If Nuix had a new years resolution – it would be to get through 2022 without any surprises.
Like most resolutions, it didn’t get past January.
Subsequently, the Nuix Ltd (ASX: NXL) share price has sunk 18% after announcing first-half revenue and earnings would fall on the prior corresponding period (PCP).
Another result, another disappointment
Key financial results from the half ending 31 December 2021 include:
- Revenue of $82-$85 million, compared to $85.3 million in the pcp
- Annualised contract value (ACV) of $161-$164 million, compared to $161.8 million
- Pro-forma EBITDA of $13-$15 million, down from $31.6 million
- Statutory EBITDA of $13-$15 million, up from a loss of $4.4 million
- Net loss of $2.0-$3.5 million, up from a loss of $16.6 million
Nuix noted that existing customer growth remains resilient. However, new customer revenue growth is lagging behind the previous half.
In its last update to the market, Nuix noted new customer revenue was 40% below pcp.
Geographically, strong performance in North America and the Asia Pacific (APAC) offset weaker performance across Europe, the Middle East and Africa (EMEA).
Regarding the stagnant ACV, Nuix reiterated it is seeing a greater shift away from module and towards consumption licenses.
Consumption licenses mean Nuix’s revenue is more closely aligned to its customers. The more data processed through the platform, the more revenue Nuix makes.
Conversely, module licenses require a one-time fee to access the software.
Theoretically, consumption licenses should result in increased revenue. However, this has yet to eventuate.
Unforced errors increase costs
Despite the modest fall in revenue, pro-forma EBITDA has more than halved due to higher costs in the half.
Pro-forma EBITDA is a better proxy for earnings than statutory, given the prior half included one-off IPO costs that won’t be repeated.
Management noted higher ‘non-operational legal costs’, likely from the numerous unforced errors Nuix has hit since its IPO.
The company is also investing in its sales team to counter the drop in new revenue. Additionally, it’s increased spending on its product pipeline.
Nuix will release its full-year results including its strategic review on February 21.
Make up your mind
On November 30, just one month before the close of the half, Nuix announced that revenue for the first four months (July – October) was 10% above the prior corresponding half.
“We have seen a lift in revenue compared to the same time last year, driven by multi year deals…”
Management did acknowledge that growth is not predictive of the remainder of the year.
Although any reasonable person would expect the commentary to apply to the full-year and not the half-year result.
Today’s announcement is an accumulation of abysmal disclosure and poor communication to shareholders.
For the sake of Nuix, I hope it had more than one new year resolution.
