Kinaxis Inc. stock sold off sharply Wednesday after the company announced the surprise departures of its chief executive officer and chief sales officer.
Shares of the Ottawa-based supply-chain management software vendor closed at a 10-month low of $133.95 on the Toronto Stock Exchange, down 14.5 per cent on that day, after the company said late Tuesday evening that CEO John Sicard would retire at the end of 2024.
His departure was portrayed as a friendly handover, as Mr. Sicard, 62, said in a LinkedIn post he had decided to retire after three decades with the company and would play an active role in the transition effort to bring on a new CEO. Mr. Sicard, who assumed the post in 2016, will also take on a consulting role with Kinaxis in 2025.
However, the company also said the leadership change represented a shift in focus “from building to scaling” in a press release. Chairman Robert Courteau said in the statement, “we agreed that now is the right time for a CEO transition,” as Kinaxis aims to more than double its annual revenue to $1-billion.
Mr. Sicard echoed that statement in his post, saying the time is right “to pass the baton to a leader who will accelerate our momentum and scale.” The company reiterated its prior guidance it expects to generate between US$483-million and US$495-million of revenue this year.
Kinaxis also said chief sales officer Claire Rychlewski has decided to leave the company after five years “to take advantage of an opportunity that better suits her goals.” She stepped into the role in April after serving as global executive vice-president, replacing Paul Carreiro after he departed as president, global field operations, earlier this year.
In a research note, National Bank of Canada Financial Markets analyst Richard Tse said “the optics are bad,” particularly regarding Ms. Rychlewski’s departure, slated for November. “From our vantage point, it likely points to some material challenges within the company’s sales organization,” Mr. Tse wrote. “Our read of the departure is that not only do those challenges remain, but they are likely not easy fixes” given her brief tenure.
Mr. Tse also noted Mr. Sicard’s departure follows the departure of Mr. Courteau’s predecessor, Ian Giffen, in June. “In our view, it likely has something to do with a heavier focus on improving sales and marketing performance which we believe to be disconnected from the quality of the product portfolio.”
Kinaxis stock has stalled in recent quarters, trading at a discount to other enterprise software companies over concerns about top-line growth. Its stock fell sharply early this month after Kinaxis trimmed its subscription-revenue growth forecast for the year to a range of 15 per cent to 17 per cent. It also upped its operating earnings guidance. Annualized recurring revenue expanded by 16 per cent year-over-year, to US$339-million, down from 18-per-cent year-over-year growth in December and 24 per cent a year earlier.
In May, Kinaxis announced its first mass layoff since going public in 2014, cutting 6 per cent of jobs. In a recent interview, Mr. Sicard said Kinaxis would reinvest the savings into marketing and sales, deepen ties with consulting partners and hasten product development.
Like many other vendors to large enterprises, Kinaxis has been affected by higher interest rates and economic uncertainty as clients throttle or stretch out spending plans. At the same time, Kinaxis hasn’t invested as aggressively in growth as it could have, Mr. Tse said recently. Still, analysts are positive about its long-term prospects, believing revenue growth can return to the 20-per-cent-plus range since the company rarely loses a client and counts hundreds of blue-chip giants as customers, including Volvo AB, Exxon Mobil Corp. and Pfizer Inc.
“Most of the company’s struggles growing topline revenue are likely related to general macroeconomic headwinds,” ATB Financial analyst Martin Toner said in an interview. “I’m surprised by the stock’s reaction,” particularly given the active interest of private-equity buyers hunting for solid, profitable software companies. “I’d characterize Kinaxis as a low-drama company regarding the volatility of the stock and returns. What the company has done over time building market leadership in its space is impressive.”