Nitro power for homework
September 2, 2022Opinion
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The global productivity business continues to grow rapidly as the nature of office work increasingly changes. Several software companies have increasingly started to offer productivity solutions, ranging from analytics to eSigning.
Work from home continues to be a global key theme, and with the COVID not abating, many workers prefer working away from the office. The latest figures show that 40% of the workforce in Australia continues to work from home, and in a survey of over 1200 companies, only 4% required workers to come into the office. Despite COVID being the biggest contributor to working from home, workers have become increasingly comfortable with the change, citing various reasons, including cost savings measures and improvements to productivity, as being the central factor in their decision to not return to the office.
Nitro software (NTO: ASX) is an Australian productivity company based out of San Francisco, with offices in Melbourne. The company provides a range of productivity tools to help with digital documentation. The Nitro Productivity platform has several eSigning and document management tools that help companies manage their day-to-day business activities.
Analysts have downgraded the stock multiple times as results have been weaker than expected. The company has been looking to focus on getting to profitability as it looks to continue to invest in infrastructure and get operations to the point of sustainability. Management has lowered its guidance for FY-22 to around $57-60 million, far lower than the initial estimate of $64-68 million. This led to the stock falling by 23% during market hours. The market capitalization of Nitro currently stands at $328 million.
Nitro has struggled in several ways, such as integrating its software, but is looking to catch up quickly. The market continues to wait and watch as risks stemming from low barriers to entry and the recent decline in stock prices for competitors such as Docusign continue to weigh negatively on investor sentiment.
The increasing levels of work from home have led to companies such as Nitro Software witnessing explosive growth in recent times. Nitro’s revenue has grown by a 31% over the past three years, hitting $32 million at the end of the first half of 2022. The company has over 2.8 million customers and over 13000 businesses, including many in the Fortune 500.
Nitro has continued to look for avenues of growth and has been expanding its business globally over the past few years. It has made numerous acquisitions over the last couple of years, including acquiring the Belgian eSign business Connective and raising $140 million for a European acquisition.
The company continued its strong run of form for the latest quarter, with ARR coming in at 61%. The results included Connectives revenue. By continuing to acquire companies, Nitro Software has found itself among the top three eSigning companies in the world. Management said the following about the growth strategy: “At a strategic level when we announced the acquisition of Connective last year, we said it would position Nitro as a top three solution for enterprise eSigning. That conviction was confirmed in the latest GigaOm Radar report where Nitro was identified as a leader and a ‘fast mover,’ and ranked as a top three vendor in global eSigning.”
Competition remains strong in the business, with competitors such as Adobe and DocuSign also offering various productivity solutions that compete with Nitro Software. Despite the fierce competition, the company has managed to carve itself a niche in the market and is looking to continue its high-paced growth for the foreseeable future.
The company’s market capitalisation is around $300 million, putting the price-to-sales at 10 times the current revenue. Production companies have generally struggled to profit, with many spending money aggressively on expansion. Nitro posted an EBITDA loss of $18 million during the quarter. Cash flow remained negative as well, but forecasts predict the company will become cash flow positive by the second half of 2023.
The global productivity market is expected to grow by around 13% over the next 8 years, and companies will be looking to integrate solutions into their business operations to reduce bureaucracy increasingly. Analysts predict the market could double, growing by 25-30% over the next 5 years.
Nitro Productivity remains a key figure in the software industry, and the CEO has stated the company is looking to continue improving capabilities to meet those needs Nitro could see its stock rise over the next few quarters as the company moves towards higher free-cash flow and profitability. “As the first acquisition since our IPO, PDFpen marks a significant strategