Nuix outlook: Interim results examined

Nuix share price lower on interim release

Nuix (NXL) – an investigative analytics and intelligence software company – listed to much fanfare towards the back-half of 2020. At one point the stock had more than doubled from its offer price of $5.31 per share, trading as high as $11.82 per share in January 2021.

Market turbulence has seen that bullish trend reverse significantly and the company has seen its share price collapse after releasing its first set of interim results to the market last Friday.

The stock opened 21% lower on the day of those results and finished out that session down 32%, at $6.06 per share. To some degree the stock rebounded on Monday, 1 March, up more than 8% during one point of the session.

Interim results at a glance

Overall, though Nuix flagged an influx of new customers and 'momentum' in its latest release, on the top line revenue stagnated, down 4% at $85.3 million, while annual contract value (ACV) for the 12 months ending 31 December was up 3% to $162 million.

This has created an interesting predicament. While the company’s first-half revenue represents just 44% of Nuix’s full-year revenue forecast of $193.5 million management said they still expected to hit that target by the close of FY21.

‘Based on the first half FY21 results, strong new business momentum, a growing pipeline and low customer churn, management reaffirms forecast as per the IPO prospectus,’ the company said. Management said they expected to hit full-year ACV of $200 million and pro forma earnings (EBITDA) of $63.6 million.

This raises a key question, namely: Does the sell-off in the stock suggest that the market doubts Nuix’s ability to deliver on its full-year revenue guidance?

To be sure, looking at the 'Seasonality' section of Nuix's IPO prospectus, the company revealed that it typically books a little over half of its full-year revenue by the end of a fiscal year’s first half.

‘Total Revenue at the end of the first half of FY18, FY19 and FY20 accounted for 54%, 55% and 51% of full-year Total Revenue,’ the company flagged in its prospectus, with it being further added that the expectation was for this trend to 'continue to be a feature of its operating model in the future.'

Positives to mull

Despite lower revenues, Nuix's bottom-line performance was better, reporting pro forma earnings (EBITDA) of $31.6 million (+3%) and pro forma profits (NPAT) of $9.5 million (48% of full-year forecasts). The company booked an after-tax net loss of $16.6 million.

Beyond that, during the half the company said it had onboarded some 49 new customers; increased profit margins; and saw low customer churn. That churn factor, coupled with robust customer engagement and a 'maturing and growing pipeline' is expected to help buoy Nuix’s ACV across the final six months of FY21, management said.

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