Nuix Limited

Thank you for standing by and welcome to the newest limited first half 26 results conference call. All participants are in a listen-only mode. It will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypads. I would now like to hand the conference call over to Mr. John Riven, CEO. Please go ahead.

Welcome everyone and thank you for joining us for Neurex's half-year 2026 results presentation. I'm John Riven, Neurex's interim CEO and with me today is our Chief Financial Officer, Peter McClelland. I'll begin today with our key messages and metrics for the half, then discuss Neurex, NEO and our strategic positioning in the AI era. Peter will then walk through our financial results in detail. After that I'll provide our outlook before taking questions. Let me start with the highlights from the half. We've delivered ACV growth of 8.4% to $234.4 million. NEO performance has been strong. ACV grew 148% on PCP to reach $46.8 million, now representing 20% of our ACV. Revenue grew 15.2% to $121.2 million, driving adjusted management EBITDA to $19.1 million, up 42.6%, demonstrating significant operating leverage. We've achieved a material lift in cash generation with positive underlying and overall cash flow, finishing with a closing cash balance of $57.8 million. We've launched a comprehensive Neuris Neo migration program, to systematically transition our customer base to the modern platform and drive ACV growth. We'll spend some time shortly talking about how NUIX Neo plus AI creates amplified capabilities, incorporating our BYO AI framework. This powerful combination of large-scale forensic data analysis and LLM integration flexibility creates a structural advantage for NUIX. and we'll take the opportunity to reaffirm today our full year ACV guidance range of $240 to $260 million, excluding any ACV associated with the Linkurious acquisitions. As we've seen, ACV finished at $234.4 million, up 8.4% on PCP, and revenue at $121.2 million was up 15.2%. Net dollar retention was 101% down from 109.6 PCP. This metric is not where we want it to be and we'll come to this in more detail shortly. Adjusted management EBITDA and statutory EBITDA saw strong growth as we realized further operating leverage in the business and we maintained a strong balance sheet for the net cash of $57.8 million up 88.4% on this time last year. providing flexibility to execute on our strategic priorities. At the AGM last November, we highlighted near-term priorities across sales, product and operations. We've made strong progress in each area, refining our go-to-market approach, building out NEO capabilities and driving operational efficiency. Most significantly, we've launched our comprehensive NEO migration program, Before we get into the detailed financials, I want to spend a moment on the AI landscape and how Nuix is positioned. The enterprise software landscape is being reshaped by AI and large language models. A market segmentation is emerging between LLM plugins for routine tasks and enterprise-ready platforms like Nuix Neo for large-scale forensic analysis. This creates significant opportunities for Nuix. NEO represents a powerful combination of forensic data analysis and LLM integration flexibility. LLMs handle ad hoc analysis of small data sets effectively. For enterprise scale data sets with forensic integrity requirements, a platform such as Neurex NEO is a required necessity. Our BYO AI framework integrates seamlessly with customer-selected LLMs, allowing them to leverage best-in-class AI models while maintaining enterprise governance and defensibility. Our customers must balance AI innovation with accuracy and defensibility. Their outcomes must withstand legal scrutiny and regulatory examination. This is where Nuix Neo plus AI Tools deliver real commercial value. Customers can plug in any AI model while our forensic-grade governance layer ensures defensibility. The platform integrates new AI models as they emerge. Most importantly, this delivers amplified ROI. Enterprise-scale processing combined with advanced AI reasoning provides both speed and defensibility. This creates a strong structural advantage as the AI ecosystem evolves. We're successfully delivering releases in line with our RMD roadmap, which was outlined at last year's Investor Day. This includes our critical investments into AI advancements. We remain on track for our key deliverables for this year and look forward to expanding capabilities across a range of areas, as you can see here, to further uplift our commercial offerings. Turning now to NUIX NEO outcomes and customer migration. As we've said, NUIX NEO growth was strong during the half, hitting 46.8 million and 101 customers. This growth has been driven by new customers, new sales to existing customers, upsells and migrations. We've seen particularly strong performance in EMEA. Investigations and foundation have been key drivers. Importantly, when customers migrate from components to Neo, we typically see a 30% to 50% ATV uplift. And new Neo sales are typically two to three times the size of non-Neo sales. The growth in Nuix Neo is driving a significant mix shift across our customer base. As we've said at the AGM, we've now brought Nuix Neo Discover into the Neo suite. given its expanded capabilities. Combined, NIO and NUIX NIO Discover now represent 40% of total ACV and are positioned to become the majority in the medium term. This migration of customers from components to NUIX NIO will be the defining characteristic of our customer base over the medium term. We know that NUIX NIO is of a significant tangible benefits to customers. The customer benefits are real and significant. Faster processing, easier workflows, smarter AI-enriched analytics, strong financial ROI and zero business disruption during migration. It's critical that we demonstrate these benefits effectively to our customers to help facilitate migration to our new platform. That's why we've designed the Nuix Neo Migration Programme to make the pathways attractive and easy for our customers. Our job is to remove friction, provide clear values and ensure customers can transition smoothly to realise these benefits. Systematising this migration is critical for Nuix, particularly given the weaker NDR outcome. This program has three strategic objectives. Secure the future by transitioning customers to our modern platform. drive ACV growth by unlocking expansion opportunities and enhance retention through superior NEO capabilities. This is a structured, predictable and well-governed journey for customers to move to Neurex NEO, designed to systematically address migration and NDR challenges we've experienced and unlock the significant value that NEO delivers. We've structured this as a three-phased approach. Phase 1 completed customer segmentation and readiness assessment. Phase 2 is building our migration factory with standardised playbooks and partner capabilities. This is happening right now. Phase 3 executes at scale through FY30. This is a disciplined, systematic approach to accelerating customer transition to Nuix Neo and further value realisation. Before I hand over to Peter, Let me briefly touch on Linkurious. As a reminder, we announced in December that we had signed an agreement to acquire Linkurious, an existing Neos Neo technology partner. This acquisition enhances Neo with graph visualization and investigation technology, which strengthens our platform capabilities. We're still waiting on French regulatory approvals and have no further information to add at this time. We will update the market when we do. I'd now like to hand over to Peter to discuss the financial results in more detail.

