Nuix Limited (NXL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Nuix Limited Full Year '26 Results. [Operator Instructions] I would now like to hand the conference over to Mr. John Ruthven, CEO. Please go ahead.

Welcome, everyone, and thank you for joining us for Nuix's Full Year 2026 Results Presentation. I'm John Ruthven, Nuix's Chief Executive Officer; and with me today is our Chief Financial Officer, Peter McClelland. Today, I'll start with our key messages and metrics for the year. Peter will then take you through our FY '26 financial performance in detail. I'll return to discuss how we're scaling Nuix Neo and integrating Linkurious, before covering what we see as significant platform evolution and strategic reset, the structural changes we've made to position the business for its next phase of growth. I'll then close out with our outlook before we take questions. Let me start with the highlights from the year. FY '26 was a year of profitable growth and decisive action. ACV finished at $260 million, well within our previously guided range. Nuix Neo ACV grew 179% to $78.5 million across 135 customers. We delivered strong growth in revenue on further success in selling multiyear deals. Adjusted management EBITDA saw a material expansion with revenue growth significantly outpacing cost growth, in line with our strategic objective. And we achieved a very strong lift in cash generation with underlying cash flow up 154% to $51 million. And here are the metrics. ACV rose 13.9%. Excluding Linkurious, ACV was up 8.6% or 11.1% in constant currency. This represents good underlying growth despite significant currency headwinds during the year. Revenue up 18.8% or 17.1%, excluding Linkurious. Net dollar retention finished the year at 105.2%, up from 101% at the half, a meaningful improvement. Adjusted management EBITDA, which is the key measure of profitability considered by management and the Board, up 60.4% or 55.1%, excluding Linkurious and a strong closing net cash position of $49.9 million, up 24.8% on the prior year and post the Linkurious acquisition. Turning to Slide 7. Alongside the financial performance, we've taken decisive action to position the business for the next phase of growth. These actions reflect a fundamental shift in how we go to market, moving from feature selling to platform value. We restructured our go-to-market and enhanced commercial capability now operational for FY '27. We unified product and technology under CTO ownership backed by a one-off R&D accelerator investment in FY '27. Our AI strategy is advancing, driving internal productivity and capturing new revenue opportunities. The Nuix Neo migration program continues with strong momentum, now representing 30% of total ACV. The Linkurious acquisition is on track with early cross-sell success. And I also want to highlight the dismissal of the ASIC case back in April, in which the Federal Court dismissed all of ASIC's claims against the company and individual directors. ASIC has since appealed that decision in relation to the company with the dismissal of all claims against the individual directors not subject to the appeal. I'd now like to invite Peter to take you through the financial results in detail.

