Good morning, ladies and gentlemen. Welcome to the Kinaxis, Inc. Fiscal 2019 third quarter conference call. At this time, all participants are in a listen only for you to queue up for questions. I'd like to remind everyone that this call is being recorded today, Friday, November 1, 2019.
I'll now turn the call over to Rick Wadsworth, vice president of Investor Relations at Kinaxis Inc. Please go ahead, Mr. Wadsworth.
Thanks very much, James. Good morning and welcome to the Kinaxis earnings call. Today, we will be discussing our third quarter results, which we issued after close of markets yesterday. With me on the call are John Sicard, our President and Chief Executive Officer and Richard Monkton, our Chief Financial Officer. Before we get started, I want to emphasize some of the information discussed in this call is based on information as of today.
November 1, 2019, 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 our SEDAR filings. During this call, we will discuss IFRS results and non IFRS financial measures. A reconciliation between the 2 is available in our earnings press release and in our MD and A, both of which can be found in the IR 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 attributed 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. 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. I'm very pleased to report our 3rd quarter results, which include SaaS revenue growth of 28%. To $31,200,000, total revenue growth of 29 percent to $47,100,000 and adjusted EBITDA of 26 percent of revenue, which includes a $2,500,000 one time charge we took following the amicable resolution of our previously disclosed arbitration with a former agent customer. Adjusted EBITDA was 31% prior to this charge.
Our strong results in Q3 were driven by several new customers closed in the second quarter, including British America Tobacco, Honda, Yamaha Motors, and Teva Pharmaceuticals to name a few. Additional net new customers and expansions in Q3 have given, have been instrumental in further driving our backlog to new heights. Which provides exceptional visibility into we are increasing all aspects of and total revenue as well as a higher EBITDA target for the year. Richard will provide these details in a few minutes. Our business performance demonstrates traction from our strategy to expand our global sales team in 2018.
And again, earlier this year, momentum in digital supply chain transformations continues. And I am, I believe, Kinaxis holds a unique leadership position using Rapid Response, our powerful and current planning platform as a vehicle to solve modern day supply chain planning challenges. Since our last call we also announced several new strategic partnerships designed to both scale our implementation capabilities and advise new prospects when they are considering their own digital supply chain transformations. With one of our long term customers Flex. They are demonstrating the power of rapid response to their extended customer base, from their global Flex Pulse Centers.
We've already had a couple of initial wins, thanks in part to their supportive referrals. We also announced the JFE systems of Japan, a subsidiary of 1 of the world's largest steel companies, joined our partnership enablement program to accelerate opportunities in that region. We have worked closely with JFE over the past decade and have joint customers in high-tech Automotive And Consumer Products Industries. Crimson And Co, who are specialists in Global Supply Chain Management Consultant, were added to our growing partner ecosystem this past quarter. They serve clients in a number of vertical markets we share including consumer products, high-tech and electronics, industrial equipment and life sciences.
While we are rilled with our growing customer base and partners. I am equally excited by the increased pace and depth of our product innovation. Within the first half of twenty twenty, we will dramatically increase the extensibility of RapidResponse with the launch of our development platform. Partners and customers will be able to harness the power of concurrency by building new capabilities and applications that are tailored for their specific needs. These extensions will plug directly into and leverage all the power of RapidResponse's unique always on concurrent planning engine.
All without customization of the core rapid response code. For customers and partners, the benefits are obvious. For Kinaxis, it means that we can better position to offer our leading SAS based supply chain planning platform to a broader market. As part of our latest product announcement, we also introduced compelling new data visualizations, including a unique interactive supply chain network visualizer with a patented way to present performance data on different screen formats ranging from desktops to mobile devices. These innovations will enable planners to shrink These innovations were extremely well received by customers, prospects, and partners when we announced them at our recent and record breaking connections user conference.
Our success this quarter and to date is driven by our focus on investing for sustained long and accelerating product innovation all takes significant time, investment and focus. As shareholders Conaxis, we appreciate you supporting our long term view. With that, I'll turn the call over to Richard for an overview of the financials for the quarter. Richard?
Thank you, John, and good morning. As a reminder, unless otherwise noted, all figures reported on today's call are in US dollars under IFRS. On a comparative basis, total revenue in the 3rd quarter increased 29 percent to 47,100,000 driven primarily by SaaS revenue, which grew 28 percent to $31,200,000. This growth was due to contract secured with new customers as well as the expansion of existing customer subscriptions. We recorded $3,300,000 of subscription term license revenue in Q3 REIT, consistent with our previous comments regarding the expected cadence of this year's customer hosted subscription renewals.
As we have previously noted, subscription term license will vary quarter to quarter in line with the timing of the individual customer renewal terms. Professional services grew by 8% to $9,300,000 compared to Q3 2018. Professional services revenues driven by a number of factors, including the number, size, and timing of customer projects, as well as the level of deployment engagements supported by our partner network. Overall we remain pleased with the diversity and strength of our revenue base. On a year to date basis, our 10 largest customers accounted for 33% of our total revenues with no individual customer accounting profit grew 36 percent to $33,300,000 or 71 percent of revenue compared to 67% in Q3 2018.
