Such statements. For a discussion, these risks and uncertainties, you should review the forward looking statements disclosure in the earnings press release as well as our 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 on the Investor Relations section of our website can access dotcom 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 IR section of our website. Neither this call nor the webcast archive may be rerecorded or otherwise reproduced or distributed without permission from Kinaxis. To begin our call, John will discuss the highlights of the quarter, as well as recent business developments, followed by Richard, who will review our financial results and outlook, finally, John, We'll make some closing statements before opening up the line for questions. While we do apologize for the late start here today, we're still targeting a 9 30 conclusion. So During the Q And A, if you could limit yourself to 1 or 2 questions, at the time, that would be greatly, greatly appreciated.
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 yours have remained healthy during this very unusual We continue to extend our deepest thanks to frontline workers everywhere and to all of you who are doing your part, to contain the spread of but no doubt more patients is needed before we can declare victory over this pandemic. I am pleased to report that our 2nd quarter results were very strong across the board, including SaaS revenue growth of 26 percent to 35,700,000 total revenue growth of 45 percent to $61,400,000 and adjusted EBITDA margin of 37%. Our team continues including France based transportation systems provider, Alstom.
Our sales pipeline continues to expand and we were successful in delivering record setting levels of professional services revenue in the second quarter. Earlier this week, we were pleased to announce that Fuji Films Medical Systems Division joined Kinaxis as a customer earlier this year. While their products include equipment related to X-ray diagnostics, imaging, endoscopy, and in vitro diagnostics. Fujifilm will leverage rapid response supply and demand planning, sales and operations planning, and inventory management to connect more than 15 global sales and manufacturing facilities in order to gain the visibility and agility needed intelligently and efficiently. We are honored to add yet another world class brand to the Kinaxis family of customers.
Since our last call, we announced an AI based demand planning software provider. Rubicloud brings us advanced AI based demand forecasting, pricing and assortment optimization and promotion planning capabilities, which are immediately applicable to the consumer packaged goods market and over time to other industries such as life sciences. The acquisition also creates an important entry point And finally, RubenCloud brings a new team with leading AI and data scientists skill sets applicable to the entire Rapid Response platform. We couldn't be happier to We also announced rapid value, a way for customers to accelerate their journey towards concurrent planning and achieve meaningful value from a prescribed rapid response deployment in as little as 6 weeks. Often, manufacturers know that their supply chain is in peril, but they don't know where or how to start the healing process.
Rapid value will drive immediate benefits to the health of these supply chains and creates the solid foundation for hyper agility. Which is necessary during times of unprecedented disruption and uncertainty. I am also initiatives continue to expand with the They have several trained rapid response consultants today with aggressive plans to grow in their practice. Overall it is truly phenomenal that all of these achievements occurred among others while the entire Kinaxis team continued to work from home. On the strength of our backlog and current sales pipeline, We are able to reiterate our finance our fiscal 2020 guidance for SaaS revenue growth and adjusted EBITDA margin while increasing other aspects of guidance.
Expand their contract approval processes, which has, in some cases, delayed the signing of new deals. However, we remain confident in extremely high and well balanced across all geographies and verticals. We are full steam ahead on our planning planned hiring investments for 2020, all of which were initially committed to based on their long term value of Kinaxis. We are pushing forward Conaxis has quite simply never been more relevant. There's never been more attention on global supply chain resilience and the power of concurrent planning With that, I will turn the call over to Richard to provide further commentary on the financials for the quarter and our outlook.
Thank you, John and good morning. As a reminder, unless noted otherwise, all figures reported on today's Total revenue in the second quarter increased 45 percent to $61,400,000. SaaS revenue grew 26 percent to 35 point $7,000,000, driven by recent new customer wins as well as the expansion of existing customer subscriptions. Subscription term license revenue grew over 300 percent to $10,000,000. This was higher than a certain of these customer hosted subscription contracts renewed at the expected annual subscription level but for longer terms than initially anticipated.
