Good morning, ladies and gentlemen. Welcome to the Kinaxis Inc. Fiscal 2023rd Quarter Conference Call. At this time, I'd like to remind everyone that this call is being recorded today, Thursday, November 5th, 2020. I'll now turn the call over to Rick Wadsworth, vice President of Investor Relations at Kinaxis Inc.
Please go ahead, Mr. Wadsworth.
Thanks, operator. Good morning, and welcome to the Kinaxis earnings call. Today, we will be discussing our 3rd quarter results, which we issued after the close of markets yesterday. With me on the call are John's card, our President and Chief Executive Officer and Richard Monkman, our Chief Financial Officer. Before we get started, I want to emphasize that some of the information discussed on this call is based on information as of today, November 5, and contains forward looking statements that involve risks and uncertainties.
Actual results may differ materially from those set forth 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 Conaxis' SEDAR filings. During this call, we will discuss IFRS results and non IFRS financial measures. A reconciliation between IFRS results and non IFRS financial measures is available in our earnings press release and in our MD and A, both of which can be found in the Investor Relations section of our website, kinaxis.com and on SEDAR. Participants are advised that the webcast is live and is also being recorded for playback purposes.
An archive of the webcast will be made available on the Investor section of our website neither this call nor the webcast archive may be rerecorded or otherwise reproduced or distributed without prior written permission from Connexus. To begin our call, John will discuss the highlights of our quarter as well as recent business developments, followed by Richard, who will review our financial results and outlook. Finally, John will make some closing statements before opening up the line for questions. As a final note, we recently held our annual user conference connections. And for the first time ever, it was fully virtual, fully open to the public, and now it's available as archived content.
Just go to the Investor Relations homepage at kinaxis.com, scroll down and click watch now on the Connections 20 banner to consume sessions on demand. It include customer presentations, new product innovations, and a number of presentations from our new solution extension partners. The event is an incredible crash course on the value proposition we offer our market, so I encourage you to listen in. I'll now turn the call over to John.
Thank you, Rick. Good morning and thank you for joining us today. First as always, I hope you and your families remain healthy. Nothing is more We must all do our part to contain the spread of COVID-nineteen and we continue to extend our deepest thanks and appreciation to frontline workers everywhere. And extend our sympathies employees and their ability to remain efficient and effective during this prolonged work from home condition.
I'm pleased to report to $39,300,000. Total revenue growth of 17 percent to $55,100,000 and adjusted EBITDA margin of 18%. On the strength of our year to date results and the growing backlog, we are very pleased the range we initially provided. We are also pleased to be able to increase our total revenue guidance to $220,000,000 to $223,000,000 and our adjusted EBITDA margin I'm incredibly pleased to be able to present this and a business model that relies on long term subscription contracts with blue chip customers. That said, we recognize that our customers are not immune to COVID 19 and have faced significant disruption themselves.
Many of our long term many of their long term suppliers have similar, similar challenges. Kinaxis has also not been completely immune to the short term side effects. While our backlog and pipeline remains stronger than ever, and sales activity continues to be very high in all regions. We are also seeing some customers Retention rates remain high and we continue to achieve over 100% net revenue retention with our current customer base. Our value is evidenced by However, we have experienced some instances where customers coping with significant adverse financial situations are not currently in industry forecast for supply chain management software and are consistent with the experiences I've just described.
Notwithstanding these side effects. It is clear to me that supply chain transformation initiatives have never been more urgent. And I am pleased Fueling our pipeline even further, we have just concluded our annual connections conference, which was virtual this year. We had a record breaking registration of over 3000 people representing over 500 companies spanning 70 countries. What is especially encouraging is that and how others are leveraging concurrent planning to absorb unprecedented levels of disruption.
Supply chain has never been more relevant Supporting this view, I'll add that the industry forecast I mentioned also predicted a stronger year for supply chain management software projects in 2021, with SaaS offerings benefiting disproportionately. Our acquisition of Rubicleoud is progressing according to plan. Recently, we were able to announce our first joint customer, Cody, and I Conic Multinational beauty company with over 70 brands. We said that one of our primary interests in Ruben cloud was for its value to our consumer products vertical, and this is but one demonstration why. Naturally, We are working on many more joint opportunities in consumer products and look forward to sharing more news of our success very soon.
Rexall, a retail customer who we welcomed with the Aruba Cloud acquisition, presented at Connections. Rexall has over 400 pharmacies dedicated to providing exceptional patient care and customer service in 180 communities across Canada. Rexall shared their success in improving demand forecast accuracy by over 20% since moving to our solution. We also welcomed Superdrug as a Nu Kinaxis customer. Superdrug is the 2nd largest health and beauty retailer in the United Kingdom.