This increase resulted from the growth in SAS revenue and other revenue, partially offset by an increase in cost of revenue, such as the related headcount, partner, third party costs, and expanded data center capacity. Profit grew by 70% during the quarter to $4,500,000 or $0.17 per diluted share compared to 10¢ per share in Q3 2018. Adjusted EBITDA for the 3rd quarter grew 29%. To $12,100,000 or 27 26 percent of revenue in line with Q3 2018. These results were due to an increase in revenue and gross profit, partially offset by an increase in operating expenses including investments to support the company's long term strategic growth initiatives.
Included in the 3rd quarter G and A expense with the write off of $2,500,000 in receivables booked in 2017 related to the resolution of the arbitration proceeding with a former Asian customer. Excluding this charge, adjusted EBITDA was $14,600,000 or 31 percent of revenue, and profit was 6,300,000 or $0.23 per diluted share. This matter is now fully resolved. While up 34% on a year to date basis, Q3 cash from operating activities of 1,100,000 was 41% lower than Q3 2018, largely due to fluctuations in operating assets and liabilities. As of September 30, 2019, cash, cash equivalents and short term investments totaled 202,200,000 an increase of $20,700,000 from the $181,500,000 as at December 31, 2018.
Our minimum contracted revenue backlog continued to strengthen. As of September 30, 2019, it was $289,700,000 as detailed in note 12 to our financials. This amount is driven by the 246 $900,000 of future contracted SaaS revenue as well as bookings for maintenance support and subscription term license revenue. The backlog will be recognized over the fourth quarter of 2019, of which $31,200,000 relates to SaaS business and $12,100,000 relates to subscription term license $111,900,000 will be recognized in 2020, of which $97,400,000 relates to SaaS business and $131,200,000 will be recognized in fiscal 2020, and thereafter, of which $118,300,000 relates to SaaS business. Total bookings in Q3 were 80,200,000 of which SaaS bookings were 48,900,000 We are very pleased with this performance.
As you know, bookings will vary between periods as they depend upon the timing of the closing of the We are pleased to increase $188,000,000 to $190,000,000. SaaS revenue will grow approximately 22% over fiscal 2018. Full year subscription term license revenue would be approximately $26,000,000. With our ongoing accelerated investments in sales and marketing, We now expect sales and marketing will be between Continuing our product team expansion and new product innovation investments, we expect that research and development will be in the range of 18 19% of total revenue. Based on these revenue and investment expectations, we now expect full year adjusted EBITDA margin between 27% 29% of revenue.
Finally, our business model is supported capital expenditures in the range of $11,000,000 to $12,000,000, the majority of which we have already invested in Q2 on planned data center expansion and R and D investments. Thank you for your continued support of Kinaxis. And with that, I will turn the call back over to John. Thank you, Richard.
In summary, we are pleased with our meaningful progress so far in 2019 and believe that we are well positioned to deliver on our increased full year targets. I'm encouraged by market conditions and ongoing sales activity, the growth in our stable of top tier partners and their level of engagement and our accelerating product innovations. Most of all, I'm humbled and encouraged by the top quality brands who continue to trust Kinaxis with their supply chain transformation initiatives. On behalf of Kinaxis, I would like to thank you for your support. And as always, for taking the time to join us on the call today.
With that, I'll
Thank you. And your first question comes from the line of Richard Tse from National Bank Financial. Go ahead please. Your line is open.
Yes. Thank you. Are you guys being very conservative with guidance? Because, your implied Q4 numbers on revenue pretty much seem like they're already in backlog. So, maybe you can kind of give us a bit of commentary on that, please.
Thank you, Rich, for the question. We are very confident with regards to the guidance that we have provided. The nature of this description does provide the long term visibility. And the as I think you appreciate Richard, sometimes it's the timing within a year that, that can vary. And so while our model has really been predicated for many years, it still is, on that 80% of the forward visibility of the next 12 months, with regards to within the next 3 months, it's it's in the it's traditionally been in the very high 90% range.
So, this guidance is consistent with that type of model. As we now disclose the backlog, you, you, as a reader, have greater insight. So I'll just say that we're very confident and you know, our goal is to continue to not only secure business, but to secure it on a, you know, a timely basis within the quarter. And, you know, any of that performance will impact ultimate results.
Okay. And John, you guys had some great product announcements connections recently. I'm kinda curious to see whether you can kinda give us some, you know, post, conference feedback in terms of the reception. Obviously, it's been good. But I'm more curious to see your sense that that interest level cascade into incremental revenue in 2020 from those new products here.
Yeah. Well, we're we were thrilled. Obviously, I think, at connections, you know, at least in recent memory, I I can't remember another connections that was that successful. And I can't remember ever announcing that many innovations in one, one event like we did. And it was the obviously, the work we've done around self healing and machine learning, auto ML and and other elements related to those math functions as well as the new user experience.
