NXL -11.57%: the data analytics software company gave back some recent strength today despite a 1H result that reads well. The company came in at the top end or above recent guidance for the half, however, the market wanted more given the stock’s ~30% gain in recent weeks. Annualized Contract Value (ACV) was up +17% to $199.6m (vs guidance of $196-199m), while EBITDA beat the mid-point of guidance with $28.4m. Free Cash Flow (FCF) was a slight miss though on higher Working Capital while the $24m cash balance was also a little lighter than expected.
We spoke to management this afternoon, our key takeaways:
- Early adoption of the Nuix Neo platform is encouraging
- Guidance implies just 2.5% growth in ACV from 1H to 2H. Our view is this is likely to be upgraded.
- FCF will improve in the second half with lower legal fees, continued revenue growth.
- Nuix is winning significant business and picking up market share, highlighting the outstanding product they offer.
- They expect a decision on the ASIC continuous disclosure case around the middle of the year, in the case of an adverse decision, penalties are likely to be handed down towards the end of the year.
- To put it in context, Get Swift (GSW) was fined $15m. This is not covered by insurance
- The Shareholder class action will take longer to work through. This is covered by insurance.
MM is bullish NXL, on the radar for the Emerging Companies portfolio ~10% lower.
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