Thank you, John, and good morning, everyone. As John mentioned, ACV finished the year at $260 million, representing a growth of 13.9% on the prior corresponding period. Excluding Linkurious, organic ACV grew at 8.6% or 11.1% in constant currency, representing good growth despite some currency headwinds. As you can see from the chart, this represents consistent growth over a 5-year period with FY '26, including the contribution from the Linkurious acquisition, which closed in April. Turning to Nuix Neo. In line with our growth strategies, Nuix Neo ACV grew 179% to $78.5 million across 135 customers, up from 75 customers in the prior year. Performance was strongly driven by migration of customers from components to Nuix Neo, new customers and further upsell of existing Neo accounts. This brings Nuix Neo share of total ACV to 30%, more than double the proportion of 12 months ago, and the migration pipeline remains strong heading into FY '27. Slide 12 shows the key components of ACV growth during the year. Nuix Neo was the key driver, contributing $50.4 million of growth, more than offsetting the decline in component ACV. Discover was a slight negative with on-premises growth more than offset by a decline in SaaS, driven by the loss of one large contract. John will talk later about how our go-to-market for Discover is being addressed. And Linkurious contributed $12 million of incremental annualized contract value during the year. Turning to NDR and churn. Net dollar retention finished the year at 105.2%, up from 101% at December half year. That improvement was driven by focused strong upsell activity. On churn, the figure of 6.6% improved from the prior year, although it was higher than the figure reported at the half. As we flagged at the 1H results, a single large account in APAC was in the process of winding down over the course of the year and as such, was already captured as downsell in NDR. The ultimate churn event when the customer formally left us and has counted as churn occurred in the second half, which contributed to the uptick relative to the first half figure. Excluding that single account, underlying churn reverted to approximately 5%, which is more reflective of the ongoing trend. More broadly, the systematic migration of customer -- from the customer base to Nuix Neo is the key lever of driving NDR improvement over time. And as customers move to the platform, we then see greater opportunity for upsell and cross-sell. Turning to the regional performance. Growth was led by North America with strong government agency sales and Nuix Neo adoption and particularly strong sales from Nuix Neo Foundation and Legal Solutions. EMEA maintained momentum led by investigation solutions across law enforcement and regulatory agencies with strong new logo acquisition in Central Europe. Asia Pacific was broadly flat, impacted by the loss of that key account that I just mentioned, although we did see successes in government agency sales and Nuix Neo adoption in the region. From FY '27, EMEA and Asia Pacific will be combined into a single international sales grouping, which John will come to later. Revenue came in at $263.2 million, up 18.8% or 17.1%, excluding Linkurious. On a constant currency basis, revenue growth was very strong at 20.3%. Multiyear deals rose to 35% of revenue, up from 27% in the prior year. And this is an ongoing area of management focus, representing a deepening of longer-term commitments from our customer base. Linkurious contributed $3.8 million in the 72 days from completion and also benefited from the close of a large multiyear deal account in June. Turning to research and development. Total R&D was $57.8 million or 5.4% up on the prior year, representing 22% of revenue. We realized efficiency benefits during the period from the structural changes made in the prior year, allowing us to increase output while maintaining disciplined cost growth and R&D continues to be funded from underlying cash flows. Looking ahead, John will talk to the one-off $15 million R&D accelerator investment planned for FY '27, which targets specific areas of platform capability where we see a unique window to capture emerging demand. Turning to adjusted EBITDA. It is certainly worth spending a moment here because this is a very strong outcome in a core measure of profitability for the group. Adjusted EBITDA rose 60.4% to $59.8 million, with the margin expanding to 22.7% from 16.8% in the prior year. This result meets our FY '26 strategic objective to grow revenue faster than operating costs and clearly demonstrates the expanding operating leverage in the business. Revenue growth significantly outpaced cost growth, highlighting the focus on profitable growth that underpins our strategy. The bridge on Slide 18 further illustrates the operating leverage achieved during the year. Starting from the FY '25 adjusted management EBITDA of $37.2 million, revenue growth of $41.7 million was the largest contributor, significantly outpacing the combined increase across all cost categories. R&D costs we've just discussed. S&D costs increase were mainly driven by commission plans and G&A with some executive restructure and other variable pay costs. To the right, you can see the pathway through to statutory EBITDA of $66.9 million after capitalized R&D, nonoperational legal costs, restructuring and acquisition costs. I would also like to highlight that statutory NPAT was $16.4 million versus $9.4 million loss in the prior year. Turning to the cash flow. This is another slide that I'd like to draw your particular attention to. We achieved a very strong uplift in cash generation during the year. Underlying cash flow increased 154% to $51 million. After those one-off type items, nonoperational legal costs, restructuring, acquisition costs, the overall free cash flow was very strong at $37.4 million, up from $4 million in the prior year. And as John mentioned earlier, the net cash position at the end of the year was $49.9 million post the Linkurious close. I'll now hand back to John to discuss Nuix Neo and our strategic positioning.

Thanks Peter. Many of you will recognize this slide from the half year result. The Neo migration program is the primary driver of the Nuix Neo growth we discussed earlier. We are now in Phase 3 Execution at Scale, with repeatable migration processes in place and partner capability expanded globally. The program is now operating at an established cadence, structured, predictable and delivering measurable ACV uplift across the base. You can see the shift occurring in our ACV mix as we migrate customers to Nuix Neo and as we win new customers to Nuix through the Neo offering. Nuix Neo's share of total ACV has increased to 30%, more than double the proportion 12 months ago. Discover growth has been lagging, and I'll come back to our response to that shortly. The important point here is that the Neo migration program has now reached an established cadence. We are winning new customers to the organization through our platform offering, and Nuix Neo is on track to become the majority of ACV in the medium term, opening up further opportunities for growth. Our AI capabilities continue to evolve and the ACV upsell opportunity is significant. Let me walk you through this from the bottom up. Approximately 60% of our 135 Nuix Neo customers have purchased the AI-enriched solutions library, solutions that many of you will be familiar with, investigations, legal discovery and data privacy. Importantly, these are not the only use cases for the powerful Nuix Neo capability, which is partly why we're making the shift from discrete solutions to broader platform capability. Moving up, Linkurious Graph Visualization technology, which was acquired in FY '26. It's early days, but the cross-sell opportunities for customers to leverage Graph Visualization technology are significant. At the top, AI enablers such as BYO AI, Semantic Search and Transcription. About 20% of Neo customers have purchased additional AI enablers so far with early upsell success following significant expansion of the offering in FY '26. Each of these layers represents an opportunity to expand ACV per customer, and we're seeing that play out in practice. These customer stories validate our commercial successes. I won't go through them now, but they are representative of the patterns we are seeing across the base. I'll move on. Turning to Linkurious. Financial close was April 26, with integration progressing to plan. The full team in Paris office has been retained. In the 72 days from financial close to year-end, Linkurious contributed ACV of $12 million, revenue of $3.8 million and EBITDA of $2 million, with revenue and EBITDA boosted in the period by multiyear deal activity. The strategic rationale remains clear. Nuix Neo processes large volumes of complex unstructured data. Linkurious visualizes the connections within it. Together, a complete workflow from raw data to visual intelligence. The graph analytics market is growing strongly with significant cross-sell opportunity across the combined customer base. For FY '27, we are implementing what represents a very significant evolution in how we build, position, sell and embed the Nuix Neo platform. The structural changes we have made in go-to-market, in combining product and technology and in our AI strategy all flow from a fundamental shift from feature selling to platform value. This is not a minor adjustment. It's a change in how we go to market, how we develop our products and how we engage with our customers. Shifting to a platform model means our addressable market in enterprise unstructured data is multibillion dollars in size with over 10,000 ICP or ideal customer profile, customers globally meeting our target criteria and current penetration of less than 10%. Let me take you through the typical ICP customer characteristics. Regulated large enterprises operating in high compliance sectors, significant data volumes at scale, complex compliance and governance requirements across the enterprise and ACV potential of $500,000 plus. Platform positioning opens up a significantly larger addressable market and deeper wallet share. This is the strategic heart of what we are building. Today, we have deep domain strength in investigations, legal review and data privacy, proven at scale with the world's most complex organizations. This is our foundation, and it's a strong one. We are building the trusted enterprise platform for unstructured data intelligence, providing AI-ready data and context for agentic workflows, compliance automation and actionable business insights. The Nuix Neo platform strategy, go-to-market and R&D are all aligned around our ICP customers. Investment is prioritized towards strengthening the platform offering. We're implementing a company-wide shift to account-based marketing, being precise in identifying and targeting accounts with ICP characteristics. This positions Nuix to meet growing demand for unstructured data intelligence at a time when enterprises are grappling with how to make their unstructured data defensible, accessible and valuable for AI programs. This is not a theoretical positioning exercise. It reflects where customer demand is already heading and where our pipeline is building. These pillars represent the strategic pathways to unlocking our future ACV potential, Neo migration, ICP upsell, new customers, Discover growth and partner and geographic expansion. These are the pathways to realizing Nuix's ACV potential, and we have strategies in place for each. Our go-to-market strategy is now in place with enhanced commercial capability. The benefits, consistent, repeatable execution across 2 regional sales teams, focused accountability for Discover growth, stronger customer retention and faster time to value through a dedicated Chief Customer Officer function, improved pipeline conversion through sales enablement and new ACV contribution