Nuix (ASX:NXL) share price sinks 7% following trading update

Here’s how Nuix is performing in FY 2022…

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The Nuix Ltd (ASX: NXL) share price is falling on Tuesday morning.

At the time of writing, the investigative analytics and intelligence software company’s shares are down 7% to $2.38.

Why is the Nuix share price falling?

Investors have been selling down the Nuix share price this morning following the release of a trading update at its annual general meeting.

According to the release, Nuix has re-signed a major advisory contract on a multi-year consumption licence, achieved other significant multi-year deals with existing customers, and completed a number of deals that were originally expected in FY 2021.

This has led to the company delivering a 10% increase in statutory revenue in both reported and constant currency during the first four months of FY 2022.

However, it has warned that its revenue profile is fluctuating and this revenue growth is not necessarily indicative of the remainder of the year. As a result, it is still too early to provide full year guidance.

It’s not all good news

Unfortunately, the 10% revenue growth is where the good news stops. Nuix revealed that its annual contract value (ACV) is flat year on year and its cost base has increased materially.

The latter is being driven partly by product development costs, which include accelerating the Engine as a Service offering. In addition, the enhancement of its sales and distribution capability, employee retention and recruitment, and legal expenses are weighing on its profit margins.

This has led to Nuix’s pro forma EBITDA falling 27% on the prior corresponding period during the first four months of FY 2022. As with its revenue, no real guidance has been given for its earnings for the full year. All management has said is that a large and ongoing increase in its cost base will impact EBITDA, with the benefits expected to flow in subsequent periods.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Nuix Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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