Thank you John and good morning everybody. As John mentioned, ACV finished the half at $234.4 million, representing an 8.4% growth on the prior corresponding period or 7.8% growth on a constant currency basis. ACV growth was driven by new customers, with new customers' ACV growth offsetting a lower growth rate in the existing customer base, as reflected in the net dollar retention, which we'll come to shortly. As John has already taken you through, Newex Neo was a key contributor to growth on the prior corresponding period, and Newex Neo Discover, which now incorporates Neo capabilities, grew by a further $6.5 million. Component ACV declined by $18.3 million due to the net downsell in the component customer base and the migration to newest NEO solutions. Net dollar retention of 101% reflects the lifting ACV achieved from our existing customer base. As you've heard earlier, this has fallen on the PCP and since the FY25 results. It is just worth noting that new customer growth is not captured in the NDR. This decline reflects downsell in a small number of large clients, offsetting the upsell in other areas. A significant proportion of this downsell was driven by the ordinary project cycles of clients with a number of peak projects ending. There was some competitive activity including one significant client that is winding down while moving to a competitor. This was flagged at the AGM. While there is not one major driver of this downsell, it is fair to say that NDR is not where we want it to be and underscores the importance of a systematic, structured approach to migrating our customer base to Newark's NEO. Customer churn improved to 5.9% down from 7.1% at FY25. Looking at regional performance, EMEA led with ACV up 18.8%. This was driven by sustained government sector growth, new logo acquisition in Central Europe and a strong UICNEO performance. North America ACV increased by 10.8% with continued adoption of foundation and investigation solutions and new wins in the service providers and financial services sectors. Asia Pac ACV declined by 8.6% with lower new customer numbers and a large legal sector client loss as was flagged at the APM. Turning to our statutory revenue, this came in at $121.2 million, up 15.2% or 12.9% in constant currency. This performance was driven by multi-year deal renewals with key accounts and strong new customer growth, particularly in new and new sales. Multi-year deals represented 33% of revenue, up from 22% in the prior period. We continue to invest in our product and customers with total research and development spend of $28.8 million, up 0.7% and representing 24% of revenues. The capitalised component of this spend was 43%, declining compared to the prior period. Importantly, R&D continues to be funded from our underlying cash flows, demonstrating the sustainability of our investment in product development. Adjusted management EBITDA rose by 42.6% to $19.1 million, with the margin expanding from 12.7% to 15.8%. Adjusted management EBITDA is our key internal profitability measure as it adds back the R&D costs that are capitalised and best represents how management is utilising the total cost pool. This increase was driven by the revenue growth that we've already mentioned and disciplined cost management demonstrating expanding operating leverage. Our EBITDA waterfall shows the path for the adjusted management EBITDA in the first half 25 through to the first half of 26, outcome of $19.1 million. Once more, showing the operating leverage as being evident. To the right of the $19.1 million, you can see the pathway to our statutory EBITDA outcome for the half of $26.5 million. I won't spend too much time here on our income statement, especially considering we talked about the operating leverage already. Non-operating legal costs of $3.3 million were significantly lower than the prior period, and you can see here we flagged the costs associated with the Linkurious acquisition. Impacting the NPAT line, the group received a tax benefit of $8.6 million, primarily arising from the partial recognition of tax assets relating to historical option cancellations. A further $33.8 million of tax assets was not recognised during the period but remains available to the company for future periods. Turning to cash flow, we achieved a material lift in both underlying and overall cash flow. Underlying cash flow was $28.4 million compared to $7 million in 1H25 and the overall free cash flow was $20.4 million compared to the negative $7.4 million in 1H25. The free cash flow conversion ratio was 149% calculated as underlying free cash flow divided by the adjusted management EBITDA. Lower non-operating legal costs associated with the court cases contributed to the overall cash flow, and we finished the half with a net cash position of $57.8 million. Our bank facility has been upsized to $50 million, which remains undrawn other than $1.3 million utilised for bank guarantees. It is worth noting that $20 million of this facility is specifically restricted to the funding of the Linkurious acquisition. I'll now hand back to John to discuss our outlook.

