No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permitted to sell these securities. The securities offered hereby have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the ‘‘1933 Act’’), or any state securities laws. Accordingly, these securities may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the 1933 Act and applicable state securities laws. This prospectus does not constitute an offer to sell or solicitation to buy any securities offered hereby within the United States. See ‘‘Plan of Distribution’’. This prospectus has not been nor will it be approved as a prospectus by the United Kingdom Financial Conduct Authority (the ‘‘FCA’’) under section 87A of the United Kingdom Financial Services and Markets Act 2000 (the ‘‘FSMA’’) and it has not been filed with the FCA pursuant to the United Kingdom Prospectus Rules nor has it been approved by a person authorized under the FSMA. This prospectus and the Offering (as defined below) are only addressed to, and directed at, persons in the United Kingdom who are ‘‘qualified investors’’within the meaning of Section 86(7) of the FSMA and (i) fall within the categories of persons referred to in Article 19 (Investment Professionals) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the ‘‘FPO’’) or Article 49 (High net worth companies, unincorporated associations, etc.) of the FPO; or (ii) to whom they may otherwise be lawfully communicated. See ‘‘Plan of Distribution’’. PROSPECTUS Initial Public Offering and Secondary Offering June 3, 2014 Kinaxis Inc. Cdn$13.00 7,739,715 Common Shares This prospectus qualifies the distribution to the public of 7,739,715 common shares (‘‘Common Shares’’, with each Common Share offered pursuant to this prospectus being an ‘‘Offered Share’’) in the capital of Kinaxis Inc. (‘‘Kinaxis’’, the ‘‘Company’’, ‘‘we’’ or ‘‘us’’) of which (i) 5,000,000 Offered Shares are being issued and sold by Kinaxis (the ‘‘Treasury Offering’’) at a price of Cdn$13.00 (the ‘‘Offering Price’’) per Offered Share for gross proceeds to Kinaxis of Cdn$65,000,000, and (ii) 2,739,715 Offered Shares are being sold (the ‘‘Secondary Offering’’ and together with the Treasury Offering, the ‘‘Offering’’) by HarbourVest International Private Equity Partners III - Direct Fund L.P. andTechnoCap I, L.P. (collectively, the ‘‘Selling Shareholders’’) at the Offering Price for aggregate gross proceeds to the Selling Shareholders of Cdn$35,616,295. See ‘‘Principal and Selling Shareholders’’. Kinaxis will not receive any proceeds from the Secondary Offering. Kinaxis is a leading provider of cloud-based subscription software that enables our customers to improve and accelerate planning and decision-making across their supply chain operations. The Offered Shares are being offered by BMO Nesbitt Burns Inc., Canaccord Genuity Corp. (together, the ‘‘Joint Bookrunners’’), TD Securities Inc., RBC Dominion Securities Inc., National Bank Financial Inc., CIBC World Markets Inc. and Cormark Securities Inc. (collectively with the Joint Bookrunners, the ‘‘Underwriters’’) pursuant to an underwriting agreement among Kinaxis, the Selling Shareholders and each of the Underwriters dated June 3, 2014 (the ‘‘Underwriting Agreement’’). The Offering Price has been determined by negotiation between Kinaxis and the Underwriters. There is currently no market through which the Offered Shares may be sold and purchasers may not be able to resell the Offered Shares purchased under this prospectus. This may affect the pricing of the Offered Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the Offered Shares and the extent of issuer regulation. The Toronto Stock Exchange (the ‘‘TSX’’) has conditionally approved the listing of our Common Shares under the symbol ‘‘KXS,’’ subject to us fulfilling all of the listing requirements of the TSX on or before August 27, 2014, including distribution of our Common Shares to a minimum number of public holders. See ‘‘Plan of Distribution’’. An investment in the Offered Shares is subject to a number of risks that should be carefully considered by a prospective purchaser before purchasing the Offered Shares. See ‘‘Risk Factors’’. Price: Cdn$13.00 per Offered Share Price to the Public Underwriters’ Fee (1) Net Proceeds to Kinaxis (2) Net Proceeds to the Selling Shareholders (2) Per Offered Share ......................................... Cdn$13.00 Cdn$0.78 Cdn$12.22 Cdn$12.22 Total Offering (3) .......................................... Cdn$100,616,295 Cdn$6,036,977 Cdn$61,100,000 Cdn$33,479,317 Notes: (1) Pursuant to the terms and conditions of the Underwriting Agreement, the Underwriters will receive a cash fee (the ‘‘Underwriters’ Fee’’) equal to six percent (6%) of the gross proceeds of the Offering, or Cdn$0.78 per Offered Share. See ‘‘Plan of Distribution’’. (2) These figures are after deducting the Underwriters’ Fee, but before deducting expenses of the Offering, which expenses are estimated to be approximately Cdn$2,200,000. Other than as disclosed in this prospectus, as the incremental costs of the Secondary Offering are not material, Kinaxis will pay the expenses associated with the Offering other than the Underwriters’ Fee. The Underwriters’ Fee will be paid proportionately by Kinaxis and the Selling Shareholders based on the respective number of Offered Shares sold by each pursuant to the Offering. See ‘‘Principal and Selling Shareholders’’and ‘‘Plan of Distribution’’. (3) The Selling Shareholders have agreed to grant to the Underwriters an option (the ‘‘Over-Allotment Option’’), exercisable at the Underwriters’ sole discretion, in whole or in part, for a period of 30 days after the closing of the Offering, to purchase up to an additional 1,160,957 Offered Shares (representing 15% of the Offered Shares) (the ‘‘Over-Allotment Shares’’) for the purpose of covering all of the Underwriters’ over-allocation position, if any, and for market stabilization purposes. If the Over-Allotment Option is exercised in full, the total ‘‘Price to the Public’’, ‘‘Underwriters’ Fee’’, and ‘‘Net Proceeds to the Selling Shareholders’’will be Cdn$115,708,736, Cdn$6,942,524 and Cdn$47,666,211, respectively. This prospectus qualifies the grant of the Over-Allotment Option and the Over-Allotment Shares issuable upon the exercise of the Over-Allotment Option. A purchaser who acquires Offered Shares forming part of the Underwriters’ over allocation position acquires such Offered Shares under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. See ‘‘Plan of Distribution’’.
178
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Kinaxis Inc. Cdn$13.00 7,739,715 Common Shares will not receive any proceeds from the Secondary Offering. Kinaxis is a leading provider of cloud-based subscription software that enables
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Transcript
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectusconstitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permittedto sell these securities. The securities offered hereby have not been, and will not be, registered under the United States Securities Act of 1933, asamended (the ‘‘1933 Act’’), or any state securities laws. Accordingly, these securities may not be offered or sold in the United States except incertain transactions exempt from the registration requirements of the 1933 Act and applicable state securities laws. This prospectus does notconstitute an offer to sell or solicitation to buy any securities offered hereby within the United States. See ‘‘Plan of Distribution’’.
This prospectus has not been nor will it be approved as a prospectus by the United Kingdom Financial Conduct Authority (the ‘‘FCA’’) under section 87A of theUnited Kingdom Financial Services and Markets Act 2000 (the ‘‘FSMA’’) and it has not been filed with the FCA pursuant to the United Kingdom Prospectus Rulesnor has it been approved by a person authorized under the FSMA. This prospectus and the Offering (as defined below) are only addressed to, and directed at, personsin the United Kingdom who are ‘‘qualified investors’’ within the meaning of Section 86(7) of the FSMA and (i) fall within the categories of persons referred to inArticle 19 (Investment Professionals) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the ‘‘FPO’’) or Article 49(High net worth companies, unincorporated associations, etc.) of the FPO; or (ii) to whom they may otherwise be lawfully communicated. See ‘‘Plan of Distribution’’.
PROSPECTUS
Initial Public Offering and Secondary Offering June 3, 2014
Kinaxis Inc.
Cdn$13.007,739,715 Common Shares
This prospectus qualifies the distribution to the public of 7,739,715 common shares (‘‘Common Shares’’, with each Common Share offeredpursuant to this prospectus being an ‘‘Offered Share’’) in the capital of Kinaxis Inc. (‘‘Kinaxis’’, the ‘‘Company’’, ‘‘we’’ or ‘‘us’’) of which (i)5,000,000 Offered Shares are being issued and sold by Kinaxis (the ‘‘Treasury Offering’’) at a price of Cdn$13.00 (the ‘‘Offering Price’’) perOffered Share for gross proceeds to Kinaxis of Cdn$65,000,000, and (ii) 2,739,715 Offered Shares are being sold (the ‘‘Secondary Offering’’ andtogether with the Treasury Offering, the ‘‘Offering’’) by HarbourVest International Private Equity Partners III - Direct Fund L.P. and TechnoCapI, L.P. (collectively, the ‘‘Selling Shareholders’’) at the Offering Price for aggregate gross proceeds to the Selling Shareholders ofCdn$35,616,295. See ‘‘Principal and Selling Shareholders’’. Kinaxis will not receive any proceeds from the Secondary Offering.
Kinaxis is a leading provider of cloud-based subscription software that enables our customers to improve and accelerate planning anddecision-making across their supply chain operations.
The Offered Shares are being offered by BMO Nesbitt Burns Inc., Canaccord Genuity Corp. (together, the ‘‘Joint Bookrunners’’), TD SecuritiesInc., RBC Dominion Securities Inc., National Bank Financial Inc., CIBC World Markets Inc. and Cormark Securities Inc. (collectively with theJoint Bookrunners, the ‘‘Underwriters’’) pursuant to an underwriting agreement among Kinaxis, the Selling Shareholders and each of theUnderwriters dated June 3, 2014 (the ‘‘Underwriting Agreement’’). The Offering Price has been determined by negotiation between Kinaxis andthe Underwriters.
There is currently no market through which the Offered Shares may be sold and purchasers may not be able to resell the Offered Sharespurchased under this prospectus. This may affect the pricing of the Offered Shares in the secondary market, the transparency andavailability of trading prices, the liquidity of the Offered Shares and the extent of issuer regulation. The Toronto Stock Exchange (the‘‘TSX’’) has conditionally approved the listing of our Common Shares under the symbol ‘‘KXS,’’ subject to us fulfilling all of the listingrequirements of the TSX on or before August 27, 2014, including distribution of our Common Shares to a minimum number of public holders.See ‘‘Plan of Distribution’’.
An investment in the Offered Shares is subject to a number of risks that should be carefully considered by a prospective purchaser beforepurchasing the Offered Shares. See ‘‘Risk Factors’’.
(1) Pursuant to the terms and conditions of the Underwriting Agreement, the Underwriters will receive a cash fee (the ‘‘Underwriters’ Fee’’) equal to six percent(6%) of the gross proceeds of the Offering, or Cdn$0.78 per Offered Share. See ‘‘Plan of Distribution’’.
(2) These figures are after deducting the Underwriters’ Fee, but before deducting expenses of the Offering, which expenses are estimated to be approximatelyCdn$2,200,000. Other than as disclosed in this prospectus, as the incremental costs of the Secondary Offering are not material, Kinaxis will pay the expensesassociated with the Offering other than the Underwriters’ Fee. The Underwriters’ Fee will be paid proportionately by Kinaxis and the Selling Shareholdersbased on the respective number of Offered Shares sold by each pursuant to the Offering. See ‘‘Principal and Selling Shareholders’’ and ‘‘Plan of Distribution’’.
(3) The Selling Shareholders have agreed to grant to the Underwriters an option (the ‘‘Over-Allotment Option’’), exercisable at the Underwriters’ sole discretion,in whole or in part, for a period of 30 days after the closing of the Offering, to purchase up to an additional 1,160,957 Offered Shares (representing 15% ofthe Offered Shares) (the ‘‘Over-Allotment Shares’’) for the purpose of covering all of the Underwriters’ over-allocation position, if any, and for marketstabilization purposes. If the Over-Allotment Option is exercised in full, the total ‘‘Price to the Public’’, ‘‘Underwriters’ Fee’’, and ‘‘Net Proceeds to the SellingShareholders’’ will be Cdn$115,708,736, Cdn$6,942,524 and Cdn$47,666,211, respectively. This prospectus qualifies the grant of the Over-Allotment Optionand the Over-Allotment Shares issuable upon the exercise of the Over-Allotment Option. A purchaser who acquires Offered Shares forming part of theUnderwriters’ over allocation position acquires such Offered Shares under this prospectus, regardless of whether the over-allocation position is ultimately filledthrough the exercise of the Over-Allotment Option or secondary market purchases. See ‘‘Plan of Distribution’’.
Underwriters’ PositionMaximum Size or Number
of Securities Available Exercise Period Exercise Price
Over-Allotment Option . . . . . . . . . . . . 1,160,957 Common Shares 30 Days following the Closing Cdn$13.00 per Common Share
In connection with this distribution, the Underwriters have been granted the Over-Allotment Option and may, subject to applicable law, over-allocate or effecttransactions that stabilize or maintain the market price of the Common Shares at levels other than those which otherwise might prevail on the open market. Suchtransactions, if commenced, may be discontinued at any time. See ‘‘Plan of Distribution’’.
The Underwriters, as principals, conditionally offer the Offered Shares, subject to prior sale, if, as and when issued by Kinaxis and sold by the Selling Shareholdersand accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement referred to under ‘‘Plan of Distribution’’ and subjectto the approval of certain legal matters on behalf of Kinaxis and the Selling Shareholders by Dentons Canada LLP and on behalf of the Underwriters by StikemanElliott LLP.
The Underwriters may offer the Offered Shares at a lower price than stated above. See ‘‘Plan of Distribution’’.
Subscriptions for the Offered Shares will be received subject to acceptance or rejection in whole or in part by Kinaxis and the Underwriters reserve the right to closethe subscription books at any time without notice. It is expected that closing will take place, and the Underwriters will be required to take up the Offered Shares,on or about June 10, 2014 or such other date as Kinaxis and the Underwriters may agree, but in any event not later than July 15, 2014 (the date on which closingoccurs being the ‘‘Closing Date’’). It is expected that one or more global certificates representing the Offered Shares distributed under this prospectus will be issuedin registered or electronic form to CDS Clearing and Depository Services Inc. (‘‘CDS’’) and will be deposited with CDS on the Closing Date. No certificateevidencing the Offered Shares will be issued to any purchasers, except in certain limited circumstances, and registration will be made in the depository service ofCDS. Purchasers of the Offered Shares will receive only a customer confirmation from the registered dealer from or through whom the Offered Shares are purchased.See ‘‘Plan of Distribution’’.
RBC Dominion Securities Inc. is a subsidiary of a Canadian chartered bank that is a lender to Kinaxis pursuant to existing credit facilities. Consequently,Kinaxis may be considered to be a ‘‘connected issuer’’ of such underwriter under applicable Canadian securities laws. See ‘‘Relationship Between Kinaxisand Certain Underwriters’’ and ‘‘Use of Proceeds’’.
Investors should rely only on the information contained in this prospectus. Neither the Company nor any of the Underwriters has authorized anyone to provideinvestors with different or additional information.
Our business was founded on the premise that supply chains have grown so large and complex, and move so
quickly, that it is virtually impossible for a large enterprise to create a single perfect supply chain plan. Enterprises
require sophisticated tools to both create plans and address variances to their plans. Our core value proposition is that
we are the leading SCM vendor that addresses a broad array of supply chain business problems with a single product.
This ‘‘one-to-many’’ capability is made possible by our unique and patented technology. By using RapidResponse
instead of combining individual disparate products, our customers gain visibility across their supply chains, can
respond quickly to changing conditions, and ultimately realize significant operating efficiencies.
True to our founding concept, as of March 31, 2014, our product helps 85 large enterprises meet both their
operational needs as well as their strategic goals. RapidResponse helps our customers to manage supply and/or
demand at an aggregate level (for example, by region or product family) and detailed level (for example, by part).
The unique design of RapidResponse supports numerous applications, including:
RapidResponse Collec�on of Cloud Applica�ons
OPERATIONAL APPLICATIONS STRATEGIC APPLICATIONS
Order Fulfillment
Inventory Management
Capacity Requirements Planning
Sales and Opera!ons Planning
Inventory Planning and Op!miza!on
Capacity Planning - Constraints
Supplier Collabora!on
Supply Ac!on
Management
Master Produc!on
Scheduling
Engineering Change
Management
Integrated Project
Management
Aggregate Supply
PlanningDemand Planning
See ‘‘Our Business - Product Capabilities and Applications - RapidResponse Application Descriptions’’.
In 2005, we moved from a perpetual license to a subscription-based business model and enabled RapidResponse
to be offered as a cloud-based service. By leveraging our cloud capabilities, RapidResponse applications can usually
be deployed in as few as four to six months. We sell our product in North America, Western Europe and Japan through
our direct sales channels and globally through relationships with partners and resellers. We focus on large, global
enterprises operating in a broad range of industries. See ‘‘Our Business – Overview’’.
ix
Industry Overview
Supply Chain Management Overview
The SCM market is a large and important global industry. Growth in the industry is being driven by shorter
product life cycles, fluctuating demand patterns, globalization, outsourcing, fragmentation of supply chain processes
and the increasing complexity of supply chains. Software solutions in the SCM industry are increasingly delivered
through the cloud using a SaaS model. We believe that the penetration rate of SaaS-based SCM solutions is low but
growing rapidly for Kinaxis’ target market, as enterprises look to improve their SCM applications over time.
According to Gartner, the total worldwide cloud application services (SaaS) industry is expected to grow to
approximately $45.5 billion by 2017. Within this market, SCM cloud applications services are expected to be an
approximately $3.9 billion industry by 2017, growing at a 5-year (2012-2017) CAGR of 20.8%. (Source: Gartner
1Q14 Report.) In contrast, according to Gartner, the worldwide constant-currency enterprise application software
forecast for the SCM segment was $8.3 billion in 2012, and is expected to grow at a 10.3% CAGR through 2017.
(Source: Gartner February 2014 Report.)
We believe that the increasing use of SaaS-based SCM solutions is driven by the following developments:
Replacement of Legacy Tools: Legacy planning systems from traditional software providers were not designed
to deal with today’s global, outsourced, multi-tier supply chains. We believe that enterprises require a new class of
software tools to perform complex analytics and real-time simulations with speed and precision beyond what legacy
planning tools can offer.
Ease of Integration: Increasing supply chain complexity creates the need for integration among trading partners
and their personnel and data systems.
Faster Deployments: As business complexity and volatility accelerates, it becomes imperative to deploy new
SCM functionality more rapidly than the 18 to 24 month (or longer) timeframe typically required for enterprise IT
software deployments. Cloud-based SCM solutions can be deployed and operational within a much shorter
timeframe.
Secure and Scalable Solutions: A cloud-based approach makes it possible to enable collaboration with partners
and suppliers, while maintaining confidence in application and data security. Cloud-based operating environments
can be scaled to improve performance and service.
More Innovation, Faster: Where a cloud software provider handles all aspects of software upgrades, customers
can benefit from the latest innovations in SCM sooner than businesses that use traditional module-based, on-premise
systems.
Lower Total Cost of Ownership: A cloud-based solution can free IT resources, save internal personnel costs and
offer quality improvements over traditional on-premise deployments.
See ‘‘Our Business – Industry Overview’’.
Business Overview
We are a leading provider of comprehensive SaaS-based SCM solutions. We aim to deliver competitive
advantages to our customers by enhancing the agility of, and their visibility into, their supply chains, while still
enabling them to extend their outsourcing and global expansion strategies in highly volatile market environments.
We focus on selling our software to the world’s largest enterprises. The sectors for these enterprises include high
technology and electronics manufacturing, aerospace and defense, industrial products, life sciences and
pharmaceuticals, automotive, and consumer packaged goods.
See ‘‘Our Business – Business Overview’’.
x
Our Competitive Strengths
‘‘One-to-Many’’ Value Proposition - One Product with Multiple Applications:
We offer a broad array of supply chain applications that are all supported by RapidResponse’s single data model
and analytics engine. This allows our customers to use a single product to holistically manage multiple supply chain
processes. We believe this provides a distinct advantage over the legacy approach of implementing and maintaining
a collection of loosely-integrated ERP bolt-on modules, or stand-alone niche software applications, that address
individual supply chain functions as separate activities.
In the recent Gartner Magic Quadrant for Supply Chain Planning (SCP) System of Record (SOR), Kinaxis was
placed in the Leaders Quadrant.1 (Source: Gartner March 2014 Report.) The report positions vendors based on
completeness of vision in the supply chain planning system of record market and on their ability to execute.
According to Gartner, ‘‘The SCP SOR is the environment in which the end-to-end integrated supply chain plans are
created, integrated, managed and made visible across the supply chain. In essence, this is establishing a single version
of the truth for the supply chain demand and supply plans, regardless of what the underlying ERP landscape looks
like’’. (Source: Gartner March 2014 Report.)
‘‘What-if’’ Simulation & Proven Big Data Analytics:
Our patented ‘‘what-if’’ simulation technology enables users to rapidly create many versions of their supply
chain environment, regardless of data size, to simulate changes without impacting the live data in the system of
record. We believe that RapidResponse’s simulation capabilities are superior to other SCM solutions.
Ease of Product Configurability:
Most supply chain software products are custom built for specific supply chain processes, significantly limiting
their ability to quickly adapt to changing requirements and models. The configurability of RapidResponse gives our
customers flexibility to adapt standard product features to meet unique requirements, while avoiding the cost and
difficulty associated with building, maintaining and upgrading a customized product. As a result of its unique
architecture, RapidResponse: delivers tailored experiences and resources sought by specific individual users and user
communities; provides adaptable supply chain process blueprints, offering a roadmap for evolving supply chain
processes; and drives rapid implementations, high user adoption, and superior time to value through flexible
deployment and maintenance processes.
Unique Ability to Address SCM Needs of the Largest Enterprises:
Large enterprises have specific characteristics that create a challenging SCM environment, including:
• global operations with complex and extensive supply chain networks;
• multiple, disparate technology systems across business functions and geographies; and
• high volatility in demand and/or supply combined with short product and delivery lead times.