We are very that fit within form to on schedule in mid-twenty 20 and already have 5 partners that have offered entirely new functionality and mission critical data through rapid response. Customers will soon be able to take advantage of new capabilities for transportation optimization planning recycling flows and enhanced production line scheduling amongst others. The ability for 3rd party extensions be developed on rapid response will ultimately accelerate and expand the value our customers will gain and represents an entirely new vector of growth for Kinaxis for years to come. Now I will ask Richard to provide further detailed commentary on the financials for the quarter and our outlook.
Under IFRS. Total revenue in the 3rd quarter increased 17 percent to $55,100,000. SaaS revenue grew 26 percent to $39,300,000, driven by new customer wins as well as the fashion of existing customer subscriptions. Subscription term license revenue was approximately $1,000,000, in line with our expectations for the quarter and previous commentary. As we have consistently noted, subscription term license revenue is primarily tied to the renewal cycle of our customer hosted software subscriptions as we recognize as right to use component of a longer term subscription in the initial month out the term.
Our professional services activity remained strong again, resulting in revenue growing 23% over the corresponding 2019 quarter to $11,500,000. The growth reflects the proven ability of our expanded delivery team to support engagements. As we have noted in the past, professional services revenue will vary from quarter to quarter based on the number size, and timing of We continue to be To date, our 10 largest customers accounted for 28 percent of total revenues with no individual customer accounting for greater than 10% of total revenue. Gross profit grew by 10 in Q3 2019. The change reflects the increased level of investments in our professional services customer support, and SaaS delivery capabilities, as well as the impact of the higher level of subscription term license revenue in 2019.
This year, we have aggressively expanded our team's capabilities across all functions organically as well as through our 2 acquisitions. In particular, we have significantly expanded the capabilities of our product team. We have invested with a longer term view and for some functions, at a level above our 2020 revenue growth. As a result of these investments, and again, the relative contribution of subscription term license revenue, our profit during the quarter decreased to 700,000 or $0.03 per diluted share compared to $0.17 per share in Q3 2019. Adjusted EBITDA for the quarter Our Q3 cash flow from operating activities was up 3 26 percent to $4,500,000 from 1,100,000 for the third quarter of 2019.
As of September 30, 2020, cash Cash equivalents and short term investments totaled $210,000,000 compared to $212,600,000 at the end of 2019. Approximately $60,000,000 of our cash, however, was used during the third quarter to fund our acquisition of Rubicloud. Our minimum contracted revenue backlog remains strong. As of September 30, 2020, It grew by 26 percent to $364,700,000 as detailed in Note 13 to our financials. This amount includes $334,900,000 of SaaS revenue backlog, which represents a 36% increase from September 30, 2019.
The backlog will be recognized over the following periods. $43,200,000 will be recognized in Q4 of 2020, of which $38,100,000 relates to SaaS business. $136,500,000 will be recognized in 2020 of which $124,300,000 relates to SaaS business. And $185,000,000 will be recognized in fiscal 2022 or thereafter, of which $172,500,000 relates to business. Total bookings in Q3 were $75,300,000 of which SaaS bookings were $71,500,000, up significantly from the last quarter Based on our strong year to date results, backlog and with 1 quarter remaining, we are tightening at the high end of our initial range are SaaS revenue growth expectations to 24% to 25%.
Given our strong Q3 saas revenue and long history of quarterly sequential growth, we appreciate that some investors may have expected that we would have raised our full Let me explain why we As John noted, the overwhelming majority of customers have renewed their subscriptions. However, some customers advise us they're not in a position at this time to renew given current market conditions. Due to some of that activity in late Q3, we were required under revenue recognition rules to bring forward some of Q4 revenue into Q3 that would have otherwise been recognized. Accordingly, our SaaS revenue guidance for the year remains appropriate. We are maintaining our annual guidance for subscription term license revenue at 16000000 to 17000000.
Overall, we now expect annual revenue to be in the range of $220,000,000 for the year to be in reflects both our higher total revenue guidance for 2020 as well as lower travel and event expenses. As per our practice, we will provide 2021 guidance when reporting Q4 results, but I would like to make a few comments now to remind listeners of some of our varies directly in line with scheduled renewals for the underlying customer hosted subscriptions. As these subscription arrangements have an approximate 3 year term, we anticipate a low level of subscription term license in 2020 specifically in the $3,000,000 to $5,000,000 range and then returning to the mid $20,000,000 level in 2022. Furthermore our expense structure has increased in line with our significant investments through both organic and acquisition growth. As John mentioned, we are very pleased to be able to maintain or increase our strong guidance throughout this very unusual year.
