Nuix Hammered after Disappointing Guidance

For the second time this year data analytics firm, Nuix has seen its share price battered lower after disappointing investors.

Investors on Wednesday sold off Nuix shares after the company said it will not meet the business forecasts set out in its IPO documents issued last December.

In reality the weak update merely confirmed rising suspicions from investors about the company’s performance and its ability to meet the float forecasts after a weak interim report in February.

The shares closed down more than 15% at $4.29 after touching an all-time low of $4.27 in early trading.

The shares floated at $5.31 in December and soared to a high of $11.855 in the heady tech-mad days of January.

But they fell more than 30% in February when the weak interim say management forced to defend forecasts in the prospectus.

At that time, the company said it was still confident of hitting its forecasts, but it would need a strong second-half performance.

That clearly hasn’t happened and the shares lost ground as a result. The shares are down 64% since the high on January 20.

Nuix told the ASX its revenue would be below prospectus guidance, but underlying earnings would be higher than predicted as some customers downgraded their contracts and others converted software licenses to consumption-driven software-as-a-service (SaaS) contracts, which require lower upfront payments.

Nuix now expects to report pro forma revenue of $180 million to $185 million, compared to a $193.5 million forecast in the prospectus, and annualised contract value (ACV) of $168 million to $177 million compared to a forecast of $199.6 million.

Pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) are forecast to be up to 5% or so higher, with the company suggesting a range of $64.6 million to $66.6 million compared to a prospectus forecast of $63.6 million.

In the statement the company explained that Some of its law firm, advisory and service provider customers have also recently informed Nuix of a reduced add-on (upsell) requirement for existing licenses.

“This is due to both their un-utilised license capacity in the current climate, as well as the recovery in legal case backlog being slower than anticipated.

“The accelerated switch to consumption licenses, including SaaS, is primarily driven by changing customer business models, caused in part by a shift from office settings to remote working environments and the need to have flexible global licensing to manage projects in line with data privacy and sovereignty requirements.

“It also reflects the attractiveness for many customers of a decision by Nuix to provide greater choice in deployment, including on-premise and in the cloud hybrid solutions, which assists customers as they evaluate their transition toward consumption licenses.

“The transition to consumption licenses, including SaaS deployments, has had a near-term negative impact on statutory revenue generation. It does not, however, diminish Nuix’s growth prospects which remain strong, as evidenced by ongoing increases in new customer acquisition and retention,“ Nuix said.

For the nine months to the end of March Nuix said it had acquired more customers than in the same period for the previous year.

“The total order value and average order value from these new customers were significantly higher than the prior year period. An accelerating trend in customer preference is evidenced by more than 25 per cent of the total order value being derived from consumption licenses, including SaaS,” it said.

Now it has the huge task of showing investors it understands the problem. It has an investor day scheduled for May 13 which will be vital for regaining its credibility.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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