ASIC legal costs drag investigative software developer Nuix into the red, shares fall 12pc
The forensics software maker has swung to a loss after paying $11.2m in legal costs, mostly due to a misleading and deceptive case from the corporate regulator.
Forensics software maker Nuix has swung to $4.8m loss after legal costs relating to an investigation from the Australian corporate regulator hammered the group.
The Australian Securities & Investments Commission launched a misleading and deceptive conduct case against Nuix last year, alleging that the company knew its forecast revenue was millions of dollars lower than what was published in an announcement to the ASX.
The company’s non-operating legal costs surged from $2.4m to $11.19m in the six months to December 31. This sent it swinging to a $4.8m loss from a $1.3m profit in the previous corresponding period.
Nuix shares plummeted on the news, closing down 11.6 per cent at $1.72 each after dipping as low as $1.66.
“Non-operational legal costs were particularly elevated in the half, primarily due to the ASIC Federal Court hearing which occurred during the period,” Nuix said, adding that it expected its legal costs to be “significantly lower” in the current half.
Stripping out these costs, underlying earnings before interest, tax, depreciation and amortisation rose 12.8 per cent to $28.37m. Revenue jumped 12.3 per cent to $98.4m.
Chief executive Jonathan Rubinsztein said the company – which has a market value of $625.44m – had not only delivered top line growth but its next big bet is its “Neo” platform had made “significant progress”.
Nuix’s investigative analytics and intelligence software takes unstructured data such as images, text and voice data and makes it searchable. Its Neo platform can read up to 2000 different file types, relying on AI to process what was typically messy unstructured data.
Mr Rubinsztein said during the first half of the financial year, the Nuix Neo platform was launched to a “small group of early adopter customers”.
He said the first Nuix Neo product, Data Privacy, was launched early in the half, followed by the investigations product.
“The launch of Nuix Neo Data Privacy and Investigations solutions to early adopters in the half reflects an enormous effort right across the organisation,” Mr Rubinsztein said.
“We are pleased to have delivered on these initiatives in line with the timetable we previously outlined. Combined with the Legal Processing solution, to be launched in the second half of this financial year, these solutions provide a step change in our offering to the Nuix customer base and will be a key driver underpinning further growth.”
The group will not pay a dividend.
Nuix was the biggest ASX IPO of 2020, but was later investigated by the corporate regulator over allegations it had lied in its prospectus documents.
Nuix has also faced media attention about concerns over its corporate governance and allegations it breached ASX disclosure rules, as well as multiple shareholder class actions following its $1.8bn IPO in 2020.
Mr Rubinsztein said last August that while some of the critical media coverage had affected Nuix’s sales and contract pipeline, the impact of that was limited to Australia.
On Monday, he said: “commercial relationships with our customers remain strong, as evidenced by further momentum in our NDR (net dollar retention) and generally low churn.”
NDR rose to 110.1 per cent from 103.1 per cent in the previous corresponding period, with Mr Rubinsztein citing an “increasing net upsell to the Nuix customer base”.
“This upsell more than offset a small rise in customer churn to 5.7 per cent, from 4.8 per cent in 1H23,” he said, adding Nuix continues its strategy of funding software development costs from free cash flow.
Underlying cash flow – before non operational legal costs – was $6.6m for the half year. It ended the period with $24m net cash and no debt.
On Monday, Nuix said it had entered a $30 million multi-currency revolving credit facility with a global bank, which will mature in three years.
Mr Rubinsztein said it would be used for “general corporate purposes, other than costs associated with litigation, arbitration or administrative proceedings”.
“The new debt facility provides Nuix with greater flexibility and options to drive growth as part of the company’s build, buy or partner approach.”
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