Nuix Ltd (ASX: NXL) share price has fallen today after announcing its first-half earnings had more than halved due to ballooning legal costs.
Nuix share price and profit plunge
Currently, the Nuix share price is down 3.89% to $1.36.
Key financial results for the half ending 31 December include:
- Revenue $84.0 million, down 1.5% year-on-year (YoY)
- Annualised Contract Value (ACV) $164.5 million, up 1.7% YoY
- EBITDA $13.8 million, down 56.4% on 1H21
- Loss of $2.3 million, down 124.5% on 1H21
Despite revenue remaining stagnant, Nuix became a more resilient business over the half.
Subscription revenue increased to 90% of ACV. Additionally, consumption-based ACV increased by 24.6%.
Nuix is currently changing its sales model from license to consumption base. In the short-term this hits sales, but over time it leverages revenue to customer volume through the Nuix engine.
The more customers use the Nuix engine, the more money flows to Nuix.
Churn remains low at just 4.1%. Meanwhile, customers are spending a similar amount of money with Nuix this year as they did in the prior period.
North America was the standout division with two large deals and three renewals. Asia Pacific also increased revenue by 10% driven by strong renewals.
This was offset by a week half in EMEA due to a strong comparable period.
Legal costs accelerate losses
The bigger issue for Nuix share price is on the cost side of the equation.
Earnings and profit fell sharply impacted by $9.8 million in legal costs and the recent acquisition of Topos Natural Language Processing.
Nuix also ramped up spending on research and development, increasing 29% over the period. Subsequently, headcount increased by 55.
Nuix won’t be running of out cash anytime soon, with $52.5 million cash in the bank.
But cash flow has historically been an issue for the business, hence the negative share price reaction today.
What’s next for the Nuix share price?
The Nuix share price will be supported by the completion of a strategic review and the arrival of Jonathan Rubinsztein as CEO.
The business will become more customer-centric in an attempt to rejuvenate its share price and revenue.
“The market potential continues to grow and expand into new industry sectors and use cases for our technology”
A simpler organisation structure will be implemented, with clear annual targets and accountabilities.
Importantly, there will be a focus on Nuix becoming a great place to work and building trust with shareholders.
“Central to our mission is to further evolve Nuix into a truly customer-centric organisation with strong top-line growth”