We believe that RapidResponse effectively addresses all of these challenges, and is the most comprehensive and
versatile SaaS-based SCM solution targeted to large enterprises.
Rapid and Efficient Deployment of an Industry Leading SaaS-based SCM Solution:
Leveraging best practices in software deployment and a wealth of SCM experience, RapidResponse can
typically be implemented in a matter of months. We believe that competing products take longer to deploy, and those
deployments are more disruptive to the user’s day-to-day business operations.
See ‘‘Our Business – Our Competitive Strengths’’.
Product Capabilities
We sell RapidResponse as a collection of cloud-based configurable applications. Our customers may deploy one
or more applications depending on their particular needs. Each application is founded on the single RapidResponse
1 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select onlythose vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not beconstrued as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties ofmerchantability or fitness for a particular purpose.
xi
data model and analytics engine. This means any subsequent application the customer may select is added as an
extension of the customer’s existing system, not as an isolated product that requires integration.
See ‘‘Our Business – Product Capabilities and Applications’’.
Growth Strategy
Key elements of our growth strategy include:
Expansion Within Existing Customer Accounts (‘‘Land and Expand’’):
Our success in selling to large national or global enterprises has been a key driver of our revenue growth and
profitability. Growth opportunities with these customers include expanding the user base and applications of
RapidResponse. A core element of our future growth strategy includes continuing to focus on large, global-scale
customers that have ‘‘land and expand’’ potential.
New Applications:
We leverage our experience with our large customers to develop solutions that apply broadly across our target
customers and markets. Continually enhanced capabilities help us win business from new customers as well as
expand our revenue from existing customers.
New Direct Sales:
We plan to continue to build our direct sales force in order to take advantage of growing demand for supply chain
solutions. In the last 24 months, we have increased the size of our direct sales team by approximately one-third and
strengthened our sales leadership team. We expect to continue to expand our direct sales capabilities in Europe and
Asia.
Channel Partner Expansion:
We continue to seek and develop relationships with third-party organizations that offer differentiated and
value-added channels to reach new name accounts and existing customers.
Additional Vertical Markets:
We believe that one of our strongest differentiators is the delivery of enterprise supply chain applications that
specifically address the unique requirements of our target vertical and sub-vertical markets. We have a long standing
focus on the high technology sector and an agnostic approach to new business verticals. We have a growing presence
within industries that have complex SCM networks such as aerospace and defense, industrial products, life sciences
and pharmaceuticals, and consumer packaged goods. In addition, we have started to develop opportunities in the
automotive sector and have seen early success in this area, winning business from a larger multinational automaker
in 2014.
Geographic Expansion:
While our sales have been primarily generated from customers headquartered in North America, we have
operations in Japan, Hong Kong and the Netherlands. We are focusing expansion of our direct and indirect sales
efforts in Western Europe and Asia-Pacific/Japan. We also cover other global markets on an opportunistic basis.
Acquisitions:
We intend to selectively consider strategic acquisitions, investments, and other relationships that we believe are
consistent with our growth strategy and can significantly enhance the attractiveness of our technology platform or
Our business was founded on the premise that supply chains have grown so large and complex, and move so
quickly, that it is virtually impossible for a large enterprise to create a single perfect supply chain plan. Enterprises
require sophisticated tools to both create plans and address variances to their plans. Our core value proposition is that
we are the leading SCM vendor that addresses a broad array of supply chain business problems with a single product.
This ‘‘one-to-many’’ capability is made possible by our unique and patented technology. By using RapidResponse
instead of combining individual disparate products, our customers gain visibility across their supply chains, can
respond quickly to changing conditions, and ultimately realize significant operating efficiencies.
True to our founding concept, as of March 31, 2014, our product helps 85 large enterprises meet both their
operational needs as well as their strategic goals. RapidResponse helps our customers to manage supply and/or
demand at an aggregate level (for example, by region or product family) and detailed level (for example, by part).
The unique design of RapidResponse supports numerous applications, including:
RapidResponse Collec�on of Cloud Applica�ons
OPERATIONAL APPLICATIONS STRATEGIC APPLICATIONS
Order Fulfillment
Inventory Management
Capacity Requirements Planning
Sales and Opera!ons Planning
Inventory Planning and Op!miza!on
Capacity Planning - Constraints
Supplier Collabora!on
Supply Ac!on
Management
Master Produc!on
Scheduling
Engineering Change
Management
Integrated Project
Management
Aggregate Supply
PlanningDemand Planning
See also ‘‘Our Business - Product Capabilities and Applications - RapidResponse Application Descriptions’’.
In 2005, we moved from a perpetual license to a subscription-based business model and enabled RapidResponse
to be offered as a cloud-based service. By leveraging our cloud capabilities, RapidResponse applications can usually
be deployed in as few as four to six months. This creates an attractive alternative to the risk and upfront cost typically
associated with supply chain software deployments by ERP providers. For our customers, we believe that
RapidResponse’s ease of use and ability to expand business applications over time translates into a loyal user base,
ongoing penetration within the customer’s organization and increasing business value over time.
We sell our product in North America, Western Europe and Japan through our direct sales channels and globally
through relationships with partners and resellers. We focus on large, global enterprises operating in a broad range of
industries characterized by complex SCM networks including high technology and electronics manufacturing,
aerospace and defense, industrial products, life sciences and pharmaceuticals, automotive, and consumer packaged
goods.
1
Industry Overview
Supply Chain Management Overview
The SCM market is a large and important global industry. We believe that the following are the key drivers of
the SCM industry:
Increased Customer Expectations: End customers of manufactured goods have grown less loyal and more
demanding, expecting lower prices and increased availability and selection of goods. The result is a proliferation of
products with shorter life cycles and fluctuating demand patterns. This drives the need to accurately predict and
respond to changes in demand, and creates opportunities for businesses with superior supply chain management
systems.
Supply Chain Globalization: The most significant growth opportunities for many of our customers are in
developing economies. Longer distances between the sources of material and manufacturers and retailers can increase
the time and resources required to produce and deliver goods, increasing reliance on effective supply management
and control.
Continued Manufacturing Outsourcing: While manufacturing outsourcing offers cost benefits, it can also result
in longer lead times, limited supply chain visibility and difficult communication for brand owners. Improved
collaboration and coordination is critical to maintain the financial benefits intended to be achieved from outsourcing.
Supply Chain Impact on Related Functions: SCM is a multi-disciplinary business process that touches all
operational functions within an organization, including engineering, finance, logistics, manufacturing, marketing and
sales and procurement. Data is increasingly scattered among participants in the supply chain. In many cases, data
resides not only in several different ERP systems, but also in spreadsheets and other sources such as Salesforce.com
databases and SQL servers. These islands of external and internal data increase latency across the supply chain and
reduce the timeliness and effectiveness of decision-making. To address this challenge, enterprises are seeking
innovations that provide all participants with a common view of the supply chain.
Increasing Complexity of the Supply Chain Ecosystem: Today’s supply chains often consist of a network of
customers, contract manufacturers, suppliers and other partners, with information and material flowing in all
directions. Complexity has been exacerbated by events that are outside of the control of companies such as natural
disasters, geopolitical disruptions and increased and evolving regulatory requirements which can have an impact on
any given industry and/or geography.
All of these factors drive demand for the integration and analysis of larger volumes of data across growing
numbers of supply chain participants.
The SaaS Opportunity in the SCM Industry
Software solutions in the SCM industry are increasingly delivered through the ‘‘cloud’’ using a SaaS model,
enabling organizations to implement, access and use software solutions remotely through an Internet connection and
standard web browser. The SaaS model can significantly reduce an organization’s cost of installing and maintaining
software applications. By purchasing SaaS solutions, organizations can also leverage the IT infrastructure
management, security, disaster recovery and other systems of the software vendor. We believe that the current
penetration rate of SaaS-based SCM solutions is low, but growing rapidly for Kinaxis’ target market, as enterprises
look to improve their SCM processes over time.
According to Gartner, the total worldwide cloud application services (SaaS) industry is expected to grow to
approximately $45.5 billion by 2017. Within this market, SCM cloud applications services are expected to be an
approximately $3.9 billion industry by 2017, growing at a 5-year (2012-2017) CAGR of 20.8%. (Source: Gartner
1Q14 Report.) In contrast, according to Gartner, the worldwide constant-currency enterprise application software
forecast for the SCM segment was $8.3 billion in 2012, and is expected to grow at a 10.3% CAGR through 2017.
(Source: Gartner February 2014 Report.)
2
$1.5
$1.9
$2.3
$2.8
$3.3
$3.9
2012 2013E 2014E 2015E 2016E 2017E
Total Supply Chain Management Cloud Applica!on Services (SaaS) Market
(figures in US$ Billions)
Source: Graph created by Kinaxis based on Gartner 1Q14 Report
We believe that the increasing use of SaaS-based SCM solutions is driven by the following developments:
Replacement of Legacy Tools: Legacy planning systems from traditional software providers create multiple
challenges. These systems were not designed to deal with today’s global, outsourced, multi-tier supply chains, and
were never intended to compute and measure risks to supply chain plans in real-time as changes in the business occur.
Legacy solutions also tend to lack strong integration between processes required for collaborative and rapid
decision-making and often rely on after-the-fact reporting. This can significantly hinder the user’s ability to
effectively respond to change. We believe that enterprises require a new class of software tools to perform complex
analytics and real-time simulations with speed and precision. These new tools go beyond the capabilities that legacy
planning tools can offer to perform integrated business planning, facilitate rapid and fully informed decision-making
and provide a secure environment for collaboration. The replacement of legacy tools is made possible by
technological developments, including big data analytics and in-memory databases within the cloud.
Ease of Integration: Increasing supply chain complexity creates the need for integration among trading partners
and their personnel and data systems. This drives demand for SCM vendors who can support: (i) data integration with
ERP systems and other transaction systems; (ii) collaboration with internal departments, customers and suppliers;
(iii) management of changing demand signals from internal and/or external sources; and (iv) other ‘‘closed-loop’’
activities to remove information and decision latency across the entire value chain. One of the ways to achieve these
objectives is integration of SCM planning in a central, secure location through a cloud-based deployment.
Faster Deployments: As business complexity and volatility accelerates, it becomes imperative to deploy new
SCM functionality more rapidly than the 18 to 24 month (or longer) timeframe typically required for enterprise IT
software deployments. Cloud-based SCM solutions can be deployed and operational within a much shorter
timeframe. In our experience, a more rapid path to business value is a key driver for on-demand services.
Secure and Scalable Solutions: A cloud-based approach makes it possible to extend SCM applications beyond
the enterprise and enable collaboration with the enterprise’s partners and suppliers, while maintaining confidence in
application and data security. In addition, if a customer’s use of a solution grows in terms of application areas, user
communities or data volumes, cloud-based operating environments can be scaled to improve performance and
service. For example, servers and memory can be added to cloud-based solutions without any new investment by
customers in hardware resources.
More Innovation, Faster: A cloud-based development approach allows for more rapid implementation of
innovations than traditional software development approaches. Where the cloud software provider handles all aspects
of software upgrades, customers can benefit from the latest innovations in SCM in advance of businesses that use
traditional module-based, on-premise systems.
3
Lower Total Cost of Ownership: A cloud-based deployment can relieve the customer’s IT department of
supporting tasks (for example, hardware provisioning and installation, setup and configuration, and upgrades),
freeing resources for more strategic IT initiatives. Typically, cloud software providers bear all the cost of the hardware
component of the solution, and also handle installation, setup and configuration, saving customers internal personnel
costs compared to on-premise deployments. In addition, cloud-based solutions often offer upgrades and quality
improvements associated with using newer versions of software.
Business Overview
Our Competitive Strengths
We are a leading provider of comprehensive SaaS-based SCM solutions. We aim to deliver competitive
advantages to our customers by enhancing the agility of, and visibility into, their supply chains, while still enabling
them to extend their outsourcing and global expansion strategies in highly volatile market environments. We believe
that Kinaxis has key competitive strengths, including those set out below.
‘‘One-to-Many’’ Value Proposition - One Product with Multiple Applications:
We offer a broad array of supply chain applications that are all supported by RapidResponse’s single data model
and analytics engine. This allows our customers to use a single product to holistically manage multiple supply chain
processes. In contrast, the legacy approach to SCM involves implementing and maintaining a collection of
loosely-integrated ERP bolt-on modules, or stand-alone niche software applications, that address individual supply
chain functions as separate activities. RapidResponse provides a distinct advantage over the legacy approach by
enabling our customers to work from a single common platform to manage, link, align, share and collaborate on
planning data across their supply chain networks. Our single product approach provides customers with end-to-end
visibility, change simulation and coordination for the planning and response of their supply chain networks.
In the recent Gartner Magic Quadrant for Supply Chain Planning (SCP) System of Record (SOR), Kinaxis was
placed in the Leaders Quadrant.2 (Source: Gartner March 2014 Report.) The report positions vendors based on
completeness of vision in the supply chain planning system of record market and on their ability to execute.
According to Gartner, ‘‘The SCP SOR is the environment in which the end-to-end integrated supply chain plans are
created, integrated, managed and made visible across the supply chain. In essence, this is establishing a single version
of the truth for the supply chain demand and supply plans, regardless of what the underlying ERP landscape looks
like’’. (Source: Gartner March 2014 Report.)
‘‘What-if’’ Simulation & Proven Big Data Analytics:
Our patented ‘‘what-if’’ simulation technology enables users to rapidly create many versions of their supply
chain environment, regardless of data size, to simulate changes without impacting the live data in the system of
record. Users can test multiple ‘‘what-if’’ scenarios against key performance indicators and contrast them to each
other or to a chosen baseline. Teams across an organization can collaborate on multiple scenarios simultaneously to
make quick and informed choices. RapidResponse supports the simulation of any number of changes or combination
of changes across, or related to, supply, demand, bill-of-material, business policy, capacity, costs and/or pricing.
Thousands of ‘‘what-if’’ simulations can be supported concurrently within a single instance of RapidResponse,
making it ideal for use by a large and diverse community of business roles and processes within an enterprise.
RapidResponse analytics allow users to model historic, present and future states of the supply chain to continuously
and automatically calculate results in response to changing inputs. Furthermore, RapidResponse has the ability to
simultaneously mimic many standard data models (such as the customer’s ERP system) to ensure calculations are
consistent across disparate data systems. We believe that RapidResponse’s simulation capabilities are superior to
other SCM solutions.
Ease of Product Configurability:
Most supply chain software products are custom built for specific supply chain processes, significantly limiting
their ability to quickly adapt to changing requirements and models. The configurability of RapidResponse gives our
2 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select onlythose vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not beconstrued as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties ofmerchantability or fitness for a particular purpose.
4
customers flexibility to adapt standard product features to meet unique requirements, while avoiding the cost and
difficulty associated with building, maintaining and upgrading a customized product. This allows our customers to
continuously adopt new practices or policies and apply our product as broadly as needed. As a result of its unique
architecture, RapidResponse:
• delivers tailored experiences and resources sought by specific individual users and user communities;
• provides adaptable supply chain process blueprints, offering a roadmap for evolving supply chain
processes; and
• drives rapid implementations, high user adoption, and superior time to value through flexible deployment
and maintenance processes.
Unique Ability to Address SCM Needs of the Largest Enterprises:
Large enterprises have specific characteristics that create a challenging SCM environment, including:
• global operations with complex and extensive supply chain networks;
• multiple, disparate technology systems across business function and geographies; and
• high volatility in demand and supply combined with short product and delivery lead times.
We believe that RapidResponse effectively addresses all of these challenges. RapidResponse gives our
customers superior insight into their operations, more effective coordination of supply chain activities, and ultimately
enables them to rationalize operating and inventory costs, improve revenue and margin visibility, and optimize
overall service levels. These benefits allow global enterprises to improve their relative competitive positioning and
financial performance. We believe that RapidResponse is the most comprehensive and versatile SaaS-based SCM
solution targeted to large enterprises.
Rapid and Efficient Deployment of an Industry Leading SaaS-based SCM Solution:
Leveraging best practices in software deployment and a wealth of SCM experience, RapidResponse can
typically be implemented in a matter of months. During the initial deployment phase, our professional services team
works with the customer to jointly develop a comprehensive deployment roadmap. The team’s initial focus is
addressing the customer’s most critical SCM concerns, and additional applications are subsequently deployed based
on the customer’s evolving needs. Our professional services team ensures an efficient deployment while supporting
the customer in maximizing its ongoing use of RapidResponse. We believe that competing products take longer to
deploy, and those deployments are more disruptive to the user’s day-to-day business operations.
Growth Strategy
Our goal is to continue to be a leading provider of cloud-based subscription software applications for the supply
chain operations of global enterprises, enabling our customers to efficiently and profitably procure, manufacture, sell
and distribute products. We intend to continue to increase our revenue and profitability by pursuing a growth strategy
that includes the following elements:
Expansion Within Existing Customer Accounts (‘‘Land and Expand’’):
Our success in selling to large national or global enterprises has been a key driver of our revenue growth and
profitability. Growth opportunities with these customers include expanding the user base and applications of
RapidResponse. Once a customer has experienced our product and realized value in a particular area of the business,
opportunities often emerge to sell RapidResponse to other areas across the enterprise. The configurable applications
offered by RapidResponse are tailored to address particular supply chain processes (for example, Demand Planning,
Inventory Management or Capacity Planning), and importantly, they are all supported by a single data model and
analytics engine. As a result, any application configured into RapidResponse remains part of the base engine, with
the data, business rules and analytics being stored in a single instance of the product. Subsequent applications to
address new supply chain processes are not added as isolated products that require integration, but rather are
implemented as a natural extension of the customer’s existing system. This is compelling to our large enterprise
customers, and existing customers have been an important source of our revenue growth. A core element of our future
growth strategy includes continuing to focus on large, global-scale customers that have ‘‘land and expand’’ potential.
5
New Applications:
By working closely with our customers we are well positioned to evaluate emerging requirements in our target
markets. The nature of our product is such that we collaborate with our customers and gain a deep understanding of
their requirements and challenges. We leverage this experience to develop solutions that apply broadly across our
target customers and markets. Examples include recently introduced RapidResponse capabilities in Supplier
Collaboration, Inventory Planning and Optimization and Integrated Project Management. Continually enhanced
capabilities help us win business from new customers as well as expand our revenue from existing customers.
New Direct Sales:
We plan to continue to build our direct sales force in order to take advantage of growing demand for supply chain
solutions. In the last 24 months, we have increased the size of our direct sales team by approximately one-third and
strengthened our sales leadership team. We expect to continue to expand our direct sales capabilities in Europe and
Asia.
Channel Partner Expansion:
We continue to seek and develop relationships with third-party organizations that offer differentiated and
value-added channels to reach new name accounts and existing customers. These may include independent referral
/ bidding relationships, reciprocal sub-contracting, one-off projects or ‘‘white labelling’’ certain of our applications.
We are particularly focused on expanding our reseller relationships, developing our relationships with Managed
Service Providers that provide supply chain management outsourcing services, and establishing affiliations with large
and influential industry advisors that can recommend RapidResponse for mutually beneficial client engagements. See
‘‘– Sales and Marketing – Sales Channels – Other Channel Partners’’ below.
Additional Vertical Markets:
We believe that one of our strongest differentiators is the delivery of enterprise supply chain applications that
specifically address the unique requirements of our target vertical and sub-vertical markets. We have a long standing
focus on the high technology sector, including electronics manufacturing, and an agnostic approach to new business
verticals. We have a growing presence within industries that have complex SCM networks such as aerospace and
defense, industrial products, life sciences and pharmaceuticals, and consumer packaged goods. In addition, we have
started to develop opportunities in the automotive sector and have seen early success in this area, winning business
from a larger multinational automaker in 2014.
Geographic Expansion:
While our sales have been primarily generated from customers headquartered in North America, we have
operations in Japan, Hong Kong and the Netherlands. We are focusing expansion of our direct and indirect sales
efforts in Western Europe and Asia-Pacific/Japan. We also cover other global markets on an opportunistic basis.
Acquisitions:
We intend to selectively consider strategic acquisitions, investments and other relationships that we believe are
consistent with our growth strategy and can significantly enhance the attractiveness of our technology platform or
expand our client base. While we have not completed any acquisitions to date, we have evaluated opportunities and
will continue to do so. We believe that our management’s past experience in enterprise software, venture capital and
mergers and acquisitions allows us to effectively identify and evaluate acquisition or partnership opportunities.
Product Capabilities and Applications
We sell RapidResponse as a collection of cloud-based configurable applications. Our customers may deploy one
or more applications depending on their particular needs. Each application is founded on the single RapidResponse
data model and analytics engine, and is accessed through a common user interface. This means any subsequent
application the customer may select is added as an extension of the customer’s existing system, not as an isolated
product that requires integration.
6
RapidResponse Application Descriptions
Order Fulfillment
Application Description Benefits
As new orders are received
or changed, customers use
RapidResponse to analyze
fulfillment options in order
to make accurate delivery
commitments to their
customers.
With RapidResponse, users can:
• Be alerted to orders that are projected
to be late and model any new or
changed orders.
• Analyze options for order fulfillment,
including: re-prioritizing orders,
alternate sourcing, expediting an order,
re-allocating supply, item substitution
or order / inventory transfers.
• Model the financial and operational
impact of alternatives and compare their
respective implications to margin, cost
of goods sold, inventory and other metrics.
• Superior responsiveness
to customers and more
reliable order
fulfillment.
• Clear and rapid insight
into the financial and
operational impact of
order changes.
• An ability to maximize
revenue opportunities
to drive growth.
• An ability to monitor
revenue at risk of
slipping outside of
promised dates.
Sample Customer Results
• Test & measurement company reduced its new large order assessment and commit process to one to two days,
down from three to 14 days previously. (Source: Kinaxis Internal Study.)
• Electronics manufacturing services company reduced response times to customer demand changes by 80% and
increased on-time delivery performance by 40% in eight months. (Source: Kinaxis Internal Study.)
• 95% of surveyed organizations used RapidResponse to help improve on-time delivery performance with results
rated as significant or better. (Source: TechFact Users Survey based on responses from 108 users,
TVID:D20-94D-F0D.)
7
Sales and Operations Planning
Application Description Benefits
The sales and operations
planning (S&OP) process is
a high-priority function for
most supply chain
organizations. It is the
means by which multiple
groups across the
organization gain consensus
on predicted demand for a
discrete planning horizon
(usually six to twenty-four
months) and develop a
corresponding supply plan to
satisfy revenue and margin
goals. RapidResponse
facilitates mature and
comprehensive S&OP that
achieves broader goals and
fills the critical capability
gaps that are currently found
in most S&OP processes.
With RapidResponse, users can:
• Integrate data across divisions, locations,
departments, product families, legacy
systems and supply chain partners.
• Combine demand and supply planning,
capacity planning, volume and mix
planning, and long-term and short-term
planning.
• Analyze and alter data at any time
to support specific ‘‘what-if’’ scenario
analysis.
• Evaluate different S&OP scenarios
directly against key metrics – both
operational (such as on-time delivery,
inventory turns and capacity utilization)
and financial (such as revenue, margins,
customer service and cash flow) – ensuring
operational plans are consistent
with financial objectives.
• Execute various stages of the S&OP process
simultaneously and continuously, resulting
in plans being actively monitored, and
notification of appropriate people when a
plan is at risk to enable immediate
corrective action.
• Faster and more reliable
plan development.
• Clearer, faster insight
into the operational
impact of changes
to the S&OP plan, and
conversely the impact
of changes within a
given function on the
S&OP plan.
• Increased consensus
through producing
viable plans that have
been contributed to and
vetted by stakeholders.
• An ability to scale and
evolve the S&OP
process to maximize
business opportunities
and minimize risks.
Sample Customer Results
• Large enterprise electronics company: ‘‘...reduced our planning cycle time from 6 weeks to 4 weeks...’’ (Source:
TechFact, TVID:CD2-40A-D90.)
• Semiconductor company: ‘‘reduced our S&OP analysis time for operations from 7 days to 3 [days]’’. (Source:
TechFact, TVID:CB5-EB3-6D9.)
• Global 500 pharmaceuticals company: ‘‘We reduced the execution time of the planning cycle by 10+ days.’’
(Source: TechFact, TVID:D2E-8A1-7FA.)
• S&P 500 electronics company: ‘‘The speed in which scenarios can be created and analyzed has gone from 24-48
hours to 10-30 minutes in our S&OP process with RapidResponse’’. (Source: TechFact, TVID:966-0EF-4A4.)
8
Inventory Management
Application Description Benefits
There are a significant
number of variables that
affect inventory. Each
variable creates some level
of risk. RapidResponse
enables customers to model
and manage those risks.
With RapidResponse, users can:
• Simulate inventory variables in real-time,
including projecting inventory levels by
modeling changes in inventory parameters.
• Be alerted to inventory imbalances
that have occurred or are anticipated to
occur based on current conditions.
• Collaboratively evaluate course correction
alternatives against key inventory
metrics and business performance measures.
• An enterprise-wide view
of projected inventory
levels to proactively
maintain targets and
avoid excess and
obsolete inventory.
• Ability to identify which
products, commodities,
and/or parts are not
performing to target
and re-examine
inventory policy
settings for better
performance.
Sample Customer Results
• Global 500 pharmaceuticals company: ‘‘With RapidResponse we improved event management for supply with
non-conformance and improved adherence to inventory targets above 95%. We are consistently managing
Industry Know-How, and Usability: What Really Matters in Supply Chain Planning, June 2013,
http://bit.ly/1ftX4GO.)
Network access & security:
All information processed through our servers is encrypted, password protected and stored securely. Customers
transmit data to their servers through an encryption channel, which protects the data against third-party disclosure in
transit. All of our servers are protected from Internet intruders by industry standard hardened firewalls, intrusion
detection and prevention systems and access control lists as well as other methods. All security services are monitored
and maintained on a regular basis by our staff as well as our certified data center providers. We employ industry
standard, centrally controlled anti-virus packages and intrusion prevention systems that are monitored and updated
on a continual basis. We enter into service level agreements (SLAs) with all customers, promising a minimum of
99.5% service availability. To date, we have consistently exceeded our SLAs.
Operations
We physically host our cloud solution in secure data center facilities in Ashburn, Virginia and Ottawa, Canada,
which are leased from Equinix, Inc. (‘‘Equinix’’) and Rogers Communications Inc. (‘‘Rogers’’) respectively. These
facilities feature redundant and fault-tolerant systems for power, cooling and Internet connectivity. In addition, the
data centers are continuously staffed with security officers and feature video surveillance and bullet-resistant
entrances equipped with biometric access controls. These facilities and our agreements with our providers can be
scaled depending on our specific needs. The Equinix facilities have achieved Statement on Standards for Attestation
Engagements (SSAE) No. 16, SOC 1, Type II. The Rogers facilities have a number of certifications, including PCI
DSS Report On Compliance, ISAE 3402 Type 2, SSAE No. 16, SOC 1, Type II , CSAE 3416 Type 2 and AT 101
SOC 2 Type 1.
Competition
While we do not believe that any specific competitor offers the distinct value proposition and integrated
capabilities that we offer, the markets that make up the SCM and operations sectors are each rapidly evolving and
highly competitive. We face competition from other SaaS players, traditional on-premise supply chain software
vendors, MSPs and in-house solutions:
SaaS Vendors: Several SaaS companies provide niche SCM solutions to small and medium sized businesses as
well as large enterprises. The advantage of SaaS for SCM is well-established, including higher service availability,
enhanced performance and enhanced security.
Traditional on-premise software: These vendors require customers to purchase, install and manage specialized
software, hardware and value-added networks for their supply chain integration needs. This approach requires
customers to invest in staff to customize, operate and maintain the software.
Managed Service Providers: MSPs combine a traditional on-premise software approach with professional IT
services. Many traditional on-premise software providers also have a professional services component.
In-House Solutions: Some companies develop custom in-house solutions to address their unique requirements.
This requires a heavy investment in the internal resources of the company to build and maintain the solution.
Competitive software and consulting services vendors primarily include: SAP AG, Oracle Corporation,
RedPrairie Holding, Inc. (including JDA Software Group, Inc.), INFOR, INC. and E2Open, Inc. From time to time
we also encounter other players in the market.
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In the recent Gartner Magic Quadrant for Supply Chain Planning System of Record, Kinaxis was placed in the
Leaders Quadrant.3 (Source: Gartner March 2014 Report.)
Gartner defines a supply chain planning (SCP) System of Record (SOR) as a planning platform that enables a
company to create, manage, link, align, collaborate and share its planning data across a supply chain — from demand
plan creation through the supply-side response and from detailed operational planning through tactical-level
planning.
According to Gartner, ‘‘Leaders demonstrate strong SCP SOR vision and execution capabilities. They have an
expansive set of functional capabilities spanning most, if not all, of the key functional modules of Gartner’s SCP SOR
reference model. Their coverage across the three categories of planning functionality — design, optimize and respond
— is good, especially for the optimize planning category. They have a good range of SCP SOD solutions and are
strong in the nonfunctional SCP SOR capabilities, such as the architecture of their SCP solutions, scalability and
speed, and availability of configurable analytics. They have established firm, functional and technical road maps that
closely align with Gartner’s view of a good future-proofed SCP SOR. Leaders exhibit strong financial performance
and the viability of their SCP solutions. Customers get good ROI at reasonable pricing and implementation service
costs, as well as good implementation timelines. Customers feel highly satisfied and would be very likely to select
the same vendor again. Leaders have good market penetration as well as broad functional penetration into their
customer base. Many of their customers are operating at Stage 3 (or higher) planning process maturity; they have a
single instance of the software that is often supporting large planning models and high supply chain complexity, and
they are planning to deploy more of the Leader’s capabilities in the future’’. (Source: Gartner March 2014 Report.)
Intellectual Property
In accordance with industry practice, we protect our proprietary products and technology through a combination
of patents, copyrights, trade-marks, trade secret laws and contractual provisions.
We generally license our software pursuant to agreements that impose restrictions on our customers’ and
partners’ ability to use the technology, such as prohibiting reverse engineering, limiting the use of software copies
and restricting access and/or use of our source code. Generally, we maintain ownership of modifications and
extensions of our software made for specific customers, although there may be restrictions on our re-use of such
software in some cases.
We also seek to avoid disclosure of our intellectual property and proprietary information by requiring our
employees and consultants to execute non-disclosure and assignment of intellectual property agreements. Such
agreements also require our employees and consultants to assign to us all intellectual property developed in the course
of their employment or engagement. We also utilize non-disclosure agreements to govern interaction with business
partners and prospective business partners and other relationships in which disclosure of proprietary information may
be necessary.
Our software includes software components licensed from third parties including open source software. We
believe that we follow industry best practices for using open source software and that replacements for this third-party
licensed software are available either on an open source basis or on commercially reasonable terms.
We hold a number of registered and unregistered trade-marks, service marks and domain names that are used
in our business in both the United States and Canada. ‘‘KINAXIS’’ is a registered trade-mark in the United States,
Canada, Taiwan, Hong Kong, Singapore, China, Japan, Thailand, Korea, Australia and the European Community and
‘‘RAPIDRESPONSE’’ is a registered trade-mark in the United States, Canada and under the Madrid Protocol.
3 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select onlythose vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not beconstrued as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties ofmerchantability or fitness for a particular purpose.
22
The following table sets out, for the issued patents we hold, the title of the patent, country which granted the
patent, the patent number and the date of grant of the applicable patent. We also have three patents pending in the
United States.
Title Country Patent Number Date of Grant
Extended Database Engine Providing Versioning and
Embedded Analytics India 255768 March 21, 2013
System and Method for Determining a Promise Date for a
Demand in a Business Environment Japan 4393993 October 23, 2009
System and Method for Determining a Promise Date for a
Demand in a Business Environment USA 8,015,044 September 6, 2011
System and Method for Determining a Promise Date
based on a supply available date USA 7,610,212 October 27, 2009
Extended Database Engine Providing Versioning and
Embedded Analytics USA 7,698,348 April 13, 2010
Scheduling System USA 7,945,466 May 17, 2011
The enforcement of our intellectual property rights depends on any legal actions against any infringers being
successful, but these actions may not be successful or may be prohibitively expensive, even when our rights have
been infringed. See ‘‘Risk Factors’’ below.
Facilities
We operate from our corporate headquarters located at 700 Silver Seven Road in Ottawa, Ontario where we
currently occupy approximately 53,000 square feet of space pursuant to a lease between us and Elk Property
Management Limited (as representative of PBX Properties Ltd.) and 856851 Alberta Ltd. Our lease runs through
2018 and we believe that the agreed upon facility and floor space is sufficient for our current and immediate future
needs. We also have a satellite office in Tokyo, virtual offices in Hong Kong and Amsterdam and we offer virtual
access for remote employees in the various jurisdictions in which we operate.
23
CORPORATE STRUCTURE
Corporate History
We were originally incorporated as Cadence Computer Corporation under the Canada Business Corporations
Act (the ‘‘CBCA’’) on June 29, 1984. In 2001, we were continued under the Business Corporations Act (New
Brunswick). We were continued back under the CBCA on July 24, 2012.
Since 1984, we have had a series of changes to our corporate name, from Cadence Computer Corporation, to
Carp Systems International, to Enterprise Planning Systems Inc., to webPLAN Inc. Our corporate name was changed
in 2005 to Kinaxis Inc.
Prior to the Offering, our authorized and issued share capital has included multiple share classes as a result of
our history of venture capital financing as well as for tax planning purposes. Concurrent with the Offering, our capital
structure will be simplified such that our authorized capital will consist of a single class of Common Shares. See
‘‘Capital Reorganization’’.
Our principal business office and registered office is located at 700 Silver Seven Road, Ottawa, Ontario,
K2V 1C3.
We have the following subsidiaries:
100% 100% 99% 100%
Kinaxis Inc.
(Canada)
Kinaxis Corp.
(Delaware)(1)
Kinaxis Japan K.K
(Japan)(2)
Kinaxis Asia Limited
(Hong Kong)(3)
Kinaxis Europe B.V.
(Netherlands)(4)
(1) Kinaxis Corp. is a wholly-owned subsidiary incorporated under the laws of Delaware and operates as our
sales and services center in the United States;
(2) Kinaxis Japan KK is a wholly-owned subsidiary incorporated under the laws of Japan and operates as our
sales and services center in Japan;
(3) Kinaxis Asia Limited is incorporated under the laws of Hong Kong and operates as our sales and services
center in Asia. We acquired Kinaxis Asia Limited in 2004. In accordance with the laws of Hong Kong,
Kinaxis Asia Limited must have two shareholders. We own 9,900 of the 10,000 issued and outstanding
ordinary shares and Douglas Colbeth, our President and Chief Executive Officer, owns the remaining 100
ordinary shares. Douglas Colbeth has executed and delivered a declaration of trust whereby he has agreed
to hold the 100 ordinary shares in trust for us and act as our nominee; and
(4) Kinaxis Europe B.V. is a wholly-owned subsidiary incorporated under the laws of the Netherlands and
operates as our sales and services center in Europe.
Three Year Business Development History
Since January 1, 2011, we have focused on RapidResponse’s continued development. In October 2011, we
announced the opening of a new office in Shanghai, China, to meet the needs of the expanding market in the region.
This was the third office in Asia for Kinaxis, following the opening of an office in Hong Kong, China in 2001 and
an office in Tokyo, Japan in 2003. The office in Shanghai, China was subsequently closed. In November 2011, we
announced the opening of a new office in Eindhoven, the Netherlands, in response to increasing demand for our
product in the region.
24
USE OF PROCEEDS
We expect to receive Cdn$58.9 million in net proceeds from the Treasury Offering, after deducting our share
of the Underwriters’ Fee estimated to be Cdn$3.9 million and estimated offering expenses of Cdn$2.2 million,
payable by us. We intend to use the net proceeds from the Treasury Offering as follows:
• approximately $30 million (approximately Cdn$33.0 million) to debt repayment;
• approximately Cdn$23.6 million to strengthen our balance sheet (representing approximately 40% of the
net proceeds of the Treasury Offering); and
• the balance for working capital and general corporate and administrative purposes (representing
approximately 4% of the net proceeds of the Treasury Offering).
We may also use a portion of the net proceeds to expand our current business through acquisitions of, or
investments in, other complementary businesses, products or technologies. However, we have no agreements or
commitments with respect to any acquisitions or investments at this time.
As noted above, approximately Cdn$33.0 million of the net proceeds of the Treasury Offering will be dedicated
to debt repayment. The portion of net proceeds dedicated to debt repayment will be used to retire $30.0 million of
outstanding indebtedness incurred to finance a share repurchase in December 2013. See ‘‘Management’s Discussion
and Analysis – Significant Factors Affecting Results of Operations – Repurchase of Shares’’.
As noted above, Cdn$23.6 million of the net proceeds of the Treasury Offering (representing approximately 40%
of the aggregate net proceeds of the Treasury Offering) will be dedicated to strengthen our balance sheet. In our
industry, a strong balance sheet (in the sense of excess working capital in the form of available cash) is attractive to
customers and we believe it can be a key decision criterion in the selection process of some of our largest target
customers. We believe that many of our principal competitors are well-capitalized large companies and having a
strong balance sheet is particularly important in order to compete successfully with those companies.
While we currently anticipate that we will use the net proceeds of the Treasury Offering as described above, we
may re-allocate the net proceeds from time to time depending upon changes in business conditions prevalent at the
time. Pending use of the net proceeds of the Treasury Offering (other than the net proceeds used to fund debt
repayment which will be so applied shortly after the Offering), such proceeds shall be held in U.S. funds and invested
in short-term, interest-bearing securities such as government securities, commercial paper and other highly rated
investment grade securities.
The aggregate net proceeds to be received by the Selling Shareholders from the sale of the Offered Shares
pursuant to the Secondary Offering are estimated to be Cdn$33.5 million (Cdn$47.7 million if the Over-Allotment
Option is exercised in full), after deducting that portion of the Underwriters’ Fee payable by the Selling Shareholders.
The Company will not receive any of the proceeds payable to the Selling Shareholders under the Secondary Offering.
Other than as otherwise set out in this prospectus, the Selling Shareholders will not pay any expenses of the Offering
other than the Underwriters’ Fee in respect of the Secondary Offering (which expenses will be paid by us) as the
incremental costs of the Secondary Offering are not material. The Selling Shareholders are responsible for any and
all legal fees and expenses incurred by legal advisors retained by the Selling Shareholders. See ‘‘Principal and Selling
Shareholders’’.
DIVIDEND POLICY
We have not paid dividends to our shareholders to date, although we do anticipate declaring a stock dividend
on our Class B Voting Common Shares in connection with the Capital Reorganization described below. We do not
currently anticipate paying cash dividends on our Common Shares in the foreseeable future. Our current policy is to
retain cash flows to finance the development and enhancement of our software and to otherwise reinvest in our
business. The declaration and payment of dividends on our Common Shares is at the discretion of our Board of
Directors and is also subject to obtaining prior written consent from our lender in accordance with the terms of our
existing credit facilities. Our dividend policy will be reviewed from time to time by our Board of Directors in the
context of our earnings, financial condition and other relevant factors.
25
CAPITAL REORGANIZATION
Our authorized capital currently consists of an unlimited number of Common Shares, an unlimited number of
Non-Voting Common Shares and an unlimited number of Class A Preferred Shares. At an annual general and special
meeting of the shareholders held on May 22, 2014 (the ‘‘Shareholders’ Meeting’’), our shareholders approved a
capital reorganization (the ‘‘Capital Reorganization’’), consisting of an amalgamation of one of our shareholders,
1170233 Alberta ULC (‘‘Alberta ULC’’) and the Company with the resulting amalgamated entity having the
following authorized capital:
• an unlimited number of Class B Preferred Shares, which will be voting shares;
• an unlimited number of Class A-1 Voting Common Shares;
• an unlimited number of Class A-2 Non-Voting Common Shares;
• an unlimited number of Class B Voting Common Shares;
• an unlimited number of Class C Preferred Shares; and
• an unlimited number of Common Shares.
The Capital Reorganization is expected to take effect on the same date as the filing of this prospectus. The
Capital Reorganization will result in:
• the holders of Common Shares and Non-Voting Common Shares receiving an equivalent number of
Class A-1 Voting Common Shares and Class A-2 Non-Voting Common Shares respectively;
• the cancellation of all of the Common Shares, Non-Voting Common Shares and Class A Preferred Shares
held by Alberta ULC;
• the shareholders of Alberta ULC receiving an aggregate of 1,253,892.5 Class B Preferred Shares,
5,114,607.98 Class A-1 Voting Common Shares and 800,000 Class A-2 Non-Voting Common Shares in
exchange for their shares in Alberta ULC;
• HarbourVest International Private Equity Partners III - Direct Fund L.P. receiving 3,858,025 Class B
Preferred Shares in exchange for all of its Class A Preferred Shares;
• certain holders of Class A-1 Voting Common Shares and Class A-2 Non-Voting Common Shares electing
to convert all or a portion of their shares into Class B Voting Common Shares for purposes of receiving a
stock dividend, provided that the declaration of any such dividend is in our sole and absolute discretion;
• the issuance of certain Class C Preferred Shares;
• the conversion, immediately prior to but conditional upon the completion of the Offering, of all of the
issued and outstanding Class B Preferred Shares, Class A-1 Voting Common Shares, and Class A-2
Non-Voting Common Shares into Common Shares, on a one-for-one basis with any fractional Common
Shares that would otherwise have been issued upon such conversion being cancelled without any payment
therefor, and the conversion, immediately prior to but conditional upon the completion of the Offering, of
all of the issued and outstanding Class B Voting Common Shares and Class C Preferred Shares into
Common Shares on the basis of one Class B Voting Common Share together with one Class C Preferred
Shares being converted into one Common Share with any fractional Common Shares that would otherwise
have been issued upon such conversion being cancelled without any payment therefor;
• the deletion of the Class B Preferred Shares, the Class A-1 Voting Common Shares, the Class A-2
Non-Voting Common Shares, the Class B Voting Common Shares and the Class C Preferred Shares from
our authorized capital following the conversion into Common Shares upon the completion of the Offering;
and
• the deletion of the restrictions on the transfer of our shares upon completion of the Offering.
Alberta ULC is a holding company, of which the Selling Shareholder TechnoCap I., L.P. is a principal
shareholder. Prior to giving effect to the Capital Reorganization, Alberta ULC has no liabilities and its only asset is
shares of Kinaxis.
26
After giving effect to the Capital Reorganization, on the completion of this Offering our capital structure will
consist of a single class of Common Shares. As of the date of this prospectus, assuming the Capital Reorganization
has been completed as of such date and without taking into account the Offering or the exercise of options described
under ‘‘Options to Purchase Securities’’, there are 18,574,874 Common Shares outstanding.
Reduction of Deficit
As at March 31, 2014, we had a deficit of $85.1 million, which in large part is a result of the increase in value
of our Class A Preferred Shares, calculated in accordance with IFRS. In connection with the Capital Reorganization,
our Class A Preferred Shares will be exchanged for Class B Preferred Shares, and the Class A Preferred Shares will
be cancelled. Immediately prior to the completion of the Offering, our Class B Preferred Shares will be converted
into Common Shares on a one-to-one basis. In accordance with subsection 39(4) of the CBCA, generally, the stated
capital of the Common Shares issued upon the conversion will be automatically increased by an amount equal to the
original stated capital of the Class B Preferred Shares; this same amount will be included in the share capital of the
Common Shares. The fair value of the liability relating to the Class B Preferred Shares recorded on our Statement
of Financial Position as at the date of conversion in connection with the Offering will also be transferred to share
capital. As such, our Class A Preferred Shares (to become Class B Preferred Shares in connection with the Capital
Reorganization) will over time have increased both our share capital and deficit. Our Board has resolved to reduce
the amount of our deficit immediately following the completion of the Offering by an amount equal to the increase
in the fair value of the liability beyond the original stated capital of the Class B Preferred Shares as at the date of
conversion to Common Shares.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS
This management’s discussion and analysis of financial condition and results of operations (the ‘‘MD&A’’) as
at March 31, 2014 and 2013 and December 31, 2013, 2012 and 2011 should be read in conjunction with our annual
and interim consolidated financial statements and the related notes thereto included in this prospectus. This MD&A
is presented as of the date of this prospectus and is current to that date unless otherwise stated. The financial
information presented in this MD&A is derived from our annual and interim consolidated financial statements
prepared in accordance with IFRS. This MD&A contains forward-looking statements that involve risks, uncertainties
and assumptions, including statements regarding anticipated developments in future financial periods and our future
plans and objectives. There can be no assurance that such information will prove to be accurate, and readers are
cautioned not to place undue reliance on such forward-looking statements. See ‘‘Forward-Looking Statements’’ and
‘‘Risk Factors’’.