And obviously, I'm I've been talking over the past couple of years about preparing for rapid response as a platform. So these are all slated for I'd say general availability inside of the first half of twenty twenty. And obviously, everything we do in R&D gets monetized in some way. On the rapid response as a platform initiative, we have early adopters, I will say, in a beta program working with us already. Working on, you know, customer initiated, applications And so that is absolutely thrilling to me.
It's exactly what I always dreamt of, if you will, you know, having that kind of mass runtime configurability. So it's no longer just the visualizations, but the ability to build customer specific IP safely in a SaaS environment. Something that is safe from upgrades. You upgrade safely and even though you have those extensions. So the adoption has been very strong.
Obviously, we had the demo booths at the event and they were, very highly busy, I would say. So we're really excited with what we've launched.
Okay. And just the last one for me in terms of the partner channel. You got a bunch of partners that kind of use a baseball analogy. What inning would you say you're in with the broad partner group when it comes to that group sort of reaching critical mass here for Kinaxis? And that's it for me.
Thanks.
You know, I have consistently said the same words were in chapter 1 book 1. You know, we you know, at the event itself, we announced and we showed we had 25 partnerships now. All at varying stages of maturity. And so you know, I, you know, for me, it's it's not so much about the quantity. It's about their maturity, as they as they continue to work with us.
And, and so frankly, I don't look at it as, okay, we're done. You know, we can slow down the partnership initiative. There are some of our greatest partners are boutiques in different parts of the world in Europe. And so we're thrilled with the uptake in that space where we continue to see more and more consultants get certified and badged as consultants and ready for implementation services. And so I don't look at it as us being deep in the game whatsoever.
It's still early days for us. Thank you.
Your next question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Go ahead please. Your line is open.
Hi. Good morning. John, can you update us on what you're seeing, with respect to the spending environment? I mean, clearly, it didn't seem like there were any macro issues quarter, but as you talk to customers currently, are there any concerns that might be affecting pipelines and sales cycles or not at this point?
I'm not seeing any negative effect. The pipeline remains very, very strong. You know, the pipeline is very diverse continues to be, I said the same words, you know, at the last earnings calls, but we're looking at the pipeline, today, very strong, very diverse, both in in geography, Europe, Asia, North America, all very, very healthy. And then a great distribution across the market segments we serve well. We're seeing particular, increased interest in the CPG and the consumer packaged goods arena.
And so, yeah, we're not seeing a negative effect whatsoever at this point.
Maybe in terms of Asia, I mean, clearly, you've had some wins there. If you could provide some more color, is it the cadence of sales cycles in Asia comparable to other regions? Are the industries that you're, targeting there, that you're having traction there similar to the other geographies And how's that pipeline progressing?
Yes. So I would say, there's a slight acceleration, if you will, in Asia and Europe. Predominantly, we're investing heavily in those regions. And we talked about that a year ago, putting our foot on the gas. And And so we're seeing the fruits of that labor, as a result.
And obviously, we can't announce every single account we win. Obviously thrilled to be able to announce Honda and Yamaha in Japan, almost back back. This is very, very significant for us in the automotive space in Japan. And, and again, the work that we've done in Europe around CPG with VAT and others, you know, is really strengthening those verticals in that region as well. So we're continuing our investments in those regions.
And again, as color, I would say, we're seeing, perhaps a slight acceleration in those in Europe and Asia. Predominantly. But I think it's reflective of our investment in those regions.
Great. And 2 quick ones, Richard. You raised your term license guidance for 2019. Did that reflect the expansion of existing on premise customers, or did you sign a new one?
With the subscription term, they have been on a renewal basis and it's not uncommon to see expansion. And growth on renewal. And so that really was the driver for the higher than anticipated performance.
And then finally, you'd previously given us term license guidance for 2020. It sounds like there was a vicinity of 11,000,000 term licenses for next year. Is that still your expectation?
Well, with regards to just the guidance in general, we're still going through our development, plan and initiatives. And so, we're going to be providing that when we comment on Q4. But in terms of the broad range, yes, that holds because that is those would be, renewals that we would look forward to completing throughout 2020 and then obviously in the out year 2021.
Okay, thanks guys. I'll echo Richard's congratulations on the quarter.
Thank you.
And your next question comes from the line of Daniel Chan with TD Securities. Go ahead please. Your line is open.
Hi, good morning guys. You saw a nice acceleration in the backlog building up there. Can you provide some color on the seasonality of the deal closures and should we expect the backlog to continue to accelerate as we get through Q4?
Well, our goal, thank you, Dan. Our goal is absolutely to see sustained growth and the backlog. Now it's as you I think appreciate the timing of the deals and others what goes into that amortization schedule, that long term subscription revenue is going to be dependent upon the timing of the arrangement. We don't really see seasonality so much with regards to the subscription side of things. It's just continues to be building.
It is fairly I would say more than common that those transactions occur later in the quarter and hence my earlier comments about contribution within the quarter or within the even sometimes the fiscal year. But, as John commented, the health of the funnel is very strong. The, the investment we've made in sales and marketing is considerable and continues. And so that our coverage of representatives, both not only in sales, but in marketing and related support globally continues to expand. So our expectation and focus is just to continue to drive that backlog.