Under IFRS 15, we are required to recognize the right to use component of the full contract upon commencement of the related subscription term. The extended contract terms will slightly change the cadence of future subscription term license revenue, primarily for 2021. Based on the current renewal schedule, we now anticipate 2021 subscription license term license revenue will be in the range of $3,000,000 to $5,000,000 and will return to the mid $20,000,000 range in 2022. These amounts may be higher should we sign any new customer hosted subscriptions or lower if a contract does not renew. Our professional services revenue grew 48 percent to $12,400,000 as this group continues to be very active remotely supporting both existing customers and new deployments.
We also increased our capacity in the professional services team through both recruitment and the acquisition of Prana in Q1. As we have noted in the past, professional services revenue will vary from quarter to quarter based on a number size and timing of We remain pleased with the diversity and strength of our revenue base. For the year to date, our 10 largest customers accounted for 31% of total revenue, with no individual customer accounting for greater than 10% of total revenues. Profit grew 56 percent to $45,700,000 or 75 percent of revenue compared to 69% in Q2 2019. The increase was driven by the growth in all revenue components, most notably description term license, which essentially has a dollar for dollar contribution to gross profit.
We have continued to expand our delivery capabilities across the board with increased investments in our delivery and support personnel, as well as our data centers. Profit increased 125 percent during the quarter to $9,000,000 or $0.32 per diluted share, compared to $0.15 $22,500,000 or 37 percent of revenue compared to 27% in Q2 2019. The growth in these items primarily relates to the significant growth in total revenue and gross margin. As I just discussed, partially offset by higher operating expenses. While COVID-nineteen has resulted in lower costs for travel and certain events, Our investment in people continue.
We have continued to hire Across the Globe in all functions in line with targeted investment levels we discussed during our initial 2020 guidance. Q1 cash flow from operating activities was up 2 52% to $30,800,000 from $8,800,000 for the second quarter of 2019. As of June 30, 2020, cash, Cash equivalents and short term investments totaled $260,600,000 compared to $212,600,000 at the end of 2019. Approximately 60,000,000 of these funds were subsequently used to fund our acquisition of Ruba Cloud. Our contracted revenue backlog remains strong.
As of June 30th, it was $333,000,000 as detailed in Note 13 to our financials. This amount includes $302,700,000 of SaaS revenue backlog. This backlog will be recognized over the following periods. $78,300,000 will be recognized in the remainder of 2020, of which $71,200,000 relates to SaaS business, $117,400,000 that we recognized in 2020, of which $105,900,000 relates to SaaS business and $137,400,000 we recognize fiscal 2022 and thereafter, of which $125,700,000 relates to SaaS business. Total bookings in Q2 were $37,100,000, of which SaaS bookings were 27.7.
Given the nature of our enterprise business, Bookings typically vary quarter to quarter and were higher in Q1. As John noted, COVID-nineteen has delayed the closing of certain opportunities as some prospects have implemented more rigorous processes for securing contract approvals. Regarding our Ruby cloud acquisition, We have already begun to integrate their capabilities into our CPG and now retail sales campaigns. Given our sales cycles, we expect the SaaS contribution to be modest in 2020 and will be a contributor to revenue in 2021 and forward. Based on our strong backlog, our assessment of current market conditions and the business outlook, We are pleased to reiterate our strong SaaS revenue growth of 23% to 25% for fiscal 2020.
Given the strong subscription term license revenue book to date, we are increasing our guidance for that item to $16,000,000 to $17,000,000 for fiscal 2020. While we expect professional services will continue to be strong, we do believe it will be closer to for Q3 and Q4, putting us on track to exceed our guidance of 20% growth for professional services. Overall, these developments support increasing our full year total revenue guidance to a range of $216,000,000 to 220,000,000. With respect to adjusted EBITDA margin guidance, with sustained recruitment, continued global expansion and addition of the full Rubicloud team, into the Kinaxis organization, our overall investment level is higher than originally anticipated. At the same time, travel restrictions and other limitations imposed by COVID have resolved in certain cost savings throughout the year.