While we continue to see and increasing recognition of our unique product differentiation provide confidence. Thank you for your continued support. With that, I turn the call back over to John.
Thank you, Richard. As I mentioned earlier, we hosted over 3000 registrant from over 500 companies spanning 6 continents and 70 countries at our virtual connections just 2 weeks ago. It was an opportunity for us to Our new supply chain command and control center gives companies instant visibility and actionable insights into the health of their business, through an intuitive and interactive dashboard that combines traditional data with new digital disruption detection signals. From a single place companies can manage day to day volatility in real time
by prioritizing and
automating routine responses. The automatic capture of decision data leads to future The solution extension partners I mentioned earlier will extend the power of the Command And Control Center application with new planning capabilities and digital inputs. Kinaxis is also strengthening its demand management portfolio. With enhanced demand sensing capabilities, companies can increase revenue, improve on time delivery, and significantly reduce stock outages by incorporating real time demand signals, data inputs, and automatic machine learning. The result is light touch and a much improved accuracy for short and long term forecasting.
Through the Ruba Cloud acquisition, the addition of AI powered promotions planning capabilities helps consumer products and retail companies identify the best business opportunities, reduce missed dollar opportunities, and increase promotions revenue uplift. All this new functionality attracts new subscription dollars, which means a larger total addressable market. As well as a more highly differentiated product. As Rick mentioned at the outset all our connections sessions are available on demand, so we encourage you to register and dig deeper into our new capabilities at your convenience. And here for yourself, how our customers describe the value of concurrent planning firsthand.
As always, thank you for taking the time to join us on this
First question comes from Richard Say with National Bank Financial.
Yes, thank you. Just want to dig into these, the non renewals a bit more based on your comments, are you suggesting that these clients are kind of in a situation of financial distress on their own and that's kind of causing them to be in this position here?
Well, it's difficult for me to judge with precision, what our customers, what is guiding our customers' decisions? I will say, it's quite typical during a pandemic like this for a lot more scrutiny around investments. And not every not every company in the world is, is, is surviving through this pandemic as well as others. And so what I would tell you is our net revenue retention remains, over 100% and the overwhelming majority of renewals have taken place Our confidence remains high in our midterm growth in that mid-twenty percentage range So, I think some of these, some of these conditions are, I would say temporal.
Yes. And if I may, John, and Thanks for that question. As John noted, with the overwhelming majority of customers renewing, this situation was, a little different in that just because of the revenue recognition rules, we have to pull revenue that we anticipate in Q4 into, into Q3. And so the total revenue was anticipated as Q4. It was the timing.
And so that really is, why we wanted to, to highlight that because When you take a look, you'll see that revenue is probably going to be in line in Q4 with the with the Q3 with this guidance. Yeah.
The only reason I asked about the weather there in financial distress is that everything we've heard just in the industry is that supply chain has been so critical during the pandemic. And yet, you know, if, these customers are sort of leaving, it sort of just begs the question, is it related to that? So anyways. With respect to the pipeline, so just to kind of LA fears here, you talked about the pipeline on your call. Can you give us an order of magnitude in terms of the sequential increase no doubt, I'm sure you got a lot of inbounds from that conference recently,
which is widely well attended, but if you can give us some perspective on that, that'd be helpful.
Yeah, absolutely. It's, it continues to strengthen from the same period last quarter. Just the fact. It is larger now than it was 3 months ago. It's I like monitoring, not just the overall size of the pipeline, but the health and not just the health, but I'd like to see is it healthy in all regions, right, in Europe and in Asia?
And I can say that, we're seeing, we're seeing more activity, more more sales activity now than we were 3 months ago. That's a fact. Obviously, our connections conference happened just 2 weeks ago. I can tell you that we, the registration and participation was that was greater than we had anticipated. It was wonderful to see, but not surprising.
I think supply chain is craft has been around as long as humanity has been. And it will be around for 1000 years to come. And under current conditions, it is not unnatural for manufacturers to be looking for ways to absorb this unprecedented ferocious disruption. And so opening this up to the public, I can tell you that the majority of companies We're prospective companies looking to learn. We had wonderful customers that talked about their journey.
