The Nitro Software Ltd (ASX: NTO) share price is dropping lower today despite the release of a strong third quarter update.
In early trade the global document productivity software company's shares are down 4% to $3.07.
How did Nitro Software perform in the third quarter?
Nitro Software continued its positive form during the third quarter and delivered further strong growth.
So much so, its subscription revenue, annual recurring revenues (ARR), and cash receipts are tracking ahead of its prospectus forecasts.
In respect to the latter, for the three months ended 30 September, Nitro Software recorded cash receipts of US$11.6 million. This was up 17% since the end of the previous quarter.
And while the company decided not to reveal its actual subscription revenue or ARR, it did advise that its subscription revenue now accounts for 56% of total revenue. This is up from 39% a year ago. Management notes that this reflects Nitro's ongoing successful conversion to a subscription-based business model.
What were the drivers of its growth?
According to the release, Nitro continued to secure key new enterprise customers in the quarter, contributing over 9,000 new licensed users in the period.
These customer wins include the City of Baltimore, Eskom and Midwestern University, Royal Mail, and Workcover Queensland.
In addition to this, further growth was delivered across its existing customer base, with Nitro continuing to achieve high levels of customer retention and expansion.
Key expanding and renewing accounts in the period include Time Warner Cable/Spectrum, Toyota Motor Europe, Vizient, and Albany Med.
Nitro's CEO and Co-Founder, Sam Chandler said: "In the initial response to the COVID-19 pandemic, we saw organisations adapt and begin to focus on defining their new normal, with improved document productivity in a remote working environment at the heart of their business needs."
"With most of the world's knowledge workers now remote, and an overwhelming developing long-term trend toward remote and digital work, customers are continuing to demand digital transformation solutions. The Nitro Productivity Suite, including Nitro Sign, provides strong operational and financial value to businesses in these times."
"We are pleased to deliver performance that is on track to meet our pre-COVID-19 revenue forecasts for the year and exceed our expectations for subscription sales, positioning us well for growth in 2021 and beyond," he added.
Outlook.
Management notes that the rising demand for digitisation solutions, which enable document productivity and workflow from anywhere, is creating new opportunities for the company. As a result, it believes it is well positioned to deliver on its vision and growth potential.
Looking to the full year, the company has updated its guidance for FY 2020.
While it has reaffirmed its revenue forecast of US$40.5 million, its subscription ARR has been increased to the range of US$26 million to US$27 million. This compares to US$24.4 million in its IPO prospectus and is being driven by greater demand for its subscription offering.
In addition, with key growth investments being offset by managed cost savings, the company forecasts an FY 2020 operating EBITDA (excluding share-based payments and FX) loss of US$4 million. This is in line with the IPO prospectus.