Taking these factors together as a percentage of revenue, we expect sales and marketing expense to be a little lower than originally anticipated, and general and administrative expenses to be a little higher and our gross margin to be towards the bottom end of the 69 71% range originally communicated. Overall, we continue to anticipate adjusted EBITDA margin will be in the range of 20% to 23% of revenue for the full year. This has been an unusual year and we continue to monitor and respond to conditions as they unfold. Overall, we are extremely pleased with our performance in Q2 and our ability to maintain or increase all aspects of our 2020 guidance. I shared John's enthusiasm regarding a long term outlook for our market for Kinaxis and for a unique and current planning technique.
Thank you for your continued support. And with that, I turn the call back over to John.
Thank you, Richard. Last year, We told you about some very exciting product innovations we were working on and I'd like to give you a brief update. First, the initial release of our expanded platform is ready, and we have signed a couple of early development partners. The first will be creating a solution for transportation optimization, driving our concurrent engine beyond the dock, and into optimizing truck loads for the delivery of finished goods. Another partner is developing an innovative solution in the area of the circular economy.
They are building algorithms to ensure that recyclable materials in finished goods can be brought back into the supply chain. As inputs into manufacturing. This is just another way Kinaxis can help remove waste and help people plan better, live better, and ultimately change the world. We will expand on the details of these new relationships and ultimately many others. Through announcements ahead.
Overall, we are very excited about the opportunity that the extended Rapid Response platform offers. We can leverage the innovations of others to more quickly add value Secondly, we have released the initial version of our demand sensing capabilities which uses machine learning and AI to hone short term demand forecasts, using analysis of key signals outside of corporate ERP systems. Like competitive promotions, holidays and weather patterns to name a few. Lastly, progress on our next generation web based user interface and exciting new data visualizations remain on track for release this year. Feedback to date has been tremendous.
The interface is both dazzling to the eye and allows for much more intuitive and context sensitive investigation of key supply chain data and trends. Naturally, we have many more exciting developments underway. I'm incredibly proud of our product team. They've been able to hit important milestones while operating under all the limitations of COVID-nineteen. Our product is our differentiator and ultimately represents the biggest driver of our market leadership and rapid growth.
I'm equally proud of how well every group within the Kinaxis family has responded to the new environment. We are continuing to get the job done for our customers and for you, our shareholders. As always, thank you for taking the time to join us on the call. With that, I'll turn
Your first question comes from Thanos Mosheopoulos of BMO Capital Markets. Your line is open.
Hi, good morning. John, in terms of the customers that you alluded to that are expanding their approval process, are there any themes there as far as geographies and verticals or is he kind of more customer specific case by case?
Yeah, no themes whatsoever from a geography or a vertical, and it is case by case. And it's not all of them. I'll also say that our start to Q3 is significantly stronger than our start to Q2. So we're making great progress on some of those delays already. I would characterize Q2 almost as being the low point of the deceleration as most manufacturers were feverishly absorbing the net effects of COVID-nineteen.
Yeah, it's helpful. And, I know it's still early days with Ruba Cloud, but now that you've owned it for a month, can you comment on seeing as far as the pipeline and your ability to leverage that to penetrate the retail vertical?
Sure. Like we're we're a month in. So it's still quite fresh for both parties. And, as I reflect, acquiring a company as company during COVID protocols is difficult integrating, can be even more challenging as you, try to work to establish strong bonds and relationships, with the new employee base. We've been working really hard at that.
The sales team is, is now fully integrated. We've, we've started a retail arm, if you will, under Paul Carrero. We're thrilled with the, the prospects, quite frankly, and the campaigns that they walked into the door with, both in retail and in some cases CPG. So those will continue to be nurtured, as a joint team. You know, we're also really, pleased with the talent.
You know, I have spent time during the second quarter meeting every single employee. I've met every single employee at Rubicloud, since, you know, in the past month. But I will say, you know, during this COVID protocol, we're expecting some some challenge, if you will, as part of the integration. Nobody is traveling. And it's living in two dimensions, well, it's a little more challenging to establish those relationships.
