Nuix valued ahead of IPO

Nuix CEO Rod Vawdrey.

Forensic software company Nuix is worth between $2.4 billion and $3.4bn, according to analysts from Morgan Stanley.

The valuation estimates of the business including its debt come as the company has plans to launch an initial public offering in the coming weeks.

The pricing equates to between 12.5 and 17.5 times the company’s forecast sales for the 2021 financial year of $194m, growing at about 19 per cent annually over three years on a compound basis.

Nuix is listing through Morgan Stanley and is 65 per cent owned by Macquarie Group.

The business has been compared by analysts to high growth Australian software companies operating globally and profitable domestic digital companies.

Nuix has software that allows users to process and make sense of huge amounts of data and provides services to governments, advisory law firms and larger corporations globally.

Prospective investors have described the price as hefty, but the company as a quality offering.

The company generated $60.6m of earnings before interest, tax, depreciation and amortisation for the 2020 financial year and the EBITDA is expected to grow to $64.1m on a proforma basis.

On an estimated statutory basis, it is expected to be $40.3m.

Analysts at Morgan Stanley say that the security and investigative software market had a global market of US$27bn in 2019 and its positive structural growth outlook is driven by litigation trends, rising data use and increasing corporate surveillance and govenance.

The analysts say that its key competitive advantage is its proprietary data processing engine, which is called the Nuix engine and can search at least 1000 file types with high speed and accuracy. The Nuix engine powers the majority of its products and applications.

Analysts add that its market is highly competitive, and it has some significantly larger peers with large research and development budgets.

Nuix also has lower customer revenues from cloud compared to some of its peers, which are trading right now at all time highs.