And the manner in which they were absorbing disruption. And I think that was the, that was the magnet for attending. So obviously, just 2 weeks ago, having, having this wonderful group of prospects in our home is, is a wonderful thing for us and we're obviously working that, working those prospects given how warm they are. So that's the way I would describe, our current condition with the pipeline.
Okay. And just one last quick one for me. Do you think these non renewals are materially, and not that they would affect 2021, or do you think the, growth in your pipeline is robust enough to kind of, give you confidence here that you'll sort of continue to track to draw on?
Well, with the renewals, you know, again, the overwhelming majority from both a dollar and a number perspective have renewed, our net retention is above, 100% and, and, And so, you know, I can't comment on the long term, but in the near term, we see that carrying on over the 100%. And then as John noted, it's a matter you see, you can see the backlog and you can see the, you know, the ratio, if you wanted to do your own rejection as to growth. And then it's a matter of our activity in, in Q4. And, and, you know, the conversion of that, that strong funnel that we have. And that's why Richard, it's it's that's why we're, you know, our our cadence is always willing to provide guidance at the same time when we report the result so that it's clear to everybody when they can see that backlog and they can see the results and You know, as John said, we remain confident in the broader market conditions.
It's not without, without its challenges, but, you know, that's, that's you know, this is our history of execution. Okay, that's
great. Thank you.
Next question comes from Thanos Moschopoulos with BMO Capital Markets.
Comes of the non renewals, to clarify, are we talking about sort of like a handful of customers or would it be something more than that? And then, in some cases, might it be a question where the customer wants to keep using the software, but it's tied up with procurements and they might actually renew it somewhat in the future. Or in these cases, does it seem more likely that they might be switching off the software indefinitely?
Well, Thanos, thanks for that question. In fact, that's a very interesting question. And we're very pleased to have, you know, welcome back customers after the parted. And, you know, there's a number of reasons why, you know, customers may have left, you know, everything from from their business climate to, to, to other factors. But, yes, we, we, for very clarity, we have welcome back clients after, the, you know, after we had a sort of a separation, if you will.
The, you know, when I do talk about, you know, the, the overwhelming majority, it's, it's, so yes, it is, it is a relatively small number. We would love to keep every customer. And in fact, what we have done and we can, we will continue to do is to invest in our, our customer success programs. And this starts off from, you know, helping them through to training through, you know, ongoing health checks with them to, you know, helping them understand features that there may that we can see that is not utilizing. We have a dedicated team in this regard.
We have a sales team that is also now just focused on working with customers. And we're seeing we're seeing that success. But there come times when regardless of what we do, the situation is just such that that, we have to, part ways, but it's, you know, gain and, you know, we you know, we remain confident in our ability to, to to work with customers, but we we can't, you know, project, I mean, we have lost customers for through acquisition or through insolvency. So, I, you know, I can't predict what's going to happen in the longer term, but those are the actions that we're taking to continue to strengthen, our rapport and relationships with our customers.
All right. And did the non renewables have any impact on the capitalized contract acquisition costs in the quarter?
I'm sorry. I missed that.
Yes. So then non renewals have an impact on your capitalized contract acquisition costs in the quarter.
No. Okay.
And then finally, John, if you could comment on the competitive environments, just with COVID and everything going on. Has there been any change in the landscape has it caused customers, for example, to become more appreciative of the value of concurrency? How are you seeing your competitors spawns in this environment relative to what the dynamic was like pre COVID?
Yes, that's a great question and we're seeing while the large incumbents continue to be, ever threatening. I will say that the openness to altering technique, well, well, frankly, in the conversations I've had, A, I've never had more about it with C level executives in a single quarter than I have in this past quarter. There's a deep interest in understanding can I be managing governing supply chain planning differently and achieve better results And so that gives me confidence that there's a trend towards transformation? And people ask me, what's the likelihood that supply chains are going to digitize and transform? The answer to that question is, 100%.
There's a 100% chance that companies will transform and digitize at some point in time. You know, the question is about timing. And so, you know, while I wouldn't necessarily declare we are at some inflection point, I will say that this pandemic has called called into question the, you know, the legacy approaches to governing supply chain planning. And the lethargy that comes with it. Most of, the conversations I'm having with supply chain practitioners I'm hearing one common thread.
The things that I could trust to be true yesterday are no longer trustworthy. Right? And so they're starting to recognize that, the agility, muscle, if you will, The atrophy in agility is what's causing a lot of the pain they're experiencing today. So as it relates to to competition, I would say, we're seeing less. I'd say, product threat from competitors that cannot come close to to showing any concurrent planning capability.