All references to $ or dollar amounts in this MD&A are to U.S. currency unless otherwise indicated.
Overview
We are a leading provider of cloud-based subscription software that enables our customers to improve and
accelerate analysis and decision-making across their supply chain operations. Our RapidResponse product provides
supply chain planning and analytics capabilities that create the foundation for managing multiple, interconnected
supply chain management processes, including demand planning, supply planning, inventory management, order
fulfillment and capacity planning. Our professional services team supports deployment of RapidResponse in new
customers and assists existing customers in fully leveraging the benefits of the product.
Our target market is large enterprises that have significant unresolved supply chain challenges. We believe this
market is growing as a result of a number of factors, including increased complexity and globalization of supply
chains, outsourcing, a diversity of data sources and systems, and competitive pressures on our customers.
We have established a strong track record of cash flow generation and revenue and earnings growth over the past
four years. Our revenue has grown at a compound annual growth rate (CAGR) of 26% since 2011. This growth is
driven both by contracts with new customers and expansion of our solution and service engagements within our
existing customer base. Our Adjusted EBITDA grew from $12.6 million for the financial year ended December 31,
2011 to $14.8 million for the financial year ended December 31, 2013. See ‘‘ - Non-IFRS Measurements’’ below.
We had 73 and 77 subscription customers as at December 31, 2013 and March 31, 2014, respectively. Our
customers are generally large national or multinational enterprises with complex supply chain requirements. We
target multiple industry verticals including high technology and electronics manufacturing, aerospace and defense,
industrial products, life sciences and pharmaceuticals, consumer packaged goods, and most, recently, the automotive
sector.
We sell our product using a subscription-based model. Our agreements with customers are typically two to five
years in length. Our subscription fee generally depends on the size of our customer, the number of applications
deployed, the number of users and the number of manufacturing, distribution and inventory sites our product is
required to model. Average annual contract value fluctuates from period to period depending on the size of new
customers and the extent to which we are successful in expanding adoption of our products by existing customers.
For the year ended December 31, 2013, our ten largest customers accounted for approximately 47% of our total
revenues. One customer accounted for 10% of our total revenue during the year ended December 31, 2013 whereas
no one customer accounted for 10% or more of our total revenue for the three months ending March 31, 2014.
Increasing revenues through new customer wins is one of our highest organizational priorities. Our sales cycle
can be lengthy, as we generally target very large organizations with significant internal processes for adoption of new
systems. We currently pursue a revenue growth model that includes both direct sales through our internal sales force,
as well as indirect sales through channels including resellers and other partners.
Due to the growth in the market and increasing need for solutions, competition in the industry from new entrants
and larger incumbent vendors will increase. In addition to this increased competitive pressure, changes in the global
economy may have an impact on the timing and ability of these enterprises to make buying decisions which can have
an impact on our performance.
We are headquartered in Ottawa, Ontario. We have subsidiaries located in the United States, the Netherlands and
Hong Kong and a subsidiary located in a satellite office in Tokyo, Japan. We continue to expand our operations
28
internationally. In the year ended December 31, 2013, 85% of our revenues derived from North America and our
remaining revenues derived from outside North America, principally from Japan and Europe.
Key Performance Indicators
Key performance indicators that we use to manage our business and evaluate our financial results and operating
performance include: total revenue, total new customers, incremental Subscription Revenue and bookings, net
revenue retention, secured subscription backlog, operating expenses, Adjusted EBITDA and cash flow from
operations. We evaluate our performance by comparing our actual results to budgets, forecasts and prior period
results.
Net revenue retention
Our subscription customers generally enter into two to five year agreements, paid annually in advance, for use
of our solution. Subscription agreements are subject to price increases upon renewal reflecting both inflationary
increases and the additional value provided by our solutions. In addition to the expected increase in Subscription
Revenue from price increases over time, existing customers may subscribe for additional applications, users or sites
during the term.
Our subscription model results in a high proportion of recurring revenue. The power of the subscription model
is only fully realized when a vendor has high retention rates. High customer retention rates generate a long customer
lifetime and a very high lifetime value of the customer. Our net revenue retention rates are over 100%, which includes
sales of additional applications, users and sites to existing customers.
The recurring nature of our revenue provides high visibility into future performance, and upfront payments
result in cash flow generation in advance of revenue recognition. Typically, more than 80% of our annual
Subscription Revenue is recognized from customers that were in place at the beginning of the year (excluding the
effect of renewals) and this continues to be our target model going forward. However, this also means that agreements
with new customers or agreements with existing customers purchasing additional applications, users or sites in a
quarter may not contribute significantly to current quarter revenue. As an example, a new customer who enters into
an agreement on the last day of a quarter will have no impact on the revenue recognized in that quarter.
Target annual operating model
We have developed a target operating model in order to assist our business planning. The annualized model
includes: a split of 80% Subscription Revenue to 20% professional services revenue; a split of 70% direct
subscription sales to 30% indirect subscription sales; Subscription Revenue growth of approximately 25%; overall
revenue growth greater than 20%; Adjusted EBITDA of 25%; gross profit of 74%; and selling and marketing,
research and development, and general and administrative expenses consisting of 23%, 20% and 11%, respectively,
of our overall costs. The model is forward-looking over the middle-term and is subject to change and adjustment to
respond to changing economic, business and financial conditions and other developments, including developments
that we cannot currently predict. There can be no assurance that we will achieve our target operating model in any
respect in any period, and if we do achieve it, such achievement may not be sustained. The model speaks to our
objectives only, and is not a forecast, projection or prediction of future results of operations. Investors should not
place undue reliance on our target operating model. See ‘‘Forward-Looking Statements’’.
Significant Factors Affecting Results of Operations
Our results of operations are influenced by a variety of factors, including:
Revenue
Our revenue consists of subscription fees, professional service fees and maintenance and support fees.
Subscription Revenue is comprised of fixed term fees for licensed on-premise use of RapidResponse or fees for
provision as SaaS in a hosted/cloud environment.
Subscription Revenue includes maintenance and support for the solution for the term of the contract as well as
hosting services when provided under a SaaS arrangement. Professional services revenue is comprised of fees
charged to assist organizations to implement and integrate our solution and train their staff to use and deploy our
solution. Professional service engagements are contracted on a time and materials basis including billable travel
29
expenses and are billed and recognized as revenue as the service is delivered. Maintenance & Support Revenue
relates to fees for maintenance and support for certain legacy customers who licensed our software on a perpetual
basis prior to our conversion to a SaaS model in 2005. Over time, this revenue stream is expected to decline as more
customers eventually convert to the more comprehensive, subscription based service or as customers choose to let
their support contracts lapse.
Cost of revenue
Cost of revenue consists of personnel, travel and other overhead costs related to implementation teams
supporting initial deployments, training services and subsequent stand-alone engagements for additional services.
Cost of revenue also includes personnel and overhead costs associated with our customer support team as well as the
cost of our data centre facilities where we physically host our on-demand solution and network connectivity costs for
the provisioning of hosting services under SaaS arrangements.
Sales and marketing expenses
Sales and marketing expenses consist primarily of personnel and related costs for our sales and marketing teams,
including salaries and benefits, commissions earned by sales personnel and trade show and promotional marketing
costs.
We plan to continue to invest in sales and marketing by expanding our domestic and international selling and
marketing activities, building brand awareness and sponsoring additional marketing events. We expect that in the
future, sales and marketing expenses will continue to increase.
Research and development expenses
Research and development expenses consist primarily of personnel and related costs for the teams responsible
for the ongoing research, development and product management of RapidResponse. These expenses are recorded net
of any applicable scientific research and experimental development investment tax credits (‘‘investment tax
credits’’) earned for expenses incurred in Canada against eligible projects. As a Canadian controlled private
corporation, a portion of these tax credits were refundable. As a public company, tax credits will no longer be
refundable and we will only record the tax credit to the extent there is reasonable assurance we will be able to use
the investment tax credits to reduce current or future tax liabilities. As the Company has an established history of
profits, we do expect to realize the benefit of these tax credits in the near term. Further, we anticipate that spending
on R&D will also be higher in absolute dollars as we expand our research and development and product management
teams.
General and administrative expenses
General and administrative expenses consist primarily of personnel and related costs associated with
administrative functions of the business including finance, human resources and internal IT support, as well as legal,
accounting and other professional fees. We expect that, in the future, general and administrative expenses will
increase in absolute dollars as we invest in our infrastructure and we incur additional employee-related costs and
professional fees related to the growth of our business and international expansion, including associated public
company costs.
Foreign exchange
Our presentation and functional currency with the exception of our subsidiaries in Japan (Japanese Yen) and the
Netherlands (Euro) is U.S. dollars. We derive most of our revenue in U.S. dollars. Our head office and a significant
portion of our employees are located in Ottawa, Canada, and as such a significant amount of our expenses are
incurred in Canadian dollars.
Loss due to change in fair value of redeemable preferred shares
We have recorded significant losses related to changes in the fair value of the redeemable preferred share
liability. Immediately prior to the completion of the Offering, all of our redeemable preferred shares will be converted
to Common Shares and the liability will be reduced to $Nil with a corresponding increase in share capital and there
will be no further impact on our results of operations from these shares.
30
Repurchase of Shares
On November 7, 2013, we sent to all holders of our Common Shares and Non-Voting Common Shares an offer
to purchase such shares at a price of $9.75 per share (the ‘‘Common Share Offer’’). Concurrently with the Common
Share Offer, an offer was also made to all holders of options to acquire our Common Shares or Non-Voting Common
Shares to surrender vested options at a price of $9.75 less the applicable exercise price (the ‘‘Option Offer’’). The
purchase price for our Common Shares and Non-Voting Common Shares was determined through deliberations of our
Board after receiving and reviewing a draft value summary prepared by our independent financial advisor. The
Common Share Offer and Option Offer were left open for acceptance until December 12, 2013. Our employees
(including management) were only entitled to tender up to 40% of the Common Shares they held (including Common
Shares underlying any options the employee elected to have cancelled in connection with the Option Offer) to the
Common Share Offer and Option Offer. We subsequently negotiated with certain holders of our Class A Preferred
Shares an offer to acquire outstanding Class A Preferred Shares at a price of $9.11 per share. Under the Common
Share Offer, a total of 195 shareholders (predominantly current and former employees) tendered some or all of their
shares to the Common Share Offer. We acquired an aggregate of 3,115,226 Common Shares (rounded) (representing
approximately 27% of the then issued and outstanding Common Shares) and an aggregate of 898,426 Non-Voting
Common Shares (rounded) (representing approximately 16.8% of the then issued and outstanding Non-Voting
Common Shares) for an aggregate purchase price of approximately $39.2 million. The Option Offer resulted in a total
of 67 option holders surrendering an aggregate of 1,421,707 options (representing approximately 57% of all then
vested options) for an aggregate price of approximately $11.4 million (after deducting the applicable exercise price
for the tendered options). Five of our seven holders of Class A Preferred Shares, holding an aggregate of 3,124,998
Class A Preferred Shares (or approximately 38% of the then issued and outstanding Class A Preferred Shares) agreed
to have their Class A Preferred Shares repurchased by us for an aggregate price of approximately $28.5 million. We
financed such repurchases with $54.1 million of cash on hand and $25.0 million borrowed from Royal Bank of
Canada. See ‘‘Management’s Discussion and Analysis - Liquidity and Capital Resources – Revolving Credit Facility
and Term Loan’’ below.
Results of Operations
The following table sets forth a summary of our results of operations for the three months ended March 31, 2014
and 2013 and the fiscal years ended December 31, 2013, 2012 and 2011:
Three months ended March 31, Year ended December 31,
2014 2013 2013 2012 2011
(In thousands of U.S. dollars, except earnings (loss) per share)
(1) After giving effect to the Capital Reorganization.
(2) All Common Shares owned, controlled or directed by the Selling Shareholders are owned of record and beneficially.
(3) On a fully-diluted basis, the % of Common Shares owned, controlled or directed by HV III and TechnoCap are 21.3% and 33.7%,respectively.
(4) If the Over-Allotment Option is exercised in full, the number of Common Shares to be sold by HV III and TechnoCap are 1,511,171 and2,389,501, respectively.
(5) On a fully-diluted basis, the % of Common Shares owned, controlled or directed by HV III and TechnoCap are 13.2% / 11.5% and 20.9%/ 18.2% respectively.
(6) Includes the Class A-1 Voting Common Shares, Class A-2 Non-Voting Common Shares and Class B Preferred Shares to be acquired fromTrust K (the other shareholder of Alberta ULC), as described below.
As indicated in the table above, prior to the Offering, the Selling Shareholders own or control, directly or
indirectly, an aggregate of 11,702,009 Common Shares representing approximately 63.0% of the issued and
outstanding Common Shares assuming the completion of the Capital Reorganization. After giving effect to the
Offering (but assuming no exercise of the Over-Allotment Option), the Selling Shareholders will own or control,
directly or indirectly, an aggregate of 8,962,294 Common Shares, representing approximately 38.0% of the
outstanding Common Shares. After giving effect to the Offering and assuming the Over-Allotment Option is
exercised in full, the Selling Shareholders will own or control, directly or indirectly, an aggregate of 7,801,337
Common Shares, representing approximately 33.1% of the outstanding Common Shares.
HV III
HarbourVest Partners, LLC (‘‘HarbourVest’’), a global private equity investment firm, is the managing member
of the general partner of HV III. Robert Wadsworth, one of our directors, is a Managing Director of HarbourVest.
HarbourVest has established a five-person investment committee which is responsible for approving investments
made by the funds sponsored by HarbourVest, including HV III. Mr. Wadsworth is not a member of the HarbourVest
investment committee.
TechnoCap
TechnoCap is a venture capital fund based in Montreal, Quebec that invests in Canadian small businesses in
Quebec, Ontario and Western Canada. The general partner of TechnoCap is TurnCap Inc. (‘‘TurnCap’’), a private
Canadian corporation. TurnCap is controlled by Richard Prytula and Marc Balevi, one of our directors.
TechnoCap’s principal investor is HarbourVest Partners VII – Venture Partnership Fund L.P. (‘‘HV VII’’), a
‘‘fund-of-funds’’ that is controlled by HarbourVest. HV VII indirectly owns 97.5% of the limited partnership interests
in TechnoCap. Investment decisions made with respect to HV VII are made by the same five-person investment
50
committee that makes investment decisions with respect to HV III. Under TechnoCap’s limited partnership
agreement, management, control and operation of TechnoCap are vested exclusively in its general partner, TurnCap.
HV VII, as the majority limited partner, can remove the general partner of TechnoCap without cause, but only on
payment of certain termination fees and pay-out of carried interest, among other amounts. Any replacement general
partner must be a Canadian resident for purposes of the Income Tax Act (Canada) or a corporation that is a
‘‘Canadian-controlled private corporation’’ for purposes of the Income Tax Act (Canada). While HV VII has certain
negative controls over disposition by TechnoCap of its assets, it cannot direct TechnoCap to purchase or sell portfolio
investments.
Recent Transactions by Principal and Selling Shareholders
On December 16, 2013, Alberta ULC (our shareholder and in which TechnoCap is currently a principal
shareholder) exchanged 800,000 Common Shares in our capital for 800,000 Non-Voting Common Shares in our
capital. In addition, following the completion of the Capital Reorganization and prior to the completion of the
Offering, TechnoCap has agreed to acquire the 481.63 Class A-1 Voting Common Shares, 75.34 Class A-2
Non-Voting Common Shares and 118.08 Class B Preferred Shares received by Trust K upon the amalgamation
(which shares will automatically convert into an aggregate of 674 Common Shares upon completion of the Offering)
at a price per share equal to the Offering Price less an amount equal to the Underwriters’ Fee. Except as set forth
above, none of the Selling Shareholders acquired any of their Common Shares during the preceding two years. This
does not include Common Shares received pursuant to our Capital Reorganization. See ‘‘Capital Reorganization’’.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets out, for each of our directors and executive officers, the person’s name, municipality
of residence, position(s) with the Company, principal occupation and, if a director, the year in which the person
became a director. Our directors are elected annually and, unless re-elected, retire from office at the end of the next
annual general meeting of shareholders. As of the date hereof, assuming the completion of the Capital
Reorganization, our directors and executive officers (as a group) owned, or exerted direction or control over, a total
of 9,767,827 Common Shares, representing approximately 52.6% of our total outstanding Common Shares (or
9,767,827 Common Shares, representing approximately 41.4% of our total Common Shares following the Offering
assuming the exercise in full of the Over-Allotment Option).
Name and Placeof Residence
Position(s) withKinaxis Principal Occupation
DirectorSince Expiry of Term
Douglas Colbeth
Scottsdale, Arizona
USA
President, Chief
Executive Officer
and Chairman of
the Board
President and Chief
Executive Officer of
Kinaxis
2001 End of the next AGM
unless re-elected
Marc Balevi
Hudson, Québec
Canada
Director President of
TechnoCap Inc. and a
Managing Partner of
TechnoCap I, L.P.
1996 End of the next AGM
unless re-elected
John (Ian) Giffen(1)(3)
Toronto, Ontario
Canada
Director Corporate Director 2010 End of the next AGM
unless re-elected
Howard Gwin(1)(2)(3)
Shanty Bay, Ontario
Canada
Director Consultant 2005 End of the next AGM
unless re-elected
Robert Wadsworth(2)
Wellesley,
Massachusetts
USA
Director Managing Director,
HarbourVest Partners
2000 End of the next AGM
unless re-elected
Ronald
Matricaria(1)(2)(3)
Scottsdale, Arizona
USA
Director Retired 2014 End of the next AGM
unless re-elected
Richard Monkman
Ottawa, Ontario
Canada
Chief Financial
Officer and Vice
President, Corporate
Services
Chief Financial Officer
and Vice President,
Corporate Services of
Kinaxis
N/A N/A
John Sicard
Ottawa, Ontario
Canada
Chief Products
Officer
Chief Products Officer
of Kinaxis
N/A N/A
Jeffrey Johnson
Scottsdale, Arizona
USA
Executive Vice
President, Global
Operations
Executive Vice
President, Sales of
Kinaxis
N/A N/A
Notes:
(1) Member of the Audit Committee. Mr. Giffen is Chair of the Audit Committee.
(2) Member of the Compensation Committee. Mr. Matricaria is Chair of the Compensation Committee.
(3) Member of the Nominating and Governance Committee. Mr. Gwin is Chair of the Nominating and Governance Committee.
52
Biographies
The following are brief profiles of our executive officers and directors, including a description of each individual’s
principal occupation within the past five years.
Douglas Colbeth: President, Chief Executive Officer and Chairman of the Board
Mr. Colbeth has been a director of Kinaxis since 2001, and moved into his current position as President and Chief
Executive Officer in 2003. Prior to joining Kinaxis, Mr. Colbeth was Chief Executive Officer of Spyglass Inc., a
leading provider of Internet software technologies. In June 1995, Spyglass became one of the first Internet software
companies to conduct a successful initial public offering. Mr. Colbeth holds a Bachelor of Science degree from Siena
College in New York.
Richard Monkman: Chief Financial Officer and Vice President, Corporate Services
Mr. Monkman has served in various finance roles with high-technology companies over the past 30 years. Prior to
joining Kinaxis in October of 2005, Mr. Monkman held the Chief Financial Officer and other senior finance positions
with leading software, services and other public and private high technology companies; most notably IceFyre
Semiconductor Corporation, Nokia Internet Communications, SHL Systemhouse Inc. and ISM Corporation. Mr.
Monkman is a Chartered Professional Accountant and has a Bachelor of Mathematics and Masters of Applied Science
from the University of Waterloo.
John Sicard: Chief Products Officer
Prior to moving into his current role, Mr. Sicard held several positions at Kinaxis including Executive Vice President
of Marketing and Development, Chief Operating Officer and Chief Strategy Officer. Before joining Kinaxis in 1994,
Mr. Sicard held senior software architect positions in research and development at FastMAN Software Systems Inc.
(also known as Promira Software Inc. before being purchased by Manugistics Group Inc.), and Monenco Agra Inc.
Mr. Sicard holds a Bachelor of Computer Science degree from Concordia University.
Jeffrey Johnson: Executive Vice President, Global Operations
Before joining Kinaxis in 2012, Mr. Johnson was Executive Vice President of Sales for PSS Systems Inc. which was
acquired by International Business Machines Corp in 2010. Mr. Johnson has over 25 years of high-technology sales
experience and has held senior sales positions with a variety of software and technology firms, including Agile
Software Corporation, PeopleSoft Inc., Blue Martini Software Inc. and SAP AG. Mr. Johnson holds a Bachelor of
Arts degree from Washington State University.
Marc Balevi: Director
Mr. Balevi is President of TechnoCap Inc. and a Managing Partner of TechnoCap I, L.P. Mr. Balevi has acted as a
director and/or as chairman of the board, of various technology companies advising them in financing and strategic
alliances. In 1981, Mr. Balevi joined KPMG LLP, an accounting firm, and practiced as a senior tax partner until 1996.
