of year
$
174,844 $
175,347
See accompanying notes to consolidated financial statements.
25
26
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(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, 2023 and 2022
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,
Mexico, 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 IFRS Accounting Standards 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 February 28, 2024.
(b) 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.
(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 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
foreign currencies are translated to the functional currency at the rates prevailing at the date when the fair value
2. Basis of preparation (continued):
(e) Foreign currency (continued):
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 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.
Estimates and judgments include, but are not limited to the following areas of accounting and disclosure:
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. Judgment may be
required to determine if 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. In general, the Company’s professional services are
capable of being distinct as they could be performed by third party service providers and do not involve
significant customization of the licensed software.
The allocation of the transaction price requires significant judgment and estimates relating to the determination
of the standalone selling price (“SSP”) for each distinct performance obligation. The methodology used to
determine the SSP depends on the nature of the products and services and how they are priced in contracts with
customers. This allocation affects the amount and timing of revenue recognized for each performance
obligation. In order to determine the SSP of promised products or services, the Company conducts a regular
analysis to determine whether various products or services have an observable SSP. If the Company does not
have an observable SSP for a particular product or service, then SSP for that particular good or service is
estimated using reasonably available information and maximizing observable inputs with approaches including
historical pricing, cost plus a margin, adjusted market assessment, and the residual approach. The Company uses
a range of amounts to estimate SSP when it sells each of the products and services separately and needs to
determine whether there is a discount that needs to be allocated based on the relative SSP of the various
products and services. In general, SSP for maintenance and support bundled in on-premise and hybrid
subscription arrangements is established as a percentage of the subscription license fee as supported by third
party evidence and internal analysis of similar vendor contracts. SSP for hosting and professional services is
established based on observable prices for the same or similar services when sold separately, or estimated using
a cost plus margin approach.
27
28
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
2. Basis of preparation (continued):
(f) Use of estimates and judgments (continued):
Revenue recognition on fixed price professional services 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.
3. Significant Accounting Policies:
(a) 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
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.
29
30
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(b) 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.
3. Significant Accounting Policies (continued):
(b) Financial instruments (continued):
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 assets
Financial liabilities at amortized cost are measured using the effective interest rate method.
All financial assets are recognized and de-recognized on trade date.
De-recognition of financial liabilities
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
Amortized cost
Short-term investments
Amortized cost
Trade and other receivables
Amortized cost
Unbilled receivables
Amortized cost
Amortized cost
Subsequent to initial recognition, financial assets at amortized cost are measured using the effective interest
method, less any impairment. Interest income is recognized by applying the effective interest rate except for
short-term receivables where the interest revenue would be immaterial. Interest income, foreign exchange gains
and losses, impairment, and any gain or loss on de-recognition are recognized in profit or loss.
Impairment of financial assets
The Company measures a loss allowance based on the lifetime expected credit losses. Lifetime expected credit
losses are estimated based on factors such as the Company’s past experience of collecting payments, the
number of delayed payments in the portfolio past the average credit period, observable changes in national or
local economic conditions that correlate with default on receivables, financial difficulty of the borrower, and it
becoming probable that the borrower will enter bankruptcy or financial re-organization.
Financial assets are written off when there is no reasonable expectation of recovery.
The Company de-recognizes financial liabilities when the Company’s obligations are discharged, cancelled or
they expire.
Derivative financial instruments and hedge accounting
Derivative financial instruments are used to manage the Company’s exposure to market risks of certain foreign-
currency denominated expenses. Derivative use is limited to the purchase of foreign currency forward contracts.
These contracts are measured at fair value and are recognized as either other receivables, or accrued liabilities
during the term of the contract. The Company does not hold or issue derivative financial instruments for trading
purposes.
Hedge accounting is applied if at the inception of the hedge, and throughout the hedge period, the changes in
the fair value of the foreign currency forward contracts are expected to substantially offset the changes in the
fair value of the hedged expense attributable to the underlying currency risk exposure.
The Company has an established strategy and risk management objectives for undertaking hedge transactions.
All foreign currency forward contracts have a maximum duration of six months and are linked to specific
forecasted expenses. The Company formally assesses at the hedge’s inception if the foreign currency contract is
expected to offset the changes in the cash flows expected on the foreign denominated expenses.
To assess hedge effectiveness during the hedging period, the Company compares the changes in the fair value of
the foreign currency forward contract to changes in the fair value of the hedged expense attributable to the
currency market risk. The effective portion of the changes in the forward value of the contract, net of taxes, is
recognized in Other Comprehensive Income (“OCI”), while any ineffective portions are recognized immediately
in income. Amounts recorded in OCI are reclassified to income in the same period as the hedged expense.
Hedge accounting is discontinued if the contract ceases to be highly effective, matures, is terminated or sold, or
if the Company removes the derivative's hedge designation. Ineffectiveness could occur if a hedged forecasted
transaction is no longer probable of occurring as expected. If hedge accounting is discontinued, amounts
previously recognized in OCI are reclassified to income.
(c) 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.
31
32
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(d) Short-term investments:
3. Significant Accounting Policies (continued):
(f) Leases (continued):
Short-term investments consist of term deposits and guaranteed income certificates held with commercial banks
for maturity terms of three to nine 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.
(e) Property and equipment:
Property and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The assets are
depreciated over their estimated useful lives using the straight-line method as this most closely reflects the
expected pattern of consumption of the future economic benefits. Depreciation methods, useful lives and
residual values are reviewed at each financial year end and adjusted prospectively, if appropriate.
Property and Equipment
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
Rate
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.
(f) 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
33
expected pattern of consumption of the future economic benefits. The lease term includes periods covered by
an option to extend if the Company is reasonably certain to exercise that option. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease
liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing
rate as the discount rate. Variable lease payments that do not depend on an index or rate are not included in the
measurement of the lease liability.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, if there is a change in the
Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company
changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Company has elected to apply the practical expedient not to recognize right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The
lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease
term.
(g) 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.
(h) 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.
(i) 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 five years.
34
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(j) Government assistance:
3. Significant Accounting Policies (continued):
(k) Income taxes (continued):
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.
(k) 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 OCI 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.
(l) Share-based payments:
The Company uses the fair value based method to measure share-based compensation for all share-based
awards made to employees and directors. The grant date fair value of equity-settled share-based payment
awards granted to employees is generally recognized as an expense, with a corresponding increase in equity,
over the vesting period of the awards. The grant date fair value is determined using the Black-Scholes model for
option grants and the Monte Carlo model for performance share unit grants. The market value of the Company’s
shares on the date of the grant is used to determine the fair value of restricted and deferred share units issued.
Each tranche of an award is considered a separate award with its own vesting period and grant date fair value.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service
and non-market performance conditions are expected to be met, such that the amount ultimately recognized is
based on the number of awards that meet the related service and non-market performance conditions at the
vesting date. For share-based payment awards with non-vesting (i.e. performance) conditions, the grant date fair
value of the share-based payment is measured to reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the
expense as if the terms had not been modified and if the original terms of the award are met. An additional
expense is recognized for any modification that increases the total fair value of the share-based payment
transaction, or is otherwise beneficial to the employee as measured at the date of modification.
(m) 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.
(n) 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.
