AI and data company Nuix Ltd [ASX:NXL] is making headlines once more for all the wrong reasons…
The company, which only listed in December, The Nuix Ltd [ASX:NXL] share price is down 18.99% at the time of writing — having been heavily sold off this morning following another FY21 guidance downgrade.
Yet another blow for shareholders as the stock continues to struggle amidst testy markets.
Especially considering the extreme attention this underperforming stock gets from the media, as Money Morning has previously discussed here.
But, let’s take a closer look at why investors are jumping ship today…
Revenue and annualised contract value down, earnings steady
Today’s revised guidance from Nuix is the second downgrade in just over a month. Lending further concerns to investors that management may be going backwards, not forwards.
This morning, Nuix announced that pro forma revenue for FY21 is now expected to be between $173 and $182 million. Down from the $180–185 million declared on 21 April. Which was already down from the $193.5 million forecast in Nuix’s IPO prospectus.
Furthermore, annualised contract value (ACV) is forecast to clock in at $165–172 million. Slightly lower than the $168–177 million reported on 21 April. But drastically down from the $199.6 million estimated in the prospectus.
Needless to say, it’s a bad look for this already struggling stock.
Fortunately, though, the one silver lining for Nuix is that it hasn’t changed its EBITDA outlook. Retaining the $64.6–66.6 million estimate from 21 April. Which is an improvement from their prospectus estimate of $63.6 million.
So, it’s not all bad news. But concerns and questions surrounding topline growth will no doubt haunt Nuix for some time to come, especially if their full-year accounts fail to reach these estimates.
Luckily, if CEO Rod Vawdrey is to be believed, the short-term outlook should be OK:
‘We understand the importance of meeting financial forecasts. There’s a near-term level of uncertainty regarding the precise timing, shape and scope of some large and anticipated customer contracts coming to fruition in the next few weeks.
‘We expect to capture most of the revenue which remains under current negotiation with these customers either by financial year-end or early in our new financial year. We remain confident in the long-term outlook for the company.’
What’s next for Nuix?
Looking ahead, it’s clear that Nuix needs these ‘anticipated contracts’ to come to fruition. Deals that could help soften the blow of these immediate worries about customer growth.
Doubly so if they represent significant potential for sustained revenues for FY22 and beyond.
Whether or not that is possible, though, only Nuix knows. Something that shareholders will want to be keeping a close eye on. Because it would not surprise us to see Nuix jump at the opportunity to talk about such deals once they’ve been finalised.
After all, they are in desperate need of some good publicity.
Until then, though, you may be better off looking elsewhere in terms of investment ideas. And if you’re looking for AI stocks, then there are certainly more options to choose from.
Just check out our latest report, including five promising AI picks, to get you started.
Because while Nuix may be grappling with growth problems, the industry certainly is not.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
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