Good morning, ladies and gentlemen. Welcome to the Connexus Inc. Fiscal 20 21st Quarter Conference Call. At this time, all participants are in a listen only mode. Instructions will be provided at that time for you to queue up for questions.
I'd like to remind everyone that this call is being recorded today, Thursday, May 7th, 2020. I will now turn the call over to Rick Wadsworth. Vice President of Investor Relations at Kinaxis Inc. Please go ahead, Mister Wadsworth.
Thanks, operator. Good morning, and welcome to the Kinaxis earnings call. I understand that there have been some technical issues getting people logged into the conference this morning. We appreciate your patience. Today, we will be discussing our first quarter results, which we issued which we issued pardon me after close of markets yesterday, With me on the call are John Secard, our President and Chief Executive Officer and Richard Monkman, our Chief Financial Officer.
Before we get started, I wanna emphasize that some of the information discussed in this call is based on information as of today, May 7 2020, 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 Relations section of our website. Neither this call nor the webcast archive may be rerecorded or otherwise reproduced or distributed without prior written permission from Kinaxis. 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. I'll now turn the call over to John
Thank you, Rick. Good morning and thank you for joining us today. First, let me say that our thoughts during this crisis are primarily for the health of our employees, our customers, partners, shareholders, suppliers and all of their loved ones. Nothing could be more important than their well-being. We also extend our deepest thanks to frontline and essential service workers everywhere.
We are deeply saddened by the horrible losses being experienced globally and sincerely hope that you and yours are healthy and safe. Notwithstanding these unprecedented times, I'm pleased to report that our first quarter results were very strong. Across the board, including SaaS revenue growth of 24 percent to $34,000,000, total revenue growth of 15% to $52,800,000 and adjusted EBITDA of 29 percent of revenue. These results were driven by our expanding base multi year subscription contracts and their corresponding long term backlog. It is a business model that is serving us well during these unique and times.
During Q1 we were happy to experience a growing sales pipeline We continue to expand relationships with customers and we won several new customers, including 1 of the world's largest consumer products companies, household name we hope to be able to share more in the future. We were able to announce that Paris based Technicolor one of our new customers in 2019 has finished the 1st phase of its global deployment rapid response for its connected home business. We also continued to announce new partnerships, including 1 with Foreflo, a European based software and consultancy firm with more than 20 I'm very pleased that our Our level of engagement with we were able to effectively deliver professional services Even in more ordinary times, we typically undertake many of our sales and services activities remotely While nothing is normal right now, I'm very pleased with our progress. While some opportunities have experienced some delay As companies adjust their ways of working, our confidence in our pipeline remains high and sales activity continues to progress. I believe there has never been more As a result, we are Ultimately, it is challenging to predict how current circumstances will affect deals in motion.
However, based on our best information, we are very confident in achieving our initial revenue guidance for the year. Richard will elaborate on this shortly. We are full steam ahead on our planned hiring investments for 2020, all of which were initially committed to based on their long term value to Kinaxis. We are continuing to build our R and D team. We are adding sales and marketing personnel.
We have made recent hires into The hiring process is different a change in this uncertain environment. But we are pushing forward to ensure that we are ready for the strong demand that we anticipate ahead As a team, we are heartened by the notion that Kinaxis is helping our customers to pilot through these turbulent dimes. Many of you would have seen our blog post on the recent sharp increase in customer usage of RapidResponse. During the first quarter, the usage rate increased by over 20%. We are seeing much more collaboration on new planning scenarios to respond to this incredibly dynamic situation.
We've seen increased following the path of disruption in With that, I'll turn the call over to Richard to provide further commentary on
Thank you, John, and good morning. As a reminder, unless noted otherwise, all figures reported on today's call are in U. S. Dollars under IFRS. Total revenue in the first quarter increased 15 percent to $52,800,000 driven primarily by SaaS revenue, which grew 24% to $34,000,000 and by 54% growth in professional services revenue.
Professional services revenues by a number of factors, including the number, size and timing of customer projects underway, as well as the amount of work being, directed by partners. As John noted, our depth of experience in working virtually with customers allowed us to quickly adjust and leverage our people and processes to ensure continued Our subscription term license revenue in Q1 was $4,900,000 consistent with our previous communication As our investors and analysts appreciate, subscription term license revenue varies quarter to quarter and year to year simply based on the timing of the individual underlying their subscription on their premises. Our investor website has an example of this accounting. We remain pleased with the diversity and strength of our revenue base. For the quarter, of total revenues with no individual customer accounting for greater than Gross profit grew 10 percent to $36,900,000.