35
36
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
3. Significant Accounting Policies (continued):
(o) Acquired intangible assets:
The Company’s intangible assets consist of customer relationships and technology acquired in a business
combination. These intangible assets are recorded at their fair value at the acquisition date. The Company uses
the income approach to value acquired technology and customer relationships intangible assets, which are the
two material intangible asset categories reported in the financial statements.
The income approach is a valuation technique that calculates the fair value of an intangible asset based on the
present value of future cash flows that the asset can be expected to generate over its remaining useful life. The
discounted cash flow (“DCF”) is the methodology used, which is a form of the income approach that begins with
a forecast of the annual cash flows a market participant would expect the subject intangible asset to generate
over a discrete projection period. The future cash flows for each of the years in the discrete projection period
are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving
the intangible assets’ projected cash flows, again, from a market participant perspective. The present value of
the future cash flows are then added to the present value of the residual value of the intangible asset (if any) at
the end of the discrete projection period to arrive at a conclusion with respect to the estimated fair value of the
subject intangible asset. After initial recognition, intangible assets are measured at cost less any accumulated
amortization and impairment losses.
Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives.
The estimated useful life for customer relationships is three to 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.
(p) 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 and whenever there is an indication that the CGU may be impaired. The
impairment testing methodology is based on a comparison between the recoverable amount (higher of fair
value less costs to sell and value-in-use of the CGU) and the net asset carrying value (including goodwill). If the
recoverable amount of the CGU is less than the carrying amount of the CGU, the impairment loss is first
allocated to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the
CGU. An impairment loss is recognized immediately in profit or loss. Any impairment loss in respect of goodwill is
not reversed.
4. Business combinations:
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 consisted 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 include 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.
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 consisted 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. During the year ended December 31, 2023,
$11,097 of contingent consideration was settled through the issuance of 86,335 shares, as outlined in note 23. 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.
37
38
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
4. Business combinations (continued):
5. Trade and other receivables (continued):
The following table presents the purchase price allocation at the acquisition date:
The following table presents changes in total unbilled receivables:
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 obligation
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
2023
2022
Balance, beginning of year
$
37,868 $
15,925
Amounts transferred to trade accounts receivable
Revenue in excess of billings
(30,112)
30,294
(10,353)
32,296
Balance, end of year
$
38,050 $
37,868
The following table presents current and non-current unbilled receivables, net of loss allowance:
Current
Non-current
6. Contract acquisition costs:
$
2023
34,896 $
3,154
2022
30,623
7,245
$
44,731
2023
2022
The trade and other receivables include gross contractual amounts of $986. Trade and other receivables of $803
have been fully collected, with the remaining amounts due provided for the loss allowance as outlined 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, customer relationships and the
relevant industry and technical knowledge of the assembled workforce. The goodwill is not deductible for tax
purposes.
5. Trade and other receivables:
Trade accounts receivable
Unbilled receivables
Taxes receivable
Other
Loss allowance
$
2023
2022
118,084 $
34,913
1,114
3,539
157,650
(1,041)
121,669
30,623
1,830
3,847
157,969
(312)
$
156,609 $
157,657
Balance, beginning of year
$
24,892 $
19,691
Additions
Amortization
Effects of movements in exchange rates
11,318
(8,872)
100
13,232
(7,439)
(592)
Balance, end of year
$
27,438 $
24,892
Amortization of contract acquisition costs is recorded in selling and marketing expense.
There were no trade accounts receivable written off in 2023 (2022 – $nil).
39
40
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
7. Property and equipment:
7. Property and equipment (continued):
Cost
Land
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
December 31,
2022
Additions
Dispositions
Effects of
exchange
rates
December 31,
2023
$
18 $
— $
— $
— $
65,418
4,066
4,521
24,565
1,059
110
657
367
(204)
(172)
(357)
(861)
(208)
(8)
(8)
(66)
18
66,065
3,996
4,813
24,005
Total cost
$
98,588 $
2,193 $
(1,594) $
(290) $
98,897
Accumulated depreciation
December 31,
2022
Depreciation
Dispositions
Effects of
exchange
rates
December 31,
2023
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
$
37,823 $
3,082
2,126
3,705
9,576 $
553
1,378
2,143
(204) $
(172)
(357)
(861)
(150) $
(9)
(10)
(26)
47,045
3,454
3,137
4,961
Total accumulated depreciation
$
46,736 $
13,650 $
(1,594) $
(195) $
58,597
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
Carrying value
Land
Computer equipment
Computer software
Office furniture and equipment
Leasehold improvements
Total property and equipment
December 31,
2023
December 31,
2022
$
18 $
19,020
542
1,676
19,044
18
27,595
984
2,395
20,860
$
40,300 $
51,852
There were no proceeds associated with asset dispositions in 2023 (2022 – $nil). Additions in 2023 include no
property and equipment acquired through business combinations (2022 – $95), as outlined in note 4.
8. Right-of-use assets:
December 31,
2022
Additions Depreciation
Effects of
exchange
rates
December 31,
2023
Offices
Data centres
Total right-of-use assets
$
$
48,023 $
5,514
471 $
442
(4,012) $
(3,218)
(66) $
(45)
44,416
2,693
53,537 $
913 $
(7,230) $
(111) $
47,109
41
42
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
8. Right-of-use assets (continued):
10. Goodwill:
December 31,
2021
Additions Depreciation
Effects of
exchange
rates
December 31,
2022
Offices
Data centres
Total right-of-use assets
$
$
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
Additions in 2023 include $nil (2022 – $1,552) of right-of-use assets acquired through business combinations, as
outlined in note 4.
Balance, beginning of year
Acquisition (note 4)
Effect of foreign exchange
Balance, end of year
2023
73,314 $
—
1,242
2022
39,988
32,256
1,070
74,556 $
73,314
$
$
The annual impairment test of goodwill was performed as of November 30, 2023 and did not result in an impairment
loss.
9. Intangible assets:
11. Trade payables and accrued liabilities:
The estimated useful life of customer relationships is three to nine years, the estimated useful life of technology is
four to seven years and the estimated life of internally developed software is five years.
Customer relationships
Technology
Internally developed software
December 31,
2022
$
9,468 $
15,541
3,262
Additions
Amortization
Effect of
exchange
rates
December 31,
2023
— $
—
106
(1,552) $
(3,158)
(694)
212 $
209
—
8,128
12,592
2,674
Total intangible assets
$
28,271 $
106 $
(5,404) $
421 $
23,394
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
Trade accounts payable
Accrued liabilities
Taxes payable
12. Deferred revenue:
2023
11,723 $
26,263
1,714
2022
10,403
27,024
2,680
39,700 $
40,107
$
$
2023
2022
Balance, beginning of year
$
133,467 $
99,239
Deferred revenue from acquisition (note 4)
Recognition of deferred revenue
Amounts invoiced and revenue deferred
—
(130,711)
134,842
938
(101,118)
134,408
Balance, end of year
$
137,598 $
133,467
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 are recorded in general and administrative expense. No provision
for these lease payments remained at December 31, 2023 ($296 as at December 31, 2022).
43
44
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
14. Lease obligations:
The Company’s leases are for office space and data centres with lease terms ranging from one 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.
15. Share capital:
Authorized
The Company is authorized to issue an unlimited number of Common Shares.