Mr. Balevi holds a Bachelor of Commerce and a Diploma in Accountancy from McGill University. He also holds the
professional designations of Chartered Professional Accountant (CPA, CA) and Trust & Estate Practitioner (TEP).
John (Ian) Giffen: Independent Lead Director
Mr. Giffen currently serves as an advisor and/or director to technology companies and investment funds. Mr. Giffen
is currently a director of Absolute Software Corporation and a number of private companies. Since 1996, Mr. Giffen
has served on the boards of a number of public companies, including Macromedia Inc., Descartes Systems Group
Inc., MKS Inc., Digital Processing Systems Inc., MGI Software Corp, Delano Technology Corporation, Corel
Corporation, Certicom Corp, Financial Models Company Inc., 724 Solutions Inc., Sierra Systems Group Inc., Open
Text Corporation, MOSAID Technologies Incorporated, RuggedCom Inc. and Strategic Vista Inc., as well as on the
boards of several private companies. Mr. Giffen is a Chartered Professional Accountant and with a Designation in
Corporate Finance. He also has a Bachelor of Arts degree from the University of Strathclyde in Glasgow. Mr. Giffen’s
professional designations, his educational background, his years of executive experience in the technology sector,
including as the Vice President and Chief Financial Officer for Alias Research Inc. from 1992 to 1996, and his service
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on other public company boards and board committees, including as a member of the audit committee for the board
of directors of all of the public companies on which he has served, and the chair all of such audit committees, with
the exception of MOSAID Technologies Incorporated, are all relevant to the performance of his responsibilities as
the Chair of our Audit Committee.
Howard Gwin: Director
From November 2011 to December 2012, Mr. Gwin served as a Managing Director of OMERS Ventures, the venture
capital arm of OMERS, one of Canada’s largest pension funds. Prior to joining OMERS Ventures, Mr. Gwin
established a track record as a widely-respected technology company operator. In addition, Mr. Gwin previously
served as President at Solect Technology Group, which was sold to Amdocs Inc., as Executive Vice President
Worldwide Operations at Peoplesoft Inc., and held progressively senior roles at International Business Machines
Corporation and Xerox Canada Finance Inc. Mr. Gwin was also a Managing Partner at Bridgescale Partners from
March 2010 to September 2011. Mr. Gwin has previously served on the boards of a number of public companies,
including Taleo Corp, MKS Inc. and Pivotal Corporation. Mr. Gwin currently serves on the boards of several private
companies. Mr. Gwin holds a Bachelor of Arts degree from Simon Fraser University in Canada. Mr. Gwin’s years
of executive experience in the technology sector, his educational background, and his service on other public
company boards and board committees, including as a member of the audit committee for the board of directors of
Taleo Corp. and MKS Inc., are all relevant to the performance of his responsibilities as a member of our Audit
Committee.
Robert Wadsworth: Director
Mr. Wadsworth joined HarbourVest Partners in 1986 and is a Managing Director who focuses on direct investments
globally. Mr. Wadsworth manages many of HarbourVest Partners’ investment activities in the industrial, services, and
information technology sectors and serves on the firm’s Executive Management Committee overseeing day-to-day
operating activities and strategic direction. He is currently a director of Camstar Systems, Inc., Earth Networks, Inc.
and several other privately-held companies. He has previously served on the board of a number of public and private
companies. Mr. Wadsworth’s prior experience also includes management consulting with Booz, Allen & Hamilton,
where he specialized in the areas of operations strategy and manufacturing productivity. Mr. Wadsworth holds a
Bachelor of Science degree in Systems Engineering and Computer Science from the University of Virginia and a
Master of Business Administration from Harvard University. Mr. Wadsworth serves as a Trustee of the University of
Virginia School of Engineering & Applied Science, St. Sebastian’s School, and the Dana Hall School.
Ronald Matricaria: Director
Mr. Matricaria is currently a director and chairman of the board at Orthofix International N.V., a publicly traded
global medical device company, a director and chairman of the board at Volcano Corporation, a publicly traded
medical device company, a member of the board of Phoenix Children’s Hospital, and most recently served on the
board of directors of Life Technologies Corporation. Mr. Matricaria has previously served on the board of directors
of a number of public and private companies including Home Depot Inc., Diametric Medical Inc., Ceridian Inc.,
(1) Amounts represent the annualized base salary to be in effect as of the Closing.
(2) Represent a grant of 50,000 RSUs and 30,000 RSUs made to Mr. Colbeth and Mr. Monkman, respectively, prior to the Closing of theOffering. Assumes an award date fair value per RSU equal to the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014. See‘‘Executive Compensation – Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentives’’.
(3) Represents the value of options granted to the NEOs. The fair value of each option was determined on the date of grant using aBlack-Scholes option pricing model. In the pricing model the following parameters were used for the year ending December 31, 2014: (i) aweighted average risk free interest rate of 2.5%; (ii) weighted average volatility of 50%; (iii) an estimated forfeiture rate of 5%; and(iv) dividends of nil. These amounts are not necessarily reflective of actual amounts that may be realized on exercise.
(4) Represents amounts expected to be earned pursuant to our annual bonus program, based on 100% of target payment amounts. Actualpayments will depend upon the achievement of performance goals and will be paid in cash in the year following the fiscal year in respectof which they are earned.
(5) Represents our match for employee RRSP/401K contribution. This program is open to all our U.S. and Canadian employees who havepassed the probation period, and the match is based on a maximum of 3% of the employee’s salary, capped at $3,500 for U.S. employeesand Cdn$3,500 for Canadian employees.
(6) Base salaries are payable in Cdn$, and amounts in the table are based on a conversion rate of US$1.00 to Cdn$1.086992 being the exchangerate reported by Oanda Corporation for conversion of one U.S. dollar into Canadian dollars on June 2, 2014.
Incentive Plan Awards
Outstanding Share-Based and Option-Based Awards
The following table sets out for each of our Named Executive Officers information concerning all option-based
and share-based awards expected to be outstanding immediately following the Closing of the Offering:
Name
Option-based Awards Share-based Award
Number ofsecurities
underlyingunexercisedoptions(#)
Option exerciseprice(US$)
Optionexpiration
date
Value ofunexercised in-the-
money options(US$)(1)
Number ofshares orunits of
shares thathave not
vested(#)
Market or payoutvalue of share-based
awards that havenot vested
(US$)(2)
Market orpayoutvalue ofvested
share-basedawards notpaid out ordistributed
(US$)
Douglas Colbeth 100,000 9.75 29-Jan-24 2.21 50,000 597,980 —
Richard Monkman 95,000 1.00 3-Oct-15 10.96 30,000 358,788 —
40,000 3.20 31-Jan-22 8.76
25,000 3.20 12-Feb-23 8.76
60,000 9.75 29-Jan-24 2.21
John Sicard 211,100 1.60 19-Jul-21 10.36 — — —
60,000 9.75 29-Jan-24 2.21 — — —
Jeffrey Johnson 250,000 3.20 7-May-22 8.76 — — —
60,000 9.75 29-Jan-24 2.21 — — —
Notes:
(1) The value of unexercised in-the-money options is calculated based on the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014.
(2) The market or payout value of share-based awards that have not vested is calculated based on the Offering Price and are based on aconversion rate of US$1.00 to Cdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadiandollars on June 2, 2014.
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Value Vested or Earned
The following table sets out the value vested or earned by the Named Executive Officers under our equity and
non-equity incentive plans immediately following the Closing of the Offering:
Name
Option-based awards —Value vested immediately
following theClosing(1)
(US$)
Share-based awards —Value vested immediatelyfollowing the Closing(2)
(US$)
Non-equity incentive plancompensation — Value earned
immediately following theClosing(US$)
Douglas Colbeth — — —
Richard Monkman 1,293,001 — —
John Sicard 730,093 — —
Jeffrey Johnson 985,456 — —
Notes:
(1) The value of the vested option-based awards is calculated based on the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014 and reflectsthe difference between the exercise price of the options and the Offering Price.
(2) The value of the share-based awards is calculated based on the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014 and reflectsthe number of vested share-based awards multiplied by the Offering Price.
Employment Agreements and Termination and Change of Control Benefits
Each of our Named Executive Officers has entered into an employment agreement with us. Those employment
agreements include provisions regarding base salary, annual bonuses, eligibility for long-term equity incentives,
eligibility for benefits, confidentiality and ownership of intellectual property, among other things. Each employment
agreement includes non-competition covenants with terms of 18 months following termination of employment for
any reason and by employer or employee, including but not limited to retirement or a Change of Control leading to
termination of employment or resignation for good reason (‘‘Termination of Employment’’).
The following is a description as of the Closing of the Offering of entitlements that would be received by each
NEO in the event of a Termination of Employment or a Change in Control, as set out in their respective employment
agreements.
Termination for Cause: If a NEO is terminated for ‘‘Cause’’ (as defined in his employment agreement), he is
entitled to receive: (i) any earned or accrued base salary and accrued but unused vacation time through to the date
of termination; (ii) reimbursement for any approved expenses through to the date of termination; and (iii) benefits
accrued to the date of termination. The entitlements in clauses (i), (ii) and (iii) are referred to as ‘‘Basic Accrued
Amounts’’. On a termination for cause, the NEO’s options granted under the Current Option Plan and the 2010 Plan
are forfeited and cease to be exercisable to any extent whatsoever. For options granted under the 2000 Plan, the NEO
will have the standard 30-day post-service exercise period from the date of termination to exercise his vested options.
If the NEO holds RSUs, on termination for cause his outstanding RSUs credited to his account will be forfeited,
regardless of whether or not they have vested on the date of termination.
Resignation: Upon a resignation, each NEO is entitled to receive his Basic Accrued Amounts. Each of the NEOs
is required to give 90 days of prior written notice of resignation. We may decide to pay out the 90 day notice period
instead of requiring working notice. Upon a resignation, the NEO’s options cease to vest and the NEO will have the
standard 30-day post-service exercise period from the date of termination to exercise his vested options. If the NEO
holds RSUs, on resignation his outstanding RSUs credited to his account will be forfeited, regardless of whether or
not they have vested on the date of termination.
Termination Without Cause or For Good Reason (Without a Change of Control): If a NEO is terminated without
Cause or terminates his own employment ‘‘for Good Reason’’ (as defined in his employment agreement) without a
‘‘Change of Control’’ (as defined in his employment agreement), he will be entitled to: (i) his Basic Accrued
Amounts; (ii) payment of 18 months base salary; (iii) up to 18 months of benefits continuance (except for
Mr. Johnson who is not entitled to benefits continuance); and (iv) a payment correlated to his annual bonus
entitlement. In the case of the payment correlated to annual bonus entitlements, Mr. Colbeth will be entitled to an
amount equal to 150% of his base salary, Mr. Monkman and Mr. Sicard will both be entitled to an amount equal
112.5% of their base salary, and Mr. Johnson will be entitled to payment of a pro-rated amount of his incentive bonus
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(at goal target). All options and any RSUs or other Share Units held by the NEO that would otherwise have vested
during the 18 months immediately after the date of termination will be deemed to have vested, and the NEO will have
90 days from the date of termination to exercise his vested options.
Termination Without Cause or For Good Reason (After a Change of Control): If a NEO is terminated without
Cause or terminates his own employment for Good Reason (as defined his employment agreement) after a Change
of Control, his entitlements with respect to Basic Accrued Amounts, 18 months of base salary, benefits continuance
and payments correlated to annual bonus entitlements are the same as those for a termination without Cause or for
Good Reason without a Change of Control, as summarized above. However, except with respect to Mr. Johnson, all
options and any RSUs held by the NEO will immediately vest, and the NEO will have 180 days from the date of
termination to exercise his vested options. Mr. Johnson’s options and any RSUs that would otherwise have vested
during the 18 months immediately after the date of termination will be deemed to have vested (except, in the case
of options granted under the 2010 Plan, for the 100% forward vesting available to all holders of options granted under
the 2010 Plan whose services are terminated without Cause following a Change in Control (as defined in the 2010
Plan)) and he will have the 90-day post-service exercise period from the date of termination to exercise his vested
options. Under his employment agreement, Mr. Colbeth may elect to self-terminate his employment within 45 days
after the closing of a transaction that gives rise to a Change of Control, and in such event his entitlements will be
as set forth in this paragraph.
Disability. If a NEO is terminated by reason of disability (as defined in his employment agreement), he will be
entitled to: (i) his Basic Accrued Amounts; (ii) salary continuance equal to 18 months base salary, less any disability
benefits received (except for Mr. Johnson who is not entitled to salary continuance); and (iii) a payment correlated
to his annual bonus entitlement pro-rated for completed months worked during the year. In the case of the payment
correlated to annual bonus entitlements, Mr. Colbeth will be entitled to an amount equal to 100% of his base salary,
Mr. Monkman and Mr. Sicard will be entitled to an amount equal to 75% of their base salary, and Mr. Johnson will
be entitled to a pro-rated amount of his incentive bonus (at goal target). The NEO’s options cease to vest and the NEO
will have the standard 180-day post-service exercise period from the date of termination to exercise his vested
options. If the NEO holds RSUs, all of his outstanding RSUs will immediately vest and be credited to his account.
Treatment of Options, RSUs and PSUs Upon a Change in Control
Under the terms of the Current Option Plan and the Stock Unit Plan, the Board has the discretion to accelerate
the vesting of options or RSUs and PSUs, as applicable, in connection with a Change in Control (as defined in such
plans).
Under the terms of the 2010 Plan, immediately prior to a Change in Control (as defined in the 2010 Plan),
50% of each unvested option will vest and become exercisable. In addition, if an NEO is terminated following a
Change of Control without Cause (as defined in the 2010 Plan), all of his or her options under the 2010 Plan will
vest and become exercisable.
Options are not affected by a change of employment or office or consulting arrangement within or among
Kinaxis and its subsidiaries for so long as the NEO continues to be a consultant, officer, director or employee of
Kinaxis or one of its subsidiaries.
Director Compensation
Our directors’ compensation program is designed to attract and retain qualified individuals to serve on our Board
of Directors. Our Board of Directors has accordingly developed a fee schedule for service as a non-employee director.
Each non-employee director will be paid an annual retainer fee of Cdn$30,000. Each non-employee director who
serves on any committee also receives an additional fee of Cdn$5,000 per year per committee (or Cdn$10,000 in the
case of each chair of a committee). In addition to the annual retainer and committee fees, the independent lead
director is paid an additional fee of Cdn$5,000 per year. All directors are entitled to reimbursement for expenses
incurred by them in their capacity as directors. Douglas Colbeth, our CEO, is not entitled to any compensation as a
director.
Directors are eligible to participate in our Stock Option Plan and Share Unit Plan. Prior to the closing of the
Offering, our policy was to grant options to independent directors under the Stock Option Plan. As a group, our
independent directors currently hold unexercised options to purchase an aggregate 233,000 Common Shares at prices
ranging from $1.00 to $9.75. See ‘‘Options to Purchase Securities’’. The options granted to independent directors
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fully accelerate on a Change of Control transaction. Following the closing of the Offering, we expect that long-term
director compensation will shift to grants of RSUs and/or DSUs under the Share Unit Plan and that all non-employee
directors will be considered for grants of equity incentives. Currently, none of our non-employee directors have
received awards under the Share Unit Plan.
Indemnification and Insurance
Directors and officers participate in our director and officer insurance program. In addition, we have entered into
indemnification agreements with our directors and officers. The indemnification agreements generally require that we
indemnify and hold the indemnitees harmless to the greatest extent permitted by law for liabilities arising out of the
indemnitees’ service to us as directors and officers, if the indemnitees acted honestly and in good faith and in a
manner the indemnitee reasonably believed to be in our best interests and, with respect to criminal and administrative
actions or proceedings that are enforced by monetary penalty, if the indemnitee had reasonable grounds to believe
that his or her conduct was lawful. The indemnification agreements will also provide for the advancement of defence
expenses to the indemnitees by us.
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INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES
None of our directors, executive officers, employees, former directors, former executive officers or former
employees, and none of their associates, is indebted to us or another entity whose indebtedness is the subject of a
guarantee, support agreement, letter of credit or similar agreement or understanding provided by us, except for
routine indebtedness as defined under applicable securities legislation.
CORPORATE GOVERNANCE
Board of Directors
Overview
Our articles provide for a minimum of three and a maximum of ten directors. The articles also provide that the
Board of Directors has the power to set the number of directors within the minimum and maximum number. In
addition, in accordance with the CBCA, the Board of Directors may appoint one or more additional directors who
shall hold office until the close of the next annual meeting of shareholders, provided that the total number of directors
so appointed may not exceed one-third of the number of directors elected at the previous annual meeting of
shareholders.
Our Board of Directors is currently comprised of six directors: Douglas Colbeth, Robert Wadsworth,
Marc Balevi, John (Ian) Giffen, Howard Gwin and Ronald Matricaria. Certain members of our Board of Directors
are also members of the board of directors of other public companies. See ‘‘Directors and Executive Officers —
Biographies’’.
Our Board of Directors is responsible for supervising the management of our business and affairs. Our Board
has adopted a formal mandate setting out its stewardship responsibilities, including its responsibilities for the
appointment of management, management of our Board, strategic and business planning, monitoring of financial
performance, financial reporting, risk management and oversight of our policies and procedures, communications and
reporting and compliance. A copy of the mandate of our Board of Directors is attached as Appendix A to this
prospectus.
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and
Governance Committee and has approved charters for each of these committees, which are described below. Our
Board of Directors has delegated to the applicable committee those duties and responsibilities set out in each
committee’s charter. The mandate of our Board, as well as the charters of the various Board committees, set out in
writing the responsibilities of our Board of Directors and the Committees for supervising the Chief Executive Officer.
Our Board of Directors has also approved written position descriptions for our independent lead director, the
chair of each of our Board’s committees and our Chief Executive Officer.
Independence
Three of the six members of our Board of Directors are independent, being Messrs. John (Ian) Giffen, Howard
Gwin and Ronald Matricaria, as that term is defined in National Instrument 58-101 - Disclosure of Corporate
Governance Practices, as amended from time to time (‘‘NI 58-101’’). Pursuant to NI 58-101, a director is
independent for the purposes of NI 58-101 if he or she has no direct or indirect material relationship with the
Company. A ‘‘material relationship’’ is a relationship which could, in the view of our Board of Directors, be
reasonably expected to interfere with the exercise of a director’s independent judgment. Certain relationships are
deemed to be material relationships for these purposes. Douglas Colbeth is not independent for the purposes of
NI 58-101 because he is an executive officer of Kinaxis. Our Board has determined that both Marc Balevi and Robert
Wadsworth are not independent for the purposes of NI 58-101 because of their relationships with HarbourVest
International Private Equity Partners III – Direct Fund L.P. and TechnoCap I, L.P., respectively, which are two of our
principal shareholders. See ‘‘Principal and Selling Shareholders’’. Should such shareholders divest a sufficient
portion of the Common Shares, the Board may determine that Mr. Balevi and Mr. Wadsworth are independent.
Douglas Colbeth is the Chair of our Board of Directors. As Douglas Colbeth is not considered independent for
purposes of NI 58-101, our Board has appointed John (Ian) Giffen, an independent director, to act as lead director
in order to ensure that our Board will successfully carry out its duties and to foster appropriate oversight of
management and strong governance practices.
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Although we do not have a majority of independent directors, our Board delegates a number of responsibilities
to the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. The Audit
Committee and the Nominating and Governance Committee are comprised solely of independent directors, and the
Compensation Committee is comprised of a majority independent directors. In addition, where potential conflicts
arise during a director’s tenure on the Board, such conflicts are expected to be immediately disclosed to the Board.
We have taken steps to ensure that adequate structures and processes will be in place upon completion of the
Offering to permit our Board of Directors to function independently of our management. Our Board of Directors will
hold regularly scheduled quarterly meetings as well as ad hoc meetings from time to time. It is contemplated that in
the course of meetings of the Board of Directors or committees of the Board, the independent directors will hold
in camera sessions at which neither non-independent directors nor officers of Kinaxis are in attendance.
Our Board intends to evaluate the appointment of an additional independent director prior to the first regularly
scheduled annual general meeting after the Closing of the Offering.
Directorships
The following directors of Kinaxis are also directors of other reporting issuers (or the equivalent) in Canada or
a foreign jurisdiction.
Name of Director Name of Reporting Issuer and Exchange
Audit fees − Fees billed by KPMG LLP were for professional services rendered for the audit of our financial
statements.
Audit–related fees – Fees billed by KPMG LLP were for audit related fees outside of the annual audit.
All other fees − Other fees billed by KPMG LLP were for services in connection with our planning and
preparation for the Offering.
Compensation Committee
Our Compensation Committee consists of three directors, two of whom are considered to be ‘‘independent’’ as
that term is defined in NI 58-101. The independent members of the Compensation Committee are Ronald Matricaria
(Chair) and Howard Gwin, and the non-independent director is Robert Wadsworth. As set out under ‘‘Directors and
Executive Officers – Biographies’’ above, Mr. Matricaria has extensive experience as an executive officer and
director of both public and private companies, which is relevant to his responsibilities as Chair of our Compensation
Committee. Mr. Gwin’s extensive experience as a consultant to, and executive officer or director of several public
and private companies is relevant to his responsibilities as a member of our Compensation Committee. He has also
previously served as the chair of the compensation committee of the board of directors of Taleo Corp. and on the
compensation committee of the board of directors of Pivotal Corporation, both public companies. Before it was
reconstituted, Mr. Wadsworth was the Chair of the Compensation Committee. Each of the members of the
Compensation Committee, through their previous work experience and board memberships, have the skills and
70
experience that enable the Compensation Committee to make decisions on the suitability of our compensation
policies and practices. In addition, our Board has determined that the composition of the Compensation Committee
is appropriate, given that the majority of the members are independent, the Chair is independent, and that
Mr. Wadsworth provides continuity of knowledge and experience based on his former role as Chair of such
committee. Mr. Wadsworth’s relationship with one of our principal shareholders will not materially adversely affect
the ability of our Compensation Committee to act independently.