through dedicated partner and alliance leadership. This structure supports commercial execution across all 5 pillars from FY '27. I mentioned I'd come back to Discover. We've established a dedicated commercial model to unlock Discover's growth potential, a distinct market opportunity with significant untapped potential, a new EVP reporting directly to the CEO, a dedicated commercial team, a distinct go-to-market strategy and investment in Discover-specific capability. Discover has a strong market presence with target buyers, whether cloud-based or on-premises. Along with this go-to-market repositioning, the R&D accelerator investment this year will mean improved Discover UX or user experience and Argentic capabilities. This dedicated commercial model creates a more focused strategy for this important customer cohort to unlock Discover's inherent value potential. Turning to AI. Our internal AI strategy takes a structured, measurable approach, dedicated AI roles, model-agnostic tooling and digital FTEs as a universal measure of AI ROI. We deploy Nuix Neo on our own workflows internally, proving value before we take it to market. Focus is on scaling capacity, not reducing headcount. And critically, every AI tool deployed carries a measurable return. This is a clear reportable ROI framework for internal AI investment. Turning to the external landscape. The enterprise AI environment is shifting, and those shifts deepen our defensive moat and create revenue opportunities. As AI spend increases and accountability rises, the differentiator is customer control over their data. Our defensive moat is strengthened by data and workflow ownership, full auditability and building for interoperability. Balancing AI innovation with accuracy and defensibility is complicated and right at the heart of our competitive positioning. Our customers have complex requirements that can be massively improved by AI innovation. And simultaneously, their outcomes must withstand legal scrutiny and regulatory examination. Nuix Neo provides a secure, auditable AI data layer, BYO AI flexibility, customer control over their data and amplified ROI through enterprise scale processing, combined with advanced AI reasoning. As we saw earlier, our pricing models are evolving and adapting to AI with AI adoption directly expanding customer spend. Neo agent and MCP server are important signals of where we're heading next, agentic workflows and ecosystem interoperability that keep Nuix embedded as the AI landscape evolves. Here you can see how it all fits together. The full Neo platform in an enterprise context. The architecture is layered. And as you move upwards through these layers, the AI monetization opportunity expands. Each layer up represents additional value capture and expanding ACV per customer. Turning now to product and technology. The product and engineering teams have been unified to accelerate delivery and strengthen platform capability. The benefits, clear accountability from strategy through to delivery, improved road map discipline and road map priorities directly connected to customer needs and commercial outcomes. Combined with the FY '27 R&D accelerator investment, this positions us to deliver faster with greater platform capability. Our product focus for FY '27 is organized around 3 key principles: intelligent user experience, a unified platform deployable in any environment and AI-powered expansion through open APIs and ecosystem integration. This slide builds on those principles with specific initiatives across 3 horizons: now, next and future. We have an ambitious road map that creates a compounding capability advantage over time. Lastly, the R&D accelerator we've alluded to a few times today, a $15 million one-off investment for FY '27 targeting 5 areas: enterprise integration and connectivity, Agentic AI capabilities, cloud platform acceleration, unified UI/UX and accelerated innovation cadence. This is an important investment that allows us to capitalize on the convergence of AI, increasing data complexity and sovereignty concerns. It positions Nuix to capture demand already emerging in our pipeline with benefits to revenue growth from FY '28. Turning to our outlook for FY '27. We are guiding to an ACV range of $285 million to $300 million, driven by further momentum from Nuix Neo. With the migration program now in an established cadence, we expect further good dollar growth in ACV terms, but clearly lower percentage rates of growth given a vastly higher base now. FY '27 adjusted management EBITDA is expected to be similar to FY '26, primarily due to the R&D accelerator investment I just mentioned. Recall that adjusted management EBITDA incorporates the entire R&D spend, both expensed and capitalized. So while we do expect further underlying operational leverage in FY '27, that will be offset by the one-off accelerator investment, which will set us up well for further profitable growth. As in previous years, you should expect growth to be weighted to the second half, underpinned by our renewals book, further contribution from upsell attach rates and new customer growth. Before we move to questions, let me reflect on the year. FY '26 was a year of profitable growth and decisive action. Financial performance was strong across key metrics. Nuix Neo continues to scale as the primary engine of profitable growth. We have made the structural changes required to shift from feature selling to platform value. These were decisive actions to position the company to capture a significant larger addressable market. Looking ahead, with enhanced commercial capability in place, continued investment in platform and AI capabilities and a clear strategy for profitable growth, we are well positioned to capture the significant opportunity ahead. With that, I'll now hand back to the operator for Q&A.