2023
2022
Issued Common Shares
Current
Non-current
Total lease obligations
$
$
5,805 $
45,985
6,991
49,977
51,790 $
56,968
The following table presents the contractual undiscounted cash flows for lease obligations as at December 31, 2023:
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
$
$
2023
6,974 $
1,640
1,703
533
10,850 $
7,264
16,129
40,579
63,972
2022
6,733
1,841
1,775
513
10,862
—
(3,858)
10,850 $
7,004
$
$
$
2023
2022
Shares
Amount
Shares
Amount
Shares outstanding, beginning of year
28,052,629 $
244,713
27,462,834 $
195,414
Shares issued from exercised options
Shares issued from vested RSUs
Shares issued from vested PSUs
Shares issued as contingent consideration (note 4, 23)
Shares repurchased
508,510
89,168
20,817
86,335
(328,660)
41,545
10,676
2,628
11,097
(3,332)
492,631
93,388
3,776
—
—
38,791
10,091
417
—
—
Shares outstanding, end of year
28,428,799 $
307,327
28,052,629 $
244,713
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.
At December 31, 2023, there were 888,044 stock options available for grant under the Plans.
The following table presents changes in stock options outstanding:
2023
Weighted
average
exercise price
Shares
2022
Weighted
average
exercise price
Shares
Options outstanding, beginning of year
1,720,326 $
75.53
2,143,375 $
76.56
Granted
Exercised
Forfeited
1,563
(508,510)
(19,949)
116.18
62.06
130.33
194,646
(492,631)
(125,064)
125.04
60.32
149.26
Options outstanding, end of year
1,193,430 $
83.08
1,720,326 $
75.53
Options exercisable, end of year
833,204 $
71.11
1,028,146 $
59.91
45
46
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(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, 2023:
15. Share capital (continued):
Share Unit Plan
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
2.00 $
2.21
1.14
2.36
3.12
1.74
Weighted
average
exercise
price
29.45
40.98
83.92
102.39
125.50
157.96
Weighted
average
exercise
price
29.45
40.98
83.57
101.83
126.84
157.94
Number
exercisable
27,950 $
429,841
140,992
102,072
72,974
59,375
Number
outstanding
27,950
429,841
208,148
243,372
202,119
82,000
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, 2023, there were 1,290,511 share
units available for grant under the Share Unit Plan.
The following table presents changes in share units outstanding:
2023
2022
RSU
PSU
DSU
RSU
PSU
DSU
Units outstanding, beginning of year
180,739
71,378
75,395
96,583
31,640
65,441
Granted
Exercised
Forfeited
204,048
(89,168)
(22,077)
96,119
(13,363)
(5,823)
9,471
—
—
200,865
(93,388)
(23,321)
52,209
(3,776)
(8,695)
9,954
—
—
1,193,430
2.17 $
83.08
833,204 $
71.11
Units outstanding, end of year
273,542
148,311
84,866
180,739
71,378
75,395
The per share weighted-average fair value of stock options granted during 2023 was $40.82 (2022– $42.82) 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
2023
2022
0%
4.21%
three to five years
39%
0%
2.75%
three to five years
41%
Each restricted share unit (“RSU”) entitles the participant to receive one Common Share. The RSUs generally vest
over time in equal annual tranches over two to three years. The weighted-average grant date fair value of the RSUs
granted during 2023 was $121.61 per unit (2022 – $120.84) using the fair value of a Common Share at time of grant.
Performance share units (“PSU”) generally entitle participants 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 or three-year vesting periods. The weighted-average grant date fair value
of these PSUs granted in 2023 was $195.44 per unit (2022 – $164.68). Valuation of these PSUs was completed 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
2023
2022
0%
4.07%
three years
43%
0.58
0%
1.40%
two to three years
41%
0.53
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 2023 was $121.95 per unit (2022 – $116.07) using the fair value of a Common Share at time of grant.
47
48
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(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
Share repurchase
2023
$
6,422 $
19,861
7,069
1,155
2022
8,438
12,888
3,757
1,155
$
34,507 $
26,238
$
2023
5,530 $
8,646
6,993
13,338
2022
3,624
6,191
4,980
11,443
16. Earnings per share:
The following table summarizes the calculation of the weighted average number of basic and diluted common
shares:
2023
2022
Issued Common Shares at beginning of year
28,052,629
27,462,834
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
Effect of shares issued as contingent consideration
Effect of shares cancelled from repurchase of shares
221,654
14,768
16,597
48,252
(32,026)
189,588
10,902
3,776
—
—
Weighted average number of basic Common Shares
28,321,874
27,667,100
Effect of share options on issue
Effect of share units on issue
546,050
281,611
701,616
240,887
Weighted average number of diluted Common Shares
29,149,535
28,609,603
For 2023, 316,341 options and 70,699 share units (2022 – 373,309 options and no share units) were excluded from
the weighted average number of diluted common shares as their effect would have been anti-dilutive.
$
34,507 $
26,238
17. Revenue:
The following table presents revenue of the Company:
On November 6, 2023, the Toronto Stock Exchange (“TSX”) accepted the Company’s notice of intention to commence
a Normal Course Issuer Bid (“NCIB”) allowing the Company to repurchase for cancellation, at its discretion, up to 5%
of the “public float” (calculated in accordance with the rules of the TSX) during the twelve-month period
commencing November 6, 2023 and ending no later than November 5, 2024. Kinaxis has entered into an automatic
share purchase plan (“ASPP”) to provide the option to instruct its broker to make purchases under the NCIB during
any applicable blackout periods. During the year ended December 31, 2023, 328,660 Common Shares were
repurchased for cancellation at an average price of $111.41 per share.
SaaS
Subscription term license
Professional services
Maintenance and support
$
2023
2022
265,080 $
19,548
123,728
18,615
213,306
38,810
98,613
16,160
$
426,971 $
366,889
49
50
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
17. Revenue (continued):
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, 2023:
20. Income tax expense:
The income tax amounts recognized in profit and loss are as follows:
SaaS
Maintenance and support
Subscription term license
18. Personnel expenses:
Salaries including bonuses
Benefits
Commissions
Share-based payments
2024
2025
2026 and
thereafter
$
274,035 $
17,505
2,189
197,682 $
12,363
56
228,860 $
8,347
—
Total
700,577
38,215
2,245
$
293,729 $
210,101 $
237,207 $
741,037
$
2023
2022
188,450 $
31,054
15,117
34,507
158,414
24,300
12,710
26,238
$
269,128 $
221,662
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
2023
$
10,831 $
9
1,858
8,182
2022
11,217
3
2,660
7,616
$
20,880 $
21,496
The following table presents amortization expense of intangible assets by function:
Cost of revenue
General and administrative
51
2023
3,859 $
1,545
5,404 $
2022
2,345
1,219
3,564
$
$
Current tax expense
Current income tax
Deferred tax expense
2023
2022
$
11,037 $
3,892
Origination and reversal of temporary differences
(1,361)
7,514
$
9,676 $
11,406
A reconciliation of the income tax expense to the expected amount using the Company’s Canadian tax rate is as
follows:
Canadian tax rate
2023
2022
26.50 %
26.50 %
Expected Canadian income tax expense
$
5,231 $
8,393
Increase (reduction) in income taxes resulting from:
Permanent differences
Change in estimates related to prior years
Foreign tax rate differences
Future tax rate differential
Other
4,178
291
(91)
107
(40)
3,083
(681)
(25)
252
384
$
9,676
$
11,406
52
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
20. Income tax expense (continued):
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)
December 31,
2022
Recognized in
profit and loss
Recognized
to goodwill
Recognized in
equity
December 31,
2023
$
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
(1,775) $
(4,348)
940
(6,453)
(6,443)
652
6,981
4,296
354
(364) $
494
262
1,024
1,006
(290)
1,560
(3,022)
691
— $
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
(2,445)
—
—
(2,139)
(3,854)
1,202
(5,429)
(5,437)
362
6,096
1,274
1,045
$
(5,796) $
1,361 $
— $
(2,445) $
(6,880)
During 2023, the Company recorded $3,734 of current tax expense directly in equity (2022 – $111) 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, 2023 was $55,661 (2022 – $41,729).
Deferred tax assets (liabilities)
December 31,
2021
Recognized in
profit and loss
Recognized
to goodwill
Recognized
in equity
December 31,
2022
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
$
(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
— $
—
—
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)
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:
$
2023
2022
6,553 $
123
(2,387)
(2,580)
3,956
(296)
(75,128)
(5,632)
(5,416)
1,677
35,796
(420)
$
5,369 $
(49,123)
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, 2023. 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 Company measures the fair value of its financial assets and financial liabilities using a fair value hierarchy. A
financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. Three levels of inputs may be used to measure fair value. The different
levels of the fair value hierarchy are defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Other techniques for which inputs are based on quoted prices for identical or similar instruments in
markets that are not active, quoted prices for similar instruments in active markets, and model-based
valuation techniques for which all significant assumptions are observable in the market or can be
corroborated by observable market data for substantially the full term of the asset or liability;
Level 3: Techniques which use inputs that have a significant effect on the recognized fair value that require
the Company to use its own assumptions about market participant assumptions.
The carrying amounts of short-term investments, trade and other receivables, unbilled receivables, and trade
payables and accrued liabilities are recorded at amortized cost and approximate fair value due to the short-term
maturity of these instruments.
The fair value of foreign currency forward contracts was determined based on Level 2 inputs, which included
period-end mid-market quotations for each underlying contract as calculated by the financial institution with
which the Company has transacted. The quotations are based on bid/ask quotations and represent the
discounted future settlement amounts based on current market rates. which
53
54
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(a) Fair value of financial instruments (continued):
23. Financial instruments (continued):
(b) Credit risk:
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.
As at December 31, 2023 and December 31, 2022, financial instruments measured at fair value in the
consolidated statements of financial position were as follows:
Assets:
Foreign currency forward contracts
Liabilities:
Contingent consideration
2023
2022
Fair value
hierarchy
Fair value
Fair value
hierarchy
Fair value
Level 2 $
600
$
—
Level 3
—
Level 3
9,146
The Company designates foreign currency forward contracts as cash flow hedges when all the requirements in
IFRS 9, Financial Instruments are met. The Company's currency pair used for cash flow hedges is US dollar /
Canadian dollar. The notional principal of the foreign exchange contracts was $43,500 CAD as at December 31,
2023 (December 31, 2022 - $nil CAD).
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:
2023
Contingent
Consideration
Other
expense
2022
Contingent
Consideration
Other
expense
Balance, beginning of year
$
9,146 $
— $
— $
Assumed in a business combination
Net change in fair value
Settlement of contingent consideration
—
1,951
(11,097)
—
(1,951)
—
9,972
(826)
—
Balance, end of year
$
— $
(1,951) $
9,146 $
—
—
826
—
826
The following table presents maximum exposure to credit risk for trade accounts receivable, net of loss
allowances, by geographic region:
United States
Europe
Asia
Canada
$
2023
71,842 $
38,129
5,639
1,451
2022
77,174
35,828
4,678
3,677
$
117,061 $
121,357
The following table presents aging of trade accounts receivable, net of loss allowances:
Current
Past due:
0 – 30 days
31 – 60 days
Greater than 60 days
2023
2022
$
99,073 $
91,360
8,023
6,079
3,886
19,355
6,126
4,516
$
117,061 $
121,357
At December 31, 2023, no customers individually accounted for greater than 10% of total trade accounts
receivable (2022 – no customers). For 2023, no customers individually accounted for greater than 10% of
revenue (2022 – 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. As at December 31, 2023, the Company has
recorded a loss allowance of $1,041 (2022 – $312).
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 commercial 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.
55
56
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
23. Financial instruments (continued):
(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, 2023, the Company had cash and cash equivalents and short-term investments totaling
$292,962 (2022 – $225,823). 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.
(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 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, 2023, 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 $7,746 lower (2022 – $7,619 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.
23. Financial instruments (continued):
(d) Market risk (continued):
The summary quantitative data about the Company’s exposure to currency risk is as follows:
December 31, 2023
In thousands of local currency
USD
CAD
EUR
GBP
JPY
Trade receivables
Unbilled receivables
Other receivables
Trade payables
Accrued liabilities
90,809
30,388
1,675
(5,811)
(12,752)
498
318
89
(4,798)
(6,520)
17,655
1,686
739
(1,185)
(1,608)
2,431
691
213
(450)
(2,618)
463,583
215,166
3,927
(43,148)
(100,891)
104,309
(10,413)
17,287
267
538,637
December 31, 2022
In thousands of local currency
USD
CAD
EUR
GBP
JPY
Trade receivables
Unbilled receivables
Other receivables
Trade payables
Accrued liabilities
Interest rate risk
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
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, 2023, 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.
57
58
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
24. Segmented information (continued):
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
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
59
$
2023
2022
245,674 $
131,470
38,441
11,386
218,110
99,645
40,727
8,407
$
426,971 $
366,889
$
2023
26,459 $
7,154
3,506
3,181
2022
32,798
10,368
4,745
3,941
$
40,300 $
51,852
$
2023
38,248 $
5,015
2,065
1,781
2022
42,217
6,833
2,658
1,829
$
47,109 $
53,537
2023
13,769 $
9,625
2022
15,787
12,484
23,394 $
28,271
$
$
25. Related party transactions:
Details of the Company’s significant subsidiaries at December 31, 2023 and 2022 are as follows:
Name of subsidiary
Principal
Activity
Place of incorporation
and operation
Functional
Currency
Ownership interest
Sales
Sales
Kinaxis Corp.
Kinaxis Europe B.V.
Kinaxis India Private Limited Support
Kinaxis Japan K.K.
Kinaxis UK Limited
Sales
Sales
State of Delaware, USA USA
EUR
The Netherlands
INR
India
JPY
Japan
GBP
United Kingdom
2023
100%
100%
100%
100%
100%
2022
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 its subsidiaries and
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:
Salary and other short-term benefits
Share-based payments
26. Capital management:
2023
4,222 $
14,139
2022
7,399
14,770
18,361 $
22,169
$
$
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, 2023. 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.
60
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Kinaxis Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in thousands of USD, except share and per share amounts)
(Expressed in thousands of USD, except share and per share amounts)
27. Contingencies and commitments (continued):
(d) Commitments (continued):
The future aggregate operating expenses that the Company has committed to incur at December 31, 2023 are
as follows:
Less than one year
One to five years
More than five years
$
$
7,634
87,607
15,000
110,241
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.
