Here’s why the Nitro (ASX:NTO) share price is backtracking 6% today

The company’s shares have been heavily sold off this week.

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Key Points

  • Nitro shares retrace despite robust Q4 FY21 performance
  • Key financial metrics increased by double-digits
  • FY21 EBITDA expected to be at a loss, but an improvement from earlier guidance

The Nitro Software Ltd (ASX: NTO) share price is on course to end the week deep in the red.

In mid-afternoon trade, the document productivity and eSigning company’s shares are down 4.34% to $1.765.

When factoring in the past week, Nitro shares have shed more than 20% in value.

What’s dragging the Nitro share price down today?

Investors have been selling down the Nitro share price following the release of the company’s cash flow report for Q4 FY21.

For the three months ending 31 December, Nitro reported revenue of US$50.7 million (A$72.01 million) excluding Connective, up 26% compared to FY20. This was at the top end of the upgraded guidance range provided in October of US$49 million to US$51 million.

FY21 revenue including Connective came to approximately US$50.9 million ($A72.29 million).

Annual Recurring Revenue (ARR) at the year’s end was at US$40.1 million (A$56.96 million) excluding Connective. This reflected a 41% increase from 31 December 2020 and is in line with the guidance range of US$39 million to US$42 million.

ARR at 31 December 2021 including Connective was US$46.2 million (A$65.65 million). Key customer wins and expansions in the quarter included Deutsche Bank, ICON, Eversheds Sutherland, Swiss Re and Ausenco.

Nitro’s transition to a Software-as-a-Service (SaaS) business model is continuing along, with subscription revenue in Q4 2021 representing 71% of total revenue. When measured against Q4 2020, this represents a 58% increase.

The company noted it maintains a strong financial position to pursue growth opportunities. At the end of the calendar year, cash and equivalents stood at US$48.2 million with no debt.

FY21 Outlook

Although the company signalled the last quarter of FY21 as a positive performance, it appears investors were expecting better results. This has led the Nitro share price to fall to July 2020 levels.

Nitro stated that operating earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to result in a loss of between US$7.5 million to US$8 million. The operating EBITDA guidance was upgraded given the strong numbers on revenue.

In late October, the company forecasted EBITDA to be at a loss of US$8 million to US$10 million.

Nitro is scheduled to release its FY21 audited results along with ARR, revenue and operating EBITDA guidance for FY22 on 24 February.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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