Kinaxis Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2026

Key Takeaways

  • Positive Sentiment: Record Q1 performance — Total revenue of $165.6M (+25%), SaaS revenue $102.9M (+21%), ARR $447M (+20%), Adjusted EBITDA $53.6M (32%) and a record quarterly profit of $29.4M, with very strong free cash flow metrics.
  • Positive Sentiment: Large new-business momentum — Q1 new business nearly doubled year‑over‑year, with a surge in $1M+ ACV deals (including the largest initial customer contract ever) and broad wins across consumer, chemicals, energy, life sciences and industrial verticals.
  • Positive Sentiment: AI and product leadership — Adoption of Maestro Agents more than doubled paying customers, Maestro Agent Studio and MAU consumption pricing are being rolled out, and Kinaxis highlights quick-start agent packages to accelerate value and expansion opportunities.
  • Positive Sentiment: Strong capital position and buybacks — Operating cash flow was $59.1M (up 87%), cash and short‑term investments ~$327.6M, and the company repurchased ~570k shares for ~$62M under its NCIB.
  • Negative Sentiment: Guidance and cost risks — Management kept full‑year guidance unchanged despite the beat, citing macro/geopolitical volatility; maintenance & support revenue declined (‑11%) and the company flagged potential uncertainty around LLM/token costs even though current impact is limited.
AI Generated. May Contain Errors.
Earnings Conference Call
Kinaxis Q1 2026
00:00 / 00:00

There are 13 speakers on the call.

Speaker 5

Good morning, and welcome to the Kinaxis Inc. fiscal 2026 first quarter results conference call. Currently, all participants are in listen-only mode. Following the presentation, we'll conduct a question and answer session. Instructions will be provided at that time for you to queue up and ask your question. I'd like to remind everyone that this call is being recorded today, Thursday, May 7th, 2026. I'll now turn the call over to Rick Wadsworth, Vice President of Investor Relations at Kinaxis Inc. Please go ahead, Mr. Wadsworth.

Speaker 9

Thanks, operator. Good morning, welcome to the Kinaxis earnings call. Today, we will be discussing our 1st quarter results, which we issued after close of markets yesterday. With me on the call are Razat Gaurav, our Chief Executive Officer, and Blaine Fitzgerald, our Chief Financial Officer. Some of the information discussed on this call is based on information as of today, May 7, 2026, contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set out in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release, as well as in our SEDAR+ filings. During this call, we will discuss IFRS results and non-IFRS financial measures, including Adjusted EBITDA.

Speaker 9

The 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 investor relations section of our website, kinaxis.com and on SEDAR+. The webcast is live and being recorded for playback purposes. An archive of the webcast will be made available on the investor relations section of our website. Neither this call nor the webcast may be re-recorded or otherwise reproduced or distributed without prior written permission from Kinaxis. We have a presentation to accompany today's call, which can be downloaded from the investor relations homepage of our website. We will let you know when to change slides. Finally, I want to remind you that our user event Kinexions will take place from June 1 to June 3 in Las Vegas. All sessions on the second and third are open to investors.

Speaker 9

You can review event details at kinexions.com. If you're interested in joining us, please reach out to me directly at rwadsworth@kinaxis.com before registering as we have capacity limitations. Over to you, Razat.

Speaker 7

Thanks, Rick, and good morning all. Turning to slide 4. I'm extremely pleased with how the team performed in the first quarter. Momentum from our last year has continued with a record Q1 performance. Our great start to the year is evidenced by performance in our two key growth metrics. Our SaaS revenue grew by 21%, a significant jump compared to 16% growth a year ago. This provides us with a tremendous start towards our SaaS growth guidance for the year. Our ARR balance grew by 20%, accelerating from 14% growth in Q1 2025. All this growth translated to significantly improved profitability in the first quarter. We achieved record quarterly profit and Adjusted EBITDA, and our Adjusted EBITDA margin was 32%. Blaine will speak to details soon.

Speaker 7

Our momentum as the leader in AI-driven supply chain planning and orchestration continues to accelerate in an environment that is characterized by the following. Firstly, there's heightened levels of volatility in supply and demand with ongoing levels of geopolitical and structural shifts. Secondly, significant push to create new levels of productivity and working capital efficiencies while improving customer fulfillment service levels. Thirdly, a growing pace of innovation and change in underlying data architectures and agentic AI in an effort to create new levels of intelligence, efficiencies, and automation. Customers are exploring new forms of intelligent decision-making, governance, operating models, and process automation, leveraging a mix of predictive, prescriptive, generative, and agentic AI. Their feedback gives us confidence that Kinaxis is on the right side of an exciting opportunity to transform the ways of working across the entire supply chain and deliver unprecedented levels of value to our customers.

Speaker 7

The opportunity ahead is significant, and the latest innovations in data architectures and AI are providing us a tremendous tailwind. Turning to slide 5. It was a record Q1 for new business in total, business from new customers and from expansions with existing customers. Almost double the amount of total new business we signed in Q1 2025, and won 60% more than in any previous Q1, measured by average annual contract value. Our average deal size was over double what we experienced in the first quarter last year. Once again, we saw disproportionate strength from contracts with $1 million plus in average ACV, winning several more than we did a year ago, including our largest initial customer contract ever, both by annual and total contract value.

Speaker 7

We'll provide you with specifics on the number of 1-plus million dollar deals annually. Our early success and pipeline suggests that 2026 could be another strong year in this regard. On to slide 6. Just under half of the new ARR we added in Q1 came from some exciting new customers, most of which were enterprise or large enterprise class. I'll highlight a few wins. In consumer products, we were thrilled to win Pernod Ricard, the world's leader in premium international champagnes and spirits. They have over 200 iconic brands, including Absolut, Beefeater, Chivas Regal, G.H. Mumm, The Glenlivet, Havana Club, and Jameson. Pernod Ricard is going to be deploying our Maestro platform for end-to-end planning across their global supply chain network in an effort to improve service levels and gain cost efficiencies. In our chemicals vertical, Tesa has become a customer.