And frankly, in the 27 years, I've been, serving this market, I've yet to see a technology come close to what we do.
That's great. I'll pass the line. Thanks.
Next question comes from Stephanie Price with CIBC.
Good morning.
Good morning
Stephanie. A bit on the conversion of the pipeline. Can you talk a bit about the commentary on deferred deals and expanded approval processes. Has those accelerated since last quarter and are they specific to certain verticals or geographies or more broad based
Yes, I think, I mentioned earlier, there's a lot more scrutiny in an investment. I think households are applying a lot more scrutiny in how they're spending. When I think is only, responsible. And so, you know, I would say that, you know, the last, you know, last earnings call, we talked about that seeing protracted, and heavier, if you will, procedures around approval. Often requiring board approval, to proceed on projects like this.
And so we're continuing to see that in a broader in a broader sense. As, you know, as the pandemic sort of, settles in and people realize that this is going to be around a little longer than perhaps they thought, you know, 3 or 6 months ago. So I'd say that the protracted procedures for approval are starting to broaden across the verticals the geographies that we serve.
Okay. Thanks. And in terms of professional services revenue, obviously strong again this quarter. If you can talk a bit about implementation timelines in the current environment and how you see kind of this growth rate trending going forward?
Oh, thanks, Stephanie. We've been extremely impressed by our expanding professional service team, both, the the the, again, the organic growth as well as with, you know, our prana team. And, and how they've been able to engage. In fact, arguably significantly higher productivity because they don't have to, spend time on travel and so on. But it's, it's not just simply that higher level of productivity and higher level engagement across customers.
It's that we've expanded our capabilities beyond just, deployment to include what we call sustained services. In that. What we do is we continue to, to engage with our customers and provide ongoing support throughout their journey with, with with Kinaxis. So this, this, this is bringing in additional, revenue for us. So it's not just simply the deployment or the initial deployment, the expansion, but it's the ongoing, level of engagement.
So it's it's a combination then of a stronger, broader team and, and a greater menu of capabilities.
Great. And then just finally for me, maybe a related question around partner execution in the quarter. Just one way of seeing through COVID in terms of partner engagements and execution? And maybe a bit on the new solution extension partners as well. I noticed that one of them was a premier sponsor of Connection last week.
Well, I'll be able to comment from, sort of, from a, from a deal perspective, then I'll let John comment further on he did note with regards to some of the, the platform enablement activity that's going on. But, you know, the majority of deals continue to be new to NBLs, continue to be partner influence. So, you know, we're very pleased with that that the partner universe continues to to expand. The number of certified individuals as well as their level of certification continues, continues to execute. And so, you know, we're very, very pleased with the, that the take up and the broadening of that knowledge, globally.
You know, in terms of, you know, the partner some of the partner enablement expansions to John? Yeah, absolutely.
One of the things that we have seen, as a result of of the pandemic. And it's, and it's really, you know, what I would say is a phenomenon coming from our own customers. This disruption has caused, you know, I would say a lot of the automation, and optimization approaches to fail because the assumptive parameters driving automation can no longer be trusted. And as a result, human intervention and agility, agility through human intervention is the path to success. It's not unlike a aircraft that hits turbulence, all of a sudden, the first thing pilot does is turn off autopilot and grabs the yoke And so this is happening all over the world.
And as a result, our customers themselves have come to us asking for what they call sustainment services. Do you have skilled individuals that can help us absorb all the volatility? Because our team, quite frankly, isn't large enough to absorb, they're on enough hands and minds to absorb the volatility they're dealing with. And so I think that's one of the areas that's caused professional services for us to remain high as well as partners, right? They're leaning on partners, heavily on sustainment services to help them absorb the volatility.
So projects remain, very, very active. The other thing I will say as a side effect is there's no what I'll call time zone fatigue, you know, in a time where professional services often happens on, on premises, where consultants and employees and partners are made to travel across time zones deal with that. Well, that's not happening. And so we're seeing even more efficiency in the delivery, of projects. Lastly, I'd say, customers are looking to accelerate milestones more than ever.
They know they know the benefits that will come with concurrency. And so they're looking to hit those milestones faster, than originally anticipated.
Great. Thank you.
Next question comes from Robert Young with Canaccord Genuity.
Hi, good morning. I was hoping to put a little bit of precision around some of your statements around these, renewals delays. Are you talking about cancellations service happening currently? Or are you talking about renewal delays, so uncertain potential for cancellation of certain of service?
