Nitro (ASX:NTO) share price sinks 14% despite record result

Nitro shares are falling on Thursday…

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Key points

  • Nitro delivered a result in line with its guidance in FY 2021
  • Management appears confident its strong top line growth will continue
  • Nitro estimates that it has a US$28 billion market opportunity

The Nitro Software Ltd (ASX: NTO) share price has been a poor performer on Thursday.

In afternoon trade, the document productivity software company's shares are down 14% to $1.47 following the release of its full year results.

Nitro share price sinks despite record results

  • Annual recurring revenue (ARR) excluding Connective up 41% to US$40.1 million
  • ARR including the Connective acquisition up 62% to US$46.2 million
  • Revenue up 26% to US$50.7 million
  • Operating earnings before interest, tax, depreciation and amortisation (EBITDA) loss of US$7.6 million
  • Cash and cash equivalents of US$48.2 million

What happened in FY 2021?

For the 12 months ended 31 December, Nitro delivered further strong ARR growth and reported a result in line with its guidance. Its ARR for the period, before the Connective acquisition, came in at US$40.1 million. This compares to its guidance of US$39 million to US$42 million and means that 66% of its revenue is now subscription-based.

Key drivers of its growth during the 12 months were the doubling of Nitro Sign eSignature requests to 2.2 million, and a substantial increase to 22 million eSignatures in total including Connective.

Furthermore, over 3 billion documents were opened in Nitro PDF Pro in FY 2021, and Nitro surpassed the milestone of 1 million PDF subscription licences, ending the year at 1.1 million.

Also coming in line with its revised guidance was its EBITDA loss of US$7.4 million excluding Connective. This was a big improvement on its original guidance of a loss of US$11 million to US$13 million.

Management commentary

Nitro's Co-Founder and Chief Executive Officer, Sam Chandler, was pleased with the company's performance in FY 2021.

He said: "FY2021 was the most dynamic year in Nitro's history, with the achievement of a number of major strategic milestones, including a successful capital raising and our biggest and most important acquisition to date – Connective. The addition of Connective's market-leading capabilities and the earlier acquisition of PDFpen – delivering native Mac and iOS capabilities – means Nitro can now serve virtually any customer need in PDF productivity and eSigning. With these acquisitions, Nitro has cemented its status as a global document productivity and eSign SaaS platform."

"FY2021 was the year in which we exceeded US$50 million of revenue, with a strong sales trajectory in the final quarter and the momentum continuing into the new year. Nitro's mission for the coming year is to continue this momentum and to build on the strategic milestones and successes of FY2021 by scaling the Nitro Productivity Platform."

"This will involve fully integrating Connective's best-of-breed technologies – a process now well underway – and using Nitro's proven go-to-market network to upsell and cross-sell Nitro and Connective products to a combined 13,000+ Business Customer base. We will remain focused on customer acquisition, retention and expansion, as well as responding to competition at a time when customers are signaling their dissatisfaction with legacy providers and increasingly demanding one vendor who, like Nitro today, can offer multiple solutions."

Outlook

Management appears confident that it will continue to grow into its US$28 billion total addressable market in FY 2022. Though, it expects this to come at a cost and is forecasting a much larger loss.

It has provided the following guidance:

  • FY 2022 ARR between US$64 million and US$68 million (38.5% to 47.2% growth)
  • Revenue between US$65 million and US$69 million
  • Operating EBITDA loss between US$18 million and US$21 million.

Management concluded: "Given the scale of the market opportunity and the Company's multiple growth levers, Nitro will continue to make strategic investments in FY2022, primarily focused on the scaling and integration of Connective into Nitro's business, developing features relevant to its customers and scaling its go-to-market engine. Nitro will also continue to explore other targeted investments, including potential acquisitions, to build capability and scale, and further cement its position as a global leader in eSigning and document productivity."

Motley Fool contributor James Mickleboro 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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