With a jump in both recurring revenues and expenses, where will the Nitro Software share price go from here?
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Nitro is a fast-growing Software as a Service (SaaS) company that provides document productivity solutions for individuals, small businesses and enterprises.
Nitro Software share price flat despite strong growth trajectory
Nitro’s first-half results reiterate a familiar narrative for fast-growing tech companies — you have to spend money to make money. Key highlights include:
Annual recurring revenue (ARR) of $33.8 million, up 56% against the prior corresponding period (pcp).
Revenue rose 26% to $24.1 million.
Sales and marketing expenditure amounted to $14.0 million, up 62%.
Research and development expenditure of $5.8 million, up 46%.
General and administrative expenditure was 5.3%, up 22%.
Operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) improved to a loss of $3.0 million
What happened to Nitro Software in 1H21?
The Nitro Software share price is up 12% year-to-date, performing in line with the broader S&P/ASX 200 Info Tech (INDEXASX: XIJ) index, which is up 6.2% year-to-date.
Nitro delivered “rapid” ARR and subscription revenue growth in the first half as the company continues to scale and bring new products to market.
The company’s key products, Nitro PDF Pro and Nitro Sign, both experienced a significant uplift in demand and usage in the first half.
Nitro PDF Pro reported a 91% increase in total activity by users, with 1.4 billion documents opened in the first half, up 48% year-on-year. Nitro Sign also reported a hefty 336% increase in business users, with over 1 million eSignatures, up 194% year-on-year.
Nitro has been making key investments in FY21, demonstrated by the significant lift in expenditure across sales and marketing, research and development as well as general expenditure.
Management addressed the jump in expenses, saying:
The benefits of the investments we have made – and continue to make – in our people, products and platform are clear in our financial results, with continued strong recurring revenue growth, increasing subscription sales, and industry-leading customer acquisition and retention numbers in a large global market that continues to grow.
The company maintained a strong balance sheet position at the end of the period, with a cash balance of $38.6 million with no debt.
Nitro’s co-founder and CEO Sam Chandler hailed the results, saying:
This was a transformational period for Nitro, with major milestones achieved as we continue to scale to meet accelerating customer demand for digital workflow productivity solutions in a post COVID, work-from-anywhere world.
Demand for our products and services shows no sign of slowing, with a 48% increase to 1.4 billion documents opened in Nitro Pro and over 1 million eSignature requests in 1H2021 – more than the whole of FY2020. There remains significant upside potential, with only 40% of US companies currently utilising eSign capabilities, and only 10% of those using them significantly, and much of the rest of world even further behind.
What’s next for Nitro Software?
The Nitro Software share price is within an arm’s reach of its 11 August all-time high of $3.78.
The company believes it is poised for growth, claiming “from new customers and products, to cross-sell opportunities and M&A, we have multiple avenues for continued growth”.
It was encouraging to see an FY21 guidance, which included:
ARR between $39 million to $42 million (FY20: $20.2 million)
Revenue between $47 million to $50 million (FY20: $19.1 million)
Operating EBITDA loss between $9 million to $11 million (FY20: loss of $1.6 million)
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Motley Fool contributor Kerry Sun 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.