And professional services revenue, partially offset by increased investments in our delivery and support teams, as well as our data center. Cost of revenue grew largely due to headcount additions, including the acquisition of Prana in late January 2020. Q11 2020 gross margin was 70% compared to 73% in Q1 2019, due to a higher use component of the multiple year subscription agreement, it is fully recognized in the 1st month of the term and effectively contributes 100% margin. Profit decreased by 20% during the quarter to $5,600,000 or $0.20 per diluted share compared to $6 per share in Q1 2019. Adjusted EBITDA for the first quarter was down 6% to 15,100,000 or 29% of revenue compared to 35% in Q1 of 2019.
These changes were primarily related to the margin impact I just noted regarding in our sales and marketing, event costs were lower in the last month of the quarter, and we anticipate these savings to continue whilst restrictions are in place. As John noted, we continue to hire Across the Globe in line with our investments targeted. Q1 cash from operating activities was up 12 percent to $21,000,000 from December 2019 close. As at March 31, 2020 cash cash equivalents and short term investments totaled $233,600,000. Our minimum $900,000 as detailed in Note 13 to our financials.
This amount includes $310,800,000 of SaaS revenue backlog. In the remainder of 2020, of which $102,400,000 relates to SaaS. $108,100,000 will be recognized in 2021, of which $98,200,000 relates to SaaS business and $118,200,000 will be recognized in fiscal 2022 and later, of which $110,100,000 relates to SaaS business. Total bookings in Q1 were $47,500,000, of which SaaS bookings were 34 point $2,000,000. As you know, given the nature of our enterprise sales model and its extended sales cycles, Bookings vary by period depending upon the timing of new customer wins and existing customer expansion and renewal schedules.
Based on our strong backlog and our assessment of current market conditions and business outlook, We are pleased to be in a position to reiterate the details of which you will have seen in our news release to date and our Q4 2019 news release. We continue to invest At the same time, given current travel restrictions, we do anticipate really realizing some cost savings While these factors may support stronger adjusted EBITDA achievement for 2020, in light of our investment plans, and recognizing the uncertainty in the current environment, we believe it is prudent to reiterate our 20 to 23% adjusted EBITDA expectations for 2020. We will continue to monitor and respond to conditions, and we'll provide an update during our 2Q conference call. Thank you for your continued support of Kinaxis And with that, I turn the call back over to John.
Thank you, Richard. Never before has the term supply chain been more prominent in the public consciousness. We all feel its importance every time we enter the grocery store or pharmacy and hope that supply chain agility and the continuous synchronization gains through the uniqueness of our concurrent planning value proposition. The need for end to end even to us as consumers. I assure you that it's much more obvious to the manufacturers of the critical goods we are seeking, many of which are becoming Kinaxis prospects.
While it hasn't been the start of the year that anyone expected, or would ever hope for, I certainly feel grateful. Grateful, primarily that the Kinaxis team has to date been healthy. And grateful to all the frontline workers that have helped ensure that. Grateful that we offer a software platform that is being leveraged more than ever to help grateful that our business, while not immune to this environment, continues to add major customers, expand existing relationships build pipeline and demonstrate resilience during this time. Finally, on behalf of Kinaxis, I am grateful for your support as always.
Thank you for taking the time to join us on the call. With that, I'll turn the line over to the operator
And our first question comes from the line of Gus Papageorgiou from PI Financial.
Great. Thanks. Congrats on a great quarter. Thanks for taking the question. Just, I guess, the question is this, I mean historically, your sales and marketing strategy has been direct sales going directly to companies.
But I'm just wondering in the current environment, given the heightened importance that we're seeing in supply change change. Is there any is there any value to maybe changing the sales and marketing strategy that isn't this, is this a time maybe where you could start to advertise more broadly to make, new customers and new industries more aware of your solution and what it can do. And then I guess also given, again, the heightened, important to supply chains, Is there any chance that you're seeing your 18 month sales cycle perhaps contract a bit?
Great questions, Gus. Thank you. You know, to be clear, actually, our sales, our sales cycles and our sales process, if you will, are in our to work hand in hand with our, with our partner ecosystem. And so again, in Q1, as we've experienced in previous quarters, the vast majority of net new business has been in direct collaboration with our partners. And so this is what is allowing us to expand at a a more rapid pace in terms of getting a broader pipeline.
So we continue down that path. And certainly, I think that, it is serving us well. In terms of, contracting sales cycles, we haven't necessarily seen, a contraction. In fact, I mentioned that we have seen some, some delay. And I wouldn't say we've seen any derailment at all.
Or I would say we've seen some delay as prospects in a very short time period were forced to change their ways of working. And deal with, you know, things like absenteeism in factories, going up all kinds of challenges hitting their, day to day business. Notwithstanding a completely, I'd say a very disruptive shift in demand patterns and demand signals. And so I think that we will ultimately come out of this stronger I think, we are seeing more than ever before the need to respond to disruptions as I I like to say every supply chain practitioner has their hands on the wheel right now. You can't math your way out of this, right?
