Kinaxis Inc.

as well as in our CDAR Plus filings. During this call, we will discuss IFRS results and non-IFRS financial measures, including adjusted EBITDA. A reconciliation between adjusted EBITDA and the corresponding IFRS result is available in our earnings press release in MD&A, both of which can be found on the Investor Relations section of our website, canaxis.com, and on CDAR Plus. The webcast is live and being recorded for playback purposes. An archive of the webcast will be made available on the investor relations section of our website. Neither this call nor the webcast may be re-recorded or otherwise reproduced or distributed without written prior permission from Connexions. To begin our call, Bob will discuss the highlights of our quarter and recent business developments, followed by Blaine, who will review our financial results and outlook and open the line for questions. We have a presentation to accompany today's call, which can be downloaded from the Investor Relations homepage of our website. We will let you know when to change slides. Over to you, Bob.

Good morning. Thank you, Rick, and thanks to all of you for joining us today. We had a great third quarter. Our momentum and financial performance has once again allowed us to increase key targets for 2025. We're winning important large enterprise accounts. We're striking partnerships with leading software vendors that add value to supply chain orchestration, and we're leading the supply chain AI race, having launched fully embedded Maestro agents to our customer base. These agents enable a new revenue stream for Kinexus and allow for faster and better outcomes for our customers. I'll start by highlighting a few key items in our financial performance. We booked the most new business for a Q3, doubling the amount from a year ago. It was the second highest total ever next to the fourth quarter of 2024 when our renewed momentum began. Quite simply, we're winning the big deals in our space. As a result, our AR growth accelerated to 17%, and we'll exit the year with a higher ARR growth rate than we did in 2024. Second, we grew SaaS revenue 17%, a strong result and testimony to our market-leading product, better scalability in our go-to-market team, and approach and enhanced focus on our very best opportunities. Third, thanks to strong growth and efficient management of the business, adjusted eager to hit record levels again, and the margin was 25%, which helped us achieve our fifth consecutive quarter rule of 40 performance. We highly value consistency around this metric. Slide five. We added many exciting new customers in the quarter. Enterprise class companies continue to be the biggest cohort, and we're particularly pleased to have won multiple large enterprise accounts. a sample which demonstrates our broad reach across vertical markets and geographies. Renault is a French multinational automotive manufacturer founded in 1899. It designs, manufactures, and sells a wide range of private and commercial vehicles under brands such as Renault, Alpine, and Mobilize. This was a highly competitive win, and it adds to our enviable list of household name European manufacturers North American, and Asian automakers. We continued our success in our emerging oil and gas vertical with the addition of Repsol. Headquartered in Spain, Repsol is a multi-energy company employing 25,000 people in over 20 countries and serving 24 million customers. We have also had successful deployments at ExxonMobil, Castrol, and others. So we can't help but be optimistic about this market. In our industrial manufacturing market, we were one of the world's leading innovators in material science based in the United States. Enterprise class accounts also include the well-known high tech brand Psycho Epson, a Japanese multinational electronics company specializing in printers, projectors, robotics and much more. BastaPak, a US-based manufacturer of sustainable packaging solutions. Even with all of the success to date, there's still lots of room for growth. There are over 14,000 prospects remaining in the vertical and geographic markets we target. And we've never been in a better position to win them. I'm also pleased that half of our gross additions to ARR came from expansion business, with existing customers, an area where we have made much progress. This success reflects both the value of our recent investments in innovative new product capabilities and validation of the tremendous value and differentiation of our core capabilities that keep supply chains transparent, agile, and in sync through ongoing volatility and disruption. Our 400-plus customers are a huge asset to Conexus and includes some of the largest companies in the world in our vertical markets. For example, in Q3, we also secured a very significant expansion with yet another global top five oil and gas company. Not able to name them right now, but we're very excited about this expansion. Another way we add value for our customers is through key partnerships that enhance supply chain orchestration. Previous this year, we announced exciting relationships with Databricks, a key part of Maestro's data fabric that helps enable AI capabilities platform-wide. And with Infor, where we are now tightly integrated to their Infor Cloud Suite for discrete manufacturing. And in Q3, we announced an exciting new partnership that will combine maestro and workday adaptive planning to give customers a unified view of their operational finance and people data to drive faster, more informed, and confident decisions. Finance data has always been important to Canaxis, but this is a big opportunity to also comprehensively embed workforce