(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, 2023, 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 2023, the Company contracted to purchase cloud data services for a minimum purchase commitment of
$22,100 over a five-year term. During 2022, the Company contracted to purchase cloud data services for a
minimum purchase commitment of $100,000 over a seven-year term.
61
62
Management’s Discussion
and Analysis for the Year
Ended December 31, 2023
63
64
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,
2023. This MD&A has been prepared with an effective date of February 28, 2024.
This MD&A for the year ended December 31, 2023 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, 2023. The financial
information presented in this MD&A is derived from our annual audited consolidated financial statements prepared in
accordance with IFRS Accounting Standards 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 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, 2023. 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;
Kinaxis Inc.
Management’s discussion and analysis
for the year ended December 31, 2023
February 28, 2024
65
66
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to protect, maintain and enforce our intellectual property rights, including our ability to defend
against third party claims;
third party claims of infringement or violation of, or other conflicts with, intellectual property rights by us;
our plans for and timing of expansion of our solutions and services;
our future growth plans;
the acceptance by our customers and the marketplace of new technologies and solutions;
our ability to attract new customers and develop and maintain existing customers;
our ability to attract and retain our people;
our expectations with respect to advancement in our technologies;
our competitive position and our expectations regarding competition;
regulatory developments and the regulatory environments we operate in;
anticipated trends and challenges in our business and the markets we operate in;
expansion of our partnerships;
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 revenue
and decrease in maintenance and support 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.
•
•
•
•
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 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.
67
68
Operational risks
Overview
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
• 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 share-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.
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 technique that activates supply chain concurrency from planning through last mile 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, primarily focusing on
companies with revenues over US$250 million across seven vertical markets: high technology and electronics
manufacturing, aerospace and defense, industrial products, life sciences and pharmaceuticals, automotive, consumer
products and retail. Customers are primarily global enterprises with complex supply chain networks and significant
unresolved supply chain challenges. Our customers include many leading organizations like Merck & Co., Ford Motor
Company, Proctor & Gamble and Schneider Electric, and tend to select RapidResponse as a purpose-built solution to
holistically address an end-to-end supply chain 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.
69
70
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 80% or more 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, 2023, our SaaS revenue was $69.9 million and $265.1 million (three
months and year ended December 31, 2022 – $58.8 million and $213.3 million), subscription term license revenue was
$2.9 million and $19.5 million (three months and year ended December 31, 2022 – $9.1 million and $38.8 million) and
total revenue was $112.0 million and $427.0 million (three months and year ended December 31, 2022 – $98.5 million
and $366.9 million). For the three months and year ended December 31, 2023 our Adjusted EBITDA was 18% of revenue
(three months and year ended December 31, 2022 – 21% and 22%). Our ending cash, cash equivalents and short-term
investment balance was $293.0 million (December 31, 2022 – $225.8 million).
For the three months and year ended December 31, 2023 our ten largest customers accounted for 22% and 20% of our
total revenues (three months and year ended December 31, 2022 – 24%) with no customer accounting for greater than
10% of total revenues (three months and year ended December 31, 2022 – no customer).
Growth strategy
Increasing revenues through new customer wins is one of our highest organizational priorities. Our sales cycle can be
lengthy, up to approximately 12 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 integrators, value added resellers 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, Morgan Franklin
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 Exiger 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, may have an impact on the timing and ability of these enterprises to make buying decisions, which may
have an impact on our performance.
We are headquartered in Ottawa, Ontario. We have subsidiaries located in the United States, Hong Kong, South Korea,
United Kingdom, Romania, Mexico, Singapore, France, Ireland, and Germany, and subsidiaries and offices in Tokyo, Japan,
Rotterdam, the Netherlands and Chennai, India. We continue to expand our operations internationally. For the three
months and year ended December 31, 2023, 59% and 60% of our revenues were derived from North American customers
(three months and year ended December 31, 2022 – 62%) and our remaining revenues were derived from European and
Asian customers.
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, 2023 is $322 million, an increase of 18% year-over-year on both a current rate and a
constant currency basis. We calculate constant currency growth rates by applying the applicable prior period exchange
rates to current period results.
$274
$285
$293
$304
$322
$221
$350
$300
$250
s
n
o
i
l
l
i
M
$200
$150
$100
$50
$0
FY21
FY22
Q1’23
Q2’23
Q3’23
FY23
Year-over-year growth
19%
Year-over-year growth in
constant currency
21%
24%
26%
23%
24%
22%
22%
18%
17%
18%
18%
71
72
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
At December 31, 2023, RPO amounts to $741 million, including $701 million in SaaS revenue (December 31, 2022 – $598
million and $550 million).
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.
$741
Selling and marketing expenses
$598
$484
s
n
o
i
l
l
i
M
$800
$700
$600
$500
$400
$300
$200
$100
$0
FY21
FY22
FY23
SaaS
non-SaaS
Significant factors affecting results of operations
Our results of operations are influenced by a variety of factors, including:
Revenue
Our revenue consists of SaaS revenue, subscription term license revenue, professional services revenue and maintenance
and support revenue.
SaaS revenue is comprised of subscription fees for provision of 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.
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.
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
74
MANAGEMENT’S DISCUSSION AND ANALYSIS
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,
Year ended December 31,
2022
(In thousands of USD, except earnings per share)
2022
2023
2021
2023
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 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:
111,990 $
43,100
68,890
63,974
4,916
797
3,099
—
8,812
4,791
4,021 $
12,409 $
19,727 $
0.14 $
0.14 $
0.43 $
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 $
426,971 $
168,074
258,897
244,795
14,102
(1,236)
8,821
(1,951)
19,736
9,676
10,060 $
46,518 $
74,872 $
0.36 $
0.35 $
1.60 $
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
Adjusted profit and Adjusted diluted earnings per share
Adjusted profit represents profit adjusted to exclude the change in the fair value of contingent consideration and our
equity compensation plans. 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, non-recurring items, income tax expense, depreciation and amortization, foreign exchange loss
(gain), and net finance expense (income). We use Adjusted EBITDA to provide readers with a supplemental measure of
our operating performance and thus highlight trends in our core business that may not otherwise be apparent when
relying solely on IFRS financial measures.
We have reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as follows:
Three months ended December 31,
2023
2022
Year ended December 31,
2022
2023
2021
Profit (loss) ........................................................... $
Change in fair value of contingent consideration
Share-based compensation .................................
Non-recurring item ..............................................
Adjusted profit ..................................................... $
Income tax expense (recovery) ............................
Depreciation and amortization ............................
Foreign exchange loss (gain) ................................
Net finance expense (income) .............................
4,021 $
—
8,388
—
12,409 $
4,791
6,424
(797)
(3,100)
7,318
(In thousands of USD)
8,562 $
1,367
7,558
—
17,487 $
(635)
6,761
(1,648)
(849)
3,629
21,116 $
21.4%
10,060 $
1,951
34,507
—
46,518 $
9,676
26,284
1,236
(8,842)
28,354
74,872 $
17.5%
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%
(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.