You've got to have your hands on the wheel and feel every vibration and respond accordingly. And obviously, our value proposition has been very much steeped in that that philosophy.
Our next question comes from the line of Daniel Chan from TD Securities.
Oh, hi. Good morning, guys. And congrats on a good quarter. I think it's great you didn't withdraw guidance. Let alone maintain the numbers, when most companies are withdrawing it.
So how has things changed since you gave your last update in February? And what are you seeing that's giving you the confidence to reiterate it?
Well, thank you, Dan, and we appreciate that. And And our confidence is driven by a number of factors. First, the benefits of subscription, particularly subscription with enterprise customers and their long term, long term nature. As you can see from the, between the revenue recognized in Q1 and SaaS, And then the backlog, the 102 backlog, that represents about 92% of the midterm of the consensus. That's out there and it's actually a little bit is in that range for our guidance as well.
So that's sort of 1st and foremost. The health of the funnel that John indicated and the capabilities of our extended sales team. So not only our direct sales team, but those working in tandem with our partners as well as marketing efforts. So it's a number of factors. You know, as, as prudent, you know, business professionals, we do have to recognize that, you know, these are, you know, different times.
And And, you know, there are, there are a number of factors that, that sales cycle, but it's primarily 1st and foremost with regards to that. The second element then is clearly on the expense side of things. And we're very fortunate in that we've been able to continue to attract and retain, some strong, you know, employees and continue to build a new theater. So we have a good visibility with regards to that, that expansion of costs. And so it's, it's those 2 factors.
We're privileged to have that type of visibility.
Okay. Thanks for that. And does the competitive landscape change at all in the current environment given that maybe some solutions aren't as well suited to a work from home environment?
We haven't necessarily seen a shift there. We're all essentially in the same circumstance. I will say that, the value proposition that we provide, this notion of, concurrent planning and agility is definitely getting a lot of attention. There are many articles being written about this. The most recent one I read yesterday from Crimson and Cove was fantastic.
Thick. It really, really drives home the need for this, for this philosophy, if you will, in planning supply chain and governing supply chain planning. And so our, as I stated, the pipeline has grown. It just has. And our activity our sales activity and this comes back to your first question remains very high.
And everyone is in the same situation. So We have, we have been virtual for quite some time, running demonstrations on a virtual platform for us. This isn't foreign. We're just doing more of them. And so I think that's what, that's what's driving our confidence.
Great thank you.
Our next question comes from the line of Paul Treiber from RBC Capital.
Thanks very much and good morning. Just wondering, we're hoping if you could elaborate a little bit on your last comment, what's interesting this quarter professional services rose sequentially. Could you speak to your ability to complete deployments in this environment with the work restrictions? Historically, how much have you been able to do remotely? And can you effectively go from prospect to full deployment all completely remotely?
Yes. So just a quick answer to your last question, it's yes. You know, we have been actually doing a lot of remote work over the years. As it relates to our current state, in professional services, and obviously we we posted a healthy performance there. I will tell you that while we had seen some delay in project activity it has been more than offset by acceleration in other projects as our customers are desperate to go live, because they know that rapid response will make them feel better.
It will handle the current condition that they're in. And so, to some extent, you know, while people are spending less time on airplanes, they're spending more time with their fingers on keyboards. And that is having a positive effect. So hopefully that answers your question, Paul. It's a great one.
We're the answer is yes, we we're certainly seeing, a lot of sales activity go 100% virtual right now with, with video conferences and the like and video based demonstrations, all of which are increased, at the moment. And, and deployment activity as well. So, you know, it's a virtual world.
Thanks. That's helpful. Second question for me is, can you speak to the magnitude of the drop in travel and expense and event costs in Q1? And then just from a ballpark point of view, what percent of revenue in a typical year is travel and event and discuss?
So, Paul, the, we're not going to be precise providing a percentage directly just because it's going to vary. And as you can appreciate, there's certain events, for instance, our annual customer event that, and other third party events are quite heavily weighted towards Q4. So they're going to vary quarter to quarter. The, but at the same point in time, we're growing our expense base with, with, new people investments and so on. And so, and so, you know, the focus really is you know, blending that, that visibility that we have with our current expenses going forward.
We are seeing some opening up now in geography. So we also would anticipate there will be some, return to, to travel levels. So it's sort of a combination of those factor. So continuing investment in the business, that visibility of the margin, that's where we're providing that guidance.
Thank you.
Our next question comes from the line of Thanos Moskopoulos from BMO Capital.
Hi, good morning. John, can you expand on what you're seeing with respect to, partner engagements? I would think you're one of the few software categories that might benefit from the pandemic and consequently, are you seeing the large SIs ramp up the level of resources and attention that they're directing towards you relative to prior the pandemic or has their engagement level been pretty consistent both pre and post?
