Before everyone gets excited about today's update, let's analyse...

Before everyone gets excited about today's update, let's analyse Nuix's financial performance half by half since its IPO. These numbers are taken directly from the half year and full year investor presentations.

1. Nuix has an extremely aggressive R&D capitalisation policy, so it's much better to focus on EBITDA less Capitalised R&D or Free Cashflow in terms of the underlying performance of the business. The table below paints a sad picture from the perspective of both top line revenue and bottom line profitability.

2. It's evident the business is burning anywhere from $5M to $15M per half depending on the extent of the "non-operational legal costs" in that half. Its misleading, in my view, to exclude these costs from the performance of the business (as Nuix continually seeks to do) as the company still faces a class action and the defence and outcomes of the ASIC litigation.

3. Nuix had a much stronger first half in FY2022 compared to the second half - revenue in 1H was $16M higher compared to 2H. If this is repeated in FY2023, then Nuix's burn rate could skyrocket back above $15M in 2H2023. This would deplete cash at bank to less than $25M. Is this enough to cover an adverse outcome on the ASIC litigation as well as to settle the class action? Unlikely it would seem. Even without non operational legal and settlement costs, Nuix is still burning $15-20M per annum. With $25M in the bank as at 30 June 2023, it would have only about 12 months of cash to fund its underlying business.

4. Of course, the existential threat to Nuix is the Sheehy matter. As Nuix has publicly stated, if the judgement goes against Nuix the company will appeal. So investors can expect ongoing legal fees on this matter. Nuix has no other choice but to appeal any adverse judgment otherwise the company would be immediately forced into administration while it attempts to negotiate with Sheehy and the other creditors (including ASIC, class action).

PS. The uptick in the share price can be hardly due to the shorts covering their position given it is less than 1% of its shares sold short based on data provided by ASX. More likely, the uptick in the price is due to pure speculation from retail investors, particularly given the relatively low volumes compared to historical trading.

You can locate data on short selling here https://www.shortman.com.au/stock?q=NXL

	1H2021	2H2021	1H2022	2H2022	1H2023		FY2021	FY2022
	Dec-20	Jun-21	Dec-21	Jun-22	Dec-22		30-Jun	30-Jun
ACV	161.8	165.6	164.5	162.0	170.0		165.6	162.0	-
Statutory Revenue	85.3	90.8	84.0	68.3	87.0		176.1	152.3
EBITDA	31.6	35.1	13.8	(1.7)	20.0		66.7	12.1
Capitalised R&D	(16.9)	(17.3)	(21.8)	(20.6)	(20.6)		(34.2)	(42.4)
EBITDA less Capitalised R&D	14.7	17.8	(8.0)	(22.3)	(0.6)		32.5	(30.3)
Free Cash Flow**	13.9	(5.5)	(16.5)	(5.0)	(9.7)		8.4	(21.5)
Net cash (debt)	102.6	70.9	52.5	46.8	37.1		70.9	46.8
Change in net cash		(31.7)	(18.4)	(5.7)	(9.7)
* Proforma Free cashflow (excluding IPO costs)