Speaker 7

Tesa develops over 7,000 innovative adhesive solutions and is active in 100 countries. Tesa is looking to leverage Maestro to help shift from regional silos to a centrally governed global supply chain model to support rapid growth, new product launches, and other strategic initiatives. We've continued our amazing run in the energy sector. Last quarter, we won Marathon Petroleum, and now we've added the largest renewable energy company in North America. The company uses a diverse mix of energy sources, including natural gas, nuclear, renewable energy, and battery storage. Their expansive asset base requires better end-to-end processes to ensure the right parts are in the right place at the right time. They're also looking to improve demand forecasting using outside-in data and machine learning techniques so they can quickly respond to new opportunities.

Speaker 7

The energy sector is undergoing massive investments to support the demands of the new AI economy and the surge in the build-out of data centers. We expect this to remain a strong sector for us ahead. In life sciences, we won a large vital organ therapy company, which for 70 years has driven meaningful innovations in kidney care. They're going to be deploying Maestro for end-to-end intelligent planning capabilities. We also won a couple of mid-market life sciences companies, ALK, an allergy treatment specialist headquartered in Denmark, and Laboratoires Théa, which researches, develops, manufactures, and commercializes a wide variety of eye care products. In industrial manufacturing, we won a significant contract with a global Fortune 500 company.

Speaker 7

This well-known leader is looking to replace siloed business unit decision-making with our unified platform covering S&OP, demand planning, distribution, inventory, shop floor scheduling, and more. They're also going to be deploying Maestro Agents to gain intelligence, productivity, and automation. In the mid-market tier of high-tech, electronic computer, wide mirrorless. There are still dozens prospects across our vertical market. We have never positioned to win. Along with success made in Q1, fifth of our additional came from existing with customers. Build of new applications was the largest single transaction business. Customers. Build of new applications was the largest single transaction business. Distribution and expansion built all time. Optimization and forecasting, most of the expand the first quarter. The success demonstrated sophisticated mathematics, namely characteristics and machine learning models, remain at the very heart of customer needs for powering high-impact supply chain decisions.

Speaker 7

Our exciting new generative and agentic AI capabilities make it easier and more effective to leverage these advanced capabilities. Working together, all these technologies provide us with an incredible opportunity to further expand our impact into broader supply chain orchestration use cases. We have over 400 customers, a growing set of capabilities to sell a highly focused go-to-market team. There's a massive room for expansion within the existing install base. On to slide 7. While winning business with the world's biggest and best supply chains is the best validation we can receive, it is a tremendous honor to be ranked as a leader in Gartner's Magic Quadrant for the 12th consecutive time, and in such a prestigious spot. Gartner published 2 Magic Quadrants this time around, one for discrete industries and another for process industries.

Speaker 7

It is a testament to the powerful flexibility of Maestro that we placed so well in both. The reports support our long-held view that differentiation in our business is not about standalone planning features. It is about how well platforms enable fast, connected, and automated decisions across the supply chain. With respect to AI, the report shows that most vendors in our space leverage it, but with varying impact. The real value is seen as coming when AI is embedded directly into decision flows and execution rather than fragmented or assistive approaches. We see ourselves positioned well here. Maestro is infused with AI end-to-end and is the world's most sophisticated context and digital representation of the physics of the real-world supply chain. It enables rapid scenario planning, synchronized decision-making, and continuous and concurrent planning. Moving to slide 8.

Speaker 7

As you will recall, we've already launched Maestro Agents, including out-of-the-box capabilities and Maestro Agent Studio, which gives supply chain teams a no-code way to compose AI agents tailored to their unique needs. Our agents, which embed large language models, including OpenAI's ChatGPT, Google Gemini, and Anthropic's Claude in training and in testing, make it easier for users of any skill level to access the full power of Maestro. They also enable automation of processes that would otherwise be impossible, difficult, or inefficient for human users to undertake, and create a practical foundation for more autonomous supply chain operations that deliver faster, better decisions with even greater confidence. In Q1, we more than doubled the number of paying customers for our Maestro Agents, and we're in discussions with many more.

Speaker 7

The application of AI and agentic AI in supply chain planning, decision-making, and orchestration is moving very rapidly, and there's no shortage of ideas for how to use it. One way we've been able to support customers in helping them prioritize specific high-impact use cases we know will deliver value quickly. For example, we recently offered customers packages for up to six agents where deployment and knowledge transfer are supported by our four deployed engineers, with full implementation done in as few as four to eight weeks. The package includes predefined agents that target some critical decisions, ensuring data integrity, anticipating demand and supply risk, improving forecast accuracy, evaluating demand shifts, and optimizing inventory and supply outcomes. We also have launched our Maestro Agent Studio to enable composability of agents tailored to our customers' unique needs.

Speaker 7

Our starter package, combined with forward deployed engineers, aims to kickstart that process and quickly demonstrate value by absorbing real planner work, standardizing analysis, creating automations, and accelerating decisions. Our world-class customers move carefully and thoughtfully, and they undeniably move forward. I'm certainly biased, but it's difficult to imagine any customer not using our AI agents in the coming years. As I've described before, the next steps in our AI journey are to add the following, orchestrator agents that coordinate and sequence multiple agents across concurrent supply chain workflows, secure connections and interoperability between Maestro agents and external agents and systems, and expanded data context and semantics through an extensible ontology layer that enables composable agents to reason consistently across larger data sets and analytical environments beyond Maestro for true supply chain orchestration.

Speaker 7

Initial versions of these initiatives will be available within 2026 and will open a much larger opportunity for Kinaxis. Stay tuned for additional announcements on this front at our Kinexions event in early June in Las Vegas. Lastly, with respect to internal use of AI, we continue to prioritize this usage for improved efficiency, better results, and increased velocity. I'll provide some examples. In R&D, we found that AI-assisted work is 25% faster on average, and over 90% of requests to move code into production now include some AI-assisted elements. Our business development team has dramatically improved efficiency and conversion by using AI for deep research on prospect accounts that could benefit most from Maestro. AI identifies the use cases, finds the right contacts, writes emails, and follows up, all referencing the specific prospect context.