Pursuant to the charter of the Compensation Committee, the mandate of the Compensation Committee is to
assist our Board in carrying out its oversight responsibility relating to human resources and compensation policies
and processes. The primary responsibilities of the Compensation Committee are to make recommendations to our
Board in respect of: (1) compensation policies and guidelines; (2) management incentive and perquisite plans and any
non-standard remuneration plans; (3) senior management, executive and officer compensation; and (4) Board
compensation matters. In carrying out these responsibilities, the Compensation Committee will evaluate the
performance of our Chief Executive Officer and all other senior executives in consideration of the respective
performance goals and objectives for each such individual and recommend to our Board the amount of regular and
incentive compensation to be paid to our Chief Executive Officer and all other senior executives; review and
recommend to our Board our Chief Executive Officer’s performance evaluations and recommendations for
compensation of our officers and key employees (other than our senior executives); review our compensation
philosophy and make recommendations for changes, where appropriate; review and make recommendations to our
Board with respect to incentive based compensation plans and equity based plans (including stock option plans and
share unit plans); review and recommend to our Board the aggregate bonus pools to be made available under our
incentive compensation plans for senior management, executives and officers; prepare or review the report on
executive compensation and compensation discussion and analysis required to be included in our continuous
disclosure documentation; retain independent advice in respect of compensation matters, where deemed appropriate,
with the expectation that a compensation consultant will be retained every two years to provide advice with respect
to the compensation of the independent directors and our executives; and review and make a recommendation to our
Board at least every three years regarding the compensation of our Board. More information on the process by which
compensation for our directors and officers is determined as set forth under the heading ‘‘Executive Compensation’’.
Nominating and Governance Committee
Our Board has appointed a Nominating and Governance Committee comprising three directors, each of whom
are considered to be ‘‘independent’’ as that term is defined in NI 58-101. The members of the Nominating and
Governance Committee are Howard Gwin (Chair), John (Ian) Giffen and Ronald Matricaria.
Pursuant to the charter of the Nominating and Governance Committee, the mandate of the Nominating and
Governance Committee is to assist our Board in carrying out its oversight responsibility for ensuring that our strategic
direction is reviewed annually and that our Board and each of its committees carry out their respective functions in
accordance with the appropriate process. In addition, the Nominating and Governance Committee is responsible for
assessing the effectiveness of our Board as a whole, each Board committee, and the contribution of each individual
director. The Nominating and Governance Committee is responsible for recommending to our Board the methods and
processes by which our Board, its committees and individual directors fulfill their duties and responsibilities,
including the methods and processes for evaluating Board, committee and individual director effectiveness.
Furthermore, the Nominating and Governance Committee is responsible for identifying, recruiting, nominating,
endorsing, recommending the appointment of, and orienting, new directors, as well as recommending corporate
governance principles and best practices to our Board. In assessing candidates the Nominating and Governance
Committee will consider whether the candidate’s competencies, skills and personal qualities are aligned with our
needs and any criteria for selecting new directors established by our Board; and ensure the candidate understands the
demands and expectations of a director of the Company.
While our Board is responsible for recommending the directors to be elected by shareholders at the annual
meeting of shareholders, we have adopted a majority voting policy to deal with situations where a candidate
recommended by our Board for election has more votes withheld than are voted in favour of such nominee. We
believe that each director should have the confidence and support of the shareholders. Where a director nominee has
more votes withheld than are voted in favour of such nominee, the nominee, even though duly elected as a matter
71
of corporate law, will be required to tender his or her resignation which will be accepted by our Board, absent
exceptional circumstances, within 90 days after the date of the shareholder meeting. Following the Closing of the
Offering, a copy of the Majority Voting Policy can be found on the Corporate Governance section of our website at
www.kinaxis.com.
Insider Trading
We have adopted an Insider Trading Policy which governs the conduct of our directors, officers, employees and
other insiders with respect to the trading of our securities, particularly in the context of material information
concerning us and our affairs. Among other matters, the Insider Trading Policy sets out prohibited trading activities,
establishes guidelines for identifying our insiders and describes reporting requirements applicable to insiders.
Under our Insider Trading Policy, our directors, officers and employees are not permitted to purchase financial
instruments to hedge or offset a decrease in the market value of our securities granted as compensation.
The Insider Trading Policy permits, in the sole discretion of the Board, officers and directors to trade during
blackout periods or during a time when such officer or director is in possession of material undisclosed information,
provided that such officers or directors have entered into an automatic share disposition plan (‘‘ASDP’’) or automatic
share purchase plan (‘‘ASPP’’) governing such trades on terms and conditions satisfactory to the Board and that are
in accordance with the guidelines in OSC Staff Notice 55-701. To date, no officer or director has entered into an
ASDP or ASPP.
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PLAN OF DISTRIBUTION
Pursuant to an underwriting agreement dated June 3, 2014 (the ‘‘Underwriting Agreement’’) between us, the
Selling Shareholders and the Underwriters, we have agreed to sell 5,000,000 Offered Shares and the Selling
Shareholders have agreed to sell an aggregate of 2,739,715 Offered Shares, and the Underwriters have severally
agreed to purchase, as principals, on the Closing Date, subject to the terms and conditions of the Underwriting
Agreement, all but not less than all of the Offered Shares offered hereby at a price of Cdn$13.00 per Offered Share
payable in cash against delivery. The Offered Shares are being offered (i) to the public in all of the provinces and
territories of Canada; (ii) in the United States to ‘‘qualified institutional buyers’’ (as defined in Rule 144A under the
1933 Act) in a private placement exempt from the registration requirements of the 1933 Act; and (iii) internationally
as permitted pursuant to private placement exemptions under local securities laws. The offering price per Offered
Share has been determined by negotiation between us and the Underwriters.
In consideration for their services in connection with the Offering, we and the Selling Shareholders have agreed
to pay a commission to the Underwriters (the ‘‘Underwriters’ Fee’’) equal to 6% of the gross proceeds of the
Offering. The Underwriters’ Fee will be paid proportionately by us and the Selling Shareholders based on the
respective number of Offered Shares sold by each of us and them pursuant to the Offering. The Underwriters may
offer selling group participation to other registered dealers that are satisfactory to us, acting reasonably, with
compensation to be negotiated between the Underwriters and such selling group participants, but at no additional cost
to us.
The obligations of the Underwriters under the Underwriting Agreement may be terminated at any time before
the Closing Date at their discretion on the basis of their assessment of the state of the financial markets and may also
be terminated upon the occurrence of certain stated events. The Underwriters are, however, obligated to take up and
pay for all of the Offered Shares if any of the Offered Shares are purchased under the Underwriting Agreement.
Pursuant to the Underwriting Agreement, we and the Selling Shareholders have each agreed to indemnify the
Underwriters and their affiliates and their respective directors, officers, and employees against certain liabilities and
expenses or will contribute to payments that the Underwriters may be required to make in respect thereof.
Subscriptions for Offered Shares offered hereunder will be received subject to rejection or allotment in whole
or in part and the right is reserved to close the subscription books at any time without notice. It is expected that the
closing of the Offering will take place on June 10, 2014 or such other date as Kinaxis and the Underwriters shall
agree, but no later than July 15, 2014. It is expected that one or more global certificates representing the Offered
Shares distributed under this prospectus will be issued in registered or electronic form to CDS Clearing and
Depository Services Inc. (‘‘CDS’’) and will be deposited with CDS on the Closing Date. No certificate evidencing
the Offered Shares will be issued to purchasers, except in certain limited circumstances, and registration will be made
in the depository service of CDS. Purchasers of the Offered Shares will receive only a customer confirmation from
the registered dealer from or through whom the Offered Shares are purchased.
The Selling Shareholders have granted to the Underwriters the Over-Allotment Option, exercisable in whole or
in part, at the sole discretion of the Underwriters, for a period ending 30 days after the Closing Date, to purchase up
to 1,160,957 Over-Allotment Shares (representing 15% of the Offered Shares), for the purpose of covering all of the
Underwriters’ over-allocation position, if any, and for market stabilization purposes. If the Over-Allotment Option is
exercised in full, the total Price to the Public, the Underwriters’ Fee and the Net Proceeds to the Selling Shareholders
will be Cdn$115.7 million, Cdn$6.9 million and Cdn$47.7 million, respectively. This prospectus qualifies the grant
of the Over-Allotment Option and the Over-Allotment Shares issuable upon the exercise of the Over-Allotment
Option. A purchaser who acquires Over-Allotment Shares forming part of the Over-Allotment Option acquires such
Over-Allotment Shares under this prospectus, regardless of whether the over-allotment position is ultimately filled
through the exercise of the Over-Allotment Option or secondary market purchases.
The Underwriters propose to offer the Offered Shares initially at the Offering Price. After the Underwriters have
made reasonable efforts to sell all of the Offered Shares at the Offering Price, the Offering Price may be decreased
and may be further changed from time to time to an amount not greater than such Offering Price, and, in such case,
the compensation realized by the Underwriters will be decreased by the amount that the aggregate price paid by the
purchasers for the Offered Shares is less than the gross price amount paid by the Underwriters to us or to the Selling
Shareholders. Any such reduction in price will not affect the proceeds received by us or the Selling Shareholders.
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The TSX has conditionally approved the listing of the Common Shares under the symbol ‘‘KXS,’’ subject to us
fulfilling all of the listing requirements of the TSX on or before August 27, 2014, including distribution of our
Common Shares to a minimum number of public holders.
None of the Offered Shares have been or will be registered under the 1933 Act, or any securities or ‘‘blue sky’’
laws of any of the states of the United States. Accordingly, the Offered Shares may not be offered or sold within the
United States except in accordance with an exemption from the registration requirements of the 1933 Act and
applicable state securities laws. The Underwriting Agreement permits the Underwriters, acting through their U.S.
broker dealer affiliates, to offer and resell the Offered Shares that they have acquired pursuant to the Underwriting
Agreement in the United States to persons who are ‘‘qualified institutional buyers’’, as such term is defined in
Rule 144A under the 1933 Act, where such offers and sales are made in compliance with Rule 144A under the 1933
Act and applicable state securities laws.
This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the Offered Shares
offered hereby in the United States. In addition, until 40 days after the commencement of the Offering, an offer or
sale of the Offered Shares within the United States by any dealer, whether or not participating in the Offering, may
violate the registration requirements of the 1933 Act if such offer or sale is made absent registration or otherwise than
in accordance with an available exemption from registration under the 1933 Act. The Offered Shares sold to, or for
the account or benefit of, persons in the United States will be ‘‘restricted securities’’ within the meaning of
Rule 144(a)(3) of the 1933 Act.
This prospectus and the Offering are only addressed to, and directed at, persons in the United Kingdom who are
‘‘qualified investors’’ within the meaning of Section 86(7) of the FSMA and (i) fall within the categories of persons
referred to in Article 19 (Investment Professionals) of the FPO or Article 49 (High net worth companies,
unincorporated associations etc.) of the FPO; or (ii) to whom they may otherwise lawfully be communicated (all such
persons together being referred to as ‘‘Relevant Persons’’). Any investment or investment activity to which this
prospectus relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Any
person who is not a Relevant Peron should not act or rely on this prospectus or any of its contents. This prospectus
contains no offer to the public within the meaning of Section 102B of the FSMA or otherwise. This prospectus is not
a prospectus for the purposes of Section 85(1) of the FSMA. Accordingly, this prospectus has not been nor will it
be approved as a prospectus by the FCA under Section 87A of the FSMA and it has not been filed with the FCA
pursuant to the United Kingdom Prospectus Rules nor has it been approved by a person authorized under the FSMA.
Market Stabilization
In connection with the Offering, the Underwriters may over-allocate or effect transactions which stabilize,
maintain or otherwise affect the market price of our Common Shares at levels other than those which otherwise might
prevail on the open market, including: stabilizing transactions; short sales; purchases to cover positions created by
short sales; imposition of penalty bids; and syndicate covering transactions.
Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline
in the market price of our Common Shares while the Offering is in progress. These transactions may also include
making short sales of our Common Shares, which involve the sale by the Underwriters of a greater number of
Common Shares than they are required to purchase in the Offering. Short sales may be ‘‘covered short sales’’, which
are short positions in an amount not greater than the Over-Allotment Option, or may be ‘‘naked short sales’’, which
are short positions in excess of that amount.
The Underwriters may close out any covered short position either by exercising the Over-Allotment Option, in
whole or in part, or by purchasing Common Shares in the open market or as otherwise permitted by applicable law.
In making this determination, the Underwriters will consider, among other things, the price of Common Shares
available for purchase in the open market compared with the price at which they may purchase Common Shares
through the Over-Allotment Option. The Underwriters must close out any naked short position by purchasing
Common Shares in the open market or as otherwise permitted by applicable law. A naked short position is more likely
to be created if the Underwriters are concerned that there may be downward pressure on the price of our Common
Shares in the open market that could adversely affect investors who purchase in the Offering.
In addition, in accordance with rules and policy statements of certain Canadian securities regulators, the
Underwriters may not, at any time during the period of distribution, bid for or purchase Common Shares. The
foregoing restriction is, however, subject to exceptions where the bid or purchase is not made for the purpose of
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creating actual or apparent active trading in, or raising the price of, our Common Shares. These exceptions include
a bid or purchase permitted under the by-laws and rules of applicable regulatory authorities and the TSX, including
the Universal Market Integrity Rules for Canadian Marketplaces, relating to market stabilization and passive market
making activities and a bid or purchase made for and on behalf of a customer where the order was not solicited during
the period of distribution.
As a result of these activities, the price of our Common Shares may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be discontinued by the Underwriters at any
time. The Underwriters may carry out these transactions on any stock exchange on which the Common Shares are
listed, in the over-the-counter market, or as otherwise permitted by applicable law.
Lock-up Arrangements
We have agreed that we will not, directly or indirectly, without the prior written consent of the Joint Bookrunners
on behalf of the Underwriters, offer to sell, grant any option to purchase or otherwise dispose of (or announce any
intention to do so) any Common Shares or any securities convertible or exercisable into or exchangeable for Common
Shares for a period commencing on the Closing Date of the Offering and ending 180 days after the Closing Date
except for: (A) the issuance of equity securities in connection with any share purchase plan of the Company; (B) the
issuance of options pursuant to the Current Option Plan; (C) the issuance of equity securities in connection with the
exercise of any options; and (D) the issuance of equity securities in connection with acquisitions in the ordinary
course of business.
In connection with the completion of the Offering, we requested the following parties (collectively, the
‘‘Locked-Up Parties’’) to agree, subject to certain customary exceptions, not to sell Common Shares or securities
convertible or exchangeable into Common Shares (or announce any intention to do so) for a period commencing on
the Closing Date and ending on the date which is 180 days after the Closing Date (the ‘‘Lock-Up Period’’):
(i) the Selling Shareholders;
(ii) the directors and management of Kinaxis and its subsidiaries (being each member of management at the
vice-president level or higher, including the Chief Executive Officer and the Chief Financial Officer of
Kinaxis);
(iii) each person (other than non-management employees of Kinaxis and its subsidiaries) that will beneficially
own or control in excess of 10,000 Common Shares upon completion of the Offering; and
(iv) each non-management employee of Kinaxis and its subsidiaries that will beneficially own or control in
excess of 4,000 Common Shares upon completion of the Offering (provided that each such non-
management employee will be entitled to dispose of up to 4,000 Common Shares during the Lock-Up
Period).
For the purpose of determining the number of Common Shares set forth in clauses (iii) and (iv) above, all options
to acquire Common Shares were counted on an as-converted basis. In aggregate, Locked-Up Parties holding
approximately 97% of the Common Shares outstanding on an as-converted basis prior to the completion of the
Offering (67% after completion of the Offering or 63% if the Over-Allotment Option is exercised in full) have entered
into a lock-up agreement or are otherwise subject to contractual restrictions on the transfer of their Common Shares
during the Lock-Up Period.
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RISK FACTORS
An investment in our Common Shares involves significant risks. Investors should carefully consider the risks
described below and the other information elsewhere in this prospectus, including our annual consolidated financial
statements and related notes, before making a decision to buy our Common Shares. Additional risks and uncertainties
not presently known to us or that we currently consider immaterial may also impair our business and operations and
cause the trading price of our Common Shares to decline. If any of the following or other risks occur, our business,
prospects, financial condition, results of operations and cash flows could be materially adversely impacted. In that
event, the trading price of our Common Shares could decline and investors could lose all or part of their investment
in our Common Shares. There is no assurance that risk management steps taken will avoid future loss due to the
occurrence of the below described or other unforeseen risks.
Risks Relating to Our Business and Industry
If we are unable to attract new customers or sell additional products to our existing customers, our revenue growthand profitability will be adversely affected.
To increase our revenue and achieve and maintain profitability, we must regularly add new customers or sell
additional solutions to our existing customers, which we plan to do. Numerous factors, however, may impede our
ability to add new customers and sell additional solutions to our existing customers, including our inability to convert
companies that have been referred to us by our existing network into paying customers, failure to attract and
effectively train new sales and marketing personnel, failure to retain and motivate our current sales and marketing
personnel, failure to develop relationships with resellers or failure to ensure the effectiveness of our marketing
programs. In addition, if prospective customers do not perceive our solutions to be of sufficiently high value and
quality, we will not be able to attract the number and types of new customers that we are seeking.
We derive a significant portion of our revenue from a relatively small number of customers, and our growthdepends on our ability to retain existing customers and add new customers.
We derive a significant percentage of our revenue from a relatively small number of customers, and the loss of
any one or more of those customers could decrease our revenue and harm our current and future results of operations.
For the twelve months ended December 31, 2013, our top ten customers accounted for 47% of our revenue, and one
customer accounted for at least 10% of our revenues. Although our largest customers may vary from period to period,
we anticipate that we will continue to depend on revenue from a relatively small number of customers. In addition,
the loss of one or more of our existing customers, or a failure to renew our subscription agreements with one or more
of our existing customers, could negatively affect our ability to market our solutions. We rely on our reputation and
recommendations from existing customers in order to promote subscriptions to our solutions. The loss of any of
existing key customers, or a failure of some of them to renew, could have a significant impact on reputation and our
ability to obtain new customers.
We encounter long sales cycles, particularly with our larger customers, which could have an adverse effect on theamount, timing and predictability of our revenue.
Our products have lengthy sales cycles, which typically extend from six to eighteen months and may in some
instances take longer. Potential and existing customers, particularly larger enterprises, often commit significant
resources to an evaluation of available solutions and services and require us to expend substantial time and resources
in connection with our sales efforts. The length of our sales cycles also varies depending on the type of customer to
which we are selling, the product being sold and customer requirements. We may incur substantial sales and
marketing expenses and expend significant management effort during this time, regardless of whether we make a
sale. Many of the risks relating to sales processes are beyond our control, including:
• our customers’ budgetary and scheduling constraints;
• the timing of our customers’ budget cycles and approval processes;
• our customers’ willingness to augment or replace their currently deployed software products; and
• general economic conditions.
As a result of the lengthy and uncertain sales cycles of our products and services, it is difficult for us to predict
when customers may purchase products or services from us, thereby affecting when we can recognize the associated
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revenue, and our results of operations may vary significantly and may be adversely affected. The length of our sales
cycle makes us susceptible to having pending transactions delayed or terminated by our customers if they decide to
delay or withdraw funding for information technology, or IT, projects. Our customers may decide to delay or
withdraw funding for IT projects for various reasons, including global economic cycles and capital market
fluctuations.
We rely significantly on recurring revenue, which may decline or fail to be renewed, and our future results ofoperations could be harmed.
In order for us to improve our operating results, it is important that our customers renew their agreements with
us when their initial subscription terms expire. Our customers have no obligation to renew their subscriptions after
the initial subscription term, and we cannot assure you that our customers will renew their subscriptions at the same
or higher levels of service, if at all.
Our revenue from subscriptions to our software and software-related support services accounted for
approximately 68% of our total revenue for the year ended December 31, 2013. Revenue from our subscriptions is
recognized over the contractual term of the license, which is typically between two to five years, and is generally
recurring in nature. Sales of new or recurring subscriptions and software-related support service contracts and
renewals after expiration of the initial term may decline or fluctuate as a result of a number of factors, including end
customers’ level of satisfaction with our software solutions; the price, performance and functionality of our software
solutions; the availability, price, performance and functionality of products and services offered by our competitors;
or reductions in our customers’ spending levels. A software industry-wide movement towards shorter contractual
license terms led by other SaaS providers, which competitive pressures may compel us to follow, could lead to
increased volatility and diminished visibility into future recurring revenue. If our sales of new or recurring
subscriptions and software related support service contracts decline, our revenue and revenue growth may decline,
and our business will suffer.
Downturns or upturns in new sales will not be immediately reflected in operating results and may be difficult todiscern.
Most of the Subscription Revenue we report in each quarter is derived from recognition of deferred revenue
relating to subscriptions entered into in previous quarters. Consequently, a decline in new or renewed subscriptions
in any single quarter will likely only have a small impact on our revenue results for that quarter. However, such a
decline will negatively affect our revenues in future quarters. Accordingly, the effect of significant downturns in sales
and market acceptance of our applications, and potential changes in our pricing policies or rates of renewals, may
not be fully reflected in our results of operations until future periods.
In addition, a significant majority of our costs are expensed as incurred, while revenues are recognized over the
life of the customer agreement. As a result, increased growth in the number of our customers could result in our
recognition of more costs than revenues in the earlier periods of the terms of our agreements.
Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales
in any period, as revenues from customers must be recognized over the applicable subscription term.
Our quarterly results of operations may fluctuate. As a result, we may fail to meet or exceed the expectations ofinvestors or securities analysts which could cause our share price to decline.
