The Bull Case for NXL. Factual Discussions.

Recommended Reading (NXL Bull-Case at $790M MC)

Mentioned this in a separate post in a comment reply, but cleaner to start fresh in a new post. In regards to the updated guidance figures, growth appears stagnant at the moment, but if you look at the AUD appreciation previously. It went from $0.69 to $0.78 when they re-issued the new guidance. That's a 13% revenue reduction by itself.

If we discount FX, the growth starts to look a lot better. Furthermore, now that the AUD has gone back to $0.73 in the past few weeks, that should bring a beneficial FX tailwind.

Conversion to ARR is better in the long-term, which is what they are doing now. But because they are converting immediate revenue to recurring, front-load revenue is reduced, so the immediate balance sheet looks uglier temporarily. For example, normally you could take a 2-Year contract income immediately, but now you split it annually into smaller allocations.

Looking at the churn rate of the software (4.5%). At such low-levels it means that the software product is so integrated into the client's ecosystem, there is almost no way for them to switch to an alternative. These are the type of software products that consistently do well.

You're getting a fresh board, fresh CEO, fresh CFO. Definitely a lot of activist moves from Macquarie. NXL is under immense pressure right now to perform, and pressure is what builds diamonds.

With regards to looking for an entry point, think now is as good as it gets, near the inflexion point. What is the actual downside here? Very unlikely to go below $600M - $700M MC. Most companies at that level are software like NTO, not much growth, weak proprietary software and will generate losses for years to come. I'd wager it would be in range of a takeover at those levels anyway. The ASIC investigation is irrelevant, because it concerns an ex-CFO's brother, who is no longer here. ASIC's ex-chief investigator is also now employed at NXL.

What is the upside? If this new board fixes the company and growth resumes (which is sound). Even at a 10% growth rate, this company goes back to $1.5B+. If they manage to hit 20% CAGR again, then we go back to $3B+ MC easily.

There are risks with every investment of course, but because of the level of scrutiny that NXL is facing right now and the institutions watching their every move, its contrarily safer than most other companies at the moment.

Upside gain is 100% to 200%+.
Downside risk is -20% to -25%.

My investment theses are sound, and I have done well. Even throwing a measly $10k at this should be worth the upside. Risk vs Reward always, but patience is essential here too. Open to discussion and different opinions. Assess the risk yourself before any commitment.

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Also, in regards to any potential Escrow funds. Like with most stocks, they are of no concern. Any sales attempted on the market will immediately devalue the rest of their holdings before they can liquidate even 1% of their positions.

What usually happens during escrow releases, is that companies conduct private transactions with other large investors off-market, so you may see new substantial holders show up during August.