Okay. Great. And then for the the large deals, that will take multi multiple years to deploy, such as the VAT, 3 year deployment, Are those deals fully reflected in the backlog or do you add it in phases as you complete parts of the deployment?
Well, the, our backlog, for just to to clarify is the minimum firm contracted revenue And it is it is it follows as disclosed the corresponding revenue types. So I'll be at subscription or the on premise subscription term license. It is not common for professional services to be really committed in the long term. And in fact, most of our arrangements and deployments are in a much shorter period of time. And then on a term, on time and material basis.
So they're not reflected in the backlog. They are reflected in our broader guidance, but not in the backlog. So, really the focus is the ongoing subscription license revenue is, as noted, and that is the driver for as we noted, the 80,000,000 bookings in total and 48,000,000 related to SaaS.
Great. Thank you. Your next question comes from the line of Deepak Kaushal from GMP Securities. Go ahead please. Your line is open.
Hi. Good morning, guys. Thanks for taking my question. I have a quick follow-up on Thanos' question on the term licenses. So Did you guys say that you're expecting it to drop next year?
And and kind of what's the intuitive sense of growth on the on Yes.
So so Yes. So in broad ranges, you know, our arrangements are longer term as you can appreciate Deepak. And generally speaking, the most of them average around 3 years. And so subscription arrangements, you know, a number of, of, of, of whom we actually have been working with well over 10 years. In some cases, even, you know, converted to subscription when we went to subscription model in 2005, continue to be deployed and continue in a number of cases to expand on a customer hosted basis.
And those are the those are the agreements, even though they'll pay us, you know, in annual installments over 3 years, under IFRS, we do have to, bifurcadine and, and, and present that revenue as subscription term license and the maintenance support. And it just happens that the cadence is, is really higher in, in this year and would also be higher our expectation in, in 2022. And as we have indicated previously, that level is going down to about a 50% level. In 2020. And, then going down a further in, in 2021, And, you know, our goal is then to be on the renewal cycle so that it would again increase.
Cash, the business, everything else remains you know, consistent throughout that period. If we just have that, that bit of a, of a, of a curve. And, obviously, it depends upon a number of factors, the extent to which customers renew and expand. And, it's not, we have, in a number of cases, actually, worked with the customer to help them understand the additional benefits of, of us hosting them in the cloud And we've converted their customer premise arrangements to that cloud, in which case then they follow into that broader SaaS model that you can see is just the sequential revenue growth.
Okay, excellent, Richard. That's very helpful. Thank you. So I have a couple of questions for John. John, Flextronics.
So I asked them a couple of years ago if they were seeing a network effect with their downstream supply chain partners by using rapid response. They kind of smiled, but they didn't say yes or they didn't say no. Clearly, if they're a partner now, they're seeing some kind of benefit. Can you give us a sense of what the benefit to a, maybe not in specific terms, but what's the benefit to a major, company to push rapid response to its its partners. What does the partner see?
What is the the the main customer see?
Great question. Thank you, Deepak. It's when you think about the macro level value that we're providing, you know, we're essentially collapsing time, you know, cycle time, the speed to detect, the speed to correct. Is it's really one of the core tenets of Rapid Response. It's one of the core tenets of what we call concurrency and concurrent planning.
And Obviously, our customers focus inside their walls first. And the speed at which they can connect demand forecasting, demand planning, to their master schedule and capacity planning and inventory and so on, is where they achieve tremendous tremendous value. It's not uncommon for them to say, Hey, what used to take 2 weeks now takes less than 2 hours or what used to take 2 hours now takes you know, 30 seconds. It is a giant leap forward. Now when you start thinking about extending that speed that concurrency outside your Four walls, therein lies a level of indirection value.
Well. So the speed at which either the customers or suppliers of a contract manufacturer could be, connected, right? So if there's a demand change from 1 of Flex's customers, for example, the speed that Flex can absorb that, having been connected, having a rapid response to rapid response connected environment, collapses tremendously, right? You eliminate a lot of that lead time. And the same is true the other way around.
Right? So if you're a brand owner leveraging a contract manufacturer, the speed at which you can see downstream effects of the supply chain, is directly correlated to the speed at which you can course correct when those adverse conditions occur. And so it's all about speed and time. You know, the speed at which you can connect, learn it. And therein lies the network effect, if you will.
And so, you know, Flex has been a great customer of ours for many, many years, well, well past a decade, maybe even closing in on 20 years. We know them extremely well. They're, they're wildly mature. Especially in the world of concurrency. And so I think they obviously, benefit internally through the use of concurrency, but, they see the potential of extending that concurrency beyond their own four walls to include, their partners.
And And the same is true for the for the partners themselves, their customers. It's, it's extremely valuable to have that absolute transparency and high speed high speed visibility up and down the supply chain.
Thanks, John. That's great insight. Just on that, on that network effect. In the past, what I'd heard is that there were some concerns around data sharing and data privacy. And there's general hesitancy of the broader supply chain, external supply chains to do that.
Did you guys solve that problem, or do the benefits outweigh that problem? Customers are over it. Which path kind of have you gone?
