NXL - Nuix Limited

[kenny]

Watching closely. For once, I tend to agree with this Motley Fool post;

[Snippet]

Nuix is a cheap technology share​

Tribeca Investment Partners’ Alpha Plus portfolio manager Jun Bei Liu still has faith in Nuix.

“Our view of the stock remains positive. We believe the share price has been severely punished on small changes in revenue composition.”

She told The Motley Fool the Nuix share price is expected to head back up as the full-year results are delivered in August.

“This business is one of the cheapest tech businesses listed on the ASX. It’s trading at half of the revenue multiple as many major tech businesses, [but] with higher growth.”

Prime Value portfolio manager Richard Ivers is also still a believer.

“Long term it’s still an attractive business,” he told The Motley Fool.

“We didn’t get a great allocation in the IPO and didn’t chase the stock when it listed. So [we] haven’t owned it the last few months – still watching.”

Reasons for Nuix’s poor half-yearly result​

Ivers acknowledged the first-half result was “disappointing”.

“The issue we are working to understand is the earnings profile and therefore the valuation of the business.”

Liu said that two factors had contributed to the half-year results coming in poorer than the prospectus revenue forecast.

“Firstly, the Australian currency has strengthened against the US dollar — and a big part of Nuix’s revenue is in US dollars,” she said.

“Secondly, the US election in November last year has disrupted the timing of contract awards (many of those missed contracts have now been signed in January). If you adjust for these two factors, the revenue was largely in line with forecasts.”

Only a couple of days before the half-yearly results, Morgan Stanley had put an overweight rating and a share price target of $11.00 on Nuix shares.

 

[dyna]

Those volumes say, it's Instos bailing out.You can almost hear them thinking"Maquarie sold us a pup.Let's take five bucks while we can get it.If this stinker comes good next year,we can always catch it again on the upside"

 

[Dona Ferentes]

Those volumes say, it's Instos bailing out. .....Let's take five bucks while we can get it. If this stinker comes good next year, we can always catch it again on the upside

tricky spot, when it's all about future growth and metrics that fit the occasion, rather than make a case for solidity. (or credibility, trust and transparency)

Following the Half Yearlies, CEO Rod Vawdrey reaffirmed its full-year guidance and blamed the half-year revenue hiccup on currency movements, a resurgence of COVID-19 in key geographies and delays in contract signing given a longer-than-expected transition among government clients following the US election.
(Three strikes, if you are counting)
Statutory revenue fell 3.9 per cent to $85.3 million and its pro forma net profit was $9.5 million.

An insider said "the feedback he is getting from existing and prospective investors is that Nuix could do a better job in terms of enunciating the key drivers of its business and prospects."

Its revenue recognition policy is now under scrutiny and a number of shareholders are evaluating its status as a growth stock and where it goes from here. There are two ways to measure revenue: statutory revenue, required under its accounting standards, and annual contract value, a commonly used metric in the software industry to average annualised revenue per customer contract. The prospectus describes ACV as “removing fluctuations from multi‑year deals in Nuix’s total revenue which results from its revenue recognition policies”.

Under its statutory revenue measure, multi-year contracts can be recognised and booked upfront – as much as 80 per cent can be booked upfront – and the rest deferred over the life of the contract for support and maintenance. In a statement, Nuix said upfront multi-year deals made up 25 per cent of its 2020 revenues and 23 per cent of revenues in the first half of FY21.

“With a continued rise in software as a service deals which are recognised on a month-to-month basis, the percentage of MYDs is expected to decrease."

Some investors believe ACV is a better measure of the company’s revenue performance. In its prospectus, Nuix forecasts ACV growth of 18.6 per cent for the full year, a figure that attracted growth investors. In the December half, ACV was 4 per cent, which many investors believe will make it difficult to reach its full-year forecasts, something the company rejects.

- apart from communications issues, even a 'back of the envelope' glance would throw up a challenge of making 18% annualised if the first half is 4%.

Will probably pop today. DNH.

 

[Dona Ferentes]

strip away the 'growth story'. strip away the new paradigm, strip away the momentum .....

an imprecise science, but it looks like something close the $5.31 IPO price as shown by the last month (& strip away the wanna-be stags, when reality set in) is what the weighted action thinks NXL is worth?

 

[Dona Ferentes]

strip away the 'growth story'. strip away the new paradigm, strip away the momentum ...

and, down on a down day?

NXL provides commentary on recent trading conditions following completion of an internal quarterly management review.
• Pro Forma Revenue of $180m-$185m (vs $193.5m forecast in the IPO Prospectus)
• Annualised Contract Value of $168m-$177m (vs $199.6m) • Pro Forma EBITDA of $64.6m-$66.6m (vs $63.6m)
• Acceleration in customer transition to consumption and software as a service (SaaS) licenses impacts the revenue profile but delivers significant longer-term business model benefits
• Current operating climate has reduced near-term upsell opportunities, while revenue from renewals and new business remain in line with expectations
• Strong underlying business performance with substantial increases in new customers won, and total and average order values, compared to the same period in FY20

During April, a significant and larger than expected number of Nuix’s customers, including one of its largest, elected to transition from module-based subscription licenses to consumption and SaaS license models, resulting in a shift in both revenue and ACV profiles.
Some of Nuix’s law firm, advisory and service provider customers have also recently informed Nuix of a reduced add-on (upsell) requirement for existing licenses. This is due to both their unutilised license capacity in the current climate, as well as the recovery in legal case backlog being slower than anticipated.

 

[bk1]

It should be remembered that this is a Software and Services company that actually makes a profit however, its down 16% today as we speak.
The upcoming Investor Day presentation in May will be interesting ...

 

[dyna]

Volume 10 million.Oh boy,that's Instos again.Macquarie is sitting on a $100 mill loss....so far. This could become a screaming buy...but when? Best to wait,methinks.

 

[dyna]

Macquarie won't be concerned, even though it would not be a good look to realise the loss right now and write it off. Unlike the former (sacked?) NXL Ceo,they sure were not dudded in the float.
They made $565.7 Million selling at the $5.31 issue price.That's a 376% capital gain on their initial $150 Million invested 9 years ago.

 

[bsnews]

Macquarie won't be concerned, even though it would not be a good look to realise the loss right now and write it off. Unlike the former (sacked?) NXL Ceo,they sure were not dudded in the float.
They made $565.7 Million selling at the $5.31 issue price.That's a 376% capital gain on their initial $150 Million invested 9 years ago.

I am into this stock for a fair amount. So on the day it got snapped before close I brought what I thought would be enough to cover my loss if it bounced back as I thought it would a punt really but I would like to think an educated one lol
I like the business and for a tech sector its not easy to find one.
Now do I hold or take the break even while I can.
Still undecided ATM.

 

[Dona Ferentes]

It should be remembered that this is a Software and Services company that actually makes a profit however, its down 16% today as we speak.
The upcoming Investor Day presentation in May will be interesting ...

Mayday or M'aidez

got below $4 during the day. Low of $3.95 and closed at $4.03, another 5% slump.

 

[dyna]

Very helpful write-up in today's AFR.
When the company signs up a client on a multi year contract,it books at least 80% of it,up-front.
Macquarie itself did this,paying its own $US 1/2 Million, 3 year contract, all in one go,3years ago.
These contracts can be up to 20% of its revenues.One Fundie cites low (sub 10%) revenue growth as a good reason for him, not to pile into nxl : a mature company with a low free cash flow and a whopping PE ratio at 55 times earnings.
Data analytics and Intell is a growth sector for sure,but this company's accounting is a bit on the aggressive side.Things may become clearer at Macquarie's conference on 6th May and Nxl's investor day on 18th of May.
Meanwhile short positions(you can keep track,yourself, on "shortman.com.au") are still rising,2.2million shares so far, are now out on loan to the short-sellers.

 

[Dona Ferentes]

Very helpful write-up in today's AFR.

Then there is the capitalisation of research and development, which is high compared to many ASX companies. Nuix capitalises, rather than expenses, about 84 per cent of R&D which it amortises over 10 years.

This treatment may boost earnings but it manifests itself in the negligible free cash flow. The low free cash flow, according to one fund manager that ran the ruler over Nuix, can be tolerated for a fast growing organic business that is investing for growth. But for a mature company with sub 10 per cent revenue growth, "it's a red flag".

 

[Dona Ferentes]

Are we there yet? (starting to look embarassing)

 

[peter2]

Three gaps down and the exterminators (evil short sellers) are in for the clean up.

 

[Miner]

Nuix holders and punters
Please read today's AFR .
The newspaper has started an investigation on nuix.
Market will savagely react this morning.
Do not hold.
Good luck

 

[galumay]

The warning signs were there for a long time.

 

[Dona Ferentes]

Nuix holders and punters ... Please read today's AFR ....The newspaper has started an investigation on nuix.
Market will savagely react this morning.

And indeed it did. Down 10% , got to as low as $3.06 mid day.

The article was very unflattering towards the way Nuix operated in its formative years. Personality conflicts, board ructions, a leading light doing time before acquital. To me, it was damning of mothership Macquarie and portrayed a rather cavalier attitude to incubating a so-called world beater. Snouts in the trough, cashing out oppies as soon as possible; all rather expected. But the hiding of relationships, inserting and deleting info about key players is deceptive.

Apart from the really high turnover/ churn of management and software engineers prior to listing, the other takeout is that, of all the risks documented in the prospectus, it turns out

[n]one of the reasons given for the latest downgrade made the top 10 risks disclosed in the prospectus.

 

[Garpal Gumnut]

There is rather a lot of RED on the chart.

Support Resistance at 12, 11,10, 9, 8, 7, 6, 5 ,4, 3 ...

gg

 

[bk1]

"The article was very unflattering towards the way Nuix operated in its formative years."

How better this would have resonated if you had included a source...but i'm not holding my breath.
Macquarie backed it from early on for a lot of money, they are entitled to take money off the table at IPO, which they did.
I'm more interested in the here and now of Nuix, not that it looks good currently.
I do not hold.

 

[dyna]

The anonymous source is only talking through a lawyer for now,but did notify ASIC in the middle of the float of financial mismanagement, incorrect accounting, wrong tax estimates and more. And what did the corporate cop do? With the mighty Macquarie involved, how could anything, not be above board? Anyway,it assigns the IPO monitoring to a....graduate and his boss. Good one ASIC!
A company associate resigns on the day of the float to cash in $3,000 worth of options for a cool $80 Million(sic).
AfterPay directors and insiders have been selling like crazy,these past couple of years,too,but at least the market has been informed every time.It's the freakin law.