Adjusted EBITDA .................................................. $
Adjusted EBITDA as a percentage of revenue .....
19,727 $
17.6%
As at
December 31, 2023
As at
December 31, 2022
(In thousands of USD)
As at
December 31, 2021
Total assets .............................................................................. $
Total non-current liabilities .....................................................
691,981 $
54,050
648,273 $
56,838
520,269
53,242
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.
75
76
Revenue
Cost of revenue
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
2022 to
2023
%
(In thousands of USD)
SaaS ..................................... $
Subscription term license ...
Professional services ...........
Maintenance and support ..
69,891 $
2,899
34,318
4,882
111,990
58,839
9,131
26,156
4,357
98,483
19%
(68)%
31%
12%
14%
$
265,080 $
19,548
123,728
18,615
426,971
213,306
38,810
98,613
16,160
366,889
24%
(50)%
25%
15%
16%
Total revenue for the three months and year ended December 31, 2023 was $112.0 million and $427.0 million, an
increase of $13.5 million and $60.1 million compared to the same periods in 2022. These increases result from continued
strong growth in both SaaS and Professional services revenue. These increases more than offset a decline in subscription
term license revenue for the three months and year ended December 31, 2023 that we expected with the regular cycle of
contract renewals with our customers.
SaaS revenue
SaaS revenue for the three months and year ended December 31, 2023 was $69.9 million and $265.1 million, an increase
of $11.1 million and $51.8 million compared to the same periods in 2022. The increases were due to contracts secured
with new customers, as well as the expansion of existing customer subscriptions.
Subscription term license revenue
Subscription term license revenue for the three months and year ended December 31, 2023 was $2.9 million and $19.5
million, a decrease of $6.2 million and $19.3 million compared to the same periods in 2022. 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 decreases were due to the regular renewal cycle, partly offset by new customer wins.
Professional services revenue
Professional services revenue for the three months and year ended December 31, 2023 was $34.3 million and $123.7
million, an increase of $8.2 million and $25.1 million compared to the same periods in 2022. The increases were due to
increased deployment activity driven by new subscription customers and expansion work with existing customers.
Professional services revenue can vary 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, 2023 was $4.9 million and $18.6
million, an increase of $0.5 million and $2.5 million compared to the same periods in 2022. The increases for both periods
largely reflect the new subscription term license customers secured in the year, and the expansion of existing on-premise
customers.
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
(In thousands of USD)
Cost of revenue .................... $
Gross profit ...........................
Gross margin ........................
Software(1)
....................
Professional services ....
$
43,100
68,890
62%
76%
29%
37,217
61,266
62%
80%
13%
$
16%
12%
$
168,074
258,897
61%
76%
22%
131,102
235,787
64%
81%
18%
2022 to
2023
%
28%
10%
Note:
(1)
Software gross margin corresponds to SaaS, subscription term license and maintenance and support revenue.
Cost of revenue for the three months and year ended December 31, 2023 was $43.1 million and $168.1 million, an
increase of $5.9 million and $37.0 million compared to the same periods in 2022. The increases were due to higher
headcount and related compensation costs, IT costs, and partner and third-party provider costs.
Gross margins for the three months and year ended December 31, 2023 were 62% and 61%, compared to 62% and 64%
for the same periods in 2022. Gross margin is driven by a mix of software and professional services gross margins.
Software gross margins for the three months and year ended December 31, 2023 were 76%, compared to 80% and 81%
for the same periods in 2022. For both periods, the lower margins reflect investments to transition customers from
private to public cloud hosting arrangements as well as a $6.2 million and $19.3 million decrease in subscription term
license revenue compared to the same periods in 2022. Professional services gross margins for the three months and year
ended December 31, 2023 were 29% and 22%, compared to 13% and 18% for the same periods in 2022. The increase for
the three months ended December 31, 2023 reflects an increase in revenue per billable hour, as well as a lower increase
in cost per billable hour from a reduction in the proportion of project work contracted to third parties. The increase for
the year ended December 31, 2023 primarily reflects the lower increase in the cost per billable hour from a reduction in
the proportion of project work contracted to third parties.
Selling and marketing expenses
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
2022 to
2023
%
(In thousands of USD)
Selling and marketing ........... $
As a percentage of revenue ..
26,606 $
24%
21,213
22%
25%
$
102,719 $
24%
79,446
22%
29%
Selling and marketing expenses for the three months and year ended December 31, 2023 were $26.6 million and $102.7
million, an increase of $5.4 million and $23.3 million compared to the same periods in 2022. 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.
77
78
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Research and development expenses
Income taxes
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
2022 to
2023
%
(In thousands of USD)
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2023
2022
2022 to
2023
%
(In thousands of USD)
Research and development .. $
As a percentage of revenue ..
20,665 $
18%
19,494
20%
6%
$
81,707 $
19%
74,147
20%
10%
Income tax expense
(recovery): ............................ $
4,791 $
(635)
—(1)
$
9,676 $
11,406
(15%)
Research and development expenses for the three months and year ended December 31, 2023 were $20.7 million and
$81.7 million, an increase of $1.2 million and $7.6 million compared to the same periods in 2022. The increases were due
to higher headcount and related compensation costs. Our investment in headcount supports ongoing programs to drive
further innovation in our RapidResponse Supply Chain Management platform and ensure sustainable market leadership.
General and administrative expenses
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
2022 to
2023
%
(In thousands of USD)
General and administrative .. $
As a percentage of revenue ..
16,703 $
15%
13,804
14%
21%
$
60,369 $
14%
54,273
15%
11%
General and administrative expenses for the three months and year ended December 31, 2023 were $16.7 million and
$60.4 million, an increase of $2.9 million and $6.1 million compared to the same periods in 2022. The increases reflect
higher headcount and related compensation costs, and an increase in IT costs and depreciation.
Other income and expense
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
2022 to
2023
%
(In thousands of USD)
Other income:
Foreign exchange gain
(loss) ................................ $
Net finance and other
income ............................
Change in fair value of
contingent consideration
Total other income ...............
797 $
1,648
(52%)
$
(1,236) $
1,499
—(1)
3,099
—
3,896
891
248%
(1,367)
(100%)
1,172
232%
8,821
(1,951)
5,634
1,240
611%
826
3,565
—(1)
58%
Note:
(1)
The percentage change has been excluded as it is not meaningful.
Total other income and expense for the three months and year ended December 31, 2023 was $3.9 million and $5.6
million, compared to income of $1.2 million and $3.6 million in the same periods in 2022. Movements in foreign exchange
rates have contributed to lower foreign exchange gains in the three months and year ended December 31, 2023,
primarily due to the revaluation of certain foreign-dollar denominated liabilities and resulted in a foreign exchange loss
for the year. Finance income increased in the three months and year ended December 31, 2023 due to higher interest
income on investments, reflecting both improved interest rates and additional funds invested. Also contributing to the
changes in other income were non-cash revaluations in the fair value of contingent consideration related to last year’s
acquisition of MP Objects B.V.
The percentage change has been excluded as it is not meaningful.
Note:
(1)
Income tax expense for the three months and year ended December 31, 2023 was $4.8 million and $9.7 million compared
to an income tax recovery of $0.6 million and an income tax expense $11.4 million for the same periods in 2022. For the
three months ended December 31, 2023 additional tax expense resulted from an increase in non-deductible share-based
payments. For the year ended December 31, 2023 the decrease was primarily due to lower profit before income taxes
and offset by non-deductible share-based payments and fair-value adjustments related to contingent considerations.