Yes, it's a funny thing. Technology is never the burden, if you will, or the friction, connecting these partners. The technology doesn't really get in the way. Relationships are what needs to get solved and the trust between partners is what needs to get solved. So, I would say that, in terms of the ultimate decisions, if you will, of having that network effect occur.
The funny thing, when you're a brand owner, you still own a number to street, you still own quality, you still own every promise you've made to every customer, even if you don't manufacture your goods. You own all of that, you own quality, you own brand, you own promises, and if you're public, then you certainly own a number to the street. So there's a there's a terrific need to have that, transparency and visibility downstream. There's an absolute terrific need for it. And so, you know, I don't think it is, uncommon you know, it's not an uncommon occurrence today, you know, to have, you know, to have that visibility through subcontractors.
We're seeing a lot of what we call the glass factory effect as more commonplace. And the result is really the reason is really that. They need that transparency in order to maintain the promises they've made to the street, the promises they've made to to customers and to understand everything from on time and full and inventory disposition and other elements like that.
Okay. Excellent. No, I appreciate the detailed answers. Thanks for taking the time. I'll jump back in the queue to
to give some time to others. Thanks.
Your next question comes from the line of Robert Young with Canaccord Genuity. Go ahead please. Your line is open.
Hi, good morning. You reported very strong EBITDA margin and raised your EBITDA guidance for the year. So it looks like Q4 will also have strong margins. And so without giving guidance to 2020, how should investors think about your margin structure going forward? Are the initiatives that you have planned going to hold margins back, or should we be thinking about, you know, operating leverage going forward?
And then maybe if you could weave into your answer, how does the drop down and subscription term license impact that?
A lot of questions there, Rob, but thank you for, for those, those questions. And First and foremost, it is with regards to the subscription. We are very pleased by not only the success of the recent quarters, but as John said, by what our future holds, And as I sort of touched on very briefly, we are, as a management team, right now, reviewing a number of of additional growth initiatives and activities. And we're in the process of of, you know, completing our our appropriate budget cycle and our longer term investment. And so we look forward to providing that wholesome guidance of not only the from a future revenue perspective, but also the margin perspective in in, when we when we provide our Q4 call, absolutely, from a from a, you know, an income statement perspective, the change in subscription term license revenue being lower will have, an impact on the margins, but we are quite unique in that we consistently drive out very, very strong margins that while we drive out that growth.
And so the, directionally, yes, as most as your and other analysts model are projecting, we'll see you know, still strong margins, but at a lower level, that macro trend would would be there. But then as I noted, with regards to the subscription term cycle on, on really on a 3 year basis, one would also expect seeing through to 2022 that, you'll also see expansions in margin. So for us, really all about the long term. It's all about continuing this growth and initiatives to actually further accelerate the core business, which is the SaaS subscription growth and continue to drive out of cash. So that's about the directional statement that we can provide.
And again, when we complete our year end call, we'll we'll provide that broader guidance.
Okay. I guess we'll have to wait for that. The $12,000,000 in the backlog for term license in Q4, like you said, that's firm contracted can you just talk about are there any scenarios where that could push beyond the year or is your confidence there very high that that'll come through in Q4?
Well, that because it's disclosed in backlog, Robert, is is contracted. And so, you know, again, in terms of subscription well, for the customer hosted arrangements, once again, there's we we were required to break that into 2 components. 1, the right to use, which is the subscription term licensed, which will recognize on the commencement of the renewal term, And then the residual, which is the maintenance support, will recognize over, say, that 3 year, that 3 year term basis. So you know, in a number of cases, it's within the quarter. Some other words, they'll sign the renewal.
Maybe they sign the renewal on, you know, hypothetically on July second and the term starts in September. So it's all within the the course. So you won't see that in in in a backlog. But, you know, in other cases, you know, maybe you sign on September 15th for, November 1st start, in which case, it would be as we've disclosed in the backlog. And in fact, our 26,000,000, number that we provided is simply the year to date number plus that 12,000,000.
So, I would say we're extremely confident. I mean, it is it's contracted and loaded. I don't know what else I can say in that and that, you know, renewal terms, again, a little 3 year terms are they're going to start. They do not want to, interrupt their use of rapid response.
Okay, that's great. And then, like, is there any hesitation that you think might happen in front of the you announced a lot of new products and a new Gen 3 of the software? And is there is it realistic to think that, there would be hesitation from customers waiting to see how this turns out to make sure that there's no issues with that, or is your, funnel moving just as normally as it would without that?
Yeah, no, it's a great question. And, you know, we have a pretty robust, alpha beta program with customers well in advance. So by the time we hit GA of any product, it has seen its paces. So, we we've been at it quite a long time and again, it's SaaS based software. So, obviously, the burden is on Kinaxis to upgrade, not customer.
And so, you know, they're, they're excited to take up new releases as they, as they as they come out. Now, certainly, we have we're on a monthly cycle of releases, which is common in SaaS. It doesn't mean every customer takes every release every month. But we do have a pretty strong upgrade program, that keeps our customers up to date. And so yeah, I wouldn't say there's any friction there whatsoever.
And And the relationships that we have with our customers, bring a lot of confidence to the releases that when they hit GA.
Okay. Last question, just maybe a broader one. I mean, like you said, the connections was very well attended and it seems as though Kinaxis has a profile that's growing, the reference abilities sharing a lot of great companies using their products. And so are you seeing any change in buyer behavior? Always asked about an update on sales cycles.
Is that changing? Is there more functionality being taken up front? Is there less pushback on price? Is there anything you could talk about buyer behavior as Conaxis matures as a company? And I'll pass the line.
Yes, thanks, Rob. So, yeah, we're a was great seeing you at the event. It's great for you to witness what we witnessed, at connections and for sure it was definitely a record breaker across the board. And, so that I would say we're seeing a lot more maturity in our prospects as it relates to what concurrency means. And I think some of this is there's a lot of discussion around it.
There's peers. And so I would say there's a lot of maturity around the potency of concurrency. And when we and so the conversations, when we meet a prospect, I would say much more fluid. There's a I'd say there's a bit of an acceleration in terms of understanding what does it mean for me to transform, into a concurrent type of a model for my supply chain. And as it relates to shrinking sales cycles.
And and I think we started that discussion probably 5 years ago. We've been monitoring that closely. And, you know, these are still generational decisions that these customers are making. They're literally changing the business fabric of their process. And so, you know, there we're still seeing in that 18 month type of a sales site plus or minus.
Some have been faster. But some quite frankly take longer. And so I wouldn't be prepared to necessarily say that, deal cycles are shrinking. I will say that the pipeline is quite healthy and quite broad. Something I study every week and it's great to see activity, in every vertical we serve.
And so, you know, I'd say there's a, you know, if I were to put some color on it, I'd say there's a maturity around what concurrency means. There's a there's a, you know, I think people are becoming awake, to what that there's a new way to solve supply chain problems. And you're right. And we just being able to announce these great customer names. You know, last year, we announced As you know Unilever and others, you saw P and G speak at our conference.
It lends a lot of credibility. To what it means to join the concurrency approach. So we're thrilled with where we are obviously and if and when we start seeing deal cycles shrink, that will certainly manifest in guidance.
Thanks.
And your next question comes from the line of Stephanie Price with CIBC. Go ahead, please. Your line is open.
Good morning.
Can you talk a bit about where you are in the rollout of the sales team and kind of what inning you're in in terms of fully ramping that sales team?
Yes. So we're, we announced last year, as we said, 2018, we announced an acceleration on team and in marketing, quite frankly. And then again, in Q1 of this year, we made that announcement that we were going to further salary, even beyond what we had thought just 3 months prior. We have open headcount in sales and marketing today. We're continuing to have acceleration, you know, to give us the coverage that we see in the pipeline.
And so you know, with a, I'd say an emphasis on, on Asia and Europe. But as well as North America, I mean, all all regions are growing. We're hiring in all regions. And I wouldn't say that, you know, there's a line in the sand somewhere in the future where I where I'm going to say that the sales force is now at capacity. Every quarter, I see a healthier and healthier pipeline.
And so as the quarter manifest. We're going to grow to make sure we have appropriate coverage in sales.
Okay, great. And then can you talk a bit about the implementation process for recent client wins. How has it changed versus a year ago? And can you talk a little bit about that timeline for implementation?
Yeah, so we're we continue to see a lot of partner involvement. So this is where you know, we talked earlier, we now have 25 partners formal partner arrangements. These aren't just marketing arrangements. And so we continue to see the vast majority of our net new wins coming in through partner influence. And we're also seeing more and more partners pick up the prime position for professional services, which is exactly what we had hoped to see.
You know, and so So that is that is becoming more commonplace. It's not certainly not every single deal where a partner is prime, but I'd say the majority of them we're starting to see that behavior. We're we're playing a supporting role. I will also say, and this is I just think it's best practice. You know, one of the things we tell every single customer is not to boil the ocean.
Okay. And and so the project plans that we look out that we work on their journeys. It's not uncommon to have multiple phases of roll out because again, this is transforming business fabric and business process. And so the way we we look at things is, you know, there has to be you know, what I would say, a go live stage inside of that 6 to 9 month window. It's not uncommon.
It doesn't mean that you're done the full transformation, you know, for these large, large corporations. But they are experiencing a concurrent environment with significant value accretion of the solution, right, inside of that window. And then they build it from there. That's that's how I would characterize the way deployments, traditionally rollout.
Great. Thank you.
Your next question comes from the line of Paul Treiber with RBC Capital Markets. Go ahead, please. Your line is open.
Thanks so much and good morning. My first question for John, earlier in your prepared remarks, you mentioned that you're encouraged by the macro conditions for environment. Previously tariff uncertainty delays, I think it was last year. There's still obviously a flu environment in terms of tariffs But just given the customer momentum that you're seeing as shown in the backlog, what's changed from a customer perspective in terms of how they're trying to address the changes in their environment? Yes.
