ASX mid-cap technology company Nitro Software Ltd (ASX: NTO) has performed strongly this year. Despite a minor blip during the March coronavirus sell-off, the Nitro Software share price has climbed close to 90% higher since January. In fact, savvy investors who picked up shares at the height of the COVID-19 panic selling would now be sitting on gains of almost 300%.
What's driven the Nitro Software share price gains?
Despite COVID-19 causing some disruption to its sales pipeline, Nitro Software still managed to deliver above its prospectus forecasts across most financial metrics for the half year ended 30 June 2020. Total revenue was up 14% against the June half 2019 to US$19.1 million, driven by a 60% increase in subscription revenue. Annual recurring revenue jumped 57% to US$20.2 million, and the company reaffirmed its prospectus guidance for full year 2020 total revenue of at least US$40.5 million.
What does Nitro Software do?
Although its market capitalisation has almost doubled this year – at around $570 million, Nitro is now on a par with other mid-sized ASX tech growth companies like Bigtincan Holdings Ltd (ASX: BTH) and Whispir Ltd (ASX: WSP). But Nitro is still flying under the radar for a lot of investors.
The company develops a suite of software solutions to allow individuals and businesses to streamline and digitise document workflows. This means that companies can create, edit, sign and store important documents entirely online, reducing the need for printing and traditional forms of hardcopy file management. Not only does this simplify workflows, but it can massively reduce printing costs for large companies, and even make them more environmentally friendly.
Nitro Software has already had massive success in the United States, with some 68% of Fortune 500 companies already among its clients. These include renewing customers like General Electric Company (NYSE: GE) and Exxon Mobil Corporation (NYSE: XOM). And while the COVID-19 global pandemic has interrupted some of its sales channels, the shift towards remote working arrangements for many large companies may play in Nitro's favour. These companies will now be forced to digitise outdated workflows and cut operating costs.
Nitro also made the decision to make its eSignature solution free throughout 2020 to help companies transitioning to working from home. This move could rapidly increase brand recognition and market penetration.
Should you invest?
I believe Nitro Software is an exciting company as it taps into a number of investment thematics that are coming to a head in 2020.
Firstly, the social restrictions many governments have put in place to fight the spread of coronavirus are forcing companies to find new ways of doing business. This involves digitising many old processes so that more work can be done online. These sorts of fundamental changes are likely to long outlive the effects of the virus. In fact, many believe the pandemic has really only sped up changes that were already happening anyway.
Secondly, Nitro's suite of products also helps companies reduce their amount of paper waste. Not only does this help cut operating costs, but it is also great for the environment – especially at a time when concerns around climate change are putting corporate social responsibility under increased focus.