You know, both pre and post, I'd say, pretty consistent. I think the only thing that, again, we've said is that the pipeline, has grown. And I would say that activity continues current sales engagements and current sales campaigns are continuing notwithstanding the conditions we are in. They're just happening remotely. And so I would say, we've had a very healthy relationship.
The partner, the global alliance team has been growing very steadily. And as we have consistently reported, our net new business, comes in vastly through the collaboration with that with the alliance partners.
Great. And, in terms of the deals that are experiencing some delays, are there any common themes, with respect to the verticals where you're seeing that, or does it really just vary customer by customer based on their unique circumstances?
It's a great question. It's been very interesting to watch. How are the usage increases occurred over time. It started with high-tech, as you can imagine, with a lot of of Chinese based, raw material manufacturers and so on in that space. And then moved into life sciences and the CP space as well, such subsequent to that.
In terms of, what we're seeing by vertical, I would say there's not, there's not, a difference there. We're not seeing any, you know, one vertical over another of experiencing experience anything unique.
Okay. And finally, there's been some press about how the algorithms and the Black Box have been failing in the current environment given volatility. And I think you sort of alluded to this. Consequently, are you seeing, customers resonates a lot more with your scenario based approach or was that already happening even prior to pandemic?
Well, I think it was already happening for sure, and that's I think the evidence is just our continued success and our continued growth as a company Obviously, during times like this, as I said, every practitioner has their hands on the wheel. This is not a situation where full automation under a storm like this actually works. And more interestingly, there will be a very, very large gap in the calendar where all the data doesn't matter, mass based models that are, that rely on historical performance, it will be very difficult to take this year's history into next year's projections. And so Again, it comes back to something that we have been espousing for many years that, it is far more potent to to be infinitely accurate, infinitely agile, sorry, than to focus on pure accuracy. And our model has around concurrent planning has been just about that hyper agility wins the day.
Think about it in terms of a sports team, right? You can practice your skill and be an effort at your craft, but when you step on the field, the team that wins are the ones that handle the conditions on the field. You never know what's gonna happen. You know, every day is a is a different day. And so this notion of Agility, hyper agility, continuous synchronization of your supply chain, absolute and end visibility 0 blindness across all functions.
This is the philosophy, I think, that will ultimately win the day.
That's great. I'll pass the line.
And our next question comes from the line of Richard Tse from National Bank Financial.
Yes, thank you. I recall you guys had a really strong pipeline last quarter. So when it comes to this quarter, were there any inbounds since the lockdowns that you had not been expecting? So what I'm trying to get, were there sort of incremental sort of inbounds coming, given this backdrop and some of the challenges that some of those prospects may be facing?
I would say nothing that we haven't expected. We continue to be Richard, you know it's to be hyperrazor focused. And so we continue to be hyperrazor focused on the market verticals, and the geographies in terms of targeting target marketing and the like. And so the pipeline has grown in every geography, and I would say in every sector, not withstanding, there have been some delay in deal closures. Again, as I mentioned, largely due to companies just having to pause, and readjust their ways of working.
In many cases, we've we had some customers saying that we're short 40,000 laptops. We have, you know, it's those types of challenges that that folks are having to deal with. But I would say nothing unexpected.
Question earlier about the conditions that you're maintaining guidance, but can you maybe touch on some of the broad external assumptions you made around maintaining guidance? So you are you thinking things are gonna open up probably in June? Like, is it gonna happen at the same time around the world? Like, maybe sort of share with us what you're thinking on that?
Sure, Richard. The, so, you know, at a sort of really high level, I guess, you know, there's obviously, our revenue on the top line. And, and, you know, again, we've talked about the strong visibility with regards to just the, the foundation of our revenue. And, and, you know, as you can appreciate from a SAS model, it really becomes, a bit of an annuity. So there may be some lumpiness when you secure those large annuities, but then they play themselves out over that typical 3 year period.
And so, you know, with, again, that's sort of the 92% that we have, between recognized and backlog, that's where we're saying, you know, the 8% is going to be this juncture from renewals that we have, visibility towards the level of new name customer wins and then the expansion of new name business. You know, it's also then driven by our view as to the, for the rest of the revenue element, primarily by the level of activity on the professional services because, the other 2 revenue elements, maintenance support are also, with strong visibility as well as subscription term license. Then it becomes a matter of our burden, if you will, in terms of both the operating and, and, cost of sales. We've talked in terms of the visibility that we have to not only the current base and the expansion and allowance for continued growth. We do see, again, opportunities to, you know, maybe not spend at that level depending upon upon events.
But, you know, at this point in time, we think it's prudent to continue to invest at high level in the business. And so we're accounting for that. And then the 3rd element is on the capital side of things. And we've already made our significant capital. We are still planning, capital expenditures in the $14,000,000 to $16,000,000 this range.
And so, you know, we, you know, our nature of our business I won't say it's, it's, you know, it's simple, but it, it is, you know, it is less open to these variabilities of, of, say a perpetual business or our product business. And so, you know, we're fortunate that we can model that, with the, with a higher degree of confidence
Okay. Just the last one for me. I think you were going to be unveiling a bunch of sort of new products, I think demand sense was a one that we saw last year at your user conference, as, you know, the backdrops are changing the rollouts there. And, that's that's it for me. Thanks.
Yeah. So we continue, you know, the R and D factory, have, hasn't really, missed a beat. You know, this, It's very interesting. We were, you know, running as a largely mobile organization even prior to this situation happening, we'd run out of space in our building. And so we had last year established a work home protocol for a very large group of individuals.
And so transitioning, the R and D factory to a full work from home protocol happened a extremely swiftly for us. We had already established a protocol and we just extended it to everyone. And so, so I'd say, we remain on course in terms of our product roadmap. And we continue to be engaged with customers in alpha and beta programs across the board. So I'd say we're on track.
And our next question comes from the line of Paul Steep from Scotia Capital.
Great. Good morning. John, could you talk just a little bit about what you've seen with the level of engagement with C level executives, would you say hesitate to use the word normalization, but have the engagements now that we're sort of into May sort of leveled back out that people are now actually looking at pushing capital and pushing faster and further on deployments of rapid response? Are we still in sort of this uneasy period for the next little while, do you think?
Well, I think time to value is on every senior executives, mind right now. And with with rapid response in our agile approach to deployment, our customers can achieve, like Technicolor are pretty rapid time to value. And as I stated earlier, the one thing that we have seen and with senior executive motive I'd say the motivation came from the senior executive, some acceleration in the first quarter, and we continue to experience that acceleration in project activity. To get to go live milestone faster. And as you can imagine, they recognize, the 1st day this is live is the 1st day we start feeling better under these current conditions.
And so I'd say, we continue to see that, that that theme, if you will, of dialogue, with senior executives. As it relates to prospects And again, you know, we're seeing senior executives pushing towards a more rapid, if ever, more so a more rapid time to value, how quickly can we get to a go live state? And we might forego some scope in order to get to a go live state and regain some control over what they might describe as COVID risk to supply chain. Great.
And then maybe either for either one of you, what's been maybe the biggest surprise in terms of, you know, order intake that surprised you either in terms of clients doing seat expansion maybe faster than you thought or module expansion in the last little bit where you would have thought, okay, maybe we'll see a little bit of a pause on some of these things, but it's gone the other way.
Well, Paul, I think, you know, we do have a number of, of vertical vectors for growth. And so I thank you for touching on those. So yes, we have seen expansion. We've seen expansions in users. We've seen expansions in sites.
We've seen expansion. And, from existing customers and new applications. And, and obviously, we've seen growth from new customers. What we're also seeing is, and what we've been supporting is, what we call, report access users. And we've created a program whereby, without, at least on the interim, without charge, we're allowing users to expand their report access.
So these are basically users that can see the results that, you know, from the simulations and other activity that's going on. And, we're seeing success there. So, you know, ours is a fixed determinable revenue model. And, but it is driven by those factors. So we're we're seeing, you know, uptake across the, you know, across all those, factors.
Thanks.
Our next question comes from the line of Deepak Kaushal from Stifel GMP.
Oh, hey. Good morning, guys. Thanks for taking my questions. John, Richard, just curious, you know, historically, new deployments of rapid response have been tied to ERP transformations, whether SAP or Oracle. Just wondering if this dynamic has changed or is expected to change post COVID what you're seeing from customers with their ERP plans and the pace of those deployments?
Yeah, I would say, today, less so, we're not necessarily seeing the adoption of concurrent planning and rapid response as a direct reflection of, ERP transformation. And, and quite honestly, we don't require it. It's not a prerequisite, at all. You know, that our our prospects are undergoing that kind of a transformation. And so I I'd say again, to reiterate, it's it's more so the recognition that what governs supply chain planning has to change.
It has to change in order to absorb this level of volatility. And that's what's I'd say, driving, driving the activity today.
Okay. Interesting. And then I just wanted to ask you about the pipeline. And in terms of the vertical markets, you know, obviously markets like travel and aerospace are facing significant exposure in this environment, but food and supply chain are becoming even more critical. What are you seeing in terms of the puts and takes in those vertical markets related to your to your pipeline of opportunity?
Can I have one more question?
Yeah. No, great question Deepak. Well, I made that statement very deliberately that we have seen a growing pipeline in every geography and every vertical. And I'm not surprised, quite honestly. When you deal with volatility of demand signals or supply availability, both are disruptions.
And so some verticals are seeing a tremendous spike in demand and also unprecedented volatility. You have no idea where the demand signals are coming from. They can't be predicted. So you have to respond to them as they arrive. And in some cases, demand may be slowing down dramatically in the first order of business is to make sure that you're, you're, not absorbing excess and obsolete inventory.
As that occurs, right? You have to really be, maximizing, if you will, your own, your own factories and making sure that you're eliminating all potential of waste. And so in both cases, you need to be able to respond. And so that's what's driving, I'd say a uniform increase in pipeline across every geography in all verticals, including aerospace.
Okay. That's very interesting. Thank you. I appreciate that. And then my last question, you know, obviously the COVID has created a significant change in in in the world.
How have you guys responded in terms of your thinking to change your strategy? Any changes on the M and A side or the mid market opportunity and when you guys go after that or how you go after that? Any thoughts on that would be helpful. Thank you.
Well, that's a, that's a great question. So with regards to, you know, our, our M and A focus, as you know, with, with one product, you know, the focus is being always how can we further accelerate the growth? How can we expand the capabilities of, of, of rapid response? And in the past, we've been sort of more opportunistic as opportunities were presented to us. With our expansion of the management team of late at our increased depth in a number of areas, including product management, R and D capabilities, thought leadership, we've been taking more of a, of a deliberate, thoughtful view.
And so we'll, are continuing to evaluate in sort of the classic do we build? Do we, do we buy? How do we also extend our capabilities? And so It's not lost on us. You know, some of the opportunities that are out there in the market today.
And so, you know, we're going to continue to evaluate and always with the view of, of, of how we can accelerate. It's not going to be, you know, necessarily a revenue, buy. We're not that type a company. So it's, it, it, is going to be focused on how do we further accelerate our overall top line growth and capabilities of proper response.
Okay. Thank you. Thank you. I appreciate you taking my questions.
And our next question comes from the line of Robert Young from Caccord.
Hi, good morning. You shared a bunch of elevated usage statistics highlighted some, complimentary reporting access. And so I know you recently created a focused sales team, specifically on existing customer expansion. And so I was wondering if you had talked about how that's gone, how it's performing how that's working out and if it's something that you now think you need to expand given, you know, this usage, bump.
Thanks, Rob. We are absolutely, first off, we are absolutely expanding that team. And so, Paul Carreiro, our Chief Commercial Officer, part of the expansion of the sales team in Walyau. And this has significantly expanded in the last 18 months, was a team dedicated to working with our existing customers and helping them understand, you know, additional use cases, additional opportunities to expand So that team has expanded the geographic, and by the way, different geographies. The, the new name customer base the, the partners, that, our teams that work directly with the partners, all areas of the sales and marketing have, have expanded.
So we are absolutely seeing, contribution from those teams. But the expansion of customers isn't just simply about the sales. I mean, the focus really is helping them to gain higher return on investment. And so that process starts actually with our customer support team our customer success team and, and, and are also with our knowledge services and helping them understand how they can better utilize their current subscription and then through that really at expansion. So that team, the sales team, the internal sales team exists, sorry, the existing, base sales team works hand in glove with, with the other parts of the organization to, to really radiate the use of rapid response.
When when you're planning for the future, are you thinking of any difference in the way that the split, I think you said 65, 35, 35, weighted more towards new logos Is there anything that would give you a sense that that should change?
Well, it's it's yes, that's sort of waiting and that's sort of over the last few years average. And it will vary quarter to quarter. But I think, that twothree, you know, that sort of a sixty-forty sort of feels about right. We're fortunate with the expansion, especially a number of our key names, it's driving the new customer growth. That is still the key driver.
And that's, whether it's 35% or 40% expansion from existing customers, that's on a growing base as well. As you can look, you can see the compound map. So, I think as a management team, we'd probably be comfortable in that 60%, 65% continuing for new name expansion.
Okay. And then lastly, lots of good commentary around the pipeline. Thanks for that. Are you seeing any signs of a delayed wave of demand as, you know, people get on top of the fires, you know, getting their business continuity plans in place and whatnot. I mean, a lot of your larger customers are being complex machines.
And so are you thinking about a delayed wave of demand? And are there any early signals in that?
I think you talked
a little bit about unaided inbounds broadening of the funnel. Like, are there any signs that, you're going to have to materially expand to handle, you know, higher level of demand maybe next year?
Yeah, that's a great question, Rob. So, yeah, even during these times and, and, the tail end of the quarter and it continues We're seeing growth in the pipeline. We're just seeing it, right. We're just it's it's healthy and the sales activity continues, as well. So we're we certainly see for this calendar year, we're confident our confidence is high enough to be reaffirming our original guidance.