So, at the event, we had one of our CPG customers obviously talking about what how large scale global manufacturers absorb catastrophe like a global, a weather condition, a weather event that is impending. And without concurrency, you generally run out of time to absorb those types of unexpected events. Now, that's a weather condition, but I would say that, the tariff situations that occur the regulatory, adjustments that occur in life sciences, etcetera, can happen at a moment's notice. And so, I would say, you know, this, this, just drawing on what I previously stated about the maturity of concurrency and the potency of that approach versus the cascaded planning that people suffer today. I would say that it's the recognition of, the importance of time.
You know, I've made statements like this before where, you know, the last 20 years manufacturers have been attempting to optimize their things and not optimize time. And to me, I think time is the new oil. It's, it's incredibly valuable you know, the speed to detect is directly related to the speed you can correct. And, and so I'd say there's there's definitely a maturity related to that. People are open to looking at the problem in a very, very different way.
Thank you. Just for Richard, just in regards to the increase in backlog, can you clarify, if there was a customer that was proportionate driver of that increase or if the increase was relatively even spread across the number of customers or if the average when was in line with the historical trends that you've seen?
Well, yes, just so on the on the SaaS side, again, it was, this past quarter, 48,000,000 in in in booking, but that was, across a number of of customers, a combination of new and quite frankly, expansion activities. As we noted, we do not have customer concentration situations, but deals will vary in size. Sometimes it's multimillion dollars a year, sometimes it's several 100,000 a year. So individual deals will continue to vary, but We're pleased to report that that backlog was a number of transactions across all our key geographies and verticals.
Great. Thanks for taking my questions.
Your next question comes from the line of Paul Steep with Scotia Capital. Go ahead please. Your line is open.
Great. Thanks. Could you chat a little bit more about your hiring trends, maybe where the number of staff is today? And then just what that trajectory looks like into 2019 2020? And then finally, where we think about you adding those staff and maybe some of the opportunities that you're seeing in terms of getting people to join Kinaxis as you continue to gain scale?
Thanks.
Thank you, Paul. We are very, very pleased with a, the team and, and, you know, both, you know, our, our 30 year employees, as well as our 30 day employees the way we've been able to continue to expand. In fact, I think as John noted about a year ago that we had a milestone whereby the, the number of new roles created, in the company were actually an an aggregate hire outside of Canada than, within Canada. And that's primarily because of the sales, the support, and other, professional services groups that we've hired. We continue to attract very, very strong candidates.
They welcome the ability to contribute to the concurrent, the concurrent planning model. We currently are with a very strong co op program about 700 individuals. And we work we expect to continue to grow that, primarily in Europe and Asia as well as throughout to continue to expand in the states. The exact level though, Paul, you know, again, as part of that mid longer term planning that the management team is currently working through. And so that type of information will be disclosed, gain when we provide our full year results.
Great. One final follow-up one. John, could you talk maybe about how you and Paul are thinking about the sales structure in terms of not only driving a number of the new wins that you've secured, but maybe the existing clients and how we should think about the expansion in those accounts, not only in terms of number of seats, but maybe in terms of module adoption as well?
Yes, that's a great question. Obviously, we've been scaling up pretty dramatically over the last 18 months. You know, the entire sales engine. And with that, by the way, is a commensurate scale up of marketing. And so both functions have actually been growing quite at a quite a healthy pace.
And obviously, that's fueling a lot of great activity, and as I said, some, some degree of momentum in Asia and Europe as a result. As it relates to, you know, what I would say the separation between selling net new and expanding into the base, you know, that is an area that Paul and I, have been working on, as we achieve scale and sales, it starts to make sense to have dedicated focus on the base itself and ensuring a very, very strong relationship continues well past the initial, the initial deal. So we are looking at, sales structure, if you will, as well as marketing support, looking at it with that kind of a separation, looking at it from a net new account versus, you know, versus the base itself. Obviously, we have leadership in every geography. And so we have sales leadership in Asia, sales leadership in Europe and specific sales leadership in North America.
So that's the way we're looking at it as we scale up.
Your next question comes from the line of Gus Papagorio from PI Financial. Go ahead please. Your line is open. Hi, thanks and congrats
on a nice quarter. Just on the customer concentration, I'm wondering if you can give us an update on your customer count. You used to say you have around 100 customers. I'm wondering kind of if you could give us a direct sense of a year over year, what has the customer count done? And on the customer concentrations, you're saying your top 10 is 33% of revenue.
I'm wondering if you remove professional services, which I assume is heavily biased towards new customers, and so look at revenue professional services. Could you give us a sense of what the top 10 would account for in terms of revenue, not a specific number, just how much higher or lower than the 33%?
Yes. So, Gus, thanks for the question. So, yes, the model is and and, you know, what we're following under our IFRS is the disclosure of the total revenue. And and total revenue, as you've rightly noted, consists of a number of elements. So that would be, professional services and say the SaaS subscription fee.
And, and, you know, our engagement with that customer in year 1, if we're the prime on the professional services rather than one of our partners, will actually probably be higher in year 1 than in year 2. And and and in some instances, you know, they may come into the top 10 because of that. And then move out of the top 10 and the 2nd year. So you do have that variance. We are not disclosing sort of the sub components of, of, of that.