The only thing I would say about Rubicloud and one of the things that really excited me about this union and this joining of forces is that it's rare enough to find, you know, enterprise class supply chain software providers, let alone finding one in our backyard in Toronto. And, it's I'm just thrilled to see what they have done. They've built a tremendous platform, very scalable, supporting enterprise class retail. And CPG. And so with that comes a very strong affinity with rapid response.
But I will also remind everyone that with that comes a typical 18 month sales cycle, they are no different than we are in that respect.
Great. Thanks John. I'll pass the line.
Your next question comes from Paul Stip of Scotia Capital.
Great. Good morning. John, just on Rubicon, maybe talk about your approach to integration, both product and you gave quick comment to Thanos there earlier about sales, but just how we should think about that? And then I've got a fast follow-up for Richard.
Yes, sure. First, I will say that, our intention is to integrate you know, technologies to basically fuse the, the, the technology from Rubicloud into our platform. The intent is not to run it as a stand alone business. And so this has always been the thesis since the beginning. And so from a product integration standpoint, that is the philosophy.
And we're obviously early days in inspecting exactly how that fusion will occur, but that is the philosophy, you know, behind, behind the integration. It's great, you know, in terms of cultural fit, that we were so close in proximity. Carrie Lou ran, Rubicleau with very similar affinities as it relates to culture. So, so far, it's gone exceptionally well from, from a teaming perspective.
Great. And Richard, can you just go back over your commentary about the extended contract terms? There's no real time trans that caught the fact that things moved out. Was this in relation to an existing client or just if you could recap that really quickly at a helpful. Thank you.
Sure. Yes. So it's dealing with subscription term license. So what we do is even though that subscription is a for instance, still look very similar to us, to a cloud based, but it's because it's customer hosted. And so it's over 3 years, what we have to do is split that 3 year payment into 2 elements from a revenue recognition perspective, the right to use, which is becomes subscription term license and then they made some support.
And what happened was the confidence of more than one customer who was renewing the period that of the customer hosted, they just, we just agreed to a longer term. And as we agreed to a longer term, the quantum, the overall booking, was larger, and that just drives a larger, component into, subscription term license as well. Then it also does provide that, longer term, tail, if you will, the recurring revenue on the, amazing support Chapada.
Great. Is it a trend or just one off? And I'll pass the line. Thank you.
It was dealing primarily with customers that had, you know, more of your shorter term. And so they've just extended for a longer term. And, and, that's why I specifically wanted to comment with regards to the cadence for 2021, whereby, you know, 2021, as you may recall, is really the low point of that 3 year cycle. We've talked about sort of the way our legacy customers are going in an overall 3 year cycle. And but this doesn't really impact, the 2022 where we see it moving up into the mid-twenty million dollars range again.
Thank you.
Your next question comes from Richard Tse of National Bank Financial. Your line is open.
Yes. Thank you. Yeah. Given the potential upside that could come from Rubel Cloud here, which it sounds like it could be meaningful should we expect that you may pursue more, tuck in technology acquisitions like Rubicleoud to take advantage of your, substantial base?
Thanks for that question, Richard. You know, I would characterize our approach now as being far more thoughtful, where we might have been a little more opportunistic. Based on our, the strength of the pipeline. And I'd say the acknowledgement and the acceptance that concurrency, that concurrent planning is is the breakthrough people have been waiting for. You know, we we have begun, if you will, at a more thoughtful process.
So I wouldn't say there's anything imminent, but I will say that our, you know, our composure around, acquisitions have has shifted.
Okay. And then just the last one for me and sort of related to Paul's question on the term license and the upside there. So are we to read the, sort of increase as, extending or expanding the term? Or I'm just trying to understand, you know, whether it's actually coming from increasing penetration within the base? And if that's the case, is that customer or customers turning on new modules or are they adding new site licenses or sheets?
Yeah. There were some expenses,
but the primary driver, Richard was just by going for a longer term. And so really trying to, lock in and, you know, it was in the interest of both parties to to, to secure a longer term relationship.
Okay.
And just a quick few to clarify Was that existing customer, sort of being being recognized formally under a term license?