As it relates to beyond that and we start thinking about the next year or 2 years beyond that. I do believe that this notion of, changing the manner in which supply chain planning occurs that will be a topic. And again, we're seeing a lot of articles being written about this. If anything, this is just highlighting a very, significant proof point that, supply chains have to be far more agile and resilient And so people, every boardroom, I believe this, every boardroom will be asking their CEOs, what will you do next time? What will you do next time?
And they'll be measuring their supply chain resilience and responsiveness and agility. Right. That's what they're that's what they're going to be after. And so I do think we'll come out of this stronger.
Thanks, Bennett. Ask one last little question. When you're talking about handing out complementary reporting. I think the concurrency aspects of your product, people sort of slowly grow into think of it as a system of record. So that has really good implications on how important you are through a crisis and how unlikely it is that customers would you know, walked away from your software.
And so I was wondering, are you are you seeing customers look at connections more as a system of record And then I'll pass on.
Yeah. I think, you know, to the point of, you know, even Gartner has a magic quadrant called system of record. So yeah, I, you know, I think our customers would definitely consider us to be not only, system of record, but mission critical. And that's really probably an even more important distinction. They consider us to be mission critical.
And so I'd say again, at this time, we part of our desire here was to be good global citizens during a time like this, to offer our customers I'd say, untethered access, report user access so that they could eliminate any and all possible friction to absorbing attempting to do their part to help the planet recover. And that was our that was our, that was our response.
Okay. And our next question comes from the line of Sudan Sukumar from 8 Capital.
Good morning guys and congrats in the quarter. Thank you. The first question, I was actually more of a follow-up to an earlier discussion on brand awareness and with partners and direct teams kind of driving the charger. But how has unsolicited inbound interest look like for you guys during this period and how has that changed, pre COVID?
Yeah. Both, you know, this is, again, when I look at the precursor to pipeline, It's what happens during our lead gen activity. And that has also followed suit. In terms of our lead gen activities and our ability to engage with market qualified leads is up. It's just up.
In the quarter period, And so that obviously is fueling the overall pipeline because that is a prerequisite. It's a precursor, if you will, to pipeline. And so, I'm very pleased with that, with the volume. I'm definitely very pleased with the volume and even more pleased with the fact there isn't a concentration. We're seeing it across Europe, Asia, and North America, and we're seeing it across the 6 primary verticals.
That that, that we focus on.
Okay. Okay. And Given the lift ins in activity on the Rapid Response platform, maybe can you speak to some of the key learnings or insights either internally or from customers on back of the pandemic that could help guide or influence your product strategy and priority for rollout of features and functionalities?
Yeah. Well, the first thing that we've noticed is the sheer volume of simulations that are occurring. That is by far, you know, definitely more users and more simulations, occurring. And, you know, we measure you know, even the number of, of, of planning computations that occur and so on, they're measured in billions at the moment. So in fact, tens of billions.
So, you know, I'd say that as you would expect during a time like this, the people are assessing alternative course corrections in real time. And so the need to very rapidly, very rapidly run alternative simulations and scenarios is critical. It is not uncommon for our customers to be running 100 of scenarios, 100 of simulations a day, 100 of them. And and this, you know, for supply chain practitioners, I I can assure you. This is not easy to do.
If you look at the legacy approach to solving supply chain problems, you might be able to run 10 in a day. Not 100, not 600, not a 1000, not across every function, not end to end. And so I'd say that is the primary, usage that we're seeing in terms of, volumes.
Good. And, I know you guys seeing opportunities for any, for any new use cases or, or acceleration of, of, features and functionality that may be in the roadmap today?
Well, I think we are, you know, we are absolutely full steam ahead, if you will, on our original product roadmap. We feel like that is the we're on the right path there. And if anything, the usage of RapidResponse right now, has more to do with its base functionality that was invented years ago. This notion of response response management scenario planning, end to end concurrent planning. These aren't the new things that we invented.
These are these are the, I'd say the prerequisite things, the baseline elements of rapid response that are most being used right now. And less less so, you know, more of the, I'd say, the modern techniques. So, you know, I'd say today, the usage of RapidResponse and what's driving our product roadmap, hasn't changed. Priorities have not changed.
Great. Thank you for calling guys and thanks for taking my questions.
And our next question comes from the line of Stephanie Price from CIBC.
Good morning. I was
trying to talk
a bit about the partner relationships in this environment and whether partners have become more focused on supply chain, given client concerns, and and whether Kinaxis is positioning itself any differently with partners, than they would in kind of these more normal times.