Thanks, Peter. Looking ahead, we reaffirmed the full-year guidance we provided the AGM the ACV of $240 million to $260 million which doesn't include any ACV associated with the Linkurious acquisition. As we said at the AGM, ACV will be weighted to the second half in line with previous years and in line with the profile of our renewals book. Our focus areas FY26 remain, continue to deliver on our business transformation strategy, drive ACV growth through NUIX NEO, ensure revenue growth exceeds operating cost growth and maintain positive underlying cash flow for the full year. As you have seen, these focus areas are features of today's half year results. Before we move to questions, let me reflect on the half. The results demonstrate continued momentum in our business transformation. ATV growth of 8.4% and Neurex NEO growth of 148% show strong market response to our offering. The listing adjusted management EBITDA and the associated margin clearly illustrates the operating leverage in our business model. While net dollar retention is not where we want it to be, the NEO migration program provides a clear strategy to address this through systematic customer transition to our modern platform. And lastly, we're incredibly excited about Nuix's positioning in the AI era. Our bring your own AI approach, combined with enterprise-grade governance and scale, positions us uniquely to help customers harness AI power while maintaining forensic sensibility. With that, I'll now hand back to the operator for Q&A.

Thank you. If you wish to ask a question, please press star and then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you are on a speakerphone, we do ask that you please pick up the handset to ask your questions. Once again, that is star and then one to join the question queue. Our first question comes from Sinclair Curie from Mamalis Australia, please go ahead with your question. Sinclair, please proceed with your question. Is it possible your phone is on mute?

Sorry, I was just on mute. Thanks for taking my question. I was just looking at your product roadmap and I was interested if you could highlight any parts of that which you think are particularly important to driving business growth in the medium term.

Yeah, we've shared with you a pretty comprehensive roadmap that takes us out to the end of this fiscal. The BYO AI models, I think, in this AI era are going to continue to drive strong growth for us. We also have planned in this half the pre-work for our launch of our Neo SaaS platform and we're very excited and confident about that taking us forward. But as you can see, it's a pretty comprehensive set of capabilities that we're bringing to market. I think in March we'll have 2.1 drop, so that will be our next release of that Neo platform, which will continue to drive momentum in the market.

Brilliant. Thanks for that. And just one last question, if I can. I think you spoke to some investment in the sales team and marketing team. It would just be interesting to understand what sort of maturity you think is required to start generating revenue more productivity, if that's something that you can elaborate on, the sort of productivity measures within your term?

A lot of that investment has been around sales enablement and embedding our ICP or ideal client profile so that we have a sales organisation that's very focused on the most liquidative part of the market. We also have our new CEO joining us at the start of next month and when she comes on board, she'll be very focused on driving account-based marketing, targeting that item, and having field programs and campaigns that will drive lead and top-of-funnel activity for us.

Brilliant. I'll jump back in the queue. Thanks for your time.

Our next question comes from Jennifer Hsu from Jefferies. Please go ahead with your question.

Hello everyone. Thank you for taking my questions. A couple of questions for me. The first one is NDR 101, particularly down sale in a small number of large contracts. Any comments on this? Thank you.