Sorry. There was more than one customer, but this was, you know, where, you know, our focus is clearly and and and the community of the market is absolutely focused on SAS. There are going to be, we anticipate in the future, there are going to be certain times when you know, a customer is precluded from going into the cloud. So, you know, for instance, maybe in aerospace, there are restrictions. But, customers prospects fully understand the value of SAS.
And quite frankly, we believe it's a better experience for them. We can more actively, we've we've got a very strong customer, support care team. We can we can make sure they remain current and so on. So there's very, very positive developments. But we also have customers having with us 15, 20 years and longer.
And in, and in some instances, because back then, it was not as, a focus. We were an early adopter in 2005 going to the cloud. And there's some customers that just want to continue that long term relationship with us and we respect that. And so, you know, this is some situation of, you know, more than one of these customers saying, hey, it's been going great. Let's just continue to grow great for, and, and quite frankly, let's lock it for a longer term.
So It's that's really the the view. So this is a, you know, a longer term relationship, longer term cash flow, and, you know, I think speaks to the confidence and can access on its team.
Your next question comes from Stephanie Price of CIBC. Your line is open.
Good morning.
Good morning, Devin.
The personal services revenue this quarter was strong again. I was hoping you could kind of talk about the scenarios in which you could see PSO performing the current guidance and maybe related, can you talk a bit about the implementation timelines in the current environment?
Yes, it's a great question. And, it's remarkable to have hit that milestone this quarter, while everyone, I mean, no, no one was on airplanes. And so all of this happened remotely. I will say that in most instances, customers with active deployments were looking for us to accelerate their value. And so, the team worked very, very hard, Village to accelerate milestones, within their projects, if anything, just to absorb the conditions that the planet is in right now.
As we look out into the future, especially in Q3, the summer months, where we often see you know, vacation schedules, the European, schedules that can affect it. This is what's applying our, you know, this is the information that's informing our guidance around the remainder of the year. And naturally, ways that we might improve on that, obviously, is, the speed at which our net new customers wish to, wish to to drive their deployments.
And if I may, just to expand. So, you know, at this point in time, I think, Stephanie, you can see that between what we've booked in the 1st 6 months and then the, the $71,000,000 of, subscription backlog for the last 2, the last two quarters of the year that, you know, that puts us around 95% of the consensus number for the full year, which is why we're very comfortable on that range. And, you know, as, and as John noted, that, you know, depending upon the timing of new deals and so on, which, quite frankly, you know, depending upon when they're closed this year, we'll have more of a toggle point is really about focused on 21. And forward deals. And the level of participation of RubiCloud in the early days is going to be modest this year.
Again, we anticipate a much starter contribution 2021. So also, that is the basis for our confidence And absolutely, you know, depending on how things go this quarter, we'll, we'll review it as is our custom on the next quarterly call.
Okay, great. Maybe I could sneak one more in around the timeline, on the retail vertical. Just wondering if you any of your customer already for the vertical or if you're looking at capitalizing on cloud's customer base and cross selling into it?
Well, I guess the answer is both. They stepped into, interconnect access with existing customers in the retail segment. Obviously, we're hoping to be able to publish those enterprise customers at some point in the future. And also, again, the thesis behind the acquisition was that they were relevant, not only in retail, that was one of the key motivators you know, an entry point into the 7th vertical, but also they're relevant in CPG And Life Sciences. We've seen use cases in in both of those segments.
And we've done exceptionally well, certainly in life sciences and CPG, the momentum is growing for us. And so we see some cross selling opportunity into our own base, on those 2 verticals. And obviously, the reciprocal is true as well. We're learning the lexicon and the use cases of retail through, Rubicloud's intellect.
Great. Thank you very much.
Thank you.
Your next question comes from Daniel Chan of TD Securities. Your line is open.
Hi, good morning. Just wanted to talk about the EBITDA margin guidance. It stayed the same despite delivering pretty strong results in the first half coming at 33%. So if I were to back into what that implies for H2, it's at the midpoint, it's only about EBITDA of about 9%. And I don't think we've ever seen, margins that low in the second half, ever since you're public company.