Yes. So, Rob, our contracts are fixed and determined. And so, you know, these these these are essentially at the end of the term, you know, customers, you know, it would be those customers not renewing. Now, in some instances, you know, arrangements may have a ramp. You know, for instance, you know, we use our strong balance sheet are you sort of jokingly calling the bank of Kinaxis whereby, as customers continue to see a stronger ROI as they broaden their usage rapid response, we may, you know, provide a bit of a shift in terms of the actual payments, but, you know, our agreements are fixed to terminal.
And so as you basically You know, they've chosen not to exercise their renewal, their renewal rights at
the end of the term. Okay.
And then remind us on the seasonality of renewals. Q4, is that a seasonally strong quarter for renewals or would you say Q1 would be the stronger quarter?
Well, a subscription arrangements are typically in sort of the 3 year band, in some cases, they're longer. And, you know, we've been now into our 15th year of, of, of, of, of, of, of, of, of, of, of, of, of, of, of, of, of, of, of, of, of subscription. So time, there was a little bit more seasonality, but as we've, we've expanded the customer base and, we'd, I would say there really isn't that level of of seasonality. You know, there is, you know, that with regards to, you know, very long term customers, some that were actually converted, you know, that were prior to 2005, those are the ones that I have to seem to talk about every earnings call with regards to subscription term license. So yes, there is some baked in on that minority of customers, cycle.
But, you know, at the broader level, I would, I wouldn't say there is that marked seasonality now. Don't forget our our our customers that we very much have a land and expand model. So, you know, what is not a common is them to expand. But those expansions are predominantly on a co terminus based So you'll see that pickup as we go through.
Okay. And then it sounds as though you've got an expanding group of prospects, if I read the comments earlier correctly, maybe even brought in further by connections. So are you putting in place more aggressive qualification and like do you think that sales needs to get more efficient here to handle a higher level of prospect volume? Or do you think you need to expand sales because these are high quality high probability prospects?
One thing that, again, is a side effect, a positive side effect, if you will, of this work from home condition is that we've been made to perfect the virtual sale and the virtual demo And, the, I'd say our presales consultants, their efficiency, I would say, has nearly gone up 3x when you think about how demonstrations used to happen, you'd get on a plane and you'd fly some somewhere a different time zone. Have dinner wake up, get up the next day, go to do a 2, 3 hour demo, then, you know, fly back. You you get the picture. And now, you can do three times the number of demonstrations in the same period without increasing that function. And that's been really, that's been really positive for us.
So we're doing a lot more online, frankly, a lot more online. And the other thing is, our employees obviously feel it's unsafe to get on airplanes and fly. And in some cases, countries don't want you visiting either. And prospects don't care to have you visit them as well. So this online phenomenon is really, is really taking hold.
So sales has gotten more efficient? Yes.
And next question comes from Paul Treiber with RBC.
Thanks very much and good morning. Another question on the non renewals. Could you confirm or quantify the pull forward, the amount of pull forward of revenue from Q4 to Q3? And then also, I assume that there'd be no impact to backlog, because these are just non renewals, but could you confirm that?
Yes, Paul. With regards to backlog, yes, there is no impact. I mean, the renewal event, you know, to the, to the extent that it's, it's, it's it's minimal contracted amount gets added into the backlog. In this instance, you know, it it so we're not really we can't really we don't talk about individual customers. So I'll I'll just say that, you know, as I think I, as I did intimate earlier, you know, this is pulling revenue from Q4 into Q3.
We're holding, in fact, we're tightening our total full year subscription growth in the 24% to 25% range. And when you run that math, you'll see either potentially slight decrease or in line with Q4 revenue being in line with Q3 depending upon expansion and new name activity in within the quarter. So that's the range that it bounced by. So again, we're, you know, it, it did not impact our ability to, to, to, to shift to the upper end of our full year the guidance.
And then thinking about the business itself, and I imagine these customers, was it a surprise to you that these customers didn't renew. You know, I assume you can see some customer usage, like were these customers under utilizing the product? And then are there other customers that, similarly maybe underutilized and rapid response And did or do you see a risk of potential non renewal at other customers that haven't notified yet?
Well, again, I mean, it's a very, it's a broad based situation. You know, sometimes, as I noted, it could be an acquisition. And so at the end of their term, they're not going to renew because there may be ready and the parent company has a customer of Kinaxis. In some cases, we've limited cases. We've had you know, insolvencies that, to have recruited that.