Speaker 7

Our professional services team is using AI to increase our assurance that partner deployments are following all the rigorous standards that get quicker answers to the field to unique deployment challenges. We will continue to emphasize the use of AI for innovative ways to improve operations company-wide and transform our internal ways of working. The search for a new CFO is going very well, and we have been working with a top-tier executive search firm to engage with over 200 potential candidates. At this time, we're in our final stretch of decision-making with a very short list of candidates. As it was when I joined Kinaxis, most of these candidates will need some transition time from their current roles. We will provide formal feedback when the process is complete. Meanwhile, Blaine is leaving us with a high-functioning finance team to allow for a seamless transition.

Speaker 7

As I said on the last call, I can't thank Blaine enough for successfully steering Kinaxis through great growth, opportunity, and change, and to leave us in such a tremendous shape today. Over to you, Blaine.

Operator

Thank you, Razat. I couldn't be more excited than to complete my time here with such a stellar quarter. Like recent periods, Q1 was beyond expectations in several key areas and establishes even greater confidence in meeting or beating our 2026 targets. If you look at slide 9, turning to the numbers and compared to Q1 2025 results, total revenue was $165.6 million. Up 25%, largely driven by very strong SaaS revenue growth and higher than expected subscription term license and professional services revenue. SaaS revenue was $102.9 million, up 21%, thanks to recent strong momentum winning new business, including record levels in Q4 2025 and our strongest Q1 ever. Subscription term license revenue was $19.1 million, up 111%.

Operator

The result was a couple million dollars higher than expected as a new customer joined us under the hybrid model. Under that model, we deliver Maestro from a hosted environment, but the customer has an option to move the deployment on-premise, which triggers term license accounting. You should adjust your annual term license estimates accordingly. Professional services revenue was $38.7 million, up 16%, and stronger than expected due to higher realized rates, as we work to ensure that pricing fully reflects our premium services. We continue to successfully shift services work to systems integrator partners, and will continue to focus on that in 2026. The strong first quarter result doesn't currently change our view that professional services revenue will grow in low single digits for the full year.

Operator

Maintenance and support revenue was $4.9 million, down 11%, due to some contract changes including success moving a couple of large customers from a hybrid hosted model to SaaS. We mentioned last call that there is ongoing interest in such transitions. As a result, we now expect maintenance and support revenue to decrease slightly and consecutively in the remaining quarters this year. Our gross profit was up by 32% to $114 million, for a 69% gross margin, up from 65%, due to a higher software margin, higher professional services margin, and a more favorable revenue mix as professional services declines as a percentage of total revenue. Our software margin was 81%, up from 80%, largely due to higher subscription term license revenue.

Operator

Professional services gross margin was 27%, compared to 21%, reflecting the higher realized rates in the quarter, as mentioned. Adjusted EBITDA was up 62% to $53.6 million, beating our record from last quarter and reflecting strong revenue growth, higher gross margin, and efficient operations. Adjusted EBITDA margin was 32%, up from 25%, which sets us up well for our full year target. It's important to note that the positive impact from high margin subscription term license revenue decreases substantially in future quarters this year. Our profit in the quarter was a record $29.4 million, higher than any previous quarter, and compared to $15.9 million in the first quarter last year. We are very proud of that result. Cash flow from operating activities was $59.1 million, up 87%.

Operator

Cash, cash equivalents, and short-term investments were $327.6 million, up from $324.7 million at the end of last year, despite $62 million deployed under our share buyback program this quarter. Moving to slide 10. Our trailing 12-month free cash flow margin was extremely strong at 24%. Given timing variations in individual quarters, we believe focusing on the trailing 12-month figure is most suitable. If you look at slide 10, it illustrates our significant progress over the past three years. That said, it's worth highlighting that free cash flow margin in Q1 was an incredible 35%. Our organic cash generation muscle is now very well developed. Turning to slide 11. Annual recurring revenue grew 20% compared to the first quarter of 2025, and now sits at $447 million.

Operator

We added $14 million to our ARR balance during the first quarter. This is a record for our Q1, even as our conservative approach to measuring ARR left significant committed future amounts out of the calculation, and despite foreign exchange movements in the period reducing the balance by $2.6 million. As Razat mentioned, ongoing strength in million-dollar-plus ACV contracts helped drive this great result. We also continue to convert very well on opening pipeline in a quarter, and our Gross Dollar Retention remains very strong. On slide 12, SaaS and total RPO balances and growth remain very robust, with SaaS RPO at $905 million and total RPO at $949 million, highlighting the strength and visibility in our business. The balance remains slightly below $1 billion as Q1 is typically a low renewal quarter, which limits RPO growth.

Operator

Over the last 3 years, SaaS RPO has a cumulative average growth rate of 20%, and total RPO has a CAGR of 19%. We look at 3-year growth rates to help normalize for the impact of normal customer renewal cycles. On slide 13, despite total revenue, SaaS revenue, and Adjusted EBITDA results coming in ahead of our expectations, we are maintaining all aspects of annual guidance, which we provided only 60 days ago. The political, economic, and foreign exchange environments remain extremely volatile, so we feel that the approach is prudent. It's still early in the year, and we will gather more information and review our assumptions next quarter.

Speaker 7

In any case, we exit the first quarter even more confident that we will achieve or beat our goals for 2026. Slide 14, we maximize our Normal Course Issuer Bid shortly after our last quarterly call, doubling the repurchase limit to approximately 2 million shares or 10% of our float at October 31, 2025. During the first quarter, we repurchased 570,204 shares for an investment of approximately $62 million. We see tremendous value in being aggressive on our share buyback program, while public markets continue to misvalue complex AI-enabled enterprise SaaS companies like ours. As I said last call, Kinaxis business has never been in better shape over my six years here. It's hard to imagine that our quarterly revenue is now approaching Kinaxis' full year revenue in the year before I joined.

