The Nuix Ltd (ASX: NXL) share price is surfing a wave of optimism on Monday after handing down its results for the first half.
At the time of writing, shares in the investigative analytics software provider are up 5.6% to $1.13. For context, the broader S&P/ASX 200 Index (ASX: XJO) is a touch lower today.
Nuix share price illuminates on an uptrend
- Statutory revenue up 4.3% year on year to $87.6 million
- Annualised contract value (ACV) grew by 3.4% to $170.2 million
- Earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 51.6% to $20.9 million
- Net dollar retention improved from 98.8% to 103.1%
- Net profit after tax (NPAT) increased to $1.3 million from a $2.3 million loss
It was generally a positive half for the software company that has long been shrouded in legal limbo. While growth may have been modest, it was broadly present across the company's key metrics in the first half.
In saying that, there were still two drawbacks apparent during the financial period. Firstly, Nuix's customer churn rate increased to 4.8% from 4.1% a year ago. The company's saving grace was increased spending from existing customers — as demonstrated by the 103% net dollar retention rate.
Secondly, increases in the cost of goods sold (COGS) outpaced the rate of revenue growth during the half. Specifically, COGS surged 35% to $11.7 million due to higher reseller volumes and greater hosting costs. As a result, Nuix's gross margin came under pressure, weakening by 3.6% to 86.7%.
What else happened in the first half?
Nuix continued to modify its board during the six months ending December 2022. On 18 November, Alan Cameron was announced as a new non-executive director.
The appointment seemed fitting given Cameron's legal expertise and the situation faced by Nuix. Based on the Nuix share price reaction to the news at the time, the market appeared to be supportive of the decision.
Simultaneously, chair Jeffrey Bleich and chair of audit and risk Sue Thomas were earmarked for rotation out of their roles. Today, Bleich's move from chair to deputy chair has been solidified. Taking his place is former Nuix deputy chair Robert Mactier.
What did management say?
Commenting on the strategic efforts made at Nuix, Group CEO Jonathan Rubinsztein said:
We've previously articulated our strategic refresh agenda, involving a greater focus on customer centricity and initiatives across three key horizons. An enormous amount of strategic work occurred during the half, and we are seeing some early positive impacts on our financial results.
Adding to this, Rubinsztein noted:
We have made further important hires into key leadership roles, invested in capabilities across engineering, corporate services and product development, commenced a culture refresh program including new branding and company values and refocused on employee value propositions.
What's next?
Unfortunately, Nuix refrained from providing any guidance for the full year. However, operationally it is clear the company is focused on its Horizon 1, 2, and 3 initiatives. This is the overarching program instigated to underpin the company's strategic refresh.
Furthermore, the FedRAMP Ready designation was awarded to Nuix and its software as a software platform during the half.
The next step is for the company to work on formalising a partnership with a US Government agency. Upon authorisation, Nuix will be able to be used for storing the US Government's most sensitive unclassified data.
Nuix share price snapshot
The performance of the Nuix share price has outstripped most ASX shares so far this year. Since 2023 began, the heavily scrutinised company has delivered a monumental 75% return.
Following today's further share price strengthening, Nuix now holds a market capitalisation of $345 million. This means the embattled company is trading on a price-to-sales (P/S) ratio of approximately 2 times if its first-half revenue is annualised.