Our quarterly revenue and results of operations may fluctuate as a result of a variety of factors, many of which
are outside of our control. If our quarterly revenue or results of operations fall below the expectations of investors
or securities analysts, the price of our Common Shares could decline substantially. Fluctuations in our results of
operations may be due to a number of factors, including, but not limited to, those listed below:
• demand for and market acceptance of our products;
• the mix of applications and services sold during a period;
• the amount of professional services purchased by our customers;
• our ability to retain and increase sales to customers and attract new customers;
• the timing of product deployment which determines when we can recognize the associated revenue;
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• the timing and success of introductions of new solutions or upgrades by us or our competitors;
• the strength of the economy;
• changes in our pricing policies or those of our competitors;
• competition, including entry into the industry by new competitors and new offerings by existing
competitors;
• network outages or security breaches;
• the amount and timing of expenditures related to expanding our operations, research and development or
introducing new solutions; and
• changes in the payment terms for our solutions.
Due to the foregoing factors, and the other risks discussed in this prospectus, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of our future performance.
We are subject to fluctuations in currency exchange rates.
We report our financial results in U.S. dollars as a significant portion of our business is conducted and invoiced
in U.S. dollars. However, as we anticipate our international business will grow, the percentage of our revenue
received in foreign currencies will likely increase. Accordingly, we are subject to, and may increasingly be subject
to, currency fluctuations that may, from time to time, affect our financial position and performance. Further, a
significant amount of our expenses are paid in Canadian dollars. As a result, we are exposed to currency risk on these
transactions. Any fluctuation in the exchange rate of these currencies may negatively impact our business, financial
condition and operating results.
We have incurred operating losses in the past and may incur operating losses in the future.
We began our operations in 1984. Throughout most of our history, we have experienced net losses and negative
cash flows from operations. As of December 31, 2013, we had an accumulated deficit of $87.1 million. We expect
our operating expenses to increase in the future as we expand our operations. Furthermore, as a public company, we
will incur legal, accounting and other expenses that we did not incur as a private company. If our revenue does not
grow to offset these increased expenses, we will not be profitable. We cannot assure you that we will be able to
achieve or maintain profitability. You should not consider recent revenue growth as indicative of our future
performance.
If we are unable to develop new products and services, sell our solutions into new markets or further penetrateour existing markets, our revenue will not grow as expected.
The software industry is subject to rapid technological change. Our ability to attract new customers and increase
revenue from existing customers will depend in large part on our ability to enhance and improve our solutions, to
introduce new features and services in a timely manner, to sell into new markets and to further penetrate our existing
markets. The success of any enhancement or new feature or service depends on several factors, including the timely
completion, introduction and market acceptance of the enhancement or new feature or service. Any new feature or
service we develop or acquire may not be introduced in a timely or cost-effective manner and may not achieve the
broad market acceptance necessary to generate significant revenue. Any new markets into which we attempt to sell
our solutions, including new vertical markets and new countries or regions, may not be receptive. If we are unable
to successfully develop or acquire new features, products or services, enhance our existing product or services to meet
customer requirements, sell products and services into new markets or sell our product and services to additional
customers in our existing markets, our revenue will not grow as expected. Moreover, we are frequently required to
enhance and update our product and services as a result of changing standards and technological developments,
which makes it difficult to recover the cost of development and forces us to continually qualify new features with
our customers.
If we do not maintain the compatibility of our solutions with third-party applications that our customers use intheir business processes, demand for our solutions could decline.
Our solutions can be used alongside a wide range of other systems, such as enterprise software systems and
business software applications used by our customers in their businesses. If we do not support the continued
integration of our solutions with third-party applications, including through the provision of application programming
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interfaces that enable data to be transferred readily between our solutions and third-party applications, demand for
our solutions could decline, and we could lose sales. We will also be required to make our solutions compatible with
new or additional third-party applications that are introduced into the markets that we serve. We may not be
successful in making our solutions compatible with these third-party applications, which could reduce demand for our
solutions. In addition, prospective customers, especially large enterprise customers, may require heavily customized
features and functions unique to their business processes. If prospective customers require customized features or
functions that we do not offer, then the market for our solutions will be adversely affected.
Our inability to adapt to rapid technological change could impair our ability to remain competitive.
The industry in which we compete is characterized by rapid technological change, frequent introductions of new
products and evolving industry standards. Our ability to attract new customers and increase revenue from customers
will depend in significant part on our ability to anticipate industry standards and to continue to enhance existing
solutions or introduce or acquire new solutions on a timely basis to keep pace with technological developments. The
success of any enhancement or new solution depends on several factors, including the timely completion and market
acceptance of the enhancement or new solution. Any new solution we develop or acquire might not be introduced
in a timely or cost-effective manner and might not achieve the broad market acceptance necessary to generate
significant revenue. If any of our competitors implements new technologies before we are able to implement them,
those competitors may be able to provide more effective solutions than ours at lower prices.
We enter into service level agreements with all of our customers. If we fail to meet these contractual commitments,we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription servicesor face contract terminations, which could adversely affect our revenues.
Our customer agreements typically provide service level commitments on a quarterly basis. If we are unable to
meet the stated service level commitments or suffer extended periods of unavailability for our applications, we may
be contractually obligated to provide these customers with service credits, refunds for service credits following the
termination of the contract, or we could face contract terminations. Our revenues could be significantly affected if
we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any
extended service outages could adversely affect our reputation, revenues and operating results.
Downturns in general economic and market conditions and reductions in IT spending may reduce demand for oursolutions, which could negatively affect our revenue, results of operations and cash flows.
Recent events in the financial markets have demonstrated that businesses and industries throughout the world
are very tightly connected to each other. Thus, financial developments seemingly unrelated to us or to our industry
may materially adversely affect us over the course of time. Volatility in the market price of our Common Shares due
to seemingly unrelated financial developments could hurt our ability to raise capital for the financing of acquisitions
or other reasons. Potential price inflation caused by an excess of liquidity in countries where we conduct business
may increase the cost we incur to provide our solutions and may reduce profit margins on agreements that govern
our provision of products or services to customers over a multi-year period. A reduction in credit, combined with
reduced economic activity, may materially adversely affect businesses and industries that collectively constitute a
significant portion of our customer base. As a result, these customers may need to reduce their purchases of our
products or services, or we may experience greater difficulty in receiving payment for the products or services that
these customers purchase from us. Any of these events, or any other events caused by turmoil in world financial
markets, may have a material adverse effect on our business, operating results, and financial conditions.
Our ability to retain customers and attract new customers could be adversely affected by an actual or perceivedbreach of security relating to customer information.
Our operations involve the storage and transmission of the confidential information of many of our customers
and security breaches could expose us to a risk of loss of this information, litigation, indemnity obligations and other
liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or
otherwise, and, as a result, someone obtains unauthorized access to our customers’ data, including personally
identifiable information regarding users, damage to our reputation is likely, our business may suffer and we could
incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change
frequently and generally are not recognized until launched against a target, we may be unable to prevent these
techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs,
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the market perception of the effectiveness of our security measures could be harmed and we could lose potential sales
and existing customers. Further, an actual or perceived security breach affecting one of our competitors or any other
company that provides hosting services or delivers applications under a SaaS model, even if no confidential
information of our customers is compromised, may adversely affect the market perception of our security measures
and we could lose potential sales and existing customers.
If we fail to protect our intellectual property and proprietary rights adequately, our business could be adverselyaffected.
We believe that proprietary technology is essential to establishing and maintaining our leadership position. We
seek to protect our intellectual property rights through trade secrets, copyrights, confidentiality, non-compete,
nondisclosure and proprietary technology agreements, filing patent applications and seeking patent protection,
trade-marks, domain names and other measures, some of which afford only limited protection. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects of our technology or to obtain and
use information that we regard as proprietary. We may be required to spend significant resources to monitor and
protect our proprietary rights, and we cannot assure you that our means of protecting our proprietary rights will be
adequate or that our competitors will not independently develop similar or superior technology or design around our
intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great
an extent as the laws of Canada. Intellectual property protections may also be unavailable, limited or difficult to
enforce in some countries, which could make it easier for competitors to capture market share. Our failure to
adequately protect and enforce our intellectual property and proprietary rights could adversely affect our business,
financial condition and results of operations.
By enforcing and/or asserting our intellectual property rights, such as our patent rights, there can be no assurance
that our patents would be held valid or enforceable by a court of competent jurisdiction or that a court would rule
that the competitor’s products or technologies constitute patent infringement.
Because intellectual property litigation, particularly software patent litigation, involves complex legal and factual
questions, the issuance, scope, validity, and enforceability of patents cannot be predicted with certainty. Patents, if issued,
may be challenged, invalidated or circumvented. If our patents were invalidated or found to be unenforceable, we would
lose the ability to exclude others from making, using or selling the inventions claimed. Moreover, an issued patent does
not guarantee the right to use the patented technology or commercialize a product using that technology. Third parties may
have blocking patents that could be used to prevent us from using technology claimed in our own patents. Thus patents
that we own may not allow us to exploit the rights conferred by its intellectual property protection.
Our solutions are complex and customers may experience difficulty in implementing or upgrading our productssuccessfully or otherwise achieving the benefits attributable to our products.
Due to the scope and complexity of the solutions that we provide, our implementation cycle can be lengthy and
unpredictable. Our products may require modification or customization and must integrate with many existing
computer systems and software programs of our customers and their trading partners. This can be time-consuming
and expensive for our customers and can result in delays in the implementation and deployment of our products.
Furthermore, our implementation capacity may be constrained during periods of high customer demand. As a result,
some customers have had, and may in the future have, difficulty implementing our products successfully or otherwise
achieving the expected benefits of our products. Delayed or ineffective implementation or upgrades of our software
may limit our future sales opportunities, impact revenue, result in customer dissatisfaction and harm our reputation.
The markets in which we participate are highly competitive, and our failure to compete successfully would makeit difficult for us to add and retain customers and would reduce or impede the growth of our business.
The markets for supply chain management solutions are increasingly competitive and global. We expect
competition to increase in the future both from existing competitors and new companies that may enter our markets.
Increased competition could result in pricing pressure, reduced sales, lower margins or the failure of our solutions
to achieve or maintain broad market acceptance. We currently face, or may face in the future, competition from:
• Traditional on-premise supply chain software vendors and other SaaS providers;
• Managed service providers that combine traditional on-premise software with professional IT services; and
• In-house solutions developed by our customers and potential customers.
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To remain competitive, we will need to invest continuously in software development, marketing, customer
service and support and product delivery infrastructure. However, we cannot assure you that new or established
competitors will not offer solutions that are superior to or lower in price than ours. We may not have sufficient
resources to continue the investments in all areas of software development and marketing needed to maintain our
competitive position. In addition, some of our competitors have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical, sales, marketing and other resources than us,
which may provide them with an advantage in developing, marketing or servicing new solutions. Increased
competition could reduce our market share, revenue and operating margins, increase our operating costs and
otherwise adversely affect our business.
If we fail to retain our key employees, our business would be harmed and we might not be able to implement ourbusiness plan successfully.
Given the complex nature of the technology on which our business is based and the speed with which such
technology advances, our future success is dependent, in large part, upon our ability to attract and retain highly
qualified managerial, technical and sales personnel. Competition for talented personnel is intense, and we cannot be
certain that we can retain our managerial, technical and sales personnel or that we can attract, assimilate or retain such
personnel in the future. Our inability to attract and retain such personnel could have an adverse effect on our business,
results of operations and financial condition.
Our growth is dependent upon the continued development of our direct sales force.
We believe that our future growth will depend on the continued development of our direct sales force and their
ability to obtain new customers, particularly large enterprise customers, and to manage our existing customer base.
Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in
recruiting, training and retaining a sufficient number of direct sales personnel. New sales personnel require significant
training and may, in some cases, take more than a year before becoming productive, if at all. If we are unable to hire
and develop sufficient numbers of productive direct sales personnel, sales of our software and services will suffer and
our growth will be impeded.
If we experience significant fluctuations in our rate of anticipated growth and fail to balance our expenses withour revenue forecasts, our results could be harmed.
Due to our evolving business model and the unpredictability of future general economic and financial market
conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and investment
on estimates of future revenue and future anticipated rate of growth. We may not be able to adjust our spending
quickly enough if the addition of new subscriptions or the renewal rate for existing subscriptions falls short of our
expectations. As a result, we expect that our revenues, operating results and cash flows may fluctuate significantly
on a quarterly basis. We believe that period to period comparisons of our revenues, operating results and cash flows
may not be meaningful and should not be relied upon as an indication of future performance.
Interruptions or delays in the services provided by third-party data centers and/or internet service providers couldimpair the delivery of our solutions and our business could suffer.
We host our solutions in Ashburn, Virginia and Ottawa, Ontario. All of our solutions reside on hardware owned
or leased and operated by us in these locations. We do not have control over the operation of these facilities, although
we do approve access to and manage our own network and servers. Our data center agreements provide for the
renewal of such agreements in accordance with the terms of the applicable agreements but are subject to early
termination in certain circumstances. If one or more of our data center operators is acquired, we may be required to
transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and
possible service interruption in connection with doing so.
Our operations depend on the protection of the equipment and information we store in these third-party data
centers and which third-party internet service providers transmit against damage or service interruptions that may be
caused by fire, flood, severe storm, earthquake, power loss, telecommunications failures, unauthorized intrusion,
computer viruses and disabling devices, natural disasters, war, criminal act, military action, terrorist attack and other
similar events beyond our control. A prolonged service disruption affecting our solutions for any of the foregoing
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reasons could damage our reputation with current and potential customers, expose us to liability, cause us to lose
customers from whom we receive recurring revenue or otherwise adversely affect our business. We may also incur
significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events
that damage the data centers we use.
Our solutions are accessed by a large number of customers often at the same time. As we continue to expand
the number of our customers and solutions available to our customers, we may not be able to scale our technology
to accommodate the increased capacity requirements, which may result in interruptions or delays in service. In
addition, the failure of our third-party data centers or third-party Internet service providers to meet our capacity
requirements could result in interruptions or delays in access to our solutions or impede our ability to scale our
operations. In the event that our data center or third-party internet service provider arrangements are terminated, or
there is a lapse of service, interruption of internet service provider connectivity, or damage to such facilities, we could
experience interruptions in access to our solutions as well as delays and additional expense in arranging new facilities
and services.
We may experience service failures or interruptions due to defects in the software, infrastructure, third-partycomponents or processes that comprise our existing or new solutions, any of which could adversely affect ourbusiness.
Our products may contain undetected defects in the software, infrastructure, third-party components or processes
that are part of the solutions we provide. If these defects lead to service failures after introduction of a solution or
an upgrade to the solution, we could experience delays or lost revenue during the period required to correct the cause
of the defects. We cannot be certain that defects will not be found in new solutions or upgraded solutions, resulting
in loss of, or delay in, market acceptance, which could have an adverse effect on our business, results of operations
and financial condition.
Because customers use our solutions for critical business processes, any defect in our solutions, any disruption
to our solutions or any error in execution could cause recurring revenue customers to seek compensation or other
contract relief from us, prevent potential customers from purchasing our solutions and harm our reputation. Although
our contracts with our customers limit our liability to our customers for these defects, disruptions or errors, we
nonetheless could be subject to litigation for actual or alleged losses to our customers’ businesses, which may require
us to spend significant time and money in litigation or arbitration or to pay significant settlements or damages. We
do not currently maintain any warranty reserves. Defending a lawsuit, regardless of its merit, could be costly and
divert management’s attention and could cause our business to suffer.
The insurers under our existing liability insurance policy could deny coverage of a future claim that results from
an error or defect in our technology or a resulting disruption in our solutions, or our existing liability insurance might
not be adequate to cover all of the damages and other costs of such a claim. Moreover, we cannot assure you that
our current liability insurance coverage will continue to be available to us on acceptable terms or at all. The successful
assertion against us of one or more large claims that exceeds our insurance coverage, or the occurrence of changes
in our liability insurance policy, including an increase in premiums or imposition of large deductible or co-insurance
requirements, could have an adverse effect on our business, financial condition and results of operations. Even if we
succeed in litigation with respect to a claim, we are likely to incur substantial costs and our management’s attention
will be diverted from our operations.
An assertion by a third-party that we are infringing its intellectual property could subject us to costly andtime-consuming litigation or expensive licenses which could harm our business.
The industries in which we compete are characterized by the existence of a large number of patents, copyrights,
trade-marks and trade secrets and by frequent litigation based on allegations of infringement or other violations of
intellectual property rights. As we seek to extend our solutions, we could be constrained by the intellectual property
rights of others. In addition, our customer contracts require us to indemnify our customers against certain liabilities
they may incur as a result of our infringement of any third-party intellectual property.
We might not prevail in any intellectual property infringement litigation given the complex legal and technical
issues and inherent uncertainties in such litigation. Defending such claims, regardless of their merit, could be
time-consuming and distracting to management, result in costly litigation or settlement, cause development delays or
require us to enter into royalty or licensing agreements. Furthermore, if our solutions exceed the scope of in-bound
licenses or violate any third-party proprietary rights, we could be required to withdraw those solutions from the
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market, re-develop those solutions or seek to obtain licenses from third parties, which might not be available on
reasonable terms or at all. Any efforts to re-develop our solutions, obtain licenses from third parties on favourable
terms or license a substitute technology might not be successful and, in any case, might substantially increase our
costs and harm our business, financial condition and results of operations. If we were compelled to withdraw any of
our solutions from the market, our business, financial condition and results of operations could be harmed.
The use of open source software in our products may expose us to additional risks and harm our intellectual
property.
Our software makes use of and incorporates open source software components. These components are developed
by third parties over whom we have no control. We have no assurances that those components do not infringe upon
the intellectual property rights of others. We could be exposed to infringement claims and liability in connection with
the use of those open source software components, and we may be forced to replace those components with internally
developed software or software obtained from another supplier, which may increase our expenses. The developers
of open source software are usually under no obligation to maintain or update that software, and we may be forced
to maintain or update such software ourselves or replace such software with internally developed software or software
obtained from another supplier, which may increase our expenses. Making such replacements could also delay
enhancements to our products. Certain open source software licenses provide that the licensed software may be freely
used, modified and distributed to others provided that any modifications made to such software, including the source
code to such modifications, are also made available under the same terms and conditions. As a result, any
modifications we make to such software will be available to all downstream users of the software, including our
competitors. In addition, certain open source licenses (‘‘Reciprocal Licenses’’) provide that if we wish to combine
the licensed software, in whole or in part, with our proprietary software, and distribute copies of the resulting
combined work, we may only do so if such copies are distributed under the same terms and conditions as the open
source software component of the work was licensed to us, including the requirement to make the source code to the
entire work available to recipients of such copies. The types of combinations of open source software and proprietary
code that are covered by the requirement to release the source code to the entire combined work are uncertain and
much debated by users of open source software. There is little or no legal precedent governing the interpretation of
many of the terms of these licenses. An incorrect determination as to whether a combination is governed by such
provisions will result in non-compliance with the terms of the open source license. Such non-compliance could result
in the termination of our license to use, modify and distribute copies of the affected open source software and we may
be forced to replace such open source software with internally developed software or software obtained from another
supplier, which may increase our expenses. In addition to terminating the affected open source license, the licensor
of such open source software may seek to have a court order that the proprietary software that was combined with
the open source software be made available to others, including our competitors, under the terms and conditions of
the applicable open source license. For those reasons we have instituted policies and practices which are intended to
limit the use of open source software that is distributed under the terms of a Reciprocal License. However, many of
the risks of open source software cannot be eliminated and could adversely affect our business.
Mergers or other strategic transactions involving our competitors or customers could weaken our competitive
position, which could harm our results of operations.
Our industry is highly fragmented, and we believe it is likely that some of our existing competitors will
consolidate or will be acquired. In addition, some of our competitors may enter into new alliances with each other
or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or
other parties, thereby limiting our ability to promote our products. Any such consolidation, acquisition, alliance or
cooperative relationship could lead to pricing pressure and our loss of market share and could result in a competitor
with greater financial, technical, marketing, service and other resources, all of which could have a material adverse
effect on our business, results of operations and financial condition.
Consolidation within our existing and target markets as a result of mergers or other strategic transactions may
also create uncertainty among customers as they realign their businesses and impact new sales and renewal rates. For
example, mergers or strategic transactions by potential or existing customers may delay orders for our products and
services or cause the use of our products to be discontinued, which could have a material adverse effect on our
business, results of operations and financial condition.
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We may not receive significant revenue as a result of our current research and development efforts.
We reinvest a large percentage of our revenue in research and development. Our investment in our current
research and development efforts may not provide a sufficient, timely return. We make and will continue to make
significant investments in software research and development and related product opportunities. Investments in new
technology and processes are inherently speculative. Commercial success depends on many factors including the
degree of innovation of the products developed through our research and development efforts, sufficient support from
our strategic partners, and effective distribution and marketing. Accelerated product introductions and short product
life cycles require high levels of expenditures for research and development. These expenditures may materially
adversely affect our operating results if they are not offset by revenue increases. We believe that we must continue
to dedicate a significant amount of resources to our research and development efforts in order to maintain our
competitive position. However, significant revenue from new product and service investments may not be achieved
for a number of years, if at all. Moreover, new products and services may not be profitable.
Because our long-term success depends, in part, on our ability to continue to expand the sales of our solutionsto customers located outside of North America, our business will be susceptible to risks associated withinternational operations.
We have limited experience operating in foreign jurisdictions. Conducting and launching operations on an
international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes
significant management resources. Customers in countries outside of North America accounted for 15% of our
revenue for the fiscal year ended December 31, 2013. Our limited experience in operating our business outside of
North America increases the risk that our current and any future international expansion efforts will not be successful.
Conducting international operations subjects us to new risks that, generally, we have not faced in North America,
including:
• fluctuations in currency exchange rates;
• new and different sources of competition;
• unexpected changes in foreign regulatory requirements;
• longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
• difficulties in managing and staffing international operations, including differences in labour laws;
• potentially adverse tax consequences, including the complexities of foreign value-added tax systems and
restrictions on the repatriation of earnings;
• localization of our solutions, including translation into foreign languages and associated expenses;
• the burdens of complying with a wide variety of foreign laws and different legal standards, including laws
and regulations related to privacy and data security;
• requirements for regional hosting of customer solutions and data, which may require additional capital
expenditures necessary to set up new data centers;
• increased financial accounting and reporting burdens and complexities;
• political, social and economic instability abroad, terrorist attacks and security concerns in general; and
• reduced or varied protection for intellectual property rights in some countries.