Profit
Three months ended December 31,
2023
2022
2022 to
2023
%
Year ended December 31,
2022
2023
(In thousands of USD except earnings per share)
..................................
...............................
Profit .................................................... $
Adjusted profit(1)
Adjusted EBITDA(1)
Basic earnings per share ...................... $
Diluted earnings per share .................. $
Adjusted diluted earnings per share(1)
$
4,021 $
12,409
19,727
0.14 $
0.14 $
0.43 $
8,562
17,487
21,116
0.31
0.30
0.61
(53%)
(29%)
(7%)
$
$
$
$
10,060 $
46,518
74,872
0.36 $
0.35 $
1.60 $
20,080
45,492
79,446
0.73
0.70
1.59
2022 to
2023
%
(50%)
2%
(6%)
Notes:
(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”.
The profit for the three months and year ended December 31, 2023 was $4.0 million and $10.1 million, or $0.14 and
$0.36 per basic share, and $0.14 and $0.35 per diluted share, compared to a profit of $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 for the same periods in 2022. The decrease in
profit this quarter was primarily due to cyclically lower subscription term license revenue. The decrease in profit in 2023
primarily reflects expected lower gross margins due to cyclically lower subscription term license revenue, and
investments we made this year in cost of revenue and other operating functions to support ongoing SaaS growth,
including transitioning customers from private to public cloud service arrangements.
Adjusted EBITDA for the three months and year ended December 31, 2023 was $19.7 million and $74.9 million, a
decrease of $1.4 million and $4.6 million compared to the three months and year ended December 31, 2022. For the
current quarter the decrease in Adjusted EBITDA primarily reflects cyclically lower subscription term license revenue. The
decrease for the year ended December 31, 2023 reflects lower subscription term license revenue and investments we are
making in cost of revenue and other operating functions to support ongoing SaaS growth, including transitioning
customers from private to public cloud service arrangements.
79
80
Key balance sheet items
Right-of-use assets & lease obligations
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
As at
December 31, 2023
As at
December 31, 2022
(In thousands of USD)
Total assets .............................................................................. $
Total liabilities .........................................................................
691,981 $
237,153
648,273
246,845
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, 2023
As at
December 31, 2022
(In thousands of USD)
Trade accounts receivable ................................................ $
Unbilled receivables ..........................................................
Taxes receivable ................................................................
Other .................................................................................
Loss allowance ..................................................................
Total trade and other receivables .....................................
118,084 $
34,913
1,114
3,539
(1,041)
156,609
121,669
30,623
1,830
3,847
(312)
157,657
Trade accounts receivable at December 31, 2023 were $118.1 million, a decrease of $3.6 million compared to
December 31, 2022. The aging of trade receivables is generally current or within 30 days past due and overdue amounts
have been provided for in a loss allowance if required. Unbilled receivables at December 31, 2023 were $34.9 million, an
increase of $4.3 million compared to December 31, 2022, due to an increase in professional services revenue recorded in
advance of billing. The decrease in taxes receivable is due to overpayments applied and prior years refunds received.
Property and equipment
As at
December 31, 2023
As at
December 31, 2022
(In thousands of USD)
Land ................................................................................... $
Computer equipment .......................................................
Computer software ...........................................................
Office furniture and equipment ........................................
Leasehold improvements ..................................................
Total property and equipment .........................................
18 $
19,020
542
1,676
19,044
40,300
18
27,595
984
2,395
20,860
51,852
Property and equipment at December 31, 2023 was $40.3 million, a decrease of $11.6 million compared to December 31,
2022. The decrease is primarily due to depreciation and comparatively less purchases of IT infrastructure as we transition
customers to public cloud arrangements.
As at
December 31, 2023
As at
December 31, 2022
(In thousands of USD)
Right-of-use assets ............................................................ $
47,109 $
53,537
Lease obligations:
Current ...........................................................................
Non-current ....................................................................
5,805
45,985
51,790
6,991
49,977
56,968
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, 2023 were $47.1 million, a decrease of $6.4 million compared to December 31, 2022. Lease obligations at
December 31, 2023 were $51.8 million, a decrease of $5.2 million compared to December 31, 2022. Decreases in right-of-
use assets and lease obligations reflects the amortization of right-of-use assets and payments made under our lease
contracts, net of additions.
Contract acquisition costs
As at
December 31, 2023
As at
December 31, 2022
(In thousands of USD)
Contract acquisition costs ................................................. $
27,438 $
24,892
Contract acquisition costs are capitalized and amortized over the expected life of the customer upon commencement of
the related revenue. Contract acquisition costs consist primarily of sales commissions paid to employees. 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, 2023 were $27.4 million, an increase of $2.5 million compared to
December 31, 2022. This increase was due to commissions incurred in the period on an increasing sales base, partly offset
by regular amortization.
Deferred revenue
As at
December 31, 2023
As at
December 31, 2022
(In thousands of USD)
Deferred revenue .............................................................. $
137,598 $
133,467
Deferred revenue at December 31, 2023 was $137.6 million, an increase of $4.1 million compared to December 31, 2022.
We generally bill our customers annually in advance for SaaS agreements resulting in initially recording the amount billed
as deferred revenue which is subsequently recognized in revenue over the agreement term. The change in deferred
revenue was due to variances in the timing of billings for new and existing customer contracts. There was no deferred
revenue relating to subscription term periods beyond one year.
81
82
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Summary of quarterly results
The following table summarizes selected results for the eight most recent completed quarters:
Dec 31,
2023
Sept 30,
2023
Jun 30,
2023
Mar 31,
2023
Dec 31,
2022
Sep 30,
2022
Jun 30,
2022
Mar 31,
2022
Three months ended
(In thousands of USD)
Revenue:
SaaS ...................................................................... $ 69,891 $ 67,940 $ 64,104 $ 63,145 $ 58,839 $ 54,038 $ 51,109 $ 49,320
21,458
Professional services ............................................
Maintenance and support ...................................
Subscription term license ....................................
23,474
34,318
25,386
26,156
25,613
26,568
32,851
29,991
7,086
5,827
7,028
9,131
2,535
3,856
4,357
4,020
4,753
4,389
4,882
2,899
4,591
3,927
378
.................................................. $ 12,409 $ 15,430 $
7,077 $ 11,602 $ 17,487 $
5,609 $
3,871 $ 18,525
111,990
108,079
105,772
101,130
43,100
68,890
63,974
4,916
797
3,099
—
8,812
4,791
42,743
65,336
57,741
7,595
76
2,598
705
10,974
3,584
42,102
63,670
64,196
(526)
(2,374)
1,819
40,129
61,001
58,884
2,117
265
1,305
98,483
37,217
61,266
54,511
6,755
1,648
891
(462)
(2,194)
(1,367)
(1,543)
997
1,493
304
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)
—
(1,646)
19,650
986
7,128
4,021 $
7,390 $
(2,540) $
1,189 $
8,562 $
1,628 $
(2,632) $ 12,522
—
8,388
(705)
8,745
462
9,155
2,194
8,219
1,367
7,558
(2,193)
6,174
—
—
6,503
6,003
4,791
6,424
(797)
3,584
6,456
(76)
997
6,517
2,374
304
6,887
(635)
6,761
(265)
(1,648)
(3,100)
(2,593)
(1,763)
(1,386)
7,318
7,371
8,125
5,540
(849)
3,629
3,927
6,324
(393)
(662)
986
6,061
(623)
81
7,128
5,914
1,165
417
9,196
6,505
14,624
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 .................................
