Kinaxis Inc. (KXS) Q4 2025 Earnings Call Transcript

Good morning and welcome to the Canaxis Inc. Fiscal 2025 fourth quarter and year-end results conference call. Currently all participants are in a listen-only mode. Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. I'd like to remind everyone that this call is being recorded today, Thursday, March 5th, 2026. I will now turn the call over to Rick Wadsworth, Vice President, Investor Relations at Canaxis Inc. Please go ahead, Mr. Wadsworth.

Thanks, Operator. Good morning and welcome to the Canaxis Earnings Call. Today we will be discussing our fourth quarter and year-end results, which we issued after close of markets yesterday. With me on the call are Razat Garab, our Chief Executive Officer, and Blaine Fitzgerald, Chief Financial Officer. Some of the information discussed on this call is based on information as of today, March 5, 2026, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set out in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release, as well as in our CDAR-plus filing. During this call, we will discuss IFRS results and non-IFRS financials, including adjusted A reconciliation between adjusted EBITDA and the corresponding IFRS result is available in our earnings press release in MD&A, both of which can be found on the IR section of our website, canaxis.com, and on CDER+. The webcast is live and being recorded for playback purposes. An archive of the webcast will be made available on the investor relation. Neither this call nor the webcast may be re-recorded or otherwise reproduced. We have a presentation that accompanies today's call, which can be downloaded from the IR homepage of our website. They'll let you know when to change slides. Over to you, Rizat.

Thanks, Rick. Turning to slide four, I'd like to start by saying how thrilled I am to be a part of the Kinexus company I've admired and competed against. Here are my top three reasons for joining Kinexus. One, getting back to my roots in supply chain software, where I've spent over 20 years of my career, particularly at this time when organizations are experiencing unprecedented levels of demand and supply volatility.

Next slide 14, annual recurring revenue growth in 2025 was improved year-over-year, compared to 12%. In constant currency, AR growth was $3 million through AR, as well as differentiated and interest rates already mentioned. Some drivers of growth included many more deals above $1 million ACV. More large enterprise accounts went on expansion business. On slide 15, STAS and total RPO balances in growth remained very robust. Both measures show a healthy three-year CAGR of 18%, and our total RPO is rapidly approaching $1 billion. This metric continues to highlight robust growth in our subscription business. Loyal customers' job and gross revenue retention come fully over 95%, and is also influenced by normal renewal cycles. Looking at slide 16, I am very pleased to introduce 2026 guidance. Given our strong momentum, we expect SaaS revenue growth of 17% to 19% in 2025, which at the midpoint is consistent with our constant currency AR growth rate exiting 2020. We expect total revenue of $620 to $635 million. Underlying this guidance, we assume that professional services revenue will grow in low single digits, as we expect success-enabling partners to handle more work, which is a key strategy to achieve scale in the business overall. maintenance and support revenue should be flat to slightly down from 2024. Given a recent conversion on premise contract, the remainder of total revenue will be made up by the growth in the 60% range versus 2025, and then the decrease into 2027 by roughly 25%. For 2026, approximately 60% of subscription term license revenue will be recognized in Q1, roughly a quarter in Q4, and the remainder in Q2. Ongoing demand from on-premise customers who are moving to our hosting infrastructure could change the assumptions, and we will advise that that happens. We view 25% adjusted EBITDA margin as a new floor for the foreseeable future and are guiding to an adjusted EBITDA margin of 25 to 26 strategic investments in the year, primarily to drive exciting growth initiatives in AI and go-to-market activities that Rizak will speak to. Our business model is trying to help you with your model. Total gross margin rates continue with steady growth in 2026. driven by a more favorable revenue mix and a slightly improved prescription revenue margin in 2026 to be similar to 2025, as the benefits of moving North American customers to public cloud will be offset by one-time cost with respect to operating expenses. We expect to grow by high single digits, and we expect research and development to grow in the high 20 percentage range versus 2025. And excluding stock-based compensation, we expect roughly 10% growth in general and administrative of expenses, including stock-based comps, we expect growth to be above 25%, reflecting some senior hires. The impact will be in the $8 to $10 million range as we make office improvements to support growth in Japan and then to grow internal IT refreshments. Slide 17. As we exit our quiet period, we will be maximizing the size of our normal course issuer bid by roughly doubling the repurchase limit to approximately 2.8 million shares, or 10% of our float at October 31st. We've already invested $54 million under the buyback and repurchased roughly 440,000 shares. At the average price paid for those shares, our new commitment to interruption and additional investment of up to approximately $284 million throughout the term of the buyback. We see tremendous value in maximizing our share buyback while public markets continue to miss value. Complex AI-enabled software companies have never been in better shape for us. ARR growth has re-accelerated, and we are winning more industry leaders than ever, including in markets that have huge AI and other tailwinds. We have room to improve SaaS revenue growth and adjust the EBITDA margin in the coming We have a revitalized go-to-market team and the market's best product that continues to lead the AI business. All this made my personal decision to take a new opportunity extremely difficult. I'll be joining an exciting private company with a path to go public ahead, which is a really exciting place to be for a CFO. I'm sure my departure raises questions that senior management changes always do. Let me address them right now. Huge AI winner and we have a great new pricing model to monetize the inevitable evolution classic leader for Connected and I truly wish I could have partnered with him a lot longer. There is no better time to have an industry veteran CEO go to market and overall leadership. 2026 is set up to be a great year and overall the future looks exceptionally Bright, staff leaders like John Sicard, Richard Munkman, and Bob Courteau. They've taught me a lot and created a truly special culture. And thanks to you, founders and analysts, for years of partnership a great deal from you and enjoyed getting to know you all. We may meet again. I'll let Rizat make some concluding remarks.

