The Nitro Software Ltd (ASX: NTO) share price has taken a hit today amid the company releasing its half-year results for the first half of FY2022.
Shares of the document solutions software as a service (SaaS) startup are currently trading for $1.12 each, down 7.05% on Friday's closing price.
Let's go over the highlights of the company's results for the half year ending 30 June 2022.
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What did Nitro Software report?
- Operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) down 107% year over year (yoy) to a $US6.3 million ($AU9.18 million) loss
- Net loss up 101% yoy to US$17.3 million ($AU25.22 million)
- Annual recurring revenue (ARR) up 52% yoy to $US51.5 million ($AU75.09 million)
- $US35.2 million ($AU51.32 million) in cash holdings and no debt
- No dividend declared
Nitro reported higher operating expenses during the reporting period. Research and development (R&D) accounted for the largest increase, growing 58% yoy.
The company also recorded a significant depreciation and amortisation (D&A) line item. This figure jumped 265% yoy to $US3.3 million ($AU4.81 million), affecting Nitro's net loss.
On the positive side, the company reported a strong compound annual growth rate (CAGR) for its ARR and subscription revenue. They grew 54% and 60% respectively from June 2020 to June 2022. Another win for the company was its high-quality earnings, with 67% of revenue coming from Fortune 500 companies.
What else happened?
Nitro Software has accelerated its transition to subscription revenue since FY2017 for its business sales channel. Subscription revenue increased to 90% in 1H2022, up from just 14% in FY2017.
The company also landed a couple of marquee clients in the first half of 2022, including a US insurer that gave the platform an additional 10,000 users. Another client in the Fortune 100 index purchased 9,000 Nitro PDF licenses in 2017.
What did management say?
Nitro Software co-founder and CEO Sam Chandler said:
Although the first half did not meet all our expectations for performance, it was still a period of growth in which ending ARR grew by 52% and scaled to over US$51 million after more than doubling in the two years to June 30. Subscription revenue also grew fast, increasing 55% year-on-year. But macroeconomic conditions have been challenging, and sales cycles lengthened towards the end of the period. As a result, we revised our plan for the second half including restructuring our Go-to-Market organisation for improved performance and efficiency, reducing costs by US$5 million, and accelerating the pathway to cash flow positive.
What's next?
The e-signing global spend is set to grow at a CAGR of 9% over the next decade and 44% through to 2025. This will be buoyed by growth in signing for high-value transactions as consumers elevate their needs for a trusted solution, the company said.
Nitro Software intends to be cash flow positive by 2H2023. As for guidance, the company expects to make a US$10-$13 million ($AU14.57-18.94 million) loss for the remaining year, with ARR falling in the range of US$57-60 million ($AU83.05-87.43 million).
Nitro Software share price snapshot
The Nitro Software share price is down 54% year to date. Its losses are far greater than the broader market's with the S&P/ASX 200 Index (ASX: XJO) down roughly 7% over the same period.
The company's current market capitalisation is around $276 million.