Speaker 7

It's been a privilege to be part of that growth. ARR and SaaS growth are accelerating. RPO is closing in on $1 billion, and profitability is up and has a higher ceiling in years ahead. Kinaxis is only at the beginning of its AI journey, which I'm confident will add even more opportunities for growth. I want to thank again the whole Kinaxis team, which is truly PFA, and all of you, our investors and analysts. I hope to see you again down the road. I will now turn the line over to the operator to start the Q&A session.

Speaker 5

We will now begin the question-and-answer session. If you'd like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick your hand setup when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first line comes from Kevin Krishnaratne. Please go ahead.

Speaker 2

Hey there. Good morning. A couple questions on Maestro. I think, Razat, you said something about how the release is allowing your customers to do things that were really complex, sometimes impossible. Can you talk about maybe the pricing here? How are customers thinking about the ROI and on their side, are they maybe hiring fewer demand planners, or are they just going faster on plans?

Speaker 7

Yeah, I think it's part of an adoption journey, Kevin. So really, you know, right now, what we're finding is a lot of the focus with our customer base is in gaining efficiencies, productivity, but also on driving, you know, working capital efficiencies and cost efficiencies and service level improvements in their supply chain. That's the biggest value proposition in the near term. Clearly, in the midterm, there's gonna be opportunities to, you know, further consolidate and scale to a much larger extent with fewer headcount and planners. That doesn't seem to be the initial focus for our customer base.

Speaker 2

Gotcha. It certainly seems like a big opportunity, some education and hand-holding on your side. You talked about the FDEs. I'm just curious to how do you work with your partners and SIs to make sure that you're getting this technology properly deployed and scaled over time?

Speaker 7

Look, we've done a few things there. Firstly, we've, you know, almost doubled our investments in training enablement for our partner ecosystem. That's a really important initiative for us this year. That's really well on track, and we're gonna continue to see us make a lot of investments. That's the first part. Second, you know, we're working with, you know, a fewer set of partner organizations, but we are going deeper in the skill development, the talent development with them.

Speaker 7

Thirdly, when partners do lead implementations, which we are perfectly fine with, we are insisting that we have a level of engagement to ensure that we're reviewing the solution design, we're reviewing the integration architecture, we're reviewing some of the testing and things like that before they go live. We have a package now, we call that the Guardian Package, that we are insisting that every customer uses when they are selecting partners. That's something that is becoming getting a lot of ground. All the mature partners we have, they like our level of engagement in the implementations, even though they take the bulk of the implementation work.

Speaker 7

They like to have Kinaxis experts involved in it to make sure we are, you know, doing it properly, and we're mitigating any risks going forward and ensuring the right outcomes for our customers.

Speaker 2

Great. Great. Thanks so much, Razat. That's mine.

Speaker 7

Thank you.

Speaker 5

Your next question comes from the line of Richard Tse at National Bank Capital Markets. Your line is open. Please go ahead.

Speaker 8

Yes, thank you. Blaine, just wanted to say it's been a pleasure working with you and all the best with your new opportunity here. If I kinda look at the growth here, it's obviously accelerated quite a bit, you know, this year versus last year. How would you attribute that growth to sort of just the improving sort of macro for supply chain, or is it specific more to Kinaxis and what you've done on the execution side? I'm just trying to kinda gauge where that incremental is coming from.

Speaker 7

Yeah, it's a good question. I think it's a combination of factors. Clearly, there are some, you know, structural shifts that are happening geopolitically from a tariff perspective, just overarching demand supply volatility that provide us some good tailwind. It builds the need and the case for the Maestro platform, so that's definitely a factor. I think beyond that, there are, I think, three other factors as well. Firstly, we're seeing a significant push for replacement cycle of old legacy, you know, supply chain planning deployments, where customers are fed up of those old legacy deployments, and they're looking for a more modern solution that is usable and is on a single platform, and is really purpose-built for taking them to the agentic era, right?

Speaker 7

There's a significant push for a replacement cycle that is underway and, you know, at the end of last year and in Q1 this year, and as well as in our pipeline, we're seeing continued increase of those replacement opportunities. That's an important factor. The second one I'll tell you is, you know, I think beyond just the macro tailwinds, we're seeing that the Chief Supply Chain Officers are under more and more pressure from their CFOs and their CEOs and their boards to create the next big wave of efficiencies, you know, in terms of working capital efficiencies, you know, because supply chains account for a very large percentage of the balance sheet and inventories that they carry, account for a very large part of the working capital.

Speaker 7

Also in certain industries where logistics costs are a big part of the percentage of cost goods sold, and with the increase in the fuel prices, there's a lot of pressure for reducing, you know, the cost basis as well. All of these factors are also creating a bigger need for our platform. The third thing I would say is I think our execution has improved dramatically and, you know, we've, you know, really rehauled our overall go-to-market engine. We've added capacity, and we're going to continue adding capacity through the course of this year in terms of quota coverage and we're just winning more business, you know, including competitive business, and we're expanding within existing accounts as well.

Speaker 8

Okay. I just have 1 other quick one in terms of the expanding business. Of the wins today, like how many would you say are being kind of influenced by the fact that you've got a pretty progressive roadmap for AI, particularly with sort of Maestro Agents? Like, is that kind of part of the decision-making, you think, in terms of what you're doing there, or is it still a bit early for that?

Speaker 7

Yeah, it's a good question. I'll tell you, in all, I mean, obviously with our existing customers, we are very actively engaged with them and they're, you know, coming on the adoption journey with us. In net new accounts where there are evaluations happening, you know, the underlying platform capabilities for agentic AI, the underlying capabilities for, you know, being able to have composability for, you know, agents and the out-of-the-box agents we have is playing a bigger and bigger role in the evaluation process. Every, you know, pursuit cycle that we're engaging involves demos of these newer capabilities and there's a growing trend where, you know, they become part of the solution set that our customers are buying even in net new logos.