Thanks, Blaine. You've strengthened our business foundation, built a great finance team, and successfully steered the company through great growth, opportunity, and change to leave us in tremendous shape today. I wish we could have worked together longer and I hope our paths cross again soon. I'm very pleased that Blaine will be with us through our Q1 earnings call in early May. In the meantime, we're actively searching for a new CFO to fill his big shoes. Going on to slide 18, can Access has a long history balancing rapid growth with strong profitability and that will not change. A 25% adjusted EBITDA margin represents a solid writing growth opportunities. We are focused on accelerating the transformation of Kinaxis to an AI-driven supply chain decision making and orchestration plan. I'll highlight four key areas of investment in 2026 which enter AI including an extensible data fabric and semantic layer to enable our full supply chain orchestration. We're going to keep our foot on the gas for even greater go-to-market success We will add quarter-carrying capacity to expand account coverage and develop the go-to-market operating model for our new and exciting agenda capabilities. Third, we'll increase the leverage of key partners to both give us bigger edge in winning new business and to scale and help deliver with an increase in our investments and ensuring strong collaboration. We are mobilizing a team of forward-deployed engineers to market and value realization. This team will work across the lifecycle of our data science and data engineering skill sets to compose agentic solutions architected to deliver valuable outcomes, while still leveraging customer engagement teams for supply chain at Palantir and Salonis. I couldn't have asked for a better person to spearhead our agentic solutions. In Tilly, we have a company-wide program to identify use cases for our ways of working in an effort to gain velocity. In our product teams alone, roughly 90% of pull requests, which is the way that new code goes from testing into live environments, includes AI-assisted code, helping us gain speed and freeing up more time for innovation. Roughly 80% of engineers and growing are using AI in their work, and half of those are power users. I hope these priorities give you a sense of how strongly we connect to the AI transformation opportunity. Evolving from a market leading supply chain software solution to a composable, agentic supply chain is a unique opportunity for Kinaxis, and is why I am here. As you know too well, there is a lot of confusion in the public markets about who the winners will be in a more AI-forward world. We are working hard to prove that all the innovations in AI, data, and agentic architectures are a significant tailwind for Canaxis as we build the future of supply chain decision-making and orchestration. In the meantime, we are focused on delivering quarter after quarter, as we did in Q4 and throughout 2025. Thank you for your ongoing support. I will now turn the line over to the operator.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Richard C. with National Bank Capital Markets. Your line is open. Please go ahead.