data in our planning processes too, in real time. When demand spikes, leaders can weigh margin impact, workforce needs, and production options to make profitable growth decisions in minutes, not weeks. This cross-functional scenario planning will help ensure faster pivots and stronger resilience. Partnerships are an important part of our supply chain orchestration story, and we will continue to build out relationships where it can help Canaxis and our customers the most. Now, I'm thrilled that we made our initial Maestro agents generally available to our customer base, creating the opportunity for a new revenue stream for Kinaxis, enabling faster and better outcomes for our customers. Maestro agents enhance our capabilities, supercharge our existing product differentiation, and represent a major step forwards towards of more autonomous supply chains that boost productivity, democratize access to data, and generate better customer outcomes faster. We've launched the initial agents with a 30-day trial after which customers can subscribe to consumption bundles for the full term of their contract. Our AI strategy is simple and compelling with three key goals to enhance Maestro's core capabilities, to extend our core capabilities within the enterprise, and then to share supply chain data with external functions and integrate external data to achieve fully orchestrated organizational decision-making without silos. Let me talk about each of these in turn. We've been using AI to enhance our core capabilities for some time, embedding machine learning and modules like self-healing supply chain and our AI-powered enterprise demand forecasting and advanced demand forecasting solutions to dramatically improve plan and forecast accuracy. The initial launch of our maestro agents adds to that track record and will dramatically increase user efficiency One example, a top 10 global pharmaceutical company used maestro agents to boost planner productivity tenfold in its work to identify inventory risk, surfacing insights in seconds instead of minutes or hours, and driving significant efficiency gains across planning processes. Additionally, one of the world's largest electronics manufacturers cut 30 hours from monthly reporting processes, and we focused that time on improved on-time delivery and higher customer satisfaction. In short, the benefits of Maestro agents are real and are being experienced in mission-critical supply chains today with some of the biggest brands in the world. Next, we'll be using AI to extend our core capabilities with Maestro Agent Studio, which will allow customers to design and configure agents tailored to their own unique processes and business rules and help them make decisions that are critical to the enterprise. This capability is already in limited availability to early innovators. After more experience here and working with partners, in 2026, we'll introduce a catalog of pre-built agents from across our ecosystem that addresses common supply chain use cases and delivers even more out-of-the-box intelligence for our customers. Finally, we'll share our supply chain data externally and also integrate more with external data by working with a network of third-party agents to enable true, orchestrated, organizational decision making that operates without silos. In this phase, our orchestrator agents will resolve issues by coordinating multiple agents, both within and outside Maestro, to come up with optimal solutions. Our partnership with Workday is an excellent early example of this, where agents will exchange labor, financial, and supply chain data in real time for vastly improved coordinated decision making. Each step in our AI journey will add tremendous incremental value for supply chain practitioners and creates a significant Connexus opportunity. Look, AI is the next evolution of software and a massive opportunity in the supply chain space and particularly for Connexus. In world-class supply chain software, complex logic modeled via tools such as heuristics, optimization, and machine learning is critical for optimizing the design and execution of the supply chain to meet business objectives. The richest and breadth of Maestro's core orchestration algorithms developed through decades of industry experience and the unique and unified proprietary data they generate will remain a massive differentiator for us, even as AI becomes ubiquitous in Maestro. Amongst existing players and any potential new AI platform entrants who are offering custom one-off solutions and lack supply chain experience, we are well positioned. We're starting our AI journey with a tremendous competitive moat We offer proven, hardened AI enhanced software, not a risky custom one-off project. We're already a mission critical trusted partner to globally referenceable big brands, and we're already embedded in the daily workflow of global supply chain teams. And we're already securely integrated with other key enterprise systems, to help in the orchestration of supply chains. So overall, I'm so pleased with our momentum so far in 2025 and super excited about the future. The talent we added and the refined focus we've implemented is helping to deliver quarters consistently and to scale the company. Our product is leader in the market and our AI enhancements are only building on that and growing our opportunity. We have created a tremendous environment to welcome our new CEO. The search is narrow and focused considerably, and we're confident in a great result for Kinexis. We'll update you as we move along, and you can count on ongoing strong execution from the high performance senior team we have in place today. Blaine, over to you.

Thank you, Bob, and good morning. As a reminder, unless noted otherwise, all figures reported on today's call are in U.S. dollars under IFRS. If you move to slide eight, I'm very pleased that our strong momentum continued through Q3. As Bob mentioned, this was a record-breaking third quarter for a new organic business based on average annual contract value. It also marks our second highest quarter on record. behind only Q4 2024, when the impact of our go-to-market restructuring started to take hold. Our ARR growth rate in Q3 left a 17%, both as reported and in constant currency, which is a testimony to our growing product leadership, demand in our space, and our company-wide efforts to achieve scalability and focus on our very best opportunities. Stronger than expected performance year to date enables us to increase fiscal 2025 SAS revenue guidance for the second consecutive quarter, along with our full year adjusted EBITDA margin outlook. I'll provide details momentarily. Our trailing 12-month free cash flow margin also remains on a strong trajectory. Briefly, for the third quarter, and compared to Q3 2024 results, Total revenue was $134.6 million, up 11% or 9% in constant currency. As I'll speak about in a moment, our success moving subscription term license business to SAS lowered total revenue growth by roughly two percentage points. SAS revenue was $92 million, up 17% or 15% in constant currency, thanks to ongoing strong bookings. Now, with respect to subscription term license revenue, certain on-premise customers that want access to exciting new cloud-based product modules, including AI modules, opted to move forward with the renewal and expansion on our hosting offering. This shift meant that starting in Q3, associated revenue is now reported as SaaS. Consequently, subscription term license revenue was only $79,000 in Q3. If you ignore the expansion amount, this is roughly $3 million less than had the renewal been won on premise. Given the level of interest in some of our new cloud-only offerings, we are having more transition discussions like these. We'll alert you to these types of changes, if any, after they happen. For professional services, revenue was $37 million, up 4% and similar to last quarter. As we've discussed, There is a competitive pricing environment for professional services, but work is underway to ensure that our pricing fully reflects the premium services our team offers. We continue to have success working with our systems integrator partners. Over the last four quarters, partners have led or jointly delivered more than 75% of new customer implementations won through our direct sales team. Given that ongoing success, Our own professional services should be a smaller portion of total revenue in the future, while remaining a key enabler of SaaS business. Maintenance and support revenue was $5.5 million, up 7%. Naturally, amounts recognized as maintenance and support revenue from the customers who transitioned to the cloud will be recognized as SaaS revenue ahead, though the impact is small. Our gross profit was up 13%, to $85.9 million for a 64% gross margin compared to 63% in the same quarter last year. The term license to SAS conversion reduced current pure gross margin by roughly one percentage point, ignoring the expansion component. Our software margin was 79%, up from 76% in Q3 last year. Professional services gross margin was 24% compared to 32% consistent with my comments around recent market conditions for these services. Adjusted EBITDA was up 13% to $33.9 million, a record level reflecting our revenue growth, improving gross margin, and despite the $3 million shift from subscription term license revenue to SAS, adjusted EBITDA margin was 25% equals Q3 last year. We continue to focus on profitability and gaining operating leverage as we scale. Our growth and profitability resulted in Rule of 40 performance for the fifth consecutive quarter, calculated by adding SAS revenue growth and adjusted EBITDA margin, our usual approach. We are proud to be consistently performing at this elite level again. Our profit in the quarter was up 150% to $16.9 million, or $0.58 per diluted share, and versus a profit of $6.8 million, or $0.23 per diluted share, a year ago, profit benefited largely from the same factors that supported our adjusted EBITDA performance. Cash flow from operating activities was $33.6 million, up 12% over the $29.9 million in Q3 2024. Cash, cash equivalents, and short-term investments were $334.4 million, up $36 million from the $298.5 million at the end of 2024, despite being active with our NCIB program. On slide 9, our trailing 12-month free cash flow margin remained strong at 19.8%. The one-time payments we made in Q1 2025 relating to tax planning and a litigation settlement reduced the result by 5.4 percentage points. So the normalized result is 25.2%, and we're trending in a positive direction. On slide 10, I'm very pleased that our annual recurring revenue, or ARR, grew by 17% year over year, both as reported and in constant currency. The balance crossed a new threshold to $407 million and grew by $16 million from last quarter, despite a slight foreign exchange headwind. This growth was driven by an outstanding quarter winning new business. Notably, we matched our best quarter ever for contracts exceeding $1 million, including both new customers and expansion deals. As Bob mentioned, we will exit 2025 with a higher ARR growth rate than we did in 2024 in constant currency terms and otherwise. The split of gross additions to ARR was 49 to 51 between new name accounts and expansion business. We remain very pleased with the healthy mix and the recent improvement in our expansion business under our new go-to-market structure. I'm particularly encouraged that applications made up the largest single component of expansion business as it demonstrates the value of our ongoing innovation. If you move to slide 11, our SAS and total RPO balances remain very strong, growing to $810 million and $846 million, respectively, with three-year categories of 18% and 16%. This metric continues to highlight growth in our subscription business and our strong growth customer retention. More details on our RPO can be found in the revenue notes to our financials. On slide 12, I'm very pleased to update our 2025 guidance. We're pleased to maintain total revenue guidance of $535 to $550 million in both as reported and constant currency terms. Our SaaS business is extremely strong, compensating for the effects on total revenue of the professional services market dynamics and the encouraging shifts from subscription term license revenue to SAS. We expect to end 2025 toward the midpoint of the range for the reported results and toward the bottom end in constant currency. For the second consecutive quarter, we're excited to increase our SAS growth guidance in both as reported and constant currency terms. We now expect full year SaaS revenue growth of 15 to 17% and 14 to 16% in constant currency. Now, thanks to the success converting on-premise business to SaaS and despite increasing customer ARR among those transitioning, we're adjusting our subscription term license revenue guidance to 15 to $16 million. More conversions could occur this year, but there's also the possibility that new customers join as hybrid or on-premise. Our current subscription term license revenue and total revenue guidance is based on a status quo. Ultimately, these are accounting details only. All contracts are subscription based and we are focused on winning and expanding with customers in a way that best suits them. After multiple quarters of better than expected performance and profitability, I'm pleased to increase our adjusted EBITDA margin guidance to between 24 and 26%. While our mid-term aspiration has been to hit a normalized adjusted EBITDA margin of 25% by 2026, it is likely we can achieve that goal a year early. Finally, on slide 13, we have continued to be active on our normal course issuer bid. In the first nine months of 2025, we repurchased approximately 467,000 common shares at an average US dollar price of $130.77. for an investment of roughly $61 million. Our NCIB ended November 5th, 2025. Over the full life of the plan, we purchased roughly 707,000 shares and invested approximately $92 million. We've entered into a new plan that allows us to purchase 1.4 million shares with a daily maximum of roughly 14,000 shares over a 12-month period ending November 11th, 2026. Overall, I'm very pleased with the momentum in our business. We've been successful in simultaneously improving both ARR growth and profitability in recent quarters. We've remained confident with our pipeline for the rest of the year and are encouraged by our success winning key deals and our higher pipeline conversion rates under our new go-to-market structure. Our recently launched MyStore agents unlock a new revenue stream, and we're only at the very beginning of that journey. I'm excited to see where the business can go from here. With that, I'll turn the call back to Bob quickly before opening the lines for Q&A.

Hey, thanks, Blaine. Just quickly, a couple of thoughts before we open the Q&A. I'm really, really pleased with the performance of the guidance and excited to raise guidance yet again. We're winning the biggest and most important deals in our markets, both against existing competitors and new entrants. Our product is already the best in our space, and Maestro agents create even more differentiation, and we've launched live solutions ahead of our competition, and we have a growing number of the world's best supply chains invested in our AI roadmap. We have 14,000 more at-bats with products and organizations, and the AI opportunity can create even more. We have 400 of the largest companies in the world that are world-class customers representing a massive expansion opportunity. Our GTM organization has never been in better shape to take advantage of our product superiority. And the CEO search will conclude soon. Our goal is to announce a new CEO in January. Our new CEO will be welcomed into a tremendous, ready-for-scale organization. Thanks for your support and your ongoing interest in Canaxis. To date, I'll turn the line over to the operator to start the Q&A session, but thanks for joining us.

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. You'll pause for just a moment to compile the Q&A roster. Your first question comes from a line of status with BMO Capital Markets. Please go ahead.

Good morning. Regarding the NYSTRO agents, I realize that it's early days, but should we think about maybe the sales cycles for that upsell opportunity being a lot shorter than for a typical upsell, just given the trial dynamic? What are you seeing in that regard?

Well, the way we've gone into the market is to partner with early innovators for each of the products. And that's going to continue. We're already doing some pretty interesting research and development. I call it applied research and development for future products with customers. And the interest is extremely high. Probably as we go into next year, we'll be in a place where we get some guidance on how that gets monetized, what the traction around that is. But I can tell you that... the enthusiasm is high, but the way this will work is they'll have an opportunity to bring the product into their company, do a trial period and then start, uh, consuming, um, AI solutions or performance units as they, as they go forward. So more to come on that as we roll out into, uh, 2026. But what I'm super excited about is the, uh, enthusiasm from some of the largest customers in the world.

Great. And then looking at the acceleration in ARR growth, to what extent has the demand backdrop in the tailwind? Are you seeing some uplift from tariff uncertainty or is acceleration just far more weighted towards your own internal execution and sales investments?

The biggest change in the last year is a year ago, we were winning with the best product in the industry and a good vision. for artificial intelligence. Now, when we're engaged in opportunities, we're showing product around AI, and we've used AI to really enhance the potential in Core Maestro. And so you're seeing that transition where customers want to see the product now. And probably the third part of this, because it's all integrated or unified, The ability to implement these solutions is much less complex than, for example, using third-party agents and setting up the data integration around this. This is a unified offering that customers are using today. They have products in their hands, and they can see, yet again, a roadmap that's even going to make this more exciting. So I think we put ourselves in a place where we have a product advantage, and then, obviously, from a go-to-market perspective, You know, we've made dramatic changes and improvements in our team, so we're also executing on the go-to-market, on these go-to-market campaigns as well in a much better way.

Great. I'll pass the line. Thank you.

Next question comes from the line of Doug Taylor with Catacord Charity. Please go ahead.

Yeah, thank you. Good morning, and congratulations on another quarter strong bookings. I'm going to follow up on that question about the market overall right now and the purchasing behavior of your customers that push pull from being distracted by all the tariff shifts and trade challenges versus driving the need for dynamic supply chain management tools. I mean, where would you say we stand right now on that spectrum? I'm just trying to understand if you feel like this strong performance is in the face of headwinds or is that shifted to a tailwind now?

I think it I think it Supply chain planning with the advent of AI is becoming a core practice inside companies. It's a must-have functionality. And what we're observing is that these are tough competitions, which we're winning. Procurement's tougher than it has been before. We find ourselves in a place where people have high expectations. about deployments and returns and all those things allow us to win. I don't think that's going to change. I think what we'll see is a situation where customers are absolutely looking more and more for these types of solutions because we're in a place now where I don't think the world is going to get less complex. It doesn't mean that people are racing to buy these applications. But when they come to a conclusion that they needed inside their business, we're winning against traditional competitors and new entrants. So we feel good about our pipelines. We feel good about our product roadmap. And we love the quality of execution from the team in a world where these are heavily competed. And there's a lot of oversight right now because of the economy and the challenges on spending. So we feel like we're in a good place

One more question for me, perhaps for Blaine, you know, obviously the margin expansion momentum, particularly impressive considering the, you know, the on-prem to SaaS dynamic. You've hit that 25% bogey a year early. Can you talk about, you know, the next horizon for you and, you know, more broadly, is there a thought to optimizing for growth a bit more versus margin expansion at this stage? Any thoughts there or is that a question, you know, best suited for the incoming CEO?

You know what, I think the, and I'll let Blaine jump into this one as well. This is the way I'm thinking about it is, you know, when you're executing the way we are with a great go-to-market team, you find yourself in a place where you create optionality. We have a, we're obviously building a pretty important investment plan for 2026. And we feel like we have room to really go after both investments that are going to improve the productivity of the organization, a lot of that using AI-based products. We'll expand our go-to-market team, we'll start new programs, and we can do it in a way where we can continue to be a profitable company. Beyond that, we're looking at multi-year investments that are super exciting that create incremental TAMs. The way I'd say it is that we feel like we're in control of alternatives. We're not going to be, you know, just trying to optimize even a margins or margins. We're not going to overweight that. We absolutely believe that there's a growth agenda in front of us, particularly now that we have our AI products in the market. Blaine, why don't you jump in on that a little bit as well?

Yeah, I mean... You know, we're in a privileged position to hit our targets a lot earlier than we were expecting. It gives us room to play in the upcoming years to figure out what type of margin do we want to balance with our growth going forward. But we still see some benefits from some opportunities in front of us. We are going through an ongoing transition of customers from private to public cloud. That will start to eliminate, again, more and more duplicative costs going forward. We are, as you've seen, we've been pushing more and more to our PS organization, pushing more and more of their deployments into the SI partners rather than taking on ourselves. And that's a low margin business. But it's something that we think we can actually increase our SAS growth even more by working very strong with these SI partners. I think there's some ongoing traction and higher margin expansion business that we have involved. The fact that we're now talking about 50-50 versus I think even a year ago to a year and a half ago, we were talking about 65-35 in terms of the new name logos and expansion business balance. And that balance is actually really important for us to get higher margin business from the expansion business. The other thing I'll point out is that we're continuing to run the business with operating efficiency. And as much as we are loving the direction we're going with AI externally, We're also focusing on with AI internally and trying to get a lot of efficiencies by using AI within our everyday processes that we have. We're in the middle of what we call investment planning and our investment planning process looks at 2026. We're in a fortunate position again to have a little bit of room to play with our margins if we want to push that more in the direction of growth. I think 25% is now a floor that we have, and so now we just have to figure out what the next level is, what's the next milestone, which I won't say on this call yet, but I think it's going to be higher than what we're at right now. That's great, Keller. I'll pass the line.

Our next question comes from the line of Paul Travers with RBC Capital Markets. Please go ahead.

Thanks so much, and good morning. Just wanted to follow up on your comment on the shift from private cloud to public cloud. Where are you in the transition? It sounds like that transition is accelerating because of customer interest in AI. So how long do you see that being in a transition period? And remind us again of the financial impact, both to gross margins, but then also on the revenue side.

Yeah, maybe I'll start. It's almost two different questions I'm going to answer here because our private cloud to public cloud migration, there isn't a big impact in terms of the product suite that they have available on being one or the other. We think it's much more efficient and flexible and it's easier to scale with public cloud. We are in the midst of that. As I mentioned before, Asia-Pacific is done. We are right in the belly of EMEA right now, so Europe should be done, we think, at the middle of 2026, and then it's North America to get to the end of the whole migration process. We do believe that there's some percentage points that we will be gaining as a result of eliminating those duplicative costs. Maybe just to jump on the second part of it, I think what the question really was is we have been seeing on-prem customers having a little bit more of a demand to move to our cloud platform. And the reason for that is we have a lot of modules that may not be available on on-prem. The most recent quarter, obviously in Q3, we had some significant movement there that we weren't expecting at the start of the year, but they reached out to us and obviously mentioned that there are some modules that they want available to them and want to move as quickly as possible. They did that while increasing ARR. So our total contract value increased when they moved over. But we still have a lot of upsell and cross-sell opportunities with those customers as they come on board and want to get access to those modules that maybe previously weren't available for the on-prem customers. Right now we do have a number of customers we're talking to that are all asking for access to the AI modules. And so we're getting ready for maybe some switch-ups with what we see and foresee with our subscription term license revenue line items.

And just a clarification question on the on-premise or term license, the SaaS transition. On a like-for-like basis, like if there's no upsell, Does that shift have an impact on ARR and RPO growth?

Yeah, for us, I'll say in the current quarter and probably every quarter going forward when this happens, there's an increase in ARR and RPO. In this particular quarter, we had a fairly nice sizable bump up for ARR, which we'll recognize over the term of the contract versus upfront. Same thing with RPO. So we took advantage of... a nice renewal that was a little bit of an upsell at the transition. And that's before the opportunity to sell those new modules that we have to those companies.

And then just lastly, what do you think the timeframe is typically between a customer moving from on-premise to SaaS to you realizing the upsell opportunity?

That's hopefully the million-dollar question. We are in, obviously, discussions with them. As we mentioned, the AI modules, as an example, right now they're on version 2510. That's a flick of the switch right now for some of the modules, the agents, especially the worksheet agents, to get access to it. There are some on the configurable agents that we have available. Those will take a little bit longer, not much longer than than what we have with flipping a switch, but there is some extra work that takes place. I think in 2026, we'll start to see some revenue coming in from those upsells and cross-sells.

That would be great to see. Thanks for taking the questions.

Next question comes from the line of Lachlan Brown with Roch Hug. Please go ahead.

Hi, Bob, Blaine, Rick. Thanks for the questions. Third quarter bookings were quite strong despite being usually a seasonally low quarter. And now we're up to the fourth quarter, which is usually your highest period for bookings. I just want to check if there was any pull forward of bookings that supported the third quarter. And if you could maybe just talk to the deal pipeline that you're seeing and confidence in 4Q bookings being strong relative to prior periods.

Sure. Yeah, I'll jump in. Q3, there weren't any pull-ins for Q3. It was a phenomenal quarter. We don't talk about win rates every single quarter, but we won all the major deals. I would say when we looked at any deal that was over a million dollars and the opportunity there, we won the vast majority of those. We won the most important deals that were out there. The execution of the sales organization, I applaud them with an amazing quarter. It was beyond expectations, beyond historical norms of what we've seen. And that just is a testament to the product differentiation we have and how important we are to these customers. We're proud to be able to obviously talk about some of the logos. One of the interesting facts is that we didn't say some of the logos. And there's one particular logo, a very, very large one that we didn't say. And they said, using Kinexus is a competitive advantage. We don't want our competitors to know that we're using it. You cannot use our logo as part of the earnings call. That's a great excuse for us to be able to say, well, yeah, that's great for this company to think of us as such a strong competitive advantage, but we want to make sure that we continue to sell and get those references for Q4 and beyond. Now, Q4 bookings, we're very confident in there. There's some major large enterprises, and that's where we're starting to see a lot of traction that we didn't see in maybe 23 and 24. The large enterprise are back. They're having a lot of discussions. They like our AI roadmap and where we're going. And I'm confident that we're going the right direction right now. So there's a very nice pipeline in Q4, I'll say.

Yeah, the only thing I would add to that is probably one of the biggest changes year over year is, as Blaine described, the execution of our sales force and how when we're in an opportunity, the type of our ability to make sure that they understand our product advantages really, really important. And we've really done a pretty good job of that in terms of the quality and quantity of people that can execute in a complex environment. But even beside the opportunity for AI, we have products in the market now that allow us to win with new customers, but are a big part of our expansion. Self-healing supply chain, AI-powered enterprise demand forecasting, and advanced demand forecasting. We're going to continue to come out with products in Core Maestro that customers are going to want. And what I loved about the quarter was the ability or the stories that our customers were talking about. We had proof points about how these products and even the new AI products have realized better customer outcomes. And that's going to only reinforce our ability to be the go-to company for both traditional SaaS solutions, AI-enhanced SaaS solutions, and now AI standalone solutions. So we've got a really, really big expansion opportunity in front of us.

Appreciate it. And more of a modeling question, but margins in professional services, we've seen that step down this year as you make more use of partner integrators and with pricing pressure in the market. But they've been ticking up in recent quarters, despite the continued outsourcing. Is this AI and product enhancements beginning to reduce the cost and complexity of Maestro deployments? And how should we think about the right steady state for professional services going forward?

Yeah, we're going to definitely... Go ahead, Blaine. Go for it.

I was going to say that obviously we don't give guidance on professional services margins. However, we think we're on the low side of where we should be right now for those margins. It should start to take up over the next little while and get back to what we expect is a good margin for us. We believe right now we have premium services for professional services teams. And that should give us a little bit more pricing power than what we're seeing right now.

The only other thing I would add is, look, as part of our SI strategy, we're definitely working hard to prioritize industries, markets, and the alignment with key partners around Connexus. Because when you have the kind of win rates we're doing, these things kick off fairly important, in many cases, business transformation projects. So core maestro, we're going to make it easier to implement, less costly, certainty of outcomes on projects, higher value. But then what you're observing, not unlike Exxon, which has always been a great example, is that people are building a business transformation program around that. And That's why it's so exciting to some of the large SI companies. And then part of the reason that we're going to defer a little bit on professional services is that we're starting up and have had some early success on subscription-based services. And that's a more normal type of revenue stream that now gets reported by some of the AI native companies. as ARR. And so, you know, through 2026 and, you know, certainly we should be in flight in 2027 with more subscription-based services. And we'll talk a lot more about that when we give our guidance going into, you know, in the March timeframe.

That's clear. Thanks, Zitan.

Your next question comes from the line of Richard Che with National Bank Capital Markets. Please go ahead.

Yeah, hi, good morning. It's Mike Stevens on for Rich. Congrats on another strong quarter here. I wanted to follow up on that SI strategy you touched on and then move away from professional services a bit. I'm just wondering if that's brought on any additional challenges at a time when you're bringing a lot of new innovation and products to market. I don't know if you could discuss the dynamics there.

Well, the dynamics Of core, Maestro have not changed. The economics haven't changed. The opportunity is still there. We'll be working with customers and partners to serve that demand. And when you have the kind of success we've had with ARR growth, new projects, biggest customers in the world, and the expansion into other parts of companies, that creates a revenue stream that we hope to encourage our customers SI partners to start taking one of the ideas of being an enterprise class software is to have the SIs start to take the resources where the pipeline is, and we're seeing that. People are investing in the SI network in a way where they're going to try and get involved in some of these world-class customers. Not unlike Greenwell, which we've just closed, and there's a few others. The follow-on to that is, as you go into AI, what's been pretty cool is there's less complexity in the implementation. And the real opportunity around professional services with AI solutions is the idea that as they become more expert in using Kinexus AI solutions, they'll be able to roll this out themselves. But because we're integrated, like for example, one of the products that we now have in the market with innovation customers, we're doing something called configurable agents. And what that means is that you can actually build solutions that are unique as we described to your business processes And there is a level of configuration complexity that's associated with that, but it's so much lower than actually implementing Conexus for the first time. So what we'll see is an opportunity to work with them with this construct of subscription services where we can get them to use our solutions more broadly throughout their company and then obviously when you start thinking about using supply chain data more broadly throughout your organization, that also creates some opportunity for mass deployment of artificial intelligence with Maestro at the core. So it really is all incremental. The ability to take advantage of AI the way we've developed them is much less complex than implementing Maestro. But by having these products, Our large customers, these massive brands that are customer-based, can get it more out of Maestro, and they can extend that capability with our AI roadmap. So it's pretty cool. It's pretty exciting. It's not dependent on a whole new professional services organization. It's extending the teams we have now and partnering with companies like Workday and the SIs. to really, really dramatically extend the functionality of Maestro throughout a company. It's a, it's a pretty good business model. We're pretty excited about it.

Okay. No, that's, that's great color. I really appreciate that. Uh, and then just on the sales and marketing spend, you're obviously seeing phenomenal returns on that spend. You've also alluded to in the call, probably continuing to invest in these opportunities. The MD&A mentioned a lot of that growth has been driven by additional spending with your partners on that go-to market. Is that where you're seeing the best ROI on that incremental spend? And looking further out, I don't know if you can give any color on how we should view that growth going forward in sales and marketing.

Look, we have zero restraints on... our spending on sales capacity. What we have is a focus on quality. We want to have more productive territories. And a lot of our spend last year was just around transitioning into talent and people and management that is going to make a difference. In the last, I guess, half of the year going into Q4, real focus on business development and marketing. Really, really changing the paradigm of making people aware of Kinexus and that's going to be critical. We hired a new, very experienced, highly connected BD or business development manager, which is about inside sales and really really putting a privilege on visibility, marketing, messaging events in a way that, you know, now that we think we're in a place where we've created even more differentiation against the competition with our products, we got a great sales execution team. Now we're going after the 14,000 customers out there that should be on the Connexus platform. But this is not straining the company anymore. from a margin perspective. This is like rigorous, high-quality ads focused on programs and people that can make a difference. And a good example of that is that we did a really nice job at our Connections event in Europe. First time we did it, great turnout, great executive event, world-class, and these things are absolutely going to turn into pipeline for us.

Okay, awesome. Appreciate all the insights.

Your next question comes from the line of Stephanie Price with CIDC. Please go ahead.

Hi, it's Sam Schmidt on for Stephanie Price. I wanted to ask a question around Rapid Start. How should we think about the mix of implementations between Rapid Start and more fulsome enterprise rollouts? And what trends are you seeing in enterprise rollouts in the current supply chain environment? Thanks.

Yeah. Well, I think it's a quick answer. Every discussion usually starts with rapid start. People want to have their solution deployed as soon as possible. It's not even something we track anymore because everyone has taken it in some format. It gets rolled out to additional things that aren't covered under rapid start. So if they decide they want enterprise scheduling, that is not covered under rapid start. If they decide that they want to use advanced demand forecasting, that's not covered under it. But generally every conversation starts with how fast can you deploy this. Obviously people want to get access to our solution as quickly as possible. It is not something we track anymore because it is embedded within every single conversation that we have.

That's helpful. Thank you. And then just one more from me. Can you share some commentary on net retention and how that's been trending? and maybe any relative differences between the retention for your larger clients versus the more mid-market clients. And then I'll pass the line. Thank you.

Sure. Yeah, so NRR is a question we get asked quite a bit. It's one of those ones that we're getting warmer and warmer as to should we disclose it more. The truth is our expansion business continues to drive NRR upwards. You know, after getting a quarter where we just doubled our incremental bookings over what we had in Q3 of last year, the second highest quarter ever for incremental bookings, trailing only Q4 of 2024. Obviously, having a much larger portion of that coming from expansion business, it's going to drive that NRO up. And we have one of the best in class gross dollar retentions, which is as strong as it's ever been. So we're in a fortune position, and that's why our constant currency error growth has reached 17%. It's actually the... It was a four-point increase from Q2, which is the largest quarter-over-quarter gain since AAR tracking began for us. So we're excited about the impact that expansion is having on our business. It's helping out with our adjusted EBITDA margins, being at a very, I would say, conservative 25% at this stage, which we think is giving us even more opportunity to grow that.

That's helpful. Thank you. That completes our Q&A session. I will now turn the call back over to Mr. Walshworth for closing remarks.

Yeah, thanks, operator. I will get back to anyone who we missed. We have a tight 9.30 stop here. So thank you all for participating on today's call. We appreciate your questions, as always, and your ongoing interest and support of Canaxis. We look forward to speaking with you again when we report fourth quarter results. Thank you very much and goodbye.

Ladies and gentlemen, that concludes today's call. Thank you all for joining.