Yeah, that's a good question. I mean clearly NDR is not in our target range. First of all, I'll point out that any new business growth doesn't fall part of those numbers. So we are happy with where we're seeing the new business growing to. Within NDR, again, churn has actually improved, so we're pleased with churn. But there were a couple of larger accounts really split across three different areas that impacted in the half. The largest amount of that downsell actually relates to normal client project activity that had finished during the period. So this is where clients are representing on projects that have now come to the end of their course and no longer need the product for that specific project. They're also within some of our global advisories that buy under global partnership arrangements. some areas where some of the participating businesses, they opt in or out of those programs, and some of the businesses are deciding to do direct rather than through global procurement. And then there was one large advisory business that we updated the market with on the AGM in the legal sector in ANZ that was lost from a competitive drive, and that's what's impacting on those results. So quite diverse across all the different regions being driven by different reasons.

Yeah, that makes sense. Thank you. In other words, new X new and new X new discover together account for 40% of total ACV. With new X new is around 46 million, so that implies new discover should be around 46 new as well. Is that correct? And also is there any specific reason why presenting new and new discover separately and that's intended reporting approach going forward?

So your calculations are broadly in line, and the reason that we still break them out is just we believe that it's important for us to be totally transparent on the mix and make-up.

All right. And we expect to, going forward, also do it separately, right?

Yes, for the foreseeable future.

Yeah. Last one for me is, With the sales transformation underway, are there any changes in the sales channel? Will it be like greater rely on the direct sales or still more distribution?

There's no planned changes to the mix. We have a blended go-to-market model covering both direct sales and then leveraging channel and partners. partner or indirect part has several flavors including large advisory firms, channel partners, partners that resell and implement. There's no clear planned change to the mix of our data market.

I see. And for the distribution channel, how do we think about the margin there compared to direct sales?

Obviously, we pay a partner margin that would be confidential to us in terms of our commercials, but they range based on the contribution or the role that that partner plays, ranging from purely a referral partner right through to a resale partner that would carry the transaction through the implementation.

Okay, that's perfect. Thank you. Thank you for your advice, Tom.

Thank you. Once again, if you wish to ask a question, please press star and then 1 on your telephone, and please wait for your name to be announced. Our next question comes from Andrew Johnson from MSD Access. Please go ahead with your question.

Yeah, hi John and Peter. Thanks for taking a couple of questions from me this morning. First up, John, you talked about ICP definition. Can you talk about how that's changing the target customers that Nuix is now pursuing compared with previously?

Hey Andrew, I wouldn't say it's changing. What it is doing is it's focusing on the go-to-market on the most lucrative part of the market. If you look at where the company has been successful and where our value proposition is strongest, it's in large scale, highly regulated industries ranging from government agencies like regulators, tax authorities, law enforcement, as well as large corporates that have internal capability around investigations, etc. So it's not really a change of focus, it's refining our go-to-market to be myopically focused on that market for us.

Okay, so does that partly explain the increase in multi-year deals? and should we expect to see that higher proportion of multi-year deals and of course the impact that has on revenue growth versus ACV growth, but should we expect to see that higher proportion of multi-year deals continue in the future?

We don't currently have a view that that percentage would increase dramatically. That said, the part of the market or our ICP being enterprises and government agencies, they tend to have a preference or leaning to longer-term deals. So it's not something that we're driving, more we're responding to commercial requirements from ICP companies.

Okay, and finally, what's in Neo 2.1 that's new compared to 2.0?

On the roadmap slide there, you can see the piece of work that has gone through with things like semantic search, some of our UI uplifts in terms of the usability of our product, Also, our local deployment, so the ability to accelerate time to value through our local deployment within a customer environment.

Okay, that's great. Thanks.

And in showing no further questions at this time, I would like to hand the floor back over to Mr. Riven for closing remarks.

Thanks operator. As we've said, we're pleased with our first half result with ACV up over 8%. Also the evidence of good operating leverage inside our business. Not happy from an NDR perspective and we've spoken about that and I can assure you that we have a focus on turning that around. Our NEO migration continues to go well and is gaining momentum driven by a systematic program of work that we're driving inside the company. I'd also make the comment that I think we're well positioned in this AI era where we're combining the power of our NEO platform with our open BYO AI approach. So with those key messages, I'd like to thank you for attending today's call and look forward to catching up with a number of you individually over the next few days. Thank you, Operator.

Thank you. That does conclude our conference for today. We do thank everyone for participating. You may now disconnect your lines.