Yes, thank you, and great results, guys. Just before, Blaine, congratulations and all the best in your new job. It was a pleasure working with you over the years. For that, like, really great color on AI. And again, I've got a really sort of basic question I'll ask here, because we're getting a lot of inbounds on this. And so when you think about Kinaxis, why is it that, you know, a sort of high-powered sort of small team could not come in and build an AI native platform to compete directly with Kinaxis here? I know it's a basic question, but it's certainly one that we're getting a ton of inbounds on.

Yeah, Richard, thanks. Thanks for asking that question. And we think about this very, and I think the the underlying facts are, you know, what are the types of problems we are solving for our customers? The types of problems with a very deep understanding of the supply chain domain and the supply chains that are highly complex, highly interconnected. And you need to understand the physics of the supply. ai or agents to do anything with it right and that's what we built in maestro over decades long and and and that platform is the single richest representation of that complex interconnected supply chain that our customers operate and then on top of that we like everyone else in the enterprise software space are leaning in in leveraging generative ai to transform the the the user interface to a more conversational but also we are leaning in on all the new data architectures and semantic architectures to create a composable agentic platform right so you know when you think about the kinds of customers we have these are break and murk okay great uh i just wanted to follow up question and i'll pass the line after that um so with

respect to the new pricing model is sort of i think the the bias here that uh it will be sort incremental to the existing growth profile here of the company, because obviously it sounds like that's kind of what is happening here. And when it comes to profitability, can you maybe provide some bit of color? Because obviously, you know, it's sort of transaction based and there's a lot of sort of pings with tokens. Like I imagine, you know, the costs won't be fixed. They'll be obviously sort of variable. So how are you thinking about sort of those two things? And then I'll past the line?

You know, as we're going through this, it's somewhat exciting in terms of we think this is a potential to accelerate growth and revenue while, you know, keeping our costs actually at the same levels. As you know, there are some like AI modules that we have that are a little bit more costly than others. But overall, what we've done is we've covered that with this actual almost variable cost that is actually committed. And that's the one thing that I think people need to realize for what we're doing here is that although it's consumption and usage based we are obviously going forward with a committed revenue scheme so at the end of the day it won't look too too much different from what we have today however there are areas of revenue opportunities and value that we're giving to our customers that we think that we should be monetizing on. And so we think this is going to be both beneficial to overall EBITDA, but also I will say that in any of our guidance we've given today, because it's early days, we have not put any of that upside in our guidance at this stage, just because it's too early to...

Yeah, let me just add a little bit to that as well. So the biggest driver for us to better align are offering going forward, bringing to our customers going forward to the way we price.

Great. Thanks again.

Your next question comes from the line of Thanos Moshopoulos with BMO Capital Markets. Your line is open. Please go ahead.

Hi, good morning. I'll let go of a congrats to Blaine on the new opportunity. Maybe starting off with a question for Blaine. When I look at your SaaS backlog at year-end relative to your SAS revenue guidance. It's a higher coverage ratio. We can start to the backlog than we've seen some prior years. Is that just a lot of conservatism or is there some other dynamic?

Yeah, it's a good observation. So our CRPO is about 80% of what our midpoint on our guidance is, which is a good thing to point out. I think we are having a healthy amount of confidence and what we're landing at, I think there is always opportunity that I just mentioned one of them with NGP where we could start next-gen pricing, which could show that we could maybe potentially beat that. Obviously, if you look at our past and then look at 2025 in particular, we did much better than that 88 percentage point. And I think that's something that we are continuing to evaluate. I'm hoping we'll be putting some smiles on people's faces throughout the rest of the year and beating that 17 to 19 percent. But right now I'd say 10 months, I guess nine months to go in the year. It's a long way to go.

Great. And then for Razaf, how would you characterize the near-term spending environment? And clearly you had strong bookings in the quarter, but is that a function of better execution, you know, better competitive performance on your part against the stable markets, or has there been some improvement in the demand environment with supply chain being more topical with tariffs and the like?