In other cases, we've had highly engaged customers that are are driving value. And this is, you know, but just because of, you know, you know, I'd almost would call it a tree ash type of situation whereby while they're driving value, they have been, they're in such a financial situation that, you know, they, they, they're not able to, necessarily renew. In some cases, you're right. It is a matter of of utilization. But again, that's where we have this customer success team that is engaged in working with them to, to try to try to try to help them.
And then just lastly, just to summarize this, To what extent is non renewals normal course in the business? And to what extent has there been a change because of the pandemic or whatever, whatever factors?
Yes. So as mentioned, we continue to have net revenue retention north of 100%. And, as Richard said, it would be abnormal to keep virtually 100% of customers over a 15 year period because of insolvency and in some cases, through acquisition where one of our customers buys another one of our customers. And so the one absorbs the other, if you will, and that's happened. You know, I will say that we have a very active, you know, what I call value assessment and performance and adoption assessment that's ongoing, for every one of our customers.
But I would say, you know, We shouldn't be surprised under COVID that cash preservation becomes the most important thing above all other things. And so, and so I, you know, I would certainly, you know, we're obviously losing a customer's never a positive thing. As Richard said, as we go through COVID, there may be, there may be other conditions that this occurs, at the same time. Our pipeline of new net new activity continues to grow larger now than it was 3 months ago. We have hundreds of prospects that were just in our home connections, learning and listening to what, our customers are doing to absorb this unprecedented time and history.
And so we're going to obviously be working those accounts very diligently. Our sales team has become far more efficient than it's ever been. So you know, we're not we're not sitting back thinking, oh my goodness, there's a, you know, this is some kind of a systemic problem. No, I think what the systemic problem is is the lack of agility and supply chain and the need to address it through transformation. And so, we're feeling pretty positive about the state of the pipeline and the sales activities going on this quarter.
Thanks for taking my questions.
Next question comes from Daniel Chan with TD Securities.
Thanks for taking my questions. Just had a question on the EBITDA margin guidance. If we back into the Q4 implied EBITDA margin at the high end, it's about 11%, which is lower than we've ever seen. Just wondering if there's anything going on in Q4 that would cause that lower EBITDA margin, whether it's higher expenses or something else that we're not thinking about here?
Yes. Thanks for the question, Dan. I mean, there, I mean, obviously at a very simple level, it's, you know, it's revenue less, cost of sales and OpEx. The, we're going to continue to, to we've provided the full year range of revenue to 20 3. So you can model on that.
You know, we're very continue to be very, you know, pleased with our professional services. The subscription term license will not be a significant level in Q4. And then we've talked about sort of the range bound for the SaaS level. So, but at the same point in time, we've noted the significant expansion of our team's capabilities, both organically, because we've been hiring aggressively through this pandemic, as well as then with the acquisition. Adding to that, it is not uncommon for sales and marketing in particular to be higher in Q4, you know, given the level of of events on a virtual basis.
So, I think all I can do is reinforce. We're very, very positive by the productivity of the business, the level of profit and, and, I'm very pleased to increase the guidance for the full year to that range.
Are you expecting to accelerate hiring through the end of the year and possibly into 2021?
Well, we're good. We are a growing organization and we're not a quarter over quarter focus. You know, we've significantly, you know, I think we've noted before that, you know, from a few years back, I've now, for instance, quadrupled our, our sales, you know, quota carrying capabilities. We dramatically, as I noted, in my prepared comments, with this, you know, most recently with the acquisition of Rubicon increased our capabilities, and on the product R and D team, we're we're expanding our global customer care. We're we're investing in the data centers.
This is all part of that longer term because what we wanna do is make sure that we're we're we're we're in a capable situation to execute upon upon this growth. And so, yes, we are going to be increasing now. I don't know, you know, we've dramatically increased over 50% this year in terms of people, I don't think that's going to be sustained. But again, what we'll do is, when we provide guidance into our operating plan for 2021, we'll give you those ranges. Okay.
And I just wanted to dig into code designing with, with Google Cloud. This came about pretty soon after you acquired Google Cloud. Can you talk about how the cross sell happened so quickly? You also mentioned in the press release that you're making progress with cross selling through the cloud into other customers in your CPG base. So just wondering if you could shed some light on how many trials are going on and if we should expect those to be just as fast as the CODI deal?
Thanks.
