Nuix (ASX: NXL) (OTCPK: NXLLF) shares are up 38%. NXL shares rose on the back of the trading statement - or preannouncement of likely results if we prefer to call it that. Those are good, thus the share price reaction of course. The bigger question is likely to be how far this revaluation will run. It's entirely possible that there's more to come on consideration, or perhaps it will all wait until we see the actual profit number in the full results in August.
As to what is actually done at Nuix: “Nuix Limited provides investigative analytics and intelligence software solutions in the Asia Pacific, Europe, the Middle East, Africa, and the Americas. The company offers Nuix Workstation, a solution for processing file formats and source types into meaningful information by capturing the content, metadata, and context; Nuix Discover that provides processing, analytics, and machine learning-powered review” and so on. The big issue over the reporting period was the acquisition of Topos, a natural language processing company.
What all that technical verbiage really means is that Nuix helps people organise their data. Natural language processing - aka, how people actually talk and think - is a useful front end to that, thus the purchase of Topos.
Nuix share price from ASX
The results themselves are not properly done as yet, what we got today was the preannouncement. What in London we'd call a trading statement: “Nuix experienced a strong close to the end of the financial year, with several key contracts executed in June.
The expected range for Annualized Contract Value (ACV) for June 2023 (FY23) represents an increase of 14% to 15% on the prior corresponding period of June 2022.
Statutory Revenue displays a greater degree of variability than ACV due to the impacts of multi-year deals. The expected range for Statutory Revenue for FY23 represents an increase of 19% to 20% on the prior corresponding period, despite the proportion of multi-year deals falling on the previous year.”
Worth noting that Nuix funds software development out of free cashflow. So, a rise in revenues can - and does - translate through into a much more than proportional increase in EBITDA and earnings. “Underlying EBITDA is expected to be up more than 50% on the prior corresponding period. Statutory EBITDA is expected to be more than 160% higher than the prior corresponding period.” One way of thinking about this is that marginal sales are near entirely earnings that flow through to the bottom line - costs are pretty much fixed, marginal costs are negligible. This is not unusual in a software company of course.
We do, though, have to wait for the full results announcement in August to see what profits were like.