And so I can't really address your, your part 2 question other than just comment on that general trend. We have seen that percentage continue to decrease as we've pulled on, and secured the confidence of new customers. So directionally, yes, our customer count is increasing and we can appreciate the value of sub metrics But with the current customer level, it's difficult to truly regress sort of the future trends. And so, we're not, we're not going to be providing guidance into the actual customer count other than to say that it continues to grow and we're very pleased with the names that, of new customers as well as our long term experience with existing customers.
Okay. Would it be fair to say though, if you look, if you may move if you remove professional services that your top 10 customers would account for less than 33% of revenue?
Well, what this year, one of the key drivers is subscription term license revenue. So, you know, if you if you were to remove that, then you would see, you know, if that was, you know, in the old model, I think you would see a little bit of a different trend, but you know, the the rally is, that's what it is. So that is not a customer concentration. It's not a customer concentration in any geography. It's not a customer concentration.
In any vertical. And so I think the main takeaway that investors should take is that this is a very robust and growing customer base.
Great. Thank you. Your
next question question comes from the line of Susan Secumier from 8 Capital.
Good morning guys and congrats on the strong quarter. Just want to touch on the backlog. What was the makeup of the backlog increase quarter over quarter by vertical? And how does that compared to what you're seeing in the pipeline today in terms of strength?
So again, thanks for the kind comments on the quarter. And, thank you for noticing the growth in the backlog. The, you know, the bookings again, a total in aggregate were 80,000,000 dollars, $48,000,000 on SaaS. What we can what you can see is the the growth in the overall backlog. And in fact, it's stronger than would appear if you just simply looked at the June 30th to September 30th, growth because obviously, June 30th I would have had Q3 numbers in it, which have now been clearly recognized.
So, our focus has always been on the incremental growth in the go forward periods. We're not, at this juncture contemplating, you know, breaking that out into a geo basis. We are pleased to see the increased growth though, and as you will read as well in, in the Europe and in Asia. And that, continues to be very strong growth in, in, as to verticals, the growth in automotive and CPG is very strong, but right now it's high-tech and life sciences that are still the 2 strongest, of verticals. But again, there's not a concentration there because individually they're both sort of in that 30% range.
So a very good dynamics overall, very pleased with the, the broad distribution. I think it's just really reinforcing the message that rapid response is so applicable across the supply chain in this concurrent planning, the same customer code can be used in different geographies, different verticals.
Great. Thank you. That's helpful. And that's just one quick one for me on just a rapid response to the platform. What new markets or verticals do you see the biggest opportunity in?
And given that obviously partners will be leading the charge here. How much of a role do you guys expect to play from, I guess, the sales and the support perspective?
Well, I'm gonna let John comment further on the platform, initiatives and the and the broader base. But, you know, again, it's it's it's great that you know, you know, Unilever, PNG are using, you know, the same, rapid response code as as Ford or or Merck or any other or for Flex or any of our other great customers. You know, it is, when we do go into a new vertical, It has generally been with the support of a marquee, customer and, to develop those unique analytics and with the platform, you know, it's going to be it's going to be increasingly easier for customers as well as our partners to take both unique embedded analytics and, and it'll really extend the use of rapid response, as we move forward, John.
Yes, certainly, you know, our partners, when I think about the platform, think the greatest way to describe it is to think about, what happened when salesforce.com announced force.com, which is a platform in which you can build extensions to Salesforce. And it opened up, you know, it opened up the market to extend Salesforce into applications and new areas. And so I like in what we're doing, it's not like we invented the model. It's a great model. And As Richard said already, rapid response is being used to support 6 different verticals plus a few, because there's always some that we're experimenting with, we haven't yet announced.
But, as it relates to extending rapid response into new market vertical this platform initiative will be, will be key. This is sort of in combination and in concert with our partners. We're not in every vertical that matters, but our partners are. And so with this, with rapid response as a platform, at their disposal, it will, you know, my opinion is at least my thesis is that it will accelerate our entry into new market verticals over time. And that's, you know, that obviously is very exciting for our partners, very exciting for us.
For existing customers, especially the larger ones, that have unique IP in their business process. Rapid Response as a platform will allow us to codify that unique IP. Safely in a SaaS environment, safe from, you know, safe with upgrades. And so again, that, you know, the value to our customers is obvious. And for our partners, it gives them the opportunity to to develop that, unique IP for specific customers in a very safe SAS manner.
And so we've been at this a long, long time. We've all, you know, rapid response has always operated as a platform. Our latest announcement at Connections was around the ability to extend the brain function, if you will, of rapid response, with total analytics. And essentially, that is what is going to fuel more and more partner engagement, as we go forward.
And with that, that concludes today's Q And A portion of the call. I'd like to turn the call back over to Mr. Wadsworth for some closing remarks.
Thank you. I understand some of you may have more questions yet. And please reach out to me with those and I'll get them answered for you. But, we appreciate your questions on the call. Good as always and your ongoing interest and support of Kinaxis.
We look forward to speaking with you again when we report our Q4 results. So goodbye for now.
This concludes today's conference call. We thank you for participation. You may now disconnect.