So are there any material expenses coming in in H2? I know you talked about Rubicloud and in, but are you accelerating some of these investments you're making into your team? Or how do you thinking about managing margins versus expanding your growth
Well, thank you, Dan. I mean, our view has always been about driving growth and driving growth over the long term period. And, we are absolutely continuing to hire, individuals of fact, in a number of cases, we're hiring for new roles that we had not originally identified in our budget, budget planning just because some excellent candidates have become available or we've we've been able to, expand, sort of global reach. And then absolutely, we are incorporating. So what's important is And you can appreciate what stays that, Rug Cloud team is in and that they have great technology, great product, but you know, you're investing at a higher level than your than your revenue.
And so there is a, you know, there is a a net cost to, to that part on from a period perspective. And so we're absorbing that within. We do anticipate, you know, continued savings in in travel at some of the events, just given COVID. But, we are seeing areas starting to open up in particular in Japan. And others.
And so we factor that in. So it just really had been a matter of, of, you know, reflecting the, the, the accelerated pace of investment with the, with the strong revenue. The, the remaining subscription term license revenue is not that significant for, for Q3 and Q4. And so, you know, we don't have that, level of direct, same period of contribution. And so it's, it's, it's our reading.
And again, depending upon that, scale of that investment as appropriate, next call, we'll update the guidance.
Okay, thanks. That's helpful. And then I just wanted to touch on the delayed deals that you're seeing, or the longer procurement processes. You said it's been improving as you're exiting the quarter. Do you have a view on how long, how much longer some of these processes are taking?
Are we talking about like quarters delay or something other than that?
Yes, in some cases, these are being escalated right to board level decisions as you would imagine, step 1 was absorbing the implications of of COVID-nineteen. And we saw that deceleration in Q2. All of our customers and prospects, energy were were around that, absorbing what I'll call shock. And that's what I've witnessed. It's basically supply chains that are in shock.
And now we're starting to see a reacceleration, if you will, in the activity. But at the same time, we're seeing more diligence being applied to the signing process that we hadn't seen before. And, and as noted, we started Q3 very strong in many cases making great progress on those delays. And so in terms of how long they will last, well, these are protocols being put in place by some of the largest companies in the world. So as COVID unrolls, we'll adjust accordingly, of course, but at the same time, we're seeing, strengthening pipeline.
Pipeline today is larger than it was same time last quarter. That's just a fact. It's very well balanced. Our productivity in running demonstrations has nearly doubled because nobody is on airplanes. And so we're seeing, and in many cases, you know, demonstrations occurring with fifty people on the line and things like that were more difficult to do in person.
But under zoom meetings or team meetings or Skype or Skype or whatever, those types of media, we're seeing a lot of productivity gains there. So, you know, we're obviously, you know, confident in our in our guidance for this, for this fiscal, this fiscal year. And, and, and as Richard noted, we're going to continue to invest, based on the demand that we're witnessing, We're going to continue to grow headcount. We had I previously suggested that we We were going to grow headcount by nearly 40%. I wouldn't be surprised if we beat that number by the end of the year.
Great. Thank you.
Your next question comes from Deepak Kaushal of Tifel, GMP. Your line is open. Thanks.
Good morning, guys. Thanks for taking my questions. I've got a couple of follow ups. I'll try to be quick. Just to follow-up on Dan's question on the rigorous, more rigorous procurement process.
John, you mentioned decisions moving up to the board. I'm more curious as to what or why, the procurement process is different. Obviously, COVID is an impact, but are companies evaluating more vendors? Are they juggling internal priorities? Is there more scrutiny on budget here?
Why is some of this stuff getting more scrutiny at higher levels?
Yeah, I think, you know, I think it's quite natural to recognize that a lot of businesses are in a state of shock as they absorb. The implications of a global pandemic. And as a result, more scrutiny is being applied to investment. And there's triage of projects. There's always more projects than there are, you know, dollars to support them.
And so I think the scrutiny and the, I'll say the scrutiny level has gone up from a board perspective to ensure that, cash is being well invested. And the investments are going to return are going to yield value. Under these current conditions. I think it's nothing more than that. You know, it's just good governance.