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)
................. $
............................................... $ 19,727 $ 22,801 $ 15,202 $ 17,142 $ 21,116 $ 14,805 $ 10,376 $ 33,149
0.46
(0.09) $
(0.10) $
0.31 $
0.06 $
0.04 $
0.26 $
0.14 $
0.14 $
0.25 $
(0.09) $
0.04 $
0.30 $
0.06 $
(0.10) $
0.43 $
0.53 $
0.25 $
0.40 $
0.61 $
0.20 $
0.14 $
0.44
0.65
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 60% 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.
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, 2023
As at
December 31, 2022
(In thousands of USD)
Cash and cash equivalents ................................................ $
Short-term investments ....................................................
174,844 $
118,118
292,962
175,347
50,476
225,823
Cash and cash equivalents decreased by $0.5 million to $174.8 million at December 31, 2023. Short-term investments
increased by $67.6 million to $118.1 million at December 31, 2023. Total cash, cash equivalents and short-term
investments increased by $67.1 million to $293.0 million at December 31, 2023.
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. A Standby Letter of Credit in the amount of $1.4
million CAD has been issued against this facility. The facility is secured by a general security agreement representing a
first charge over the Company’s assets. Our principal cash requirements are for working capital and capital expenditures.
Excluding deferred revenue, working capital at December 31, 2023 was $418.9 million. 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 of $194.4 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,
2023
2022
Year ended December 31,
2022
2023
(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 redemption (purchase) of short-term
investments ..............................................................
Net inflows (outflows) from cash and short-term
investments ..............................................................
Cash provided by (used in) operating activities
27,969 $
12,257
(27,505)
1,820
14,541
12,546
1,995
(2,327) $
(28,245)
4,575
(1,420)
(27,417)
79,357 $
(67,312)
(12,035)
(513)
(503)
24,518
(74,987)
26,840
(4,244)
(27,873)
(20,000)
(65,013)
(20,000)
(7,417)
64,510
(7,873)
Cash generated by operating activities for the three months ended December 31, 2023 was $28.0 million compared to
$2.3 million cash used in the same period in 2022. The increase in cash generated is primarily due to improved cash
inflow on working capital balances and higher interest income. Cash generated by operating activities for the year ended
December 31, 2023 was $79.4 million compared to $24.5 million for the same period in 2022. Higher cash inflow during
the year ended December 31, 2023 primarily reflects improved cash inflow on working capital balances and higher
interest income, partly offset by lower profit in 2023.
83
84
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Cash provided by (used in) investing activities
Cash generated by investing activities for the three months ended December 31, 2023 was $12.3 million compared to
$28.2 million cash used in the same period in 2022. The cash generated for the three months ended December 31, 2023
resulted from a net redemption of short-term investments of $12.5 million partly offset by purchases of property and
equipment of $0.3 million. For the same period in 2022, cash used included a net purchase of short-term investments of
$20.0 million, in addition to purchases of property and equipment of $8.2 million. Cash used in investing activities for the
year ended December 31, 2023 was $67.3 million compared to $75.0 million for the same period in 2022. Cash used
during the year ended December 31, 2023 included a net purchase of short-term investments of $65.0 million in addition
to purchases of property and equipment and intangible assets of $2.3 million. Cash used for the same period in 2022
included a net purchase of short-term investments of $20.0 million and purchases of property and equipment and
intangible assets of $18.2 million. Cash used for investing activities in 2022 also included a use of cash of $36.7 million for
the acquisition of MP Objects B.V.
Cash provided by (used in) financing activities
Cash used in financing activities for the three months ended December 31, 2023 was $27.5 million compared to $4.6
million cash generated for the same period in 2022. The increase in cash used was from the repurchase of shares as part
of our Normal Course Issued Bid (“NCIB”), offset by an increase in the proceeds from the exercise of stock options. Cash
used in financing activities for the year ended December 31, 2023 was $12.0 million compared to $26.8 million cash
provided by financing activities for the same period in 2022. The increase in cash used was from the repurchase of shares
from the NCIB and a decrease in the lease incentives received.
Contractual obligations
Our lease commitments are primarily for office premises and secure data center facilities with expiry dates that range
from November 2023 to February 2037. The largest lease commitment relates to our 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 2023, the Company contracted to purchase cloud data services for a minimum purchase commitment of $22.1 million
over a five-year term. During 2022, the Company 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, 2023, including commitments relating to
leasing contracts and cloud services agreements:
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 .................... $
6,539 $
7,513 $
5,928 $
24,462 $
7,634
39,682
47,925
15,000
44,442
110,241
39,700
—
—
—
39,700
53,873 $
47,195 $
53,853 $
39,462 $
194,383
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 .................... $
Off-balance sheet arrangements
7,919 $
8,795 $
6,436 $
6,706
18,125
40,000
26,736 $
35,000 $
49,886
99,831
40,107
—
—
—
40,107
54,732 $
26,920 $
46,436 $
61,736 $
189,824
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, 2023 and 2022 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 commercial 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.
85
86
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
manage currency risk by matching foreign denominated assets with foreign denominated liabilities and by entering into
forward currency contracts for certain known Canadian dollar denominated expenses.
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 and tied to Royal Bank prime rate and Royal Bank US base rate. No amounts have been drawn as at
December 31, 2023.
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, 2023 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, 2023, 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.
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, 2023, 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 three months and year ended December 31, 2023.
Outstanding share information
As at December 31, 2023, 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 three months and year ended December 31, 2023 and as of February 28, 2024 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,
2022
Net issued
Number
outstanding at
December 31,
2023
Net issued
Number
outstanding at
February 28,
2024
28,052,629
1,720,326
180,739
75,395
71,378
376,170
(526,896)
92,803
9,471
76,933
28,428,799
1,193,430
273,542
84,866
148,311
(98,301)
(11,424)
(8,520)
—
(7,577)
28,330,498
1,182,006
265,022
84,866
140,734
87
88
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our outstanding common shares increased by 376,170 shares in 2023 due to the exercise of 508,510 stock options, the
vesting of 13,363 performance share units resulting in 20,817 shares issued, and 89,168 restricted share units, and 86,335
shares issued as contingent consideration, less 328,660 shares repurchased for cancellation.
Our outstanding stock options decreased by 526,896 options in 2023 due to the grant of 1,563 options, less 508,510
options exercised and 19,949 options forfeited. Each option is exercisable for one common share.
Our outstanding restricted share units increased by 92,803 units in 2023 due to the grant of 204,048 units less 89,168
units vested and 22,077 units forfeited. Our outstanding deferred share units increased by 9,471 units in 2023 due to
9,471 units granted. Our outstanding performance share units increased by 76,933 units in 2023 due to 96,119 units
granted less 13,363 units vested and 5,823 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.
89
90