No one is writing about Nuix’s value based on its trading...

No one is writing about Nuix’s value based on its trading results. For companies $10m-$200m in market cap which are EBITDA positive a multiple of 13.8x is regarded as sensible at this time. The market continues to ratchet down.

At an EBITDA of $10-$12m and using a 13-14x multiple Nuix at best is worth $140-$160m.

However a number of factors suggest a large discount should be applied because:
- Nuix revenues are declining and it is still relying on multi year deals that may not be renewed eg ASIC is out to tender and larger relationship deals like FTI (signed as part of the Ringtail acquisition) may not be renewed (the combined annual recurring revenue from both customers could be as much as A$10M)
- existing contracts that still stick are reportedly being renewed at lower prices or moving to consumption deals on much lower data volumes (Nuix completely botched its pricing strategy when it flipped to consumption pricing without really understanding the sort of data volumes that its software was processing
- Nuix is continuing to incur higher operating and legal costs and will do so for the foreseeable future while it attempts to turn itself around and see if the myriad of class actions and claims; and
- Nuix’s high rate of development capitalisation may not be sustained so EBITDA may fall further. Nuix's EBITDA also adds back c. 80% of capitalised R&D costs. Were this to be expensed, Nuix's operating EBITDA would be -$20M

As a standalone proposition, it is hard to see that Nuix has any equity value without a significant injection of capital to turnaround the core business. This analysis of course does not reflect the further drag on value arising from the three class actions, the former CEOs lawsuit, any outstanding ASIC investigations and the higher execution risk due to talent drain and a weak market strategy.

It is possible that the business of Nuix but not the corporate entity has a value to a trade buyer who might be able to extract some synergies but they are unlikely to want to pay all of those synergies away.