Some companies are you might consider to be in crisis. And so when in crisis, you apply more scrutiny and tighter governance and tighter controls. And I think that's that is, that's all we're seeing. I don't measure this in months, by the way. We were being very purposeful in describing this in, in terms of, you know, the signing protocols.
It's the tail end of the deals, that we're seeing this, this protraction, at this juncture though, I can't really comment. I don't know how long this will last, but we're obviously, aware of it now and planning accordingly.
Okay, that's helpful. And just a follow-up question on pricing trends. What are you seeing in terms of pricing? Richard mentioned the term license renewal is at the same price for longer term. Is there a price term trade off going on here?
Is there competitive pressures on pricing? What are you kind of seeing from that perspective?
I think, as more and more companies understand the value of of the market and are coming in the market. There are some natural, price pressure, but we provide some unique value. And so, I think we could be more creative in in our our pricing and we look at the long term. So I wouldn't characterize it feedback as overall broad pressure right now.
Your next question comes from Paul Treba of RBC Capital Markets. Your line is open.
Thanks very much. Good morning. In regards to Rubicon, you indicated that the contribution will be modest this year and then higher next. What's the magnitude of the expected contribution next year if you could put some rough sort of indicators around it? And then given the expected ramp in the revenue, do you either have good visibility to new deals or does the company have a sizable backlog, you know, at the at the current time?
Thanks, Paul. The, so what John noted was we are going to be, you know, blending in and integrating. And so there's a couple of chilies. One is on the, now supporting the vertical and retail and certain elements of retail. But also strengthening our CPG offering.
And so it's, it's really a number of things. It's not just simply a vector of additional new customer wins, but it's also increasing the likelihood of closing wins and CP space and so on. Now these are vertical sorry, these are enterprise class customers. So the sales cycle It is, you know, continues to be long. John noted that, you know, Rubicloud has had success in is working with customers, I would say, more at the early stage.
And what we're really going to see is, is leverage and expansion. That's going to be in the out years. We will provide more specifics as we go through this journey together, and that would be in part of our 2021 guidance. But we remain very confident in our sustained SaaS growth in that mid-twenty percent range, and in line with our our targets for 2022.
And you announced rapid value in the quarter. Did that program, did
it have any impact on professional services or, the timing of revenue recognition in terms of subscription in the quarter?
Yes. So we announced that this quarter and, and launched that program. I can tell you that we have, We have prospects, that are in the in the pipe looking at that. We're close to closing some net new business as a result of that program as as it as it reflects Q2. However, there was no, no immediate impact, more so, just a great opportunity for prospects to, to engage with us with a much lower risk, higher value.
And really it's, you know, I think about it as the speed to pain relief. Kind of a program. You know, as I mentioned, a lot of manufacturers know they're ill. And, step 1 is to feel better you know, of course, you want to be cured, but step 1 is to feel better. Can you lower my fever in 6 weeks?
I'll feel better, I'll be stronger, and then I can focus on a cure. That's really the focus behind rapid value.
And do you see rapid value as helping offset some of the delays, in the approval side you know, does that come up in terms of the time to value as one of the things that's getting more scrutiny now?
I think it's too early to tell. We don't have enough data points on that. Of course, the thesis here is that, you know, even large, and this is true by the way of our business. We have extremely large, customers that start small and grow. And we have small customers that start large.
That happens. In this case, obviously, we're trying to provide, a path for manufacturers to get more immediate relief, for the payment they're in right now, for their suffering. And that's the, that's really the motive. As it relates to, affecting any of the delays, I think it's too early to tell. Ultimately, people are going to do this because they know they need a cure.
They ultimately work with us because they believe in concurrent planning and they want to transform the way their supply chains are being governed.
Your next question comes from Gus Papagio of PI.
Hi, thanks, and thanks for taking my question. I talked to your customers that are very complimentary on how rapid responses help them, help their supply chains through this COVID crisis. The one interesting comment that came out was that even within organizations, that that used rapid response, you know, some or do some parts of the organization use it and some don't. And it was very apparent as it's the ones that didn't So I'm just wondering, within your installed base, given what's happened with all the chaos and supply chains, do you think that there's a much bigger opportunity to increase the seats within your some of your even amongst your biggest customers?
