The NUIX Ltd (ASX:NXL) share price is rebounding slightly today. This comes after the company's shares fell a whopping 15% yesterday on news that it wouldn't reach its initial IPO financial guidance.
NUIX shares are trading at $4.39 at the time of writing, 2.21% higher than yesterday's close.
For those who aren't aware and may have only begun following the Aussie tech company recently, Nuix is engaged in providing software-related services to large corporations, government, law enforcement, law firms, and service providers.
The kicker is the nature of its clients. It's widely speculated that Nuix provides its software services to some of the largest Western government law enforcement and national security organisations, like the CIA and FBI. This is also why Nuix became the highest value technology IPO in Australia in 2020.
Its products include Nuix Discovery, Nuix Investigate, and Nuix Workstation among others. Most of the firm's revenue gets derived from this software. However, that makes the company very vulnerable to changes in subscription models. This is where the dramatic falls eventuated from yesterday.
What's been happening to NUIX?
There were obviously some rumblings that NUIX wouldn't meet its initial financial guidance from its IPO.
However, as The Motley Fool reported yesterday, the news yesterday was further accentuated by the fact that NUIX was downgrading its guidance just over six weeks after reaffirming its following media criticism.
One of its major investors, Macquarie Group Ltd (ASX: MQG) promptly cashed out on its initial $150 million investment in December last year. This was when NUIX shares were over $1 more expensive than they are today. For the record, Macquarie pocketed a cool $450 million for its foresight.
However, the NUIX rebound today shows there is still a lot of investor faith in the company.
Yesterday's NUIX financial report said that the changes to the company's bottom line were due to the aforementioned subscription changes. NUIX had shifted its offerings towards a more "flexible" consumption-based model. In this model, companies could pay based on the amount of NUIX's software they used.
This hit NUIX's revenue as many of the smaller users were no longer charged a flat fee. However, NUIX insists that it also led to more customers and will continue to do so. This may well lead to a more sustainable, competitive business over time.
While its shares crashed, its report stated that the change could be seen as an overall positive:
For the nine months ended 31 March 2021, the Company acquired more customers than in the same period for the previous year. The total order value and average order value from these new customers were significantly higher than the prior year period. An accelerating trend in customer preference is evidenced by more than 25 per cent of the total order value being derived from consumption licenses
Share price snapshot
Despite today's gains, the NUIX share price has been falling dramatically over recent months. As of today, it's down 13% this week, 17% this month and 46% in 2021 so far.
Considering it outstripped many other S&P/ASX All Technology Index companies last year, NUIX investors will also be disappointed to learn that it's down 130% against its broader technology sector over the past 12 months.