The occurrence of any one of these risks could negatively affect our international business and, consequently,
our results of operations generally. Additionally, operating in international markets also requires significant
management attention and financial resources. We cannot be certain that the investment and additional resources
required in establishing, acquiring or integrating operations in other countries will produce desired levels of revenue
or profitability.
From time to time, we may become defendants in legal proceedings as to which we are unable to assess ourexposure and which could become significant liabilities in the event of an adverse judgment.
From time to time in the ordinary course of our business, we may become involved in various legal proceedings,
including commercial, product liability, employment, class action and other litigation and claims, as well as
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governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert
management’s attention and resources and cause us to incur significant expenses. Furthermore, because litigation is
inherently unpredictable, the results of any such actions may have a material adverse effect on our business, operating
results or financial condition.
We are subject to taxation in various jurisdictions and the taxing authorities may disagree with our taxpositions.
With operations and sales in various countries, we are subject to taxation in Canada and several other
jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The
amount of taxes we pay in Canada and these other jurisdictions could increase substantially as a result of changes
in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax
laws and precedents, which could have a material adverse effect on our liquidity and results of operations.
Furthermore, there can be no assurance that we will not be subject to adverse consequences as a result of the Capital
Reorganization or any related transactions, including increased tax liability. No ruling has been sought from the
Canada Revenue Agency in respect of the income tax consequences associated with such transactions.
In addition, the authorities in Canada and other jurisdictions could review our tax returns and impose additional
tax, interest and penalties, which could have a material impact on us and the results of our operations. We participate
in government programs with both the federal government and the Government of Ontario that provide investment
tax credits based upon qualifying research and development expenditures. These expenditures primarily consist of the
salaries of the persons conducting the research and development activities. If these investment tax credits are reduced
or eliminated, this may adversely affect our business, financial condition and results of operations. Although we are
of the view that all expenses and tax credits we claim, including research and development expenses and related
investment tax credits, are reasonable and deductible and have been correctly determined, there can be no assurance
that the Canadian taxation authorities will agree. If the Canadian taxation authorities successfully challenge such
expenses or the correctness of such income tax credits claimed, our operating results could be adversely affected. If
the Canadian taxation authorities reduce a tax credit either by reducing the rate of the credit or the eligibility of some
research and development expenses in the future, our operating results could be adversely affected.
We conduct operations worldwide through subsidiaries in various tax jurisdictions pursuant to transfer pricing
arrangements with our subsidiaries. If two or more affiliated companies are located in different countries, the tax laws
or regulations of each country generally will require that transfer prices be the same as those between unrelated
companies dealing at arms’ length. While we believe that we operate in compliance with applicable transfer pricing
laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities.
If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arm’s
length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect
these revised transfer prices, which could result in a higher tax liability to us.
If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is
critical to achieving widespread acceptance of our applications and attracting new customers. Our marketing efforts
are primarily directed at lead generation and growing brand awareness. Brand promotion activities, including our
promotion of expert content, may not generate customer awareness or increase revenues, and even if they do, any
increase in revenues may not offset the expenses we incur in building our brand. If we fail to successfully promote
and maintain our brand, or incur substantial expenses, we may fail to attract or retain customers necessary to realize
a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for
broad customer adoption of our applications.
Our strategy includes pursuing acquisitions and our potential inability to successfully integrate newly-acquiredcompanies or businesses may adversely affect our financial results.
We do not currently have any agreement or commitments to acquire any businesses. However, we continue to
seek opportunities to acquire or invest in businesses, products and technologies that could expand, complement or
otherwise relate to our current or future business. We may also consider, from time to time, opportunities to engage
in joint ventures or other business collaborations with third parties to address particular market segments. The pursuit
of these activities may divert the attention of management and cause us to incur various expenses in identifying,
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investigating and pursuing suitable acquisitions or joint ventures, whether or not they are consummated. If
consummated, these activities create risks such as: (i) the need to integrate and manage the businesses and products
acquired with our own business and products, (ii) additional demands on our resources, systems, procedures and
controls, (iii) disruption of our ongoing business, (iv) adverse effects to our existing business relationships; and
(v) potential loss of key employees. Moreover, these transactions could involve: (i) substantial investment of funds
or financings by issuance of debt or equity securities; (ii) substantial investment with respect to technology transfers
and operational integration; and (iii) the acquisition or disposition of product lines or businesses. Also, such activities
could result in one-time charges and expenses and have the potential to either dilute the interests of existing
shareholders or result in the issuance of, or assumption of debt. Such acquisitions, investments, joint ventures or other
business collaborations may involve significant commitments of our financial and other resources. Any such activity
may not be successful in generating revenue, income or other returns to us, and the resources committed to such
activities will not be available to us for other purposes. Moreover, if we are unable to access capital markets on
acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a
less than optimal capital structure. Our inability: (i) to take advantage of growth opportunities for our business or for
our products, or (ii) to address risks associated with acquisitions or investments in businesses, may negatively affect
our operating results. Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition
or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially
reduce our earnings which, in turn, may have an adverse material affect on the price of our Common Shares. If we
do complete such transactions, we cannot be sure that they will ultimately strengthen our competitive position or that
they will not be viewed negatively by customers, securities analysts or investors.
The forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the marketsin which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates,if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may
not prove to be accurate. The forecasts in this prospectus relating to the expected growth in the SaaS market may
prove to be inaccurate. Even if this market experiences the forecasted growth described in this prospectus, we may
not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in
implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of
market growth included in this prospectus should not be taken as indicative of our future growth.
Risks Related to the Offering
There has been no prior public market for our Common Shares.
Prior to the Offering, no public market existed for our Common Shares. An active and liquid market for our
Common Shares may not develop following the completion of the Offering, or, if developed, may not be maintained.
If an active public market does not develop or is not maintained, investors may have difficulty selling their Common
Shares.
The initial public offering price of our Common Shares has been determined by negotiations between us and the
Underwriters for the Offering and may not be indicative of the price at which our Common Shares will trade
following the completion of the Offering. We cannot assure investors that the market price of our Common Shares
will not materially decline below the initial public offering price.
We will incur increased costs as a result of operating as a public company, and our management will be requiredto devote substantial time to new compliance initiatives.
Prior to this Offering, we have not been subject to the continuous and timely disclosure requirements of
Canadian securities laws or other rules, regulations and policies of the TSX. We are working with our legal,
accounting and financial advisors to identify those areas in which changes should be made to our financial
management control systems to manage our obligations as a public company. These areas include corporate
governance, corporate controls, internal audit, disclosure controls and procedures and financial reporting and
accounting systems. We have made, and will continue to make, changes in these and other areas, including our
internal controls over financial reporting. However, we cannot assure purchasers of our Common Shares that these
and other measures that we may take will be sufficient to allow us to satisfy our obligations as a public company on
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a timely basis. In addition, compliance with reporting and other requirements applicable to public companies will
create additional costs for us and will require the time and attention of management. We cannot predict the amount
of the additional costs that we may incur, the timing of such costs or the impact that management’s attention to these
matters will have on our business.
The market price for our Common Shares may be volatile.
The market price for our Common Shares may be volatile and subject to wide fluctuations in response to
numerous factors, many of which are beyond our control, including the following:
• actual or anticipated fluctuations in our quarterly results of operations;
• recommendations by securities research analysts;
• changes in the economic performance or market valuations of companies in the industry in which we
operate;
• addition or departure of our executive officers and other key personnel;
• release or expiration of lock-up or other transfer restrictions on our outstanding Common Shares;
• sales or perceived sales of additional Common Shares;
• significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving us or our competitors;
• litigation involving us, our industry or both, or investigations by regulators into our operations or those of
our competitors;
• developments or disputes concerning our intellectual property or other proprietary rights;
• the size of our market float;
• operating and share price performance of other companies that investors deem comparable to us; and
• news reports relating to trends, concerns, technological or competitive developments, regulatory changes
and other related issues in our industry or target markets.
Financial markets have recently experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of companies and that have often been unrelated to the operating
performance, underlying asset values or prospects of such companies. Accordingly, the market price of our Common
Shares may decline even if our operating results, underlying asset values or prospects have not changed. Additionally,
these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than
temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price
and volume will not occur. If such increased levels of volatility and market turmoil continue, our operations could
be adversely impacted and the trading price of our Common Shares may be materially adversely affected.
We do not anticipate paying dividends on our Common Shares in the foreseeable future.
Our current policy is to retain earnings to finance the development and enhancement of our software and to
otherwise reinvest in our business. Therefore, we do not anticipate paying cash dividends on our Common Shares in
the foreseeable future. Our dividend policy will be reviewed from time to time by our Board of Directors in the
context of our earnings, financial condition and other relevant factors. See ‘‘Dividend Policy’’.
Our future capital requirements may result in dilution of our shareholders’ ownership of our Common Shares.
We may need to raise additional funds through public or private debt or equity financings in order to:
• fund ongoing operations;
• take advantage of opportunities, including more rapid expansion of our business or the acquisition of
complementary products, technologies or businesses;
• develop new products; or
• respond to competitive pressures.
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Any additional capital raised through the sale of equity may dilute existing shareholders’ percentage ownership
of our Common Shares and shareholders could be asked in the future to approve the creation of new equity securities
which could have rights, preferences and privileges superior to those of holders of our Common Shares. Capital
raised through debt financing would require us to make periodic interest payments and may impose restrictive
covenants on the conduct of our business. Furthermore, additional financings may not be available on terms
favourable to us, or at all. A failure to obtain additional funding could prevent us from making expenditures that may
be required to implement our growth strategy and grow or maintain our operations.
Sales of a substantial number of our Common Shares in the public market could cause our share price to fall.
Sales of a substantial number of Common Shares in the public market could occur at any time before or after
the expiration of the lock-up agreements described in ‘‘Plan of Distribution’’. These sales, or the market perception
that the holders of a large number of Common Shares intend to sell Common Shares, could reduce the market price
of our Common Shares. In addition, the Underwriters may waive the provisions of these lock-up agreements and
allow these shareholders to sell their Common Shares at any time. There are no pre-established conditions for the
grant of such a waiver by the Underwriters, and any decision by them to waive those conditions would depend on
a number of factors, which may include market conditions, the performance of our Common Shares in the market
and our financial condition at that time. If the restrictions in such lock-up agreements are waived, additional Common
Shares will be available for sale into the public market, subject to applicable securities laws, which could reduce the
market price for Common Shares. Holders of options to purchase Common Shares will have an immediate income
inclusion for tax purposes when they exercise their options (that is, tax is not deferred until they sell the underlying
Common Shares). As a result, these holders will generally need to sell Common Shares purchased on the exercise
of options in the same year that they exercise their options. This may result in a greater number of Common Shares
being sold in the public market, and fewer long-term holds of Common Shares by our management and employees.
We have broad discretion in the use of the net proceeds from this Offering and may not use such proceedseffectively.
We cannot specify with certainty the particular uses of the net proceeds we will receive from this Offering. Our
management will have broad discretion in the application of the net proceeds, including for any of the purposes
described in ‘‘Use of Proceeds’’. Accordingly, a purchaser of Common Shares will have to rely upon the judgment
of our management with respect to the use of the proceeds, with only limited information concerning management’s
specific intentions. Our management may spend a portion or all of the net proceeds from this Offering in ways that
our shareholders may not desire, that may not yield a favourable return and that may not increase the value of a
purchaser’s investment. The failure by our management to apply these funds effectively could harm our business.
Pending their use, we may invest the net proceeds from this Offering in a manner that does not produce income or
that loses value. Investors should also note that Kinaxis will not receive any proceeds from the Secondary Offering.
If you purchase our Common Shares in this Offering, you will incur immediate and substantial dilution in thebook value of your Common Shares.
The initial offering price of our Common Shares will significantly exceed the net tangible book value per share
of our Common Shares. Accordingly, if an investor purchases Common Shares pursuant to the Offering, the investor
will incur immediate and substantial dilution of its investment. If the outstanding options to purchase our Common
Shares are exercised, an investor will incur additional dilution.
A significant number of our Common Shares will be owned by a limited number of existing shareholders after theClosing and such shareholders will be able to exert significant control over matters subject to shareholderapproval.
Immediately after Closing, our existing shareholders (including the Selling Shareholders) will own, on a
non-diluted basis, approximately 67.2% (62.2% if the Over-Allotment Option is exercised in full) of our outstanding
Common Shares. As a result, our existing shareholders (including the Selling Shareholders) will be in a position to
exercise significant influence over matters requiring shareholder approval, including the election of directors and the
determination of significant corporate actions, after Closing. The concentration of ownership with existing
shareholders (including the Selling Shareholders) could delay or prevent a change in control of our Company that
could otherwise be beneficial to our shareholders, or could make some transactions more difficult or impossible to
complete without the support of these shareholders.
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Shareholders selling a large number of Common Shares could decrease the market price of our Common Shares
or impair our ability to raise capital by issuing Common Shares in the future.
Sales of a large number of Common Shares in the public markets, or the potential for such sales, could decrease
the trading price of our Common Shares and could impair our ability to raise capital through future sales of Common
Shares.
United States persons who own Common Shares may be subject to United States federal income taxation on
undistributed earnings and may recognize ordinary income upon disposition of shares.
Passive Foreign Investment Company. Significant potential adverse United States federal income tax
consequences generally apply to any United States person who owns shares in a ‘‘passive foreign investment
company’’ or PFIC. In general, the Company would be a PFIC for a taxable year if 75% or more of its income
constitutes ‘‘passive income’’ or 50% or more of its assets were held to produce ‘‘passive income.’’ Passive income
generally includes interest, dividends and other investment income. Although we do not expect to be a PFIC after the
sale of the Offered Shares, no assurance can be given that we will not be a PFIC after the sale of Offered Shares or
in the future. If you are a United States person, we advise you to consult your own tax advisor concerning the
potential tax consequences to you under the PFIC rules.
Controlled Foreign Corporation. United States persons who, directly or indirectly or through attribution rules,
own 10% or more of the voting power of the Company’s shares, which we refer to as United States 10% shareholders,
may be subject to the ‘‘controlled foreign corporation’’ or CFC rules. Under the CFC rules, each United States 10%
shareholder must annually include its pro rata share of the CFC’s ‘‘subpart F income,’’ even if no distributions are
made. In general, a non-U.S. corporation will be treated as a CFC only if United States 10% shareholders collectively
own more than 50% of the total combined voting power or total value of the company’s shares for an uninterrupted
period of 30 days or more during any year. Although we do not expect to be a CFC immediately after the sale of the
Offered Shares, no assurance can be given that we will not be a CFC after the sale of the Offered Shares or in the
future. If you are a United States person we advise you to consult your own tax advisor concerning the potential tax
consequences to you under the CFC rules.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports
about our business, our share price and trading volume could decline.
The trading market for our Common Shares may depend on the research and reports that securities or industry
analysts publish about us or our business. We do not have any control over these analysts. If one or more of the
analysts who cover us downgrade our Common Shares or change their opinion of our Common Shares, the share
price may decline. If one or more influential securities or industry analysts cease coverage of our Common Shares
or our business or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could
cause our share price or trading volume to decline.
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CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Dentons Canada LLP, counsel to the Company, and Stikeman Elliott LLP, counsel to the
Underwriters, the following is a general summary, as of the date hereof, of the principal Canadian federal income tax
considerations under the Income Tax Act (Canada) and the regulations thereunder (the ‘‘Tax Act’’) that are generally
applicable to a holder who for the purposes of the Tax Act and any applicable income tax treaty or convention, and
at all relevant times, is or is deemed to be a resident of Canada, who acquires Common Shares pursuant to the
Offering and who beneficially owns Common Shares as capital property, and deals at arm’s length with, and is not
affiliated with, the Company and the Underwriters (a ‘‘Resident Holder’’). The Common Shares will generally be
considered to be capital property for this purpose unless either the Resident Holder holds (or will hold) such Common
Shares in the course of carrying on a business, or the Resident Holder has acquired (or will acquire) such Common
Shares in a transaction or transactions considered to be an adventure or concern in the nature of trade. A Resident
Holder whose Common Shares might not otherwise qualify as capital property may, in certain circumstances, be
entitled to make an irrevocable election pursuant to subsection 39(4) of the Tax Act to treat its Common Shares and
every other ‘‘Canadian security’’ (as defined in the Tax Act) owned by such Resident Holder as capital property in
the taxation year of the election and in all subsequent taxation years. Such Resident Holders should consult their own
tax advisors as to whether an election under subsection 39(4) of the Tax Act is available and/or advisable in their
particular circumstances.
This summary is not applicable to a holder: (i) that is a non-resident of Canada for purposes of the Tax Act;
(ii) that is a ‘‘financial institution’’ as defined in the Tax Act for purposes of the mark-to-market rules; (iii) an interest
in which would be a ‘‘tax shelter investment’’ as defined in the Tax Act; (iv) that is a ‘‘specified financial institution’’
as defined in the Tax Act; (v) that reports its ‘‘Canadian tax results’’ (as defined in the Tax Act) in a currency other
than Canadian currency; or (vi) that has entered or will enter into a ‘‘synthetic disposition arrangement’’ or
‘‘derivative forward agreement’’ (as such terms are defined in the Tax Act) with respect to the Common Shares. Any
such holder to which this summary does not apply should consult its own tax advisor.
This summary is based upon the current provisions of the Tax Act and counsel’s understanding of the current
published administrative policies and assessing practices of the Canada Revenue Agency. The summary also takes
into account all specific proposals to amend the Tax Act that have been publicly announced by or on behalf of the
Minister of Finance (Canada) prior to the date hereof (the ‘‘Tax Proposals’’), and assumes that all such Tax Proposals
will be enacted in the form proposed. No assurance can be given that the Tax Proposals will be enacted in the form
proposed or at all. This summary does not otherwise take into account or anticipate any changes in law, administrative
policy or assessing practice, whether by way of legislative, regulatory, judicial or administrative action or
interpretation, nor does it address any provincial, territorial or foreign tax considerations.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal
or tax advice to any particular holder. Accordingly, holders are urged to consult their own tax advisors about
the specific tax consequences to them of acquiring, holding and disposing of Common Shares.
Dividends on Common Shares
Dividends received or deemed to be received on Common Shares by a Resident Holder who is an individual
(other than certain trusts) must be included in income and will be subject to the gross-up and dividend tax credit rules
normally applicable under the Tax Act to taxable dividends received from taxable Canadian corporations. The
Company may designate all or a portion of such dividends as ‘‘eligible dividends’’, which will be subject to an
enhanced gross-up and dividend tax credit regime in accordance with the rules in the Tax Act. The Company will
notify its shareholders of any such designations at the appropriate times. There may be limits on the ability of the
Company to designate dividends as eligible dividends. The amount of the dividend received by an individual (other
than certain trusts), but not the amount of the gross-up, may be subject to alternative minimum tax.
Dividends received or deemed to be received on Common Shares by a Resident Holder that is a corporation must
be included in its income and will generally also be deductible in computing its taxable income. A Resident Holder
that is a ‘‘private corporation’’ or a ‘‘subject corporation’’ (each as defined in the Tax Act) may be liable under Part IV
of the Tax Act to pay a refundable tax at a rate of 331⁄3% on dividends received or deemed to be received on Common
Shares to the extent such dividends are deductible in computing the Resident Holder’s taxable income. This tax will
generally be refunded to the Resident Holder at a rate of $1.00 for every $3.00 of taxable dividends paid while it is
a private corporation or a subject corporation.
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Dispositions of Common Shares
A disposition, or a deemed disposition, of a Common Share (other than to the Company) by a Resident Holder
will generally give rise to a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition
of the Common Share exceed (or are less than) the total of the adjusted cost base of the Common Share to the
Resident Holder and any reasonable costs of disposition. For this purpose, the adjusted cost base to a Resident Holder
of a Common Share will be determined at any time by averaging the cost of such Common Share with the cost of
all other Common Shares owned by the Resident Holder as capital property at that time, which cost shall include any
reasonable acquisition expenses incurred by the Resident Holder.
Generally, one-half of any capital gain (a ‘‘taxable capital gain’’) realized by a Resident Holder in a taxation year
must be included in the Resident Holder’s income for the year. A Resident Holder is required to deduct one-half of
any capital loss (an ‘‘allowable capital loss’’) it realized in the year from its taxable capital gains realized in that year,
and allowable capital losses in excess of taxable capital gains realized in a given year may be carried back and
deducted in any of the three preceding taxation years, or carried forward and deducted in any subsequent year, from
net taxable capital gains realized in such years (but not against other income) to the extent and under the
circumstances described in the Tax Act. If the Resident Holder is a corporation, any capital loss realized on a
disposition or deemed disposition of a Common Share may in certain circumstances be reduced by the amount of any
dividends which have been received or which are deemed to have been received on the Common Share. Similar rules
may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns shares, directly or
indirectly through a partnership or a trust. Taxable capital gains realized by a Resident Holder who is an individual
(other than certain trusts) may give rise to alternative minimum tax depending on the Resident Holder’s
circumstances.
A Resident Holder that is throughout the year a ‘‘Canadian-controlled private corporation’’ (as defined in the Tax
Act) may be liable to pay a refundable tax at a rate of 62⁄3% on its ‘‘aggregate investment income’’ (as defined in the
Tax Act) for the year, including taxable capital gains from the disposition or deemed disposition of Common Shares.
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ELIGIBILITY FOR INVESTMENT
In the opinion of Dentons Canada LLP, counsel to the Company, and Stikeman Elliott LLP, counsel to the
Underwriters, based on the current provisions of the Tax Act, provided that on the date of the Offering the Common
Shares are listed on a ‘‘designated stock exchange’’ (as defined in the Tax Act), which currently includes the TSX,
or that the Company is a ‘‘public corporation’’ (as defined in the Tax Act), the Common Shares will on that date be
qualified investments under the Tax Act for trusts governed by registered retirement savings plans (‘‘RRSP’’),