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The Nuix (ASX:NXL) share price has a lot of ground to make up in FY21

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Last week didn’t end well for Nuix Ltd (ASX: NXL) shareholders. The embattled ASX technology company’s shares plunged almost 30% lower on Friday following the release of its first-half FY21 results. Despite a modest recovery on Monday, the Nuix share price is still only valued at $6.30, well short of the $11.86 high it reached in late January.

The company only listed on the ASX in December, but this sort of yo-yoing in its share price might already have some investors heading for the hills.

What does Nuix do?

Nuix specialises in data analytics. Its software helps corporations, law firms and even government and law enforcement agencies sift through mountains of digital data, including emails and social media posts, to deliver actionable solutions. It claims to already have an impressive customer list including Amazon.com Inc. (NASDAQ: AMZN), Samsung Electronics Co Ltd and Commonwealth Bank of Australia (ASX: CBA).

Last week’s big falls in the Nuix share price will have caused quite a stir with institutional investors, as the tech company had some big-name backers when it floated in December. Macquarie Group Ltd (ASX: MQG) took a 30% stake in the Nuix initial public offering (IPO) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) also invested.

What drove the Nuix share price lower?

First-half revenues came in at $85.3 million, down 4% year on year, while pro forma earnings before interest, tax, depreciation and amortisation expenses (EBITDA) increased 3% to $31.6 million. The company posted a statutory net loss for the half of $16.6 million.

The big concern driving the Nuix share price lower was that the company’s results are already falling behind its own prospectus forecasts. Half-year revenues were only 44% of the FY21 forecast, pro forma net profit after tax was 48% of forecast, and pro forma EBITDA was only just nudging 50%. This leaves a lot for the company to achieve in the second half of the year in order for it to meet its internal targets.

Commenting on the results, CEO Rod Vawdrey admitted that Nuix had a “softer” first quarter, but he tried to reassure investors that “the stronger weighting towards the second half is in line with expectations given COVID and seasonality.”

Outlook

Nuix reaffirmed its original forecasts for FY21. It still expects total revenues to come in at $193.5 million for the year, and pro forma EBITDA to be $63.6 million. Based on its first-half results, these might seem like ambitious targets, but Nuix believes that it has built a strong enough pipeline to get there.

Whatever happens, these soft first-half results mean there will be a lot of scrutiny on the company over the second half of FY21.

The Nuix share price has fallen by more than 21% since listing.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rhys Brock owns shares of Commonwealth Bank of Australia and Macquarie Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Amazon and Nuix Pty Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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