Well, we've always had a land and expand strategy for sure. And as I mentioned earlier, I think you know, you too, we saw a lot of, what I'll call, absorption activity. People were absorbing this new normal and, and establishing new protocols one conversation, I'll recall in Q2 with one of the chief supply chain practitioners. He mentioned to me that every day is a box of chocolates to to quote the famous movie. You never know what you're going to get.
Things that are absolutely known and factual one day fail the next and then come back the following day. So there was a lot of effort in the 2nd quarter absorbing I would tell you that part of the, part of the professional services, the record breaking professional services revenue was the result of an acceleration of existing, projects and people really driving hard to hit milestones so that they could reap the benefits of concurrency during COVID. As it relates to our future, and I think that, a global pandemic, is really, I think it'll serve as a catalyst. It's a bit of a wake up call that, you know, supply chain practitioners are recognizing that status quo doesn't work. It just doesn't.
And, ultimately, I think that, you know, our prognosis of the business is going to strengthen strengthened basically as a result, as, as, manufacturers recognize the power of agility was, you know, the potency of hyper agility, over focusing entirely and only on accuracy. See, right. It's, you know, I like in COVID, you can't max your way out of this. You've got to respond your way out. And it's not, it's not a reflection on, you know, on the, you know, on how poor math models are.
That's not the point. The point is how quickly can you detect sense and respond to, you know, to being to being outside of your planning parameters.
Your next question comes from Robert Young of Canaccord Genuity. Your line is open.
Hi, good morning. You said that you had, little delays, like I was talking about, you said, a few of them are at the tail end of the process at the the alter, so to speak. And so I was, curious how you think about those as it relates to your guidance. Do you include those in guidance on a probability that they would fall within the year or would those be upside to the guidance that you're providing?
Well, thank you, Rob, for that question. So, and you know, all these things are factored into, to the guidance. So, I mean, just to recap at the beginning of the year, you know, our, our, at least for SaaS, for the SaaS metric, we, we look to about 80% rule. And and 80% being in backlog. So it's it's the minimum committed backlog.
And then the the remaining 20% comes from renewals that are scheduled. New name wins and expansions. And so, you know, this juncture, if you look at mathematically, it's about 95% of, of the full year guidance between the backlog and recognized to date is there. And so that 5% or 5% is coming from basically renewals, expansions and new name wins for the next 6 months. So we take that into consideration when we're looking funnel and so on.
And so, you know, sometimes deals, you know, a deal that starts on, October 1st versus the deal that starts on December 31st, that deal on October 1st has 3 months of revenue in the current year. And And obviously there's no revenue for the other deal, but they both contribute to 2021. And so we just have that bit of a a bit of a leeway factor that we have to recognize and consider, and that's that's in our guidance. So, you know, again, Rob, what we'll do is, depending upon how we progress, collectively with our customers and prospects through this process, we'll, we'll revisit, the guidance, on our Q3 call.
Okay. So it sounds if I understand that correctly, that it's conservative 5% would be on 200 and plus 1,000,000 top line would be maybe $10,000,000 at the beginning of the year for expansions. And so it would seem if they're large that those wouldn't be included in the guidance as
you look forward into the
second half. Is that the wrong way to think about that?
I think you need to, to, I mean, we're going to let our guidance down on its own because, you know, as we move through the year, it's only natural that that percentage moves from 80% up. I mean, ultimately, you know, in the third quarter, we should be almost at the, the full year number just because, you know, the deals tend to, you know, John didn't know, we, we've had deals close to the beginning of the quarter and But, you know, in some cases, deals will be later in the quarter. And so their contribution to the current quarter is limited there. Obviously, typically a 3 year deal. So that does bode well for the out years.
There are no further questions at this time. I turn the call back over to Mr. Watford.
Thank you, operator, and thank you everyone for participating on today's call. We appreciate your questions as well as your ongoing interest in and support of Kinaxis. We look forward speaking with you again, and we report our Q3 results. Bye for now.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect