The Nuix Ltd (ASX: NXL) share price has tumbled more than 25% this morning as the market digests the company’s half-year results.
Nuix is a software developer that assists companies in managing, securing, de-risking and utilising large amounts of data through analytic tools.
Nuix’s operational highlights
Momentum continued to build over the last six months, with new business up 17% (49 new customers) compared to the prior corresponding period (pcp).
Representing 26% of first-half revenue, investment in R&D continues to be a priority in order to deliver product enhancements and progress cloud use cases for the Nuix engine.
After a successful listing on the ASX last December, the company has also attracted key new hires including salespeople and engineers.
The numbers
Total revenue came in at $85.3 million for the half, down 4% on the pcp. This represents 44% of the company’s FY21 revenue forecast which was presented in the IPO prospectus.
Annualised contract value (ACV) finished at $162 million, up 3% on the pcp. Pro-forma EBITDA, which excludes one-off IPO costs, was $31.6 million, growing 3% thanks to strong profit margins. Nuix’s statutory net loss after tax was reported as $16.6 million for the half-year.
The weaker USD had a material impact on revenue across the period, which was partly offset by higher recurring revenue and strong new business sales of $13.1 million.
Gross margins widened as a result of a boost to software licences, which accounted for 98% of first-half revenue.
Management indicated it expects to accelerate hiring initiatives in the second half of the year to continually support the transition to the cloud and add additional enterprise sales resources as the company expands into new markets.
As at 31 December 2020, Nuix had a net cash balance of $103 million and net assets of $263 million.
In December last year, the company’s IPO raised $953 million, with the proceeds partly used to pay down existing debt and fund the cancellation of options exercisable before completion of the offer.
Management commentary
Commenting on the results, Nuix CEO, Rod Vawdrey said: “We are pleased to report a good first half result that demonstrates the diversity of our business and the stickiness of our customer base. Our people have responded incredibly well to the new normal of working from home and providing virtual support to each other and our customers.
We have continued to invest in product development, increasing our ability to understand, investigate and protect data for customers and ourselves, including releasing a Microsoft Teams connector. We have also invested in our security practices including using the Nuix Endpoint Adaptive Security product internally as well as with key clients.”
What lies ahead?
Nuix operates in a growing industry that is being driven by an increased need for data and regulatory compliance.
The company estimates it has a strong foothold in the US$4 billion eDiscovery and digital forensics software markets, and will continue to develop strategic initiatives to tap into the US$25 billion government, risk and compliance market.
To learn more about Nuix’s business model, industry tailwinds, valuation and risks, check out this article: Is Nuix the next ASX growth share darling?.
