Today's Fin Review. Posted at 5.10pm
The corporate regulator’s accounting expert has conceded that annualised contract value – the measure by which Nuix reports much of its performance – was an imperfect yardstick that may not best reflect the true financial performance of the business.Christine Oliver was called as a witness for the Australian Securities and Investments Commission on Tuesday as part of the corporate watchdog’s case against the software business.Nuix has unravelled spectacularly since an investigation by this masthead that revealed governance and disclosure failings before its sharemarket float. FacebookASIC alleges the Nuix board published ASX announcements on February 26, 2021 and March 8, 2021 that told investors the company would hit the statutory and annualised contract value numbers, or ACV, forecast in the company’s prospectus.ACV represents the total value of the agreements Nuix had with customers averaged out over the year.Under cross-examination, Ms Oliver admitted that ACV was a “point in time” measure that was not the most critical reflection of how a business was performing.“It might be a useful indicator of how you’re going,” Ms Oliver said, before acknowledging that various calculations could arrive at various ACV outcomes.Council for Nuix, Matthew Darke SC, suggested that ACV might not have been the most useful metric upon which retail investors made decisions about whether to buy Nuix shares.ASIC has accused the company and its board of negligence by not disclosing a shortfall in ACV.Two accounting expert witnesses appeared on Tuesday: Ms Oliver for ASIC, and Michael Potter for Nuix.Both experts were asked whether ACV could inform an investor, at a point in time, about how the financial health of the business might perform in future.“It’s a point-in-time measure,” Mr Potter told the court, adding that statutory revenue was a much “better” method of measuring business performance.“It’s a matter of professional judgment of no overarching standard of how forecasts should be applied.”The four-week trial – now in its second week – will canvas Nuix’s financial disclosure following its $1.8 billion IPO in 2020. The court has heard that Nuix’s ACV dropped to $161.9 million for the 2021 financial year.Estimates for the first half of FY21 were $17.1 million, or 9.6 per cent, lower than the financial figures used to develop the prospectus.By April, revenue forecasts were also down to either $185 million or in the range of $180 million to $185 million, the court heard.Expert witnesses are expected to be called for the rest of the week. Economists will be called on Wednesday, while market analysts will appear on Thursday.ASIC has been pursuing Nuix since a joint investigation by The Australian Financial Review, The Sydney Morning Herald and The Age revealed serious culture and governance issues as well as a history of missed sales forecasts.
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