Yeah, I, it's a great question. And, you know, as it relates to that particular deal, I will say, while we don't comment specifically on one deal versus the other. Closing that particular opportunity happened significantly faster than other opportunities almost 50% faster, you know, as a result. So the fact that we had, you know, we had a relationship already in place and the value proposition being so potent for consumer products, I think, really helps. So of course, we're, with our strength in consumer products, we are actively engaged right now.
Describing and demonstrating and selling the value proposition that came with that with other CP customers.
Next question comes from Paul Steep with Scotia Capital.
Okay, great. I'll stick to it. Richard, can you just confirm that the 50% year on year was at the end of the quarter? Thanks folks. For headcount that is?
Oh, the 50, yeah, sorry, yeah, the it's over 50% from the start of
this year. Yeah.
And we had made that point in earlier earnings calls that we were projecting to be potentially north of 40 and we're north of 40. Closer to 50, perhaps slightly above 50 at this stage.
That helps. Thanks.
No problem.
Next question comes from Deepak Kaushal with Stifel, GMP.
Hi, good morning guys. Thanks for taking my question. So I'll keep to one then, gross margins. They took a dip in the quarter, Richard, probably the lowest I've got on record. I'm wondering if you can tell us how much of that headwind is organic versus an organic and maybe some color on the cash versus non cash portion and what portion of that is sustainable versus acquired amortization?
Thank you.
Well, yes, thanks, Deepak. The with regards to gross profit, you know, it's highly influenced by the timing of the subscription term license revenue. So, you know, it it does it does vary some quarters is over 70%, some quarters is under 70%. And then, you know, in terms of the COGS, there's 3 fundamentals. There is, the professional services team.
There is the data center and the whole infrastructure for the cloud support. And then there's the customer support organization. Those are the 3 key areas. All areas have been, been, been growing and accelerating Now the margin on professional service revenue is lower than the margin. On on SaaS.
And so, you know, that, that, that gross profit is really a function of therefore the cost, the timing of subscription license and the mix of PS. And so, we still think that's very, very strong. It's obviously led to strong EBITDA performance. In fact, the point whereby, you know, we increased our overall adjusted EBITDA performance for the year.
Next question comes from Suthan Sukumar with 8 Capital.
Good morning, guys. Just a quick question on the around some of the recent deals that you signed. Can you speak on some of the trends that you're seeing around buying behavior? Are there particular solutions and modules or even see they're being purchased more now upfront, versus before. And what the impact has been on your, kind of average contract value versus historical periods?
Yes, it's a great question.
I will say that it really depends on how customers being affected by this pandemic. In some case, as customers have seen demand for their products go through the ceiling. And so they're working very, very diligently to absorb and capture and ship, you know, improve their on time and full measurements to capture all of that demand. In some cases, customers are seeing their demands go through the floor. And so they're working really hard to preserve cash Cash preservation is a key element, lowering inventory becoming hyper, hyper efficient, to absorb the volatility.
And so a lot depends on the type of condition that that, a prospect finds themselves in.
Okay. Next
question comes from Nick Agostino with Lorraine. Bank Securities.
Yes. Good morning. John, just wondering now that we're about more than 8 months into this pandemic, Are there any clients you spoke earlier about a prolonged contract approval process? Are there any clients that may be you're anticipating to come in late Q1, early Q2 or sometime during Q2 that have come in in Q3 or even in early Q4 that are part of your backlog that maybe you can speak to. There's a prolongment on the contract process but you are seeing those customers come in?
Thanks.
Yes. The answer is yes. We've been successful in getting contracts closed in October, that that might have been anticipated earlier. You know, we'd had contract negotiations completed in their entirety, only to see, you know, potentially 6 or longer weeks waiting for board meetings to occur to get final, approval. So, I mean, that that's the, you know, the the, you know, the, I'd say phenomenon that we didn't necessarily see in the past.
And so, obviously, we're there's engagements and activity going on ongoing as we speak throughout, you know, throughout Q4. And we're just drawing attention to this new phenomena. Every every company is is implementing these protracted, what I would say, you know, more detailed approval processes, differently. So, you know, we're obviously monitoring this very, very closely, you know, forecasting our activities very closely as a result of this. As a result of what we're seeing.
And obviously, that's reflected in our guidance.
Okay. Thanks.
And at this time, I will turn the call over to Mr. Wadsworth.
Thanks, operator. And thanks everyone for your questions. Apologies to have to limit questions at the end, but we're running into some time constraints. Here. So please reach out to me and we can chat after the call.
As always, we do appreciate your questions and your interest and support of Kinaxis. We'll speak with you again when we report our Q4 results. So, bye for now.
This concludes today's conference. You may now disconnect.