[Operator Instructions] Your first question comes from Sinclair Currie with MA Moelis Australia.

I was really interested to understand a bit more about the migration pathway into Neo. Just to make sure I understand it correctly. So at the moment, you're getting most customers on to the foundation layer, and that's delivering you that sort of 30% plus ACV uplift. And then the next layer is to upsell further some of these AI tools. Can you give me some indication of what the uplift would be in ACV on a full suite sale?

Yes. Thanks for the question. Your modeling of it is right. So bear in mind that the Neo contribution comes from not only migration, but also winning new customers straight on to the Neo platform. In terms of the uplift to the AI enhanced capabilities and then ultimately, the addition of Linkurious, we haven't done full modeling or we don't have enough track record to be able to put a number in market, but we expect that uplift obviously to be quite a significant part of that growth opportunity.

Okay. And then in terms of when you do get that uplift, is there a similar outcome in terms of margins? Or should we take into account some greater pass-through costs with some of that uplift if you do get those AI-related sales?

No. I mean generally, the uplift, the same level of margins applying. We are still seeing that growth from component to foundation, but that's not the exclusive path. We are seeing also from components straight through to full NEO. Some customers find it an easier path to go from component to foundation and then to full Neo. We're also seeing pleasingly in the results at the moment that in our Neo suite, we are seeing existing customers starting to buy additional AI services and that migration from one to the other. So we're seeing increased upsell and cross-sell opportunities once we get customers on to the Neo platform, but the margins are sort of maintaining where we've been looking at historically.

Brilliant -- and just sorry, just one last question, apologies. Just looking at the environment in the year ahead, you had some downsell in the past related to, from what I understand, less activity, fewer sort of big scale investigations, et cetera. Is there anything on the horizon to suggest that normalizes, stabilizes or even maybe we see a little bit of uptick potentially in activity coming down the pipe?

No, we're not seeing any additional or change in trends. As we've spoken about through the year, we did see a number of the larger service providers with some of their model, you were seeing downsells as member organizations also headed off in different paths. So as we look forward, we're not seeing any major structural change to the way customers are buying our product today. There will always be some where you'll get that natural step down from an end of a project, new projects will start up along the way and then global organizations also will have differences in their buying patterns year-on-year. So the teams work really hard at the relationships with the customers to try to understand what they see coming over the horizon, but we're not predicting any major structural changes at the moment.

[Operator Instructions] Your next question comes from Andrew Johnson with MST Access.

Two questions. First up, just around the divisional outlook or the performance in -- for the 3 geographic segments and then the outlook. Do you expect those sort of trends to continue? U.S. was very strong. Europe was still pretty good, and Asia Pac was pretty -- was soft to flat, if I've got those numbers correct. Can you just talk about how you see the outlook for those segments?

Yes. So thanks, Andrew. We -- in terms of the restructure of the business, which is referenced, we've maintained 3 go-to-market motions However, we now have combined APAC and EMEA into a single international go-to-market and we've broken out Discover into its own go-to-market and those moves and changes are to address growth. So we expect APAC to return to growth. You'll see in the slides that it was broadly flat this year, and Discover was slightly down. So the intention of the moves we've made is to return those 2 go-to-market motions to growth.