Speaker 7

It's becoming a bigger and bigger factor, I would say, in net new accounts.

Speaker 8

Okay, great. Thank you.

Speaker 5

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

Speaker 12

Hey, thanks for taking my question. Blaine, it's been great working with you over these years. I wanna dig into the spending on environment. On one hand you've got global volatility and oil prices, supply chains underscoring the need for your software, but on the other hand, enterprises will often delay decisions during these kinds of periods of uncertainty. What's the dynamic you're seeing with your prospects today and, you know, how might that vary across the different verticals and geographies?

Speaker 7

Yeah, there's definitely some differences by industry verticals and geographies there. You know, there are some verticals like the high-tech value chain or the energy sector that is, you know, feeding into the surge in the build-out of, you know, the AI data centers, where those needs are very urgent and they're not waiting for the macroeconomic uncertainty to sort of settle itself. They're really moving ahead with those investments. There are other industries like, you know, aerospace and defense, where we're seeing similar trends.

Speaker 7

In industries where there are more chronic disruptions and, sort of, inflationary cost pressures, you know, our solution and what we at Kinaxis and, you know, what Maestro builds a bigger business case for our sponsors and our champions in these organizations to get additional funding to move ahead with these initiatives, right? We're frankly not seeing, you know, any delays or inertia in decision-making. I would call out that to be the case, especially in North America. Our North America business, you know, had a fantastic Q4. They've had a fantastic Q1 and the pipeline has tremendous momentum for us in North America. You know, slightly different dynamic in Europe.

Speaker 7

You know, Europe, we are seeing, you know, we had a very strong Q4 in Europe, and we are seeing good pipeline momentum there, but the pace of decision-making doesn't seem to have the same sense of urgency as in North America. In Asia Pacific, you know, it's a different dynamic, you know, based on which country you're talking about between Japan, Taiwan, and India, which is where we operate. In India, we're seeing a lot of deal flow and a lot of momentum in organizations that are looking to scale up and looking to become more competitive, continue to invest in our solutions. You know, it varies by industry and vertical. In general, we have not seen the slowdown with any of the macro issues.

Speaker 7

In fact, if anything, it's been a little bit of a tailwind.

Operator

Okay. That's some really helpful color. I know you've been calling out some of your larger deals, especially this quarter. Did you say that you signed your largest initial deal ever?

Speaker 7

That's correct. Both in terms of ACV

Operator

Okay

Operator

average, annual contract value and in terms of total contract value. That's right.

Operator

All right. I'm gonna go in a different direction. I was wondering if you could comment on how you're ramping up your reseller channel. Like, how has the progress been there, I guess going through the smaller deal size?

Speaker 7

Yeah, that's an important area for us because, you know, of course, we are adding direct quota carrying capacity in our go-to-market engine. You know, resellers play a really important role, particularly in segments of the market where we don't have our own direct coverage. That includes, you know, many countries and regions around the world, as well as, you know, certain segments of the market that are, you know, more down-market. We have a pretty good, robust, global reseller program. We are actively evaluating and recruiting and developing partner relationships where appropriate with them. We do wanna continue making investments in training and enabling them and making them more proficient.

Speaker 7

Then we also have, you know, an offering, you know, a sort of a rapid quick start offering where, you know, it's still our Maestro platform, but we've really, you know, simplified the template and usage for it because a lot of these resellers are selling to customers that are, you know, at a different phase of maturity as organizations, and they want something that can be implemented very quickly, have lower total cost of ownership and can lead to more rapid time to value. A combination of the product packaging, as well as the training and enablement, and then our global reseller program is important. You know, we had a pretty good year last year with this program.

Speaker 7

This year, we're looking to continue that growth momentum with the reseller program as well.

Speaker 12

All right. That was really helpful. I'll pass the line now.

Speaker 5

Your next question comes from the line of Lachlan Brown at Rothschild & Co Redburn. Your line is open. Please go ahead.

Speaker 3

Hi. Thanks for the questions. Blaine, wishing you all the best on your next opportunity. You added $5.7 million of SaaS revenue in the first quarter, which I believe is your last quarter of SaaS revenue dollars added sequentially. I believe this, you know, did come ahead of your initial expectations. Could you just run us through the core drivers behind this? Was it on pricing, cross-selling, commencement of large new contracts, or anything else to call out within that number?

Operator

Yeah. Great question. We had a pretty healthy balance of new name accounts as well as expansion that obviously contributed to that. It was almost at, like, 50/50 for where we ended up. At the end of the day, it comes down to, like, execution of that go-to-market team that is doing extremely well. They're converting at a very high clip to a point where, you know, when Razat joined, he said, "I've never seen conversion like this." These are levels that are extremely high, which we're obviously very proud on. Obviously, the strength of Q4 really helped us out and put us in a great. It was, you know, just compounding at this stage.

Operator

A great Q4 and then a great Q1 is helping us hit those high numbers. It's a situation where as CFOs, it's pretty exhilarating to be in a position where you get to go out and have these amazing numbers that you get to brag about. We gave our guidance in a, I think, a fairly prudent way. I'd say we're very confident, more confident probably than we've ever been before, that we're gonna at least hit those numbers. I hope that my successor is gonna be very happy with me giving them a reward to be in a position to potentially give you some, I guess, increases in those guidance in the future.

Operator

We've been in a very fortunate position to have some great execution on the go-to-market side. The other piece I would just kind of end with is, like, you know, you asked a question about expansion and AI, an earlier question came from that, and we called out Demand.AI and Agentic AI. Both of those products are our fastest-growing products right now. There's a lot of high demand. We're in a fortunate position that what we've been innovating for has led to where we're at right now. Maybe one of the unsung kind of metrics that usually a CFO wouldn't want to brag about right now is just the R&D increase. We are investing for the future right now.