Yeah, I think it's a good question. Look, I think it's a few reasons. First, I...

That's great to hear. Thanks. I'll pass the line.

Your next question comes from the line of Kevin Krishnarante with Scotiabank. Your line is open.

Please go ahead. Hey there. Good morning. And also, Bill, congrats, Blaine. Great working with you and good luck on the future. Question on your R&D. Did I hear that you plan to grow that line 20%? And if so, can you just comment on the moving pieces there? I noticed in your slide deck you talk about the addition of forward deployed engineers. I'm just wondering, you know, sort of what you're seeing. Is that driven by customers? Are some of the decisions taking a bit longer on their side requiring you to kind of step up, you know, the FTEs to help drive that adoption? Just wondering if you can unpack the growth in R&D.

Yeah, great question. And so what I said is that we'll be in the high 20 percentage range for that growth year-over-year. And there's a great reason. I mean, we're seeing unprecedented momentum in the business at this stage. we had in 2025 we had the biggest deal ever we had the biggest day ever every quarter had the biggest uh amounts that we've ever seen for the demand coming in in the winter we had for every single region um we had just the evita of net income uh basic eps like everything was off the charts records for us uh that demand uh makes us believe there's a bigger opportunity that we could actually go after at this stage and r d with the innovations that we see in front of us with Agentec AI, with what's happening on trying to get access to the machine learning that we have in place and the tool that we have that our product has built, we just see that there's so much more than this. A lot of the discussions we're having right now between Radad and myself and the other leaders of this team is that with just being a supply chain planning company, what you're probably going to see is a company that may not even have supply chain in it at some point the future and be more focused on enterprise AI. I think that is the eventual vision of where Canaxis will do extremely well. And I think we have now this leadership team, which is part of it, is that we have a leadership team that's all coming together and creating a huge opportunity. So the R&D, Ben? Yeah, let me just have a little bit more credit to that.

So look, R&D investments are growing, and that's a very deliberate, two big buckets. It's one, investing in our core maestro platform, you know, given the news. These things are...

Thank you for all that color. In the interest of time, I'm going to pass the line. Thank you very much.

Your next question comes from the line of Paul Traber with RBC Dominion Securities. Your line is open. Please go ahead.

Thanks.

Question for Raza.

You talked about one of the reasons that you joined Canaxis is building and scaling the company that you see as a market leader. And, you know, what do you, as you look forward to the next couple of years, what do you see as the largest challenge to scaling that you're looking to address as you grow?

Yeah, it's a good question. And what I'll say is it's a unique moment in time for Kinexus and, frankly, for me to come in and to really build and scale. And I'm very bullish on the market need, on the market opportunity, the market size. You know, I'm very bullish on the domain problems that we're solving and the hard complexity and the value generation potential of those problems. I think the biggest barrier for a company like us would be to continue to scale in terms of retaining and attracting the talent that is required for us to realize the potential we have and to realize the expectations our customers have. That continues to be the biggest sort of thing to focus on is the talent. You know, what doesn't keep me up at night is the market potential. I'm not too worried about the competition because we really have amazing customers and we have a lot of momentum. It's really about scaling the business in every dimension with the best talent because we solve hard problems. We're not solving easy problems for our customers. And so we need the top caliber talent. And so you're going to see us continue to expand the talent. You know, we've got, you know, we're anchored, you know, with some amazing talent in Ottawa, Toronto, Dallas.

One point you made that you're not worried about competition. You mentioned earlier the new hire from Palantir. I think that's one of the first times I've heard Canaxas mention Palantir. Can you speak to, like, the competitive environment? You know, if you're seeing these new entrants get traction in the market, or still do you just see the traditional competitors?

The next story there is it's a very fragmented market. You've got a mix of a lot of, you know, old legacy players, including some of the ERP players, where we're actually driving replacement cycles. You know, you've got some players that have emerged more so in the last 10, 15 years. that we see in different cycles in different industries or different verticals or different geographies. And then you've got some new entrants that are coming in, right? But through all of that, our wind rates have been very high throughout 2025. And maybe they can talk a little bit more about the wind rates there.

