May 6, 2022
Operator
Good morning, ladies and gentlemen. Welcome to the Kinaxis Inc.
Fiscal of 2022 First-Quarter Results Conference Call. Currently, all participants are in a listen-only mode.
Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.
I'd like to remind everyone this call is being recorded today, Friday, May 6th, 2022. I will now turn the call over to Rick Wadsworth, the Vice President of Investor Relations at Kinaxis Inc.
Please, go ahead, Mr. Wadsworth.
Rick Wadsworth
Thanks, Operator. Good morning and welcome to the Kinaxis earnings call.
Today, we will be discussing our first quarter results, which we issued after close of markets yesterday. With me on the call are John Sicard, our President and Chief Executive Officer, and Blaine Fitzgerald, our Chief Financial Officer.
Before we get started, I want to emphasize that some of the information discussed on this call, based on information as of today, May 6, 2022, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements.
For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release as well as in Kinaxis ' SEDAR filings. During this call, we will discuss IFRS results and non-IFRS financial measures.
The reconciliation between IFRS results and non-IFRS financial measures is available in our earnings press release and in our MD&A, both of which can be found on the IR section of our website, Kinaxis.com and on SEDAR. Participants are advised that the webcast is live and is also being recorded for playback purposes.
Some archive of the webcast will be made available on the Investor Relations section of our website. Neither this call, excuse me, nor the webcast archive may be rerecorded or otherwise reproduced or distributed without prior written permission from Kinaxis.
To begin our call, John will discuss the highlights of our quarter, as well as recent business developments, followed by Blaine, who will review our financial results and outlook. Finally, John will make some closing statements before opening the line for questions.
We have a presentation to accompany today's call, which can be downloaded from the Investor Relations home page of our website Kinaxis.com. We will let you know when to change slides in.
I'll now turn the call over to John.
John Sicard
Thank you, Rick. Good morning, everyone, and thank you for joining us today.
I'll be starting on Slide 4. I'm pleased to report that Kinaxis had a very strong start to our fiscal year, both in our financial results and key operating metrics.
For Q1, we achieved SaaS revenue growth of 22% to $49.3 million, total revenue growth of 70% to $98.1 million, and an adjusted EBITDA margin of 34%. Blaine will provide all the specific details momentarily.
Moving to Slide 5. Momentum in winning new customers continues to accelerate as more companies consider replacing inflexible, legacy cascaded planning techniques in favor of a more agile concurrent planning approach.
In Q1, we matched our all-time record for new customer wins that we said in the previous quarter. This is particularly noteworthy as the last quarter of any years, typically the strongest for Kinaxis, so matching that performance means this was an all-time record for any Q1 in our history, and serves to boost our confidence in what is to come for the remainder of 2022.
We are honored to be selected by a growing number of global companies that put their trust and confidence in Kinaxis and Rapid Response to bring about transformative improvement in supply chain planning performance. For example, leading health science companies like Siemens Healthcare and Bayer Crop Science, in the consumer products sector, we added the iconic brands, Kimberly-Clark and Carlsberg.
And we secured another major expansion with one of our many flagship customers in the automotive sector. Complementing our ongoing success with large enterprise companies like these, we continue to see success in the mid-market with over 35% of our new customer wins in the first quarter coming from this category.
We are thrilled with our ability to serve such a broad universe of companies and verticals with a single SaaS offering. It is a testament to the universal value of concurrent planning and validation of the strategic product decisions we've made in the past.
Record breaking new customer wins in Q1 coupled with expansion from our installed base has resulted in continued growth in our annual recurring revenue. At March 31st, our ARR grew a healthy 24% year-over-year to $236 million in constant currency.
Behind that, our fourth quarter rolling pipeline continues to grow stronger still and shows a healthy balance across all key geographies and vertical markets. In Q1, we experienced a sharp growth in the number of unsolicited inbound leads.
In fact, an all-time historical high, which in turn helped to support an all-time record number of direct prospect engagements for the quarter. These are distinct signs of momentum in the business.
Together, these leading indicators provide us with the confidence to grow SaaS revenue by 23% to 25% this year and to increase other aspects of our annual guidance. I'll now ask Blaine to discuss the results for the first quarter and share more details about our improvements in guidance for 2022.
Blaine?
Blaine Fitzgerald
Thank you, John. And good morning.
As a reminder, unless noted, otherwise, all figures reported on today's call are in U.S. dollars under IFRS.
Let's move to Slide 6. Total revenue in the first quarter was up 70% to $98.1 million, reflecting strong SaaS revenue growth, typically strong subscription term license revenue, and a high level of professional services activity.
SaaS revenue grew 22% to $49.3 million driven by record new customer wins in recent quarters and expansion of existing customer subscriptions. Subscription term license revenue was $23.5 million versus $2.1 million in Q1 of 2021.
Fluctuations in this revenue item are generally tied to the normal renewal cycle of our customer hosted software subscriptions, and will vary period to period as a result. Q1 2022 represents the peak of that cycle.
Our professional services activity was strong again, resulting in $21.5 million in revenue, or 78% growth over the corresponding quarter of 2021. Rapid growth reflects accelerating new customer wins in recent periods.
Higher professional services capacity and utilization, and expansion of our service offerings. Generally, this revenue item varies from quarter-to-quarter based on a number, size, and timing of customer projects underway, as well as the proportion of work assumed by partners.
Maintenance and support revenue for the quarter was $3.9 million, up 26% from Q1, 2021, reflecting overall growth in the subscription business with a small group of customers who have chosen deploy Rapid Response on-premise or who maintained the option to do so. We continue to be pleased with the diversity and strength of our total revenue base.
For the quarter, our 10 largest customers account for 40% of our total revenues, compared to 27% in the comparative period. As I just mentioned, the higher proportions in the outcome of being at the peak of our normal subscription term license reference cycle.
The value of one such on-premise subscription renewal was large enough to account for more than 10% of total revenues. Now, if we go back to Q1, 2019, at the same stage of our approximately three-year renewal cycle, you'll see the same pattern occurred.
First quarter gross profit increased by 87% to $69.6 million as a result of revenue growth. Gross margin in the quarter was 71% compared to 64% in Q1, 2021, largely reflecting the greater proportion of high gross margins subscription term license revenue in the mix and a very strong 20% gross margin on professional services revenue due to high utilization as a team.
Adjusted EBITDA was up 267% to $33.1 million for a margin of 34% compared to 16% in the first quarter last year. Our profit in the quarter was $12.5 million compared to our loss of $1.5 million in Q1 of 2021.
The significantly higher revenue and gross margin resulted in greater profitability despite increased investment in key operating areas. Q1 cash flow from operating activities was up 7% from the comparable period at $22 million.
At March 31st, 2022 cash equivalents and short term investments totaled $252.2 million compared to $233.4 million at the end of 2021. We remain pleased with our outstanding track record of cash generation.
Let's move on to slide 7, turning to some key metrics, our annual recurring revenue grew $42 million or 22% year-over-year to $232 million, including currency impacts. The currency movements master even stronger underlying growth.
In constant currency, our area grew 24% year-over-year to $236 million. This improvement reflects the unprecedented strength we have recently experienced winning new accounts and of success winning incremental business from our installed base.
I'll remind you that growth rate for the fast ports of ARR is higher than for total ARR. Moving on to slide 8, our remaining performance obligation remains strong at $479.1 million up 25% from March 31, 2021.
Of that total, $445.2 million relates to SaaS business, which is up 22% year-over-year. Further details on our RPO can be found in the revenue notes to our financials.
Recall that growth in RPO reflected both incremental Business One and renewals of existing subscription amounts, which are subject to the normal schedule of existing customer contract renewals and the duration. ARR only reflects incremental changes, up or down in new or existing customer subscription amounts, and as such, is a better indicator of future revenue growth.
On to Slide 9. With respect to our outlook, we are pleased to be able to provide you with increased guidance for fiscal 2022.
We now expect total revenue for 2022 to be between $345 million and $355 million. SaaS revenue is still expected to grow between 23% and 25% over our 2021 level.
We now expect subscription term license revenue to be between $32 million and $34 million. The balance of the incremental increase in total revenue guidance will come largely from professional services.
Finally, we now expect our adjusted EBITDA margin to be between 16% and 19%. Overall, our results for the first quarter was strong and the key metrics we watch as indicators of future business growth are trending very positively.
We are thrilled to be investing in this exciting and developing opportunity. With that, I will turn the call back over to John.
John Sicard
Thank you, Blaine. Just over a month ago, I celebrated 28 years at Kinaxis.
I can honestly say that I have never been more energized about the future than I am now. We are at this very moment experiencing what I call supply chain renaissance, a generational shift in how supply chains will operate for decades to come.
And setting a new foundation for future generations of supply chain practitioners. We're moving away from legacy cascaded lethargic, and siloed planning techniques and moving towards modern high we're add Jail, immersive, inclusive, concurrent planning techniques.
And I believe Kinaxis is uniquely qualified to accelerate that reality. And finally, a quick commercial about our upcoming customer conference and thrilled to share that we're having sold out in-person event happening next week in San Diego.
In fact, I'm told it's significantly oversubscribed at the moment. The good news is that we are going to simultaneously continuously stream virtual content through the connections 2022 event.
I encourage you all to participate virtually in our premier global conference for supply chain planners, innovators, and thought leaders. You can register under the financial analysts category for the virtual event track at connections.com.
During the conference, you will have the opportunity to hear from supply chain executive practitioners and experts from leading companies such as Amgen, Honeywell, PQ Corporation, and Qualcomm, to name a few, on how they are meeting today's challenges and building their roadmaps for the future. Certain sessions that aren't initially available virtually will be made available later on demand.
As always, thank you all for taking the time to join us on the call. With that, I'll turn the line over to the Operator for Q&A.
Operator
Yes. Thank you.
As mentioned, we will now begin the question-and-answer session. [Operator Instructions].This one is first question comes from Richard Tse with National Bank Financial Markets.
Richard Tse
Thank you. And congrats on the really big quarter here, guys.
Listen, it sounds like the pipeline is getting a lot bigger. Can you, maybe, talk about how much of that due to your marketing investments in recent years, or the expanded partners, or just the broad market tailwinds.
Trying to get a feel for where that's coming from.
Blaine Fitzgerald
Yeah, Richard Tse, it's a great question. I think I'd probably had 90 conversations now, at least 90 one on one conversations in the last 15 months or so with chief supply chain officers in the narrative that is really unified.
Every board is asking every CEO, what will you do next time? There's an appreciation that uncertainties the only constant and agility is becoming the new competence that people are looking for.
And so the pipeline continues to grow quite strongly I will say quarter-over-quarter. More importantly, I mentioned earlier the unsolicited inbound leads, which saw a very sharp increase quarter-over-quarter.
I think it's a reflection of what I'll call an appreciation that we're at crossroads in this craft, in this discipline, that incremental is in it [Indiscernible], that there has to be a fundamental shift in how supply chains are governed. And so I think this is what this global pandemic has done.
It's created an opportunity for the practice, not just for companies, but for the practice of supply chain to reflect on what matters most going forward. And so there was a time, Richard Tse, where we would be competing with CRM projects are competing with MRP upgrade projects.
Those were I would say, very strategic, not anymore. Supply chain, I think is probably my at least in my estimation, the most strategic endeavor.
And I think it will last the next 5 to 10 years.
Richard Tse
Okay. So there's a related question here.
If you look at the landscape, it's certainly been fairly active the past years from an acquisition standpoint, and you have Blue Yonder. Now you've got [Indiscernible].
I'm not going to ask whether you guys are a potential target as well, but how is the competitive landscape changing in the midst of those acquisitions. Is it strengthening your position as those companies regroup or -- what do you think about that?
Blaine Fitzgerald
There's been no meaningful change, honestly, in the competitive landscape for us. You mentioned Anaplan there, I think they're predominantly focused on the office of finance coming into a CFOs office.
Supply chain is all together a completely different function and significantly more complex, I would say. And so we very, very rarely will bump into them.
I can't remember the last time, frankly. And so it continues to be SAP as predominant incumbents.
We will bump into Blue Yonder and 09 from time-to-time as typical. And I honestly, I would point you back to the Gartner Magic Quadrant, which I recogniz as the old one, I would encourage you to keep an eye out for the next one, which I think will be eminent.
And I think they really get it right. I have a lot of respect for the process they put everyone through.
It is very, very detailed, and I think they really get the competitive landscape right. And so maybe the next week or two will tell us the story.
Richard Tse
Okay. And the last one for me, the services numbers actually continues to be quite robust here.
Can you maybe just update us on the nature of the services versus the ones that you handle with your partners?
John Sicard
Yeah, I -- we've been looking at that, and we were anticipating getting this type of a question. These last two quarters, in fact, I want to say five or six quarters in a row, we've been experiencing record-breaking, net, new wins, and so as a side effect of bringing on that number of customers, it's a natural side effect that we would be starting more projects.
That said, we are doing fewer projects -- fewer engagements directly, like were the lead versus when our partners are lead. We're still seeing the vast majority of deployments that are occurring today where partners are taking the lead.
We might have a secondary role, but we are taking on the the minority of lead -- what I'll say the professional services lead position for net deployments. So I think what we're seeing is a side effect of a very rapid, successful, net, new customer acquisition over a very short period of time.
The last two quarters -- we announced in Q4, the record number net new accounts in the history of Kinaxis in Q4 being typically the strongest quarter of the year, as long as I've been here. And then replicating that yet again in Q1 which I think is a sign of momentum in the market.
So I don't see this as a systemic situation. It's really just a side effect of our recent acceleration of net new accounts.
You asked about the type of service that hasn't really changed either. The deployment services, whether it's starting with RapidStart and expanding from there, or I did mention as a result of our acquisition in India, we're doing some sustainment services for some of our largest customers.
But overall, we haven't seen a real shift in the type of service that we're offering.
Richard Tse
That's great. Thank you.
Operator
Thank you. And next one comes from Thanos Moschopoulos with BMO Capital Markets.
Thanos Moschopoulos
Hi, good morning. John I remember at the time as your IPO at the time you'd said that it gets constrained to growth well as customers needing to realize thing you can software like this as you alluded to, currently, that's not the case anymore or the often get it.
So at this point, what would be the constraint, the growth? I mean, you're obviously putting up very strong growth, but in terms of accelerating it beyond that, is there constraint in terms of sales and marketing capacity, or in terms of the plenty capacity, or what's the dynamic there.
Blaine Fitzgerald
Yes. It's a great question and there is something that keeps me up at night, obviously that we think about as we absorb success.
Obviously we are -- there isn't a day we're not hiring across the board ourselves as a company. But more importantly, there isn't a day where we're not recruiting partners and system integrators.
I believe we added another 15 or so in Q1, we're up over 90 signed agreements with partners. Not all of them system integrators, of course.
Some of them are Solution Extension Partner, some of them are [Indiscernible]. That all said, we're investing quite heavily right now in the on boarding and the training required to make sure we can accelerate the readiness of our partners.
So we're obviously looking, as I said, to these leading indicators, I've talked a lot about this past earnings calls unsolicited inbound leads, which is essentially when somebody brings your doorbell with the come to your store without any solicitation, they just come to you. So we monitored that very closely as a leading indicator.
And that has us working, very diligently with our partner network to certify as many third parties as we possibly can so that we can be ready to absorb the momentum in the success we see in front of us.
Thanos Moschopoulos
Kind of partner related question, I think in the past you've alluded to the opportunity of leveraging resellers to perhaps tackle a market segment even if it's smaller than mid-markets. Is it very [Indiscernible] on that front or anything on the report?
Blaine Fitzgerald
I'm happy to report that we actually had our first successful bar sale. That initiative isn't very old quite and it's nascent states.
But we have signed many, many bars already. I don't know the exact count because, you know Rick?
Rick Wadsworth
I believe we're up to over 20 years.
Blaine Fitzgerald
Yeah. Over 20 bars.
And one of them has successfully closed a deal on their own, with our support obviously, but we're thrilled with that. You mentioned that the mid market and I talked about this in the opening remarks.
That we're thrilled to be able to satisfy the needs of such a broad spectrum of customer sizes and verticals. Our smallest customer does under a $100 million in revenue, under a $100 million and they're using exactly the same software is companies that are over a $150 billion.
So it is a testament, as I said, a testament of the power of concurrent planning it's technique. And obviously our bar program right now is really focused on expanding our sales footprint outside of the geographies that we're already in, and certainly tackling a much broader pipeline of potential.
John Sicard
I think we used to talk about targeting 3,000. On previous -- 3,000 accounts.
On previous earnings calls, we've talked about that growing to 6,000 or 7,000. I can tell you today, with the bar engagement that we have, we're probably closer to 20,000.
Thanos Moschopoulos
That's great, and just a quick one for Blaine. Is it safe to assume that the 23% to 25% SaaS revenue growth could be a couple of points higher in constant currency?
Blaine Fitzgerald
A great observation and great question. At the -- I will say that our numbers are being held back a little bit from -- because of FX issues.
The -- I'm looking forward to the euro, and Japanese yen, and British pound, all those, to make a recovery during the year, and I'll say I'm very confident in the 23% to 25%, but I will also say that FX is a part of the reason that we're in that range right now.
Thanos Moschopoulos
Okay. Great.
[Indiscernible].
Operator
Thank you. And the next question comes from Daniel Chan with TD Securities.
Daniel Chan
Hi. Good morning.
Another question on the guidance. It seems to be coming from Proserve, and you guys are talking about a lot of net new customers coming in.
So I'm just wondering why this increased Proserve outlook doesn't correspond with the substantial increase in software guidance, whether that's from term license or SaaS? I know you increased the term license guidance, but that seems to could be mostly related to strength from this current quarter.
John Sicard
Maybe I'll step it with it professional services and why we're seeing the increases. Number of reasons, but the biggest reason goes back to again to the customers that we're seeing coming in.
And as you can imagine, the professional services revenue comes in at the upfront for any of our software agreement that we had in place. And so that revenue is right now kidding the front of ramp that we're going to have with the subscription amount that come coming over a longer period of time.
We are in a position that we're very fortunate that very big numbers that are coming for professional services, but we are working very gives bills and so you make sure that our partners are getting the bigger bulk or the bigger piece of the pipe when we when you do those networks. So this is just as a symptom of the fact that this is the upfront fee that a lot of customers will take on to deploy our software into their environment.
Daniel Chan
Is it fair to say that the professional services that you're deploying this year than in the upside that you've guided to. Is it fair to say that maybe some of the software revenue you're going to see would fall into 23 then?
Blaine Fitzgerald
Yes, definitely. We -- our software revenue, we generally have contracts between three and five years.
So other than subscription term license revenue, which the majority of its recognized upfront, our sales revenues will be recognized over that three to five-year period, and we do have some ramping deals that are in place as well. So we do have some committed ARR that will be landing over the next two to three years.
Daniel Chan
Okay. Thanks.
And then just another question on Proserv's strength. You mentioned that engagements with your partners haven't changed.
Just wondering to what extent your move into the mid-market is driving a stronger demand for Proserve as well, considering some of these smaller customers may not have the resources to deployment in sales and may want to leverage your services?
John Sicard
Well, yes, absolutely. As as I mentioned, just the sharp increase in net new customer wins in a very tight window translates to a sharp number of project starts all at the same time.
Now, I will say obviously mid-market companies will tend to have smaller overall projects than our enterprise class customers. But there is definitely foundational workfare.
So that comes back to working very, very diligently with our system integrators to make sure that they're well-prepared to absorb those projects alongside those net new wins. But again, I wouldn't classify them as being substantially different.
