The Nuix Ltd (ASX: NXL) share price is under scrutiny today after the company responded to market commentary about its business.
What did Nuix say?
The company wanted to respond to articles that had appeared in the media today, including the Australian Financial Review.
It said that it re-affirmed its FY21 IPO prospectus forecasts when it released its FY21 half year result on 26 February 2021. The guidance is based on internal procedures, including an in-depth analysis by the management team and its sales channel of current orders and sales pipeline.
Nuix said that its order book for the six months ended 31 December 2002 was $107 million and its sales pipeline is strong.
How did the company do against expectations?
Nuix said that both its FY21 first half revenue and annualised contract value (ACV) reported on 26 February 2021 were in line with management’s expectations when considering the impact of currency headwinds and the timing of certain deals which subsequently completed in January.
The ASX tech share noted that it said in its prospectus that contract completions are typically weighted towards the end of Nuix’s financial half years. Nuix said that in the first half of FY21, more than 30% of that half’s revenue was signed in December 2020.
Nuix said that ACV also included a delay in spending with the US government associated with the US election, in particular the unexpected delay in transitioning the administration which impacted access to government agencies and officials required for signing contracts. Nuix said it’s well positioned to capture US government spending as it’s released.
FY21 forecast
Nuix’s FY21 revenue forecast is based on estimated renewals, upsell renewals and new business. Renewals and upsell renewals, through additional cores, licences and application add-ons, are forecast at $164.1 million representing 85% of total revenue.
New customer revenue, which has the longest sales cycle and provides opportunity for future renewals and upsell, is forecast at $29.4 million, representing 15% of FY21’s forecast revenue. In the first half, renewals and upselling of $72.2 million was 85% of total revenue and new business at $13.1 million was 15% of total revenue, both in line with the full year forecast mix.
Management comments
Nuix CEO Rod Vawdrey said: “Nuix has been a trusted partner for more than fifteen years to leading organisations around the world including governments, law enforcement agencies, regulators and major corporations. As a newly listed company we are committed to building the same long-term trust with the market. The fundamentals of our business remain strong supported by our powerful processing engine and sticky customer base.”
Summary thoughts
Nuix shares have fallen 45% since reporting, and this response hasn’t done much to ignite a recovery. Investors who are interested in Nuix may see this as an opportunity, but there’s nothing to say it won’t fall even further from here.
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