It was another horrible month for the Nuix Ltd (ASX: NXL) share price in May 2021. It dropped by 33%.
What happened?
Nuix drifted lower throughout the month as investors came to terms with a forecast downgrade on 21 April 2021.
At that time it said that FY21 pro forma revenue (meaning company calculated revenue), compared to the IPO prospectus forecast of $193.5 million, was instead going to be $180 million to $185 million. It also downgraded its annualised contract (ACV) projections from $199.6 million to a range of between $168 million to $177 million.
Nuix said in the April downgrade that the acceleration in the customer transition to consumption and software as a service (SaaS) licenses impacts the revenue profile but delivers significant longer-term business model benefits.
However, the current operating climate had reduced near-term upsell opportunities, while revenue from renewals and new business remained in line with expectations.
But that was April.
Another downgrade for the Nuix share price
At the end of May 2021, Nuix downgraded expectations again.
Nuix said that as a result of decent developments in its new and existing customer contract revenue pipeline, it is adjusting its guidance.
FY21 pro forma revenue is now expected to be in a range of $173 million to $182 million. This is down from a range of $180 million to $185 million – this guidance was only given just over a month ago on 21 April 2021.
Annualised contract value (ACV) is now forecast to be in a range of $165 million to $172 million. That’s down from a forecast of $168 million to $177 million.
There was part of the guidance that didn’t change. Pro forma EBITDA (EBITDA explained) guidance is still for a range of $64.6 million to $66.6 million. That’s because the company is being careful with costs.
The expected timing of closure of some upsell opportunities and new potential customers was affecting things. There remains uncertainty in relation to both the structure and timing of a small number of large customer upsell opportunities, including whether these may result in multi-year deals during FY21.
Summary thoughts on Nuix and the share price
The anecdotal evidence I’ve seen suggests that Nuix has a good product that has compelling uses in the real world.
However, two revenue downgrades so soon after the IPO is not a good look. There are also some question marks about the leadership.
There may be a beaten-down, opportunistic chance here – investors clearly liked the concept of the company when it listed. Perhaps it has been sold off too much? But it’s not one of the ASX growth shares on my own watchlist right now.