They might be smaller in scope, but not different from enterprise class accounts.
Daniel Chan
Great. Thank you.
Operator
Thank you. And next question comes from Robert Young with Canaccord
Robert Young
Hi. Good morning.
Just looking back over the years, it's struck me that you hadn't really raised guidance in the first quarter very often. Certainly not the quantum you're doing with this quarter.
And so, given a lot of that coming from professional services, as others pointed out. I'm just curious, is there an implication there around the speed of gross year at the beginning of the year faster than other years?
Is there anything that's creating a dynamic where you're trying -- you see a higher level of professional services here in the short run?
John Sicard
I'll answer that. We're in a fortunate position on see that things are ramping really quickly and professional services, arguably the first group that are going to be the touched by this rapid growth that we're seeing.
And then you're right, we generally haven't we've been pretty accurate in terms of understanding what are opening year forecast or guidance would look like? I think we're in a situation where we're in a day unfortunate that duration where things are happening faster than we anticipated and professional services that the first area that we're seeing that set increasing a lot quicker than we expected.
We're also seeing on the retention periods like our customers are extremely happy with us. And so some of the reasons why you're seeing this increase in guidance is that we've gotten to a position with a lot of our renewals that we're seeing for the rest of the year that are looking really, really good at this stage.
I mean, I would say on a retention perspective, especially on gross retention. This will be one of the milestone years that any company out there, whatever have so we're very, very fortunate to be enough position at this stage.
But we're in whether situations that I think every CFO wants to be and where things are rolling in our favor in a lot of different respects and we're able to increase the guidance at this stage and we'll keep you up to date for the rest of the year.
Robert Young
Okay. Just to be clear on when -- the comments on gross retention, is that expansion that you're trying to highlight there, or it's just the high level of expansion that you're expecting to drive the gross retention?
Blaine Fitzgerald
Great comment. So when I talk about gross retention, I talk about our customer retention.
So we've always talked about that. We're in the mid-90s to high 90s.
I think we're closer to the latter at this stage for, uh, 2022. Net retention has continued to be over a 100%.
We're still very, very happy with the expansion that we've seen on our current customers, and what we're doing right now is that we're in the process of with every new customer, we bring in, and that's more prouder to be able to allow us to expand that revenue over time. So we're situated pretty well in both of those retention figures.
Robert Young
Okay. And the comments made on the unaided inbounds, I'm curious how you're handling those.
As far as I understand, you're not covering all of the verticals out there as yet, and so are you seeing a lot of inbound outside of your target markets, target geographies, and how do you handle those? Are most of these going to be your partners?
Maybe if you talked about that, and how it informs your planning.
John Sicard
Absolutely Rob, we're certainly seeing inbound leads from the mid market accelerate, as we show evidence of success in supporting that sector. And that certainly across all the geographies and of course, we're taking inbound leads in geographies where we're not necessarily directly present and with a growing list of bars that gives us an opportunity to make allocations if you will, on those opportunities.
And so that is continuing as we go. And of course that is fueling, as I said in the earlier comments, it's one thing to have somebody ring the doorbell and just be browsing.
It's another when they say no, no, I have a project. I am -- I have a process, I'd like you to go through and that is fueling not only the pipeline, but active engagements and for me are leading indicators.
The other thing I can tell you. I think maybe you and I have known each other a long time Rob and I've always said our cycle times tend to be on average 18 months.
Well, I've been monitoring that very, very, very closely and that is now there is evidenced to suggest that closer to 12 to 15 now. And I'm confident enough to say I think that will sustain for some time because this is becoming so crucial for so many companies to tackle.
So we're obviously thrilled with that momentum, and the best we made on our global alliance initiatives and growing that team are really, really paying off.
Robert Young
The cycle time like the whole can of worms help others expand on it more, but the -- what's the key drivers is it the rapid value? Is it the shift to mid-market?
Is it customers pushing you to go faster through the sales process? I mean, if there's one or two key drivers in the compression of that sales cycle, why would it be and then --
Blaine Fitzgerald
Yeah. I will tell you that based on my conversations that if I had to pick the number one, it's -- I described it this way, when I'm talking to chief supply chain officer, they tell me I have 104 fever.
I -- like the symptoms are so horrible and so they're looking for a really rapid prescription. [Indiscernible] can you lower my fever?
And then we can talk about transforming for the future. And I think that is the one catalyst that is really driving is the other -- I think I mentioned this before that boards are all over this topic.
Supply chain isn't something that's tactical or cost centered and absolute strategic weapon. Even just recently, I want to say yesterday, this might be the first time this happened where Cardinal Health specifically mentioned Kinaxis as a partner in their press release in their earnings call script.
And so this is becoming more and more typical were supply chain is becoming hyper strategic. And the needs transform away from the legacy lethargic approach to cascaded approach to one that is hyper agile is becoming urgent.
I think those would be the two things I would say, Rob.
Robert Young
Yes, thank you.
Operator
Thank you. And the next question comes from Stephanie Price with CIBC.
Stephanie Price
Hi. Good morning.
Just following up on that conversation there. Could we talk a bit about the pace of RapidStart sales cycle and conversions to make the maximal roll out?
John Sicard
Yes, Stephanie. I can certainly speak to that.
I in fact, RapidStart was very much born out of many conversations I was having with chief supply chain officers that told me exactly that I need to deal with symptoms first before I can deal with cure. I need to be strong enough.
If I can use that analogy and RapidStart continues to be what I believe unmatched in the market the ability to shake hands and go live inside of a 12 week period. In fact, the one recent life science customer I want to say it was 6 to 8 weeks to their initial go live which I think is revolutionary right there.
We are seeing continuation of pickup on that theme. Although depending on the size, it's not uncommon for an enterprise class customers to say, look, I love this RapidStart, I need to go live as fast as possible, but I need to embellish the starting point just a bit.
And so we might see something in the sort of 4 months time horizon for that initial go live. It continues to be very strategic to us at something that we lead with, and obviously for mid markets, it is extremely well received.
Stephanie Price
Great. Thank you.
And then, one for Blaine. Just on the Q1 margins.
You're obviously very strong. Can you talk a bit about the decision to raise margin guidance for the full year by 10 basis points and the investments that you're looking at for the rest of year, maybe?
Blaine Fitzgerald
Sure. Yeah, it's simply -- it actually came down to math at the end of the day, going from 15 to 18 to 16 to 19 with a slight increase in subscription term license, which generally brings to us a 100% margin, but as you can imagine, with professional services also, a large part of the increase in total revenue, it has less of an impact on the margin at the bottom of the bottom line.
It had -- does have, obviously, a dollar -- a big dollar impact for us. But the percentage impact is less though because what we expect that we came in around 20% for professional services at the end of Q1.
We expect we're going to be somewhere in that 10% to 20% range for professional services. One of the things that we're noticing is that the utilization of our team is extremely high, and we went to manage that utilization throughout the rest of the year.
So we're going to ensure that although when we see revenues continuing to ramp, we're going to try and ensure that we have enough resources to support a slightly lower utilization, which will then mean a slightly lower gross margin. But we're pretty happy with that margin it indicates.
And so at the end of the day, it's a spreadsheet to math formula, and we'll take 16 to 19, so we're happy there. Your second part of the question was asking about where do we see investments.
And our biggest investments is going to be headcount and dealing with the increase we're seeing.
Blaine Fitzgerald
We will have to add people on the professional services side. We are continuing to look at the sales side to try and meet the demand that we're seeing.
The fact that we have this great inbound final that's coming in is amazing, but we've also need to make sure that we're finding all those potential customers that haven't picked up their phone and haven't email us. And so we're in a position right now where we know there's a lot open field and we're doing our best to get as much of that to continue to ramp our revenue overtime.
And right now, what you should expect from us is ramping revenue for the next little while.
Stephanie Price
Great call, thank you.
Operator
Thank you and our next question comes from Paul Treiber with RBC Capital Markets.
Paul Treiber
Thanks so much and good morning. Just want to focus on scalability, longer term and big picture.
You mentioned the gating factor is securing partners and also capacity. With RapidStart, is that I know it's speeds to time to market, but then also does it accelerate or improved scalability in terms of reducing some of those constraints in terms of professional services like yours in third party is the attach rate lower?
Is it, obviously it's posture deploy. But in sort of reduced that gating factor.
John Sicard
That is a wonderful question Paul and various Stuart in that it does actually it was very much designed to, as it's a prescription. They've you behind a prescription, is that it's the same medicine for everybody.
And the thesis there is that we can teach -- we can teach our partners how to administer that very safe prescription. This is the same for everybody.
The same starting point. And so this comes back to the training and on boarding and readiness of our bars and our system integrators for that matter, to be able to rapidly deploy and replicate RapidStart as a starting point for every customer.
That's definitely the thesis and it is working in our favor, especially in the bar area where we're seeing more mid markets activity than enterprise class activity. And so absolutely, the answer is yes, we do see RapidStart as being a vehicle to reduce the friction, if you will, of getting bars started and successful in deploying rapid response.
Paul Treiber
And taking that and looking out and sort of extending RapidStart, can you move ultimately? Is it a possibility of moving more towards to something that's more self-service, and maybe even along the lines of multi-tenant from an architectural point-of-view?
So your partners as much more in a hands free for them to deploy customers or eventually get to the point of customers can just deploy it themselves?
John Sicard
There is part of the beauty of RapidStart is it uses a prescribed set of data that is very, very typical and I would say uniform across the customers that we serve. There may be some industry specific new offs between say, high tech electronics and life sciences and CPG.
There will be some certain data elements that existing one market vertical that does not exist in the other. But those are completely encapsulated in the, what I'll call the dosage of RapidStart.
In terms of self-serve, I would say the systems that incorporate of customers ' supply chain data, it's typically not a what I would say, walk up and use. There's typically some -- I'd say some IT work that still has to happen to integrate the datasets between even a mid-market player and our cloud platform.
So obviously, I would love to see a press hard, bottom copies yours, log in, and use your credit card kind of process. Maybe we'll get there someday.
John Sicard
I will tell you that supply chains are like people: almost all the same, but just different enough to be meaningful. And so for the time being, I think we're going to -- we're still going to have some need to have human beings involved in the deployment.
That said, we are seeing a continuous reduction in the amount of effort it takes to go live. I will tell you conversations I have with executives, and I said, no, you can be live in 12 weeks.
There's absolute disbelief until we prove it. I've always said it: you can only earn someone's respect after doing what you promised.
And so we promised. And so I think we're going to continue to improve on that.
Not sure that will end up with a walk-up and use anytime soon.
Paul Treiber
That's helpful. Just one last one.
Just in terms of the momentum of new wins mentioned at mid-market, it's 35%. If you exclude mid-market, how do you characterize the momentum of large enterprise.
Are you also hitting record highs or quarterly highs in terms of large enterprise wins?
John Sicard
I don't know that I've actually measured it that way, but my intuition tells me that the answer is yes. In fact, conversations we've had recently on the management team, it felt like Q1 was a return of enterprise class customers coming back.
It was slower boats to turn and we're looking at the pipeline and we're seeing very, very, very healthy activity in the enterprise class. Obviously, we're thrilled with being able to announce Bayer, Siemens and obviously Kimberly Clark, and Carlsberg and these are all very, very large enterprise class accounts.
You're going to see a continuation of those based on what I see in the pipeline. But at the same time with our adoption of leveraging bars, we're going to continue to see success in the mid market as well.
Paul Treiber
Great. I'll pass the line, thank you.
John Sicard
Thank you.
Operator
Thank you. And the next question comes from Christian Sgro with Eight Capital.
Christian Sgro
Hey, good morning, all. Thanks for taking my questions.
Congratulations to, can you comment on how the disconnect between private and public markets is affecting M&A pipeline. And if Fed any conversations with potential comments, there.
John Sicard
Well, I think as I said earlier on earlier calls anyway, we're being a lot more thoughtful when it comes to M&A. We concluded a very small tuck-in in Q1.
And obviously our pipeline, we continue to look at a pipeline of M&A potential, and it is motivated around filling white space in our technology, like accelerated white space in our technology. I's not so much looking to buy revenue, but looking to accelerate white space and technology.
I would say that there maybe some other potentials throughout the year as we go through that process. We're exceptionally diligence to ensure that anything that we look at is technically accretive, that anything we look at has strong used case fit for the markets we currently serve.
And so stay tuned, I'd say on progress there. That's I guess, my commentary on the M&A front.
Christian Sgro
Great. Thanks.
And has on-boarding the BP customer last quarter helped actuate any conversations in that vertical and other wins similarly Greenfield or a more competitive displacement?
John Sicard
It's a great observation in fact that we were able to pick up DT in the new facility or oil and gas sector. Not the first, not the only.
There are some that we have not announced, and obviously very complex supply chain in that state, very complex. And of course Kinaxis does complex really well.
So I wouldn't say that we're at a stage where we would announce that vertical as one of our primary ones. I think I've said this on previous calls while we announced 7 that we're actively engaged in, we certainly have customers and many more than that.
It's really one of an area of focus for us that we tend to be guided by. But we are really happy with our progress, not only with BP, but in that sector.
So stay tuned for more news as things progress.
Operator
Very good. And the next question comes from Martin Toner with ATB Capital Markets.
Martin Toner
Good morning, everyone. Congrats on a great quarter.
I would like to talk about what needs to happen for EBITDA margins to move into the 20s and then higher. When I strip out subscription term licenses, it looks like you're pretty close.
But can you talk about that?
Blaine Fitzgerald
Sure. I'll jump in.
[Indiscernible] so I'll just say that it's one of those situations where you have a company that -- like ourselves, that we believe we're very, very balanced in terms of growth as well as profitability. A lot of [Indiscernible], obviously, we're in the rule of 40, and we've tried to invent the rule of 100 this quarter.
So we're pretty happy with the direction it has gone in. And what we've done on the profitability side is we've been cognizant of the fact that there is a lot of growth still in front of us.
And so we're trying to manage that growth with accelerating revenue streams that we're seeing right in front of us right now. And so definitely, I think I've said the last last call, if we wanted to be, we could continue to be at a 30% to a 35% adjusted EBITDA margin company right now.
We are constantly making a decision to stick in that range of -- well, right now, we're saying 16% to 19%. If we wanted to be over 20%, we could easily do that this year.
I think we are -- it's going to be very close to that range. Obviously, 19% is not too far away.
But we also don't want to under invest for the opportunity that's in front of us because we do think that this is an accelerating revenue stream, and I want to come back to you one day and say again, hey, guess what? This is the second time we've had a rule of 100.
And that potentially could be in our future.
Martin Toner
That's great, thanks so much. The RapidStart cohort of customers they're still fairly new, just wondering, how -- can you talk about the success you've had growing with those customers at this early juncture?
John Sicard
Yes, absolutely. We've exactly as the thesis had predicted, lowering somebody's fever and making them feel stronger leads to them doing more.
Adding more value. So expansion is a very natural side effect I would say of getting to that, getting to that stage.
And so we have already seen significant expansions across multiple accounts that have already started with with RapidStart. It's where they start.
It's definitely not where they expect to end in their transformation journey. So it's been very, very successful.
We're thrilled with the initiatives.
Martin Toner
Great, thanks, John. And can you say that your pipeline is still growing faster than ARR?
John Sicard
Yes. That's sort of way say yes.
Our pipeline is growing faster than revenue. It's growing faster and ARR so, it's given us the confidence to be very -- I'll be very, very confident in that this call because we see the projections and where our conversion rates are.
But pipeline growing thought certain revenue or ARR is a good sign.
Martin Toner
That's great answer. Thanks so much guys.
And last one to San Diego is a [Indiscernible]. See you there.
Operator
Thank you. And the next question comes from Suthan Sukumar with Stifel Canada.
Suthan Sukumar
Good morning, guys, and congrats on the strong quarter. One question I had left here was more on the RapidStart versus RapidResponse piece.
Kind of curious, what considerations are enterprise customers making today Windy go with the flagship RapidResponse to platform versus the RapidStart program and the the go-to-market benefits at that brings today?
John Sicard
Sure. It's a great question.
First all, I will just clarify that RapidStart -- think of RapidStart as being a blueprint and prescription of the RapidResponse platform. There's nothing -- the software itself isn't different.
It's not different at all. It's the configurations, the starting point, the starting configuration that is different, but it's not a watered down version of RapidResponse at all.
Blaine Fitzgerald
It has all the full power, and potency, and concurrent planning, and end to end transparency. It's fully immersive and inclusive from tip to toe.
In terms of the software platform itself is zero difference zero. The the only difference with RapidStart is we're coming in with our 25 year plus experienced in saying this is the starting blueprint that we can leverage to get you live, to get you concurrent, to start adding value inside of 3 months horizon.
And from that point forward, we can grow the configuration to become more of, what say is tailored to your own specific use cases. And so that's why this has been so powerful.
We've been at this for so long that our customers are relying on our own intellect in our own experiences to blueprint very valuable starting points. And that's what RapidStart is.
It's a blueprint. It's a prescription.
It's a starting point. And from that point on-wards, well then they tailored to their own specific use cases that expand it from that point.
Suthan Sukumar
That's okay. Just a follow-up on that John the customers better, they're comfortable with making kind of that full-blown purchase decision with RapidResponse.
Are they looking for an expanded set of capabilities, right out the gate? Or are there other the sort of decisions, factors that are influencing that?
John Sicard
Yeah. Absolutely.
We've encountered even recently some very large enterprise accounts that absolutely appreciate the RapidStart approach. And they start there with some embellishments.
I'll use that word. We say we want RapidStart plus, I don't know, constrained planning.
Could you add that one feature on top of that prescription? And that might extend that starting point by a few weeks.
But that would be, say, more typical in the enterprise class than mid-market. But I think the philosophy of start -- of getting a very rapid go-live is uniform between mid-market and enterprise.
The only difference is sometimes the starting point has some additional complexities in it that will extend -- might extend the go-live by a few weeks, but it will hit a very urgent need of that particular account.
Suthan Sukumar
Great, great. And then one last thing for me just on kind of looking ahead year and looking at the macro backdrop.
Do you see any sort of change in the mix of it or the mix of adoption between RapidStart and kind of the RapidResponse platform given the potential uncertainty head in the macro backdrop, whereas it not really been a factor given that supply chain, so it's just going to be growing under strategic imperative year for the companies that you're working with?
John Sicard
Yes. I think that supply chain is going to be a growing imperative for many years to come.
I fundamentally believe that I really think this is becoming an urgent, as they say, necessity is the mother of invention. And it might have started with weather events.
The evergreen being ever stuck in the Suez, port strikes, and then the pandemic hits, and then there's war, and then there is fluid inflation challenges hitting different parts of the world and recovering at different rates. This is really informing management teams all over the world and a recognition that if were going to absorb this level of volatility and I say is the ferocity of volatility, then something needs to change.
They need to become more agile. And I think that is was really fueling our momentum.
There's momentum begets momentum, and we are experiencing it right now here at Kinaxis.
Suthan Sukumar
Thank you for taking my questions, guys.
Operator
Thank you. And this concludes the question-and-answer session.
I would like to turn the call to Rick Wadsworth for any closing comments.
Rick Wadsworth
Thanks, Operator. And thank you, everyone, for participating on today's call.
We certainly appreciate your questions, as always, and your ongoing interest in the support of Kinaxis. We look forward to speaking with you again when we report our second quarter results.
Bye for now.
Operator
Thank you. The conference is now concluded.
Thank you for attending today's presentation made out of Centralized.