Yes. So we announced, I think, last year that our alliance, our formal partner alliance group is now roughly 25, 25 partners in the global alliance practice for us. And I'd say again, they I wouldn't say that we are increasing or decreasing. It's very steady, steady state in terms of our engagement with them. In Q1.
The vast majority of net new business came through their influence again. I'd say that we continue to see an acceleration in partner certifications. So many of those you can see on on LinkedIn as people post their badges. Not everybody posts their certification badges, but I would say we're seeing some acceleration in the number of certified third party consultants as they prepare I wouldn't characterize it as being, any giant leaps though. I'd say it's been very steady and very healthy.
Great.
And then just one final one from me on existing customers. So I was just wondering on kind of more hard hit to industry, such as high-tech and life sciences, what you've seen from those existing customers, if they're looking for broader rollouts or if there's been any that are kind of looking for some sort of deferrals or price concessions in the current environment?
Yes. So we haven't seen any anything unusual on price concessions or any of those things? I think we're privileged to be working with some of the largest manufacturers in the world. I would and your first question, You know, I, I'm, I'm sorry. I, can you remind me the first side first side of your question, Stephanie?
No, no problem. I was just asking around the increase. If you've seen any increase coming to higher hits industry, so they've been kind of increasing their usage?
Yes, nothing unusual, notwithstanding more simulations. And we certainly have been monitoring the number of scenarios, which is the first thing we saw a pretty dramatic leap in. And in terms of, of high-tech electronics, I'd say, was first in the wave, where we started to see a spike. Very quickly followed by life sciences and then consumer products. As you know, I'd say life essentials soap and the like The demand signals coming from the marketplace was pretty dramatically different than expectation.
So I'd say those are the first three in that wave. And in terms of the usage of RapidResponse, I'd say the vast majority, if not close to 100% of the increase usage has been, around running alternative scenarios and simulations.
Okay. And our next question comes from the line of Nick Agostino from Laurentian Bank Securities.
Yes. Good morning. Congrats on the quarter. I guess two questions for me. First, John, I think in the past, you spoke about, you know, Kinaxis and your channel partners are looking at other verticals on an ongoing basis.
I'm just wondering if the current pandemic crisis may be got either Kinaxis or some of your SI partners to, I guess, accelerate penetration or consideration into into new verticals, or are you still just kind of monitoring, prospects on the vertical side but you're just comfortable with the with the chance you are the, the verticals you have right now?
Yeah. So we've always said that, you know, we remain hyper and razor focused on the verticals and geographies in which we target. And at the same time, we do have customers that are outside those 6 verticals. We're always incubating and testing our value propositions across across those verticals. And when we feel confident in our solution and our ability to manage those use cases, then we go after them more deliberately and then we'll talk about those more publicly.
Usually, there's a bellwether account we can talk about at that time. Obviously, we're thinking quite a bit about our growth levers and how we can accelerate growth in the future. We feel like the pipeline of activity is quite vast. In the areas that we're already focused. And so we certainly don't want to become defocused and not take advantage of the activity we have immediately before us.
I think over the over time, And I've said this before, we're not in every market vertical, but it's a matter of when, not if. I do believe that this notion of card planning and And, this pursuit of hyper agility is, ubiquitous and it will serve all supply chain markets at some point in the future.
Okay. And then my second question, wondering on the new wins and specifically the CPG client win that you announced. Obviously, you've got some sizable wins in that specific market. I'm just wondering during the course of Q1 as the pandemic was making its way around the world. Can you were there any specific customers that maybe or wins, including that CBG win, CBG win, sorry, that maybe you won or was accelerated as a result of the pandemic.
And So my question specific on the CPG side, but also maybe any other vertical where you saw the acceleration of the win where the customer said we wanna sign up today because of pandemic.
Yeah. I wouldn't necessarily, categorize it like that. Many of the deals that closed in the first quarter were well down the maturity path. They, you know, you know, as you know, some of these companies are the largest in the world. They don't negotiate contracts and then 24 hour period.
It just doesn't happen. I would say that in cases, in cases of CPG life sciences, high-tech electronics predominantly where we're seeing a lot of that disruption, more so. The deals just didn't slow down. They did not, defocus their attention on getting things accomplished. Once I will say that project scope That is an area that has been, where we've seen some discussion where you know, customers and prospects are looking for an accelerated time to value, right?
So you see a grand scope of things. And yes, there's a is the Holy Grail, but at some point, you have to start feeling better. And so in some cases, we're negotiating a quicker time to value on projects, a phase 1 that happens in a much faster timeframe so that they can absorb the pandemics effects.
Well, I think that's, was the, last question. So we wanna thank everybody again for participating on today's call. And, we appreciate your ongoing questions and support at Kinaxis and look forward to speaking with you again when we report our Q2, twenty twenty results. Thank you, and goodbye.
This does conclude today's conference call. You may now disconnect.