Yeah, that's a great point. Obviously, the common question is the competitive landscape changes. The short answer is yes, but only slightly. FAP, O9, Blue Yonder are still the main competitors we see. We have extremely high win rates. I think we've talked about in the past over 60% against, I would say, one of those. They almost landed the goose egg in terms of trying to win dollars for 100% against one of those. But those are the big three that we continue to do. There's going to be more new entrants that are going to affect.

In the interest of time, please limit yourself to one question.

Your next question comes from the line of Lachlan Brown with Rothschild and Co Redburn your line is open please go ahead hi Rosa Blaine congrats on the strong result and Blaine congrats on an excellent tenure as CFO I would like to dive into the regions Asia was pretty successful throughout 2025 Europe was a good driver of growth while North America was a laggard could you run us through while we're seeing different outcomes in the different regions to recent bookings over the couple of quarters tell a different story and just any initiatives uh you're doing to push growth into the north american market thanks yeah sure um well number one i'll just reiterate we had

records every quarter every uh for the whole year i would say though the one that's like significant significant amount was emia it was uh well beyond our expectations i i won't say the percentage but they were extremely much higher than their target they had the the APAC team also did extremely well they had a Q1 and Q2 that was much higher than our expectations and in North America they set the all-time record right now they are the ones that are the champions for us in terms of those records for the full year so it's one of those situations where I don't people look for the bad news we don't have the bad news in any region at this stage we're very proud of those regional leaders and how they performed. If there's one that kind of stuck out as way over the targets that we had, that was EMEA. They did extremely, extremely well.

Yeah, look, North America is our largest region in terms of bookings and AOR and revenue. And we have tremendous momentum in North America right now. You know, I think we're going to be off to a great start this year and the end of our CQ as well. So, actually, I'm super excited about the momentum in our North American business.

Appreciate it. Thanks. I'll pass it on.

Your next question comes from the line of Stephanie Price with CIBC World Markets. Your line is open. Please go ahead.

Thank you. Good morning. Congratulations, Blaine and Rosat. Looking forward to working with you. My question is on the Maestro agents. You know, they've been available more broadly to your customer base. Just curious about early feedback on the consumption bundles for the agents and what customers are saying about the pricing strategy that you discussed, and maybe more generally how customers are kind of thinking about the pace of AI uptake here.

Yeah, look, it's a good question. First, on the early adoption with customers, right, so we were very deliberate in curating a mix of customers from various industry verticals. that we play in to make sure we could work with those early adopter customers in a very iterative, agile way and continue to improve the underlying agent studio that we've developed now. And the results are exciting. You know, clearly there's a lot of learning cycles on the customer side and on our side as we go through that. You know, and what we're finding is, you know, the use cases fall in sort of two or three different buckets, right? There are use cases that are very straightforward, are easy to compose and deploy, add additional.

Your next question comes from the line of John Shao with TD Cowan. Your line is open. Please go ahead.

Yes, thanks for taking my question. I've had to mention semiconductors and new ones. So just curious if this industry is any different from a supply chain planning perspective, any specific pain points you are helping them to address that's just unique to them, and how should we think about your expansion with this new vertical, as you mentioned, top five global foundry? Thanks.

Yeah, look, the semiconductor industry has a very interesting supply chain. I've had the fortune of working with semiconductor companies for many years now. You know, if you think about the high-tech value chain, the semi-tech companies are sort of the...

This will end the Q&A session. The Canaxis team will reach out to those who did not have a chance to ask questions. I will now turn the call back to Rick Wadsworth, Vice President of Investor Relations at Canaxis, Inc., for closing remarks. Please go ahead.

Thanks, Operator. Thank you, everyone, for participating on today's call. We appreciate your questions and your ongoing interest in support, upper dimension.

This concludes today's call. Thank you for attending. You may now disconnect.