Operator

The innovation that we're doing is what's getting us the wins against all of our competitors and the future competitors, because they're seeing that we're investing in our product and making this product top rate of any Gartner M-MQ that's out there. We're in a great position.

Speaker 3

Thanks. The comment on agents ties nicely into my next question. With the new paying customers on Maestro Agents, how has their usage been? Has that come in, you know, above, below expectations? Has this changed your thinking around how you're bundling MAU usage within subscription?

Speaker 7

Yeah, no. You know, we're really happy with the traction we're getting with the early adopters of our Maestro Agents. It's been a lot of fun and actually, you know, they'll be presenting and discussing some of those early wins at our Kinexions event. It's always exhilarating to hear our planners, you know, who are our users talk really about how they can do things in minutes or seconds, what would take them hours or days. I think that's really on a really good, strong trajectory.

Speaker 7

Of course, as we are landing new customers, you know, with our, with our agentic capabilities, we wanna make sure we're also working with our partners and our forward-deployed engineers to make sure we can think through the outcomes and the use cases and get them the value. That continues to be a really important focus area for us. In terms of the MAU pricing, we, as you know, we launched that last quarter in Q1. All new proposals going out to customers and to prospects involve that Maestro activity unit structure, which is a consumption and value and outcome-based pricing structure.

Speaker 7

We've continued to get good feedback from customers and prospects, and we're continuing to refine the details and the minutiae details of the metrics. All the telemetry is in our platform as well, both for ourselves as well as for our customers to track it. Then, just to remind you, later this year, in July this year, all renewals we're gonna be doing with our customers is also gonna involve the MAU pricing structure. It's just a, it's a great, you know, sort of trajectory for us to tie the movement and the emphasis we have around our AI-oriented use cases and roadmap and the agentic capabilities with this MAU-based pricing structure.

Speaker 3

That's very helpful. Thanks.

Speaker 5

Your next question comes from the line of Paul Treiber at RBC Capital Markets. Your line is open. Please go ahead.

Speaker 6

Thanks very much and good morning. Just in terms of You mentioned pricing. You also mentioned that you're seeing larger deal sizes. Could you just dig into further on the deal sizes? Does that reflect more so momentum of larger customers, or are you also seeing an increase in the economics per customer? With the changes in your pricing structure with AI, you know, other aspects of your roadmap, how do you think about the average economics per customer going forward?

Speaker 7

Yeah. Look, I think, Well, firstly, it's a very good question. What I'll say is between, you know, sort of winning business with large organizations, and sort of the deal sizes, what I'll say is that both are important factors, right? I mean, I think we are selling to large enterprise organizations. That was, you know, a big contributor of our bookings in Q1. You know, some of the large wins were with some of the largest companies in the world. Also I think the scope of the capabilities we're taking to market is broadened, right? As we've innovated and brought new capabilities to market. You know, Blaine talked about Demand.AI, which is our machine learning-based forecasting capabilities.

Speaker 7

That is using outside-in data and using sophisticated machine learning techniques that we feature engineer for improving our customers' approaches to how they think about demand of the organization. You know, another capability that we introduced, which is our Enterprise Scheduling capabilities. Which is using sophisticated, you know, scheduling genetic algorithms and optimization capabilities to bring efficiencies to the shop floor of these manufacturing organizations and bring an integrated approach to supply planning with production scheduling. All these expansion capabilities, now we have these agentic capabilities that we are also adding onto our footprint. All of these capabilities are creating fantastic opportunities for us to both cross-sell to existing customers, but also when we land net new logos, they're becoming a broader footprint.

Speaker 7

A lot of times customers are working with us because we're able to bring that end-to-end solution with a platform that understands the complexity and the physics of the supply chain, and then we're adding these intelligent algorithms, these intelligent agents on top of them to really be able to create the next wave of value. It's, I think, a combination of larger organizations, but also a broader set of capabilities.

Speaker 6

That's helpful and great to hear. The second question, just on, you know, there's obviously a lot of interest for customers to use AI to develop more software internally. Based on the feedback that you've seen or heard from customers, where are they delineating between you know, software for supply chain or within the enterprise that they're looking to build themselves versus what they would use a partner like Kinaxis to provide?

Speaker 7

Yeah, look, this is, this is a good question, and I think, most of our customers are still calibrating, you know, where, you know, they work with Kinaxis versus where they do in-house development. What I can tell you is, as we are making investments in our underlying platform, we are providing capabilities more and more where customers can both use out-of-the-box capabilities that we embed in our products and our capabilities. Also, we are able to provide extensibility and composability in the underlying platform we have. When there are unique capabilities that our customers need or use cases where we need to extend what we are able to do, we are being able to facilitate that in a very supportable, maintainable, and sustainable way, right?

Speaker 7

Going forward, I think, the ability of our platform to provide for that composability and provide for, you know, all the extensibility will allow both our customers and our partners to develop capabilities on our platform. When they develop capabilities on the platform, it's not to write custom applications or custom solutions like in the traditional or legacy approach to it. It's really gonna be allowing them to compose solutions, compose agents, compose, you know, micro apps, while taking into account all the different pieces of the Lego blocks that are part of our platform. So, that's an important trend that we're seeing. Supply chains, the extended supply chains deal with the minutiae of operational details.

Speaker 7

There's a lot of, you know, variance in the needs by industry, by vertical, by geography, by country, by operational function. Being able to have a platform that is flexible, extensible, and composable, gives them that ability to leverage all the knowledge we've been able to accumulate over the years and all the reflections we have of the, you know, the digital representation of that physical supply chain and the intelligence library of algorithms we have together with our semantic and ontology layer to really be able to compose applications when needed as well. Our vision is to not only play in out-of-the-box packaged applications, but to also play a growing role in organizations that do want to innovate and in that DIY space as well.

Speaker 6

Thanks for taking the questions.

Speaker 5

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

Speaker 10

Hi, good morning. Hoping you could talk a little bit about where you are in the partnership strategy. How should we think about partnerships with companies like Databricks and Nvidia contributing to growth? How do you think about growth with the traditional SI partners here?

Speaker 7

Yeah. It's a good question. Look, I mean, obviously, we've been working with our SI partners for several years, and we're gonna continue working with them. They're playing a bigger and bigger role as we scale up the business. You know, like as I mentioned earlier in the call, we're really doubling down and investing in the training and enablement and ensuring that we still have an active involvement in those implementations, through the Guardian Package that we now have with these SI partners. In terms of, you know, the rest of the ecosystem beyond the SIs, there's some important, you know, ecosystems that we are becoming a part of in a more and more active and strategic way.

Speaker 7

Of course, you know, we work with two hyperscalers, Google and Azure, we are actively working with them. You know, you'll be hearing some announcements coming up at Kinexions along these lines and some of the more, you know, innovative work we're doing with some of these hyperscalers. In addition to the hyperscalers, Google and Azure, you know, we're also working actively with Nvidia. We had made that announcement in our partnership to innovate our optimization engines and our MIP solvers using Nvidia's cuOpt, which is, you know, an innovative capability that they've just launched recently. You know, it runs on their GPUs. We're getting deeper and deeper into that Nvidia ecosystem.

Speaker 7

With Databricks, that's an important relationship because we're building out our extensible data fabric. That's a relationship we entered last year. We are continuing to leverage their machine learning pipelines as we enable capabilities for forecasting and machine learning-based forecasting for our customers. That component that we are OEM-ing from Databricks is also very important. I envision that the ecosystems like Nvidia and Google and Azure will become more and more important for us. There's another element which is, we OEM and we leverage the LLMs as well, right? OpenAI, Google Gemini, as well as Anthropic Claude. There's different ecosystems emerging.

Speaker 7

We want to, of course, play appropriately in those ecosystems. With the hyperscalers, with the SIs, and in some situations with some of these other folks, we are engaging and partnering in certain accounts as we engage with customers, as we engage with prospects as well. You're gonna see us continue to double down and focus on developing these ecosystem relationships even further going forward.

Speaker 10

Thank you. Maybe for my question, I mean, next question. Obviously, Kinaxis has been doing well in multiple areas and definitely results this quarter were very good. Is there anything worrying you, Razat, as you now have kind of been in the seat for the few months here? How are you thinking about the business and the evolving landscape here?

Speaker 7

Well, I worry about everything. Look, it's the business clearly has a lot of momentum right now, and, you know, but we're not being complacent about it, right. If I look at it, you know, with all the new wins and the growth we have, we have to stay anchored and focused on ensuring our customers are getting value. We are doing that, you know, you know, with a lot of investments we've made in our delivery organization, in our customer success organization, and with our partner ecosystem, right. I mean, we only retain the right to continue growing as long as we can keep making our customers successful and ensuring they're getting value from our solutions.

Speaker 7

That's a, that's a really important focus for us. Of course, beyond that, you know, we are accelerating our innovation cycles. We've increased our investment significantly in R&D, as Blaine mentioned earlier, you know, and the investments in R&D are not from the point of or a vantage point that there's a great white shark that is coming to eat us. It's really to, you know, really focus on the fundamentals of what are the needs of our customers, what are they trying to achieve, and then map that to all the new and exciting technologies, whether they are new data architectures or new generative and agentic AI capabilities. How can we marry those together to create the next wave of value for them? That's a very big focus area is our innovation roadmap.

Speaker 7

You're seeing us continue to innovate so we can leverage our fantastic core we have, which is Maestro and the end-to-end planning capabilities and that representation of the concurrent supply chain, but also extend beyond that with an extended platform to get into agentic orchestration across the end-to-end supply chain, right? That's where we are investing the data fabric and the semantic ontology layer and the knowledge graph and the Maestro Agent Studio. A lot of things to get done, but all exciting. All of that only happens as long as we can retain and attract the best talent and our people, right? The company has a fantastic culture. We are not taking that for granted.

Speaker 7

We're making sure that we continue to retain the innovation culture, the collaboration culture, the product-centric and customer-centric culture. We also need to make sure we attract the right talent as we aspire to bigger dreams and bigger goals. Those are the things that I'm working on is making sure we continue delivering on customers, making sure we continue to execute on our innovation roadmap, and continue to make sure we retain and attract the best talent possible.

Speaker 10

Thank you very much.

Speaker 5

Due to time, we ask that the Q&A roster limit yourself to one question, please. Your next question comes from the line of John Shao at TD Cowen. Your line is open. Please go ahead.

Speaker 1

Good morning, guys. Thanks for taking my question. I just want to ask about token costs, which is seen as a concern for some software investors. I know your pricing model is hybrid and consumption-based, could you still remind us the guardrail you have there to make sure it's not going to be a gross margin headwind? Thanks.

Operator

Yeah, that's a great question. We, we've heard in, you know, a lot of different companies having to worry that tokenized costs and the change in tokenized costs will elevate the amount of cost of goods sold as you go forward. We're in, I think, just like everyone else, we're still in the early days. We're not seeing that impact at this stage. It will be something we'll have to figure out. At the same time, we're having some almost tokenized pricing that we're, you know, bringing to our customers. We're trying to offset that cost with our own pricing strategy as we go forward, but it's still too early to determine how that's gonna play out.

Operator

Just like any other new change, we expect that there's gonna be a price elevation in the short term, and then it will start to work its way out and be a little bit more efficient as we go forward. Today, it doesn't have any impact on any of our numbers including in our short-term forecasts.

