Kinaxis Inc. KXS-T has hired investment banker Goldman Sachs to advise the company on maximizing shareholder value after recent challenges at the Ottawa software company that have weighed on the stock.
But selling the company, which makes software for supply-chain management, does not seem to be high on the priority list. “The board strongly believes that execution of its strategic plan is the best path to maximize shareholder value,” Kinaxis said in a news release.
That was met by a fierce rebuke from Kinaxis investor Irenic Capital Management LP, which said in a statement “we are deeply concerned that the board is not acting responsibly or in the best interests” of the company or shareholders by considering a potential sale. That, it said, “is the right and logical next step.” For the board to indicate it plans to stay the course “is irresponsible and contrary to the fiduciary duties of the Kinaxis directors. The Board cannot make a decision about the best path without first considering the alternative paths – and it is clear the Board is simply unwilling to do that.”
Kinaxis spokesperson Joel Shaffer said “the Board is focused on enhancing value for shareholders, is fully aware of its fiduciary duties, and will continue to act accordingly.”
The move to hire Goldman is one of several changes announced Tuesday and follows last month’s surprise announcement that chief executive officer John Sicard will depart at the end of 2024, as well as subsequent calls by shareholder Daventry Group LP to sell the company, calling it the victim of “self-inflicted and avoidable” mistakes that have left it “dramatically undervalued.”
Kinaxis said it then hired Goldman Sachs for financial advice on generating better shareholder returns after the board canvassed shareholders on “the best approaches going forward.” ATB Capital Markets analyst Martin Toner said in a note that he believed the company would try to improve its marketing, including selling new products to existing customers. The stock was down slightly in early afternoon trading.
Kinaxis also said chairman Robert Courteau, who replaced Ian Giffen when he left the board this year, would assume a more hands-on role, working closely with Mr. Sicard until a permanent CEO is hired to replace him. Mr. Courteau’s title has been bumped up to executive chair for the time being, and long-time board member Angel Mendez has been named lead independent director.
Mr. Sicard’s departure was announced in late August along with the unexpected exit of chief sales officer Claire Rychlewski after just a few months on the job. The outgoing CEO will remain an adviser to the company through 2025.
The company also revealed Tuesday that it had hired an unidentified “leading management consultant firm” to work with it on initiatives to increase value, improve profitability margins and capture more of a market it estimates is worth US$16-billion. Kinaxis is on track to generate between US$483-million and US$495-million in sales this year, but its stock has stalled in recent quarters, trading at a discount to other enterprise software companies over concerns about top-line growth. Its share price fell sharply last month after it trimmed its subscription-revenue growth forecast for the year to between 15 per cent and 17 per cent.
Kinaxis has been a stalwart of Canada’s software scene and traded at a premium to other software stocks at various points in its 10 years as a public company. The 40-year-old enterprise’s product is considered an industry leader, and it boasts blue-chip giants such as Volvo AB, Exxon Mobil Corp. and Pfizer Inc. as customers.
Like other vendors to large enterprises, it has been affected by higher interest rates and economic uncertainty, as clients throttle or stretch out spending plans. At the same time, it hasn’t invested as aggressively in growth as it could have, National Bank financial analyst Richard Tse said recently. In a note Monday, RBC analyst Paul Treiber said sales execution “has been a challenge for the company” and that fixing it “should be priority No. 1.”
Still, analysts are positive about its long-term prospects, believing revenue growth can return to the 20-per-cent-plus range if the company applies the proper focus to its issues.