Nuix Shares Down as Management Update Fails to Impress (ASX:NXL)

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Troubled software company Nuix Ltd [ASX:NXL] is back in the limelight today. And again, it’s for all the wrong reasons…

The NXL share price is down 12.89% for the day, at time of writing, majorly sinking after comments from the company’s first AGM failed to lift investor sentiment.

For long-term investors, it’s yet another blow to a position that has already been battered this year. From the start of 2021, Nuix shares have collapsed by 74.13%. And while there is still every chance management could turn things around, it isn’t looking likely right now.

Let’s take a closer look at what the CEO and Chairman had to say…

Slight boost in revenue not enough to stem sell-off

The one positive from today’s address is that Nuix’s statutory revenues are in the green. For the four-month period ending October, sales lifted by 10% — the one silver lining keeping investors’ hopes up.

Because beyond that, recent performance has been poor to say the least…

For instance, revenue from new customers is 40% lower than the same time last year, suggesting that while Nuix is getting more money from its existing clients, it’s struggling to win over new ones.

That’s not ideal for the long-term growth of this still-developing business.

On top of this, their annualised contract value (ACV) is stagnating. Management confirmed that the current ACV run rate is in line with their FY21 result. Again, a fairly big blow for a stock that should be delivering strong growth in its key metrics.

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Worse still, because their costs are rising, Nuix is retaining less of this revenue. Pro forma EBITDA, for that four-month October period, is estimated to be down 27% year-on-year.

Needless to say, management has a lot of work ahead of them to turn things around.

Which is why, as Chairman Jeff Bleich notes, replacing current CEO Rod Vawdrey is a key first step:

Part of this [next] chapter involves a new CEO to steer the Company towards its full potential. Thanks to Rod Vawdrey’s willingness to announce his retirement plans early, so that we could conduct a broad, global search, and effective CEO transition, we are delighted that we have been able to identify and select an outstanding successor before this meeting.

What is more, we announced that Jonathan Rubinsztein will take the reins as the new CEO of Nuix starting next week, earlier than our initial expectations of late January. Jonathan is a seasoned technology executive with a track record of leading dynamic organisations in international environments.

He brings a deep understanding of our requirements and opportunities, and a successful record of steering an ASX-listed entity through a period of transformation and growth. Our Board was especially impressed with Jonathan’s strategic thinking, global viewpoint, tremendous energy, commitment to culture, and devotion to Nuix’s organisational mission.

What’s next for the Nuix Share Price?

As Bleich’s comments state, the immediate focus will be to onboard Rubinsztein as fast as possible. With his quick introduction to the role a clear indication that the board wants to put the failings of 2021 behind them.

Beyond that, I’m sure we’ll begin to see some bigger changes in the background. The kind of operational shift that will hopefully help Nuix tame costs and increase revenue growth.

For current shareholders, only time will tell if a proper turnaround is possible.

In the meantime, if you’re looking for some tech plays that are a little less mired in controversy, then there are plenty of small-cap opportunities. We’ve put together a list of five our favourites in our comprehensive report, right here.


Ryan Clarkson-Ledward,
For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here

About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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