Speaker 7

Yeah. Just to add a little bit to that, right? I mean, tokens come into play on two fronts. One, on the internal usage of, you know, AI and code assists and other LLM capabilities. There, now we are allocating a token budget to all our engineering teams, and we have seen situations where some of the most productive engineers are blowing through that. Actually, frankly, we're celebrating that to some extent because the numbers are not something we can't manage within our budgetary guidelines and on our in our forecasts. What we're seeing in terms of outcomes, in terms of velocity and productivity improvements and speed is just fantastic. That's on the internal side.

Speaker 7

With our customers, we have put in place a telemetry, like I mentioned. The MAU construct factors in tokens, like Blaine said, and we monitor that telemetry. Our customers can monitor that telemetry. When customers reach, you know, the top end of that, we do engage our commercial teams to engage with the customers to see if they need to top up on that, right? We are well protected from that regard. We are also watching closely what are the pricing trends for unit costs from LLM providers. Obviously, we've been beneficiaries of those unit costs coming down in the last two years pretty dramatically, but we are watching that pretty closely as we go forward.

Speaker 5

Your next question comes from the line of Mark Schappel at Loop Capital. Your line is open. Please go ahead.

Speaker 4

Hi, thank you for taking my question. Razat, there's been considerable recent discussion about kind of the software power center kind of shifting from traditional applications to these orchestration layers, and that seems to be a trend that you guys are embracing. I was wondering if you could just elaborate maybe on how real that shift is you're seeing, and then also maybe just elaborate on your orchestration capabilities.

Speaker 7

Yeah, look, I think, you know, the underlying data architectures are shifting and, you know, I'll talk about ourselves a little bit. You know, the key sort of capability we have, you know, orchestration means different things to different people. For us, really what it means is to leverage our underlying platform and our sort of understanding of the physics of the supply chain, and to really help our customers plan, make decisions, take actions, and to really be able to achieve the outcomes and then to go through the learning cycles as they go through that. That's the orchestration loop as we think of it, right? Planning, decision-making, actioning, execution, achieving the outcomes and the results, and then going through the learning cycles.

Speaker 7

You know, I think what's most important and frankly, the big effort to achieve this vision is not so much on the underlying technical architectures or the product capabilities or the agentic capabilities. It's more importantly in working with organizations on how they need to rethink their ways of working. These organizations are, you know, Fortune 1000 companies that we're working in the seven verticals we work in, right? It requires I mean, there are some use cases that can have a quick hit with, you know, creating productivity and automation in repetitive tasks and things. Those are the low-hanging fruit and easy things to facilitate through agentic workflows.

Speaker 7

To really truly get into orchestration across functions, across, you know, planning horizons of strategic decision-making versus tactical decision-making versus execution, it requires organizations to rethink their fundamental operating models, their underlying processes, you know, how they're organized, how they think about, you know, their metrics, and that takes time, right? That's why as we, You know, I think in my humble opinion, I think most people are over-expecting what impact, you know, these orchestration capabilities will have in the enterprise in the near term. I think they're also underestimating the impact in the mid to long term. It's not just a technology-driven approach. You've got to also make fundamental changes to your organization structure, operating models, processes, metrics, and things like that to really transform your ways of working, right?

Speaker 7

That's why, you know, the work we do together with our partners is very critical in achieving the true outcomes from this vision.

Speaker 4

Thank you.

Speaker 5

Your next question comes from the line of Suthan Sukumar at Stifel. Your line is open. Please go ahead.

Speaker 11

Good morning, gents, and congrats on a very impressive quarter. With respect to my question, I just had a wanted to chat on the competitive landscape with AI. How are you guys positioning Maestro Agents versus the agentic frameworks that are offered by some of the incumbent underlying platforms like SAP that your customers already use? I'm just wondering, is this more of a share of wallet discussion at the orchestration layer, or is there a coexistence and interoperability here that can be leveraged? Thank you.

Speaker 7

Yeah, you I think you were cutting out there, but I think I got the gist of the question. Look, I think, what I'll say is most organizations are, early in the journey to really leverage these agentic orchestration capabilities, right? Customers have done pilots with agents. They have put many agents in production, including with ourselves, and they're seeing good results when it comes to getting productivity and automation, you know, improvements. To really truly do orchestration, I fully expect that, you know, companies will have to have orchestrator agents who work across a very heterogeneous systems landscape, right? In that regard, our philosophy and our approach is to be interoperable, right?

Speaker 7

We're not trying to be everything to everyone, but as we have sort of, you know, architected our platform and as we are making investments in the go-forward roadmaps in our platform, we're really architecting the way that we can be interoperable, right? You know, in the end-to-end world of supply chain, any Fortune 1000 company may have anywhere from 10 to, you know, 100 applications that power that end-to-end supply chain, right? We have to really have the ability to really be able to integrate to those systems and work across those systems. The orchestration use cases that agents can facilitate will also need to traverse a pretty diverse systems landscape.

Speaker 7

That's where this semantic ontology layer is very important because it provides the context for what these orchestrators do. It provides a common taxonomy, and then, you know, these agents have a chance of traversing that heterogeneous landscape. Of course, as companies are doing that, they're always looking for opportunities to consolidate that heterogeneous landscape and to simplify them, but they continue to be fairly heterogeneous in that end-to-end supply chain world. Our design principle is really around interoperability and coexistence.

Speaker 7

At the same time, you know, we expect that, you know, we'll have our own agents that will play the orchestration role, and at the same time, I expect that there'll be orchestrator agents from third parties, where they leverage the Maestro platform for making decisions and for doing computations that we are very good at doing, you know, for supply planning, for demand planning, for, you know, inventory optimization, for production scheduling and things like that. I think it'll work in both ways, and that's how we're architecting our platform.

Speaker 11

Great. Thank you.

Speaker 5

We've reached the end of the Q&A session. I'll now pass the call back to Rick for closing remarks.

Speaker 9

Thank you. Pardon me. Thank you everyone for participating on today's call. We appreciate your questions and your ongoing interest and support in Kinaxis. Look forward to speaking with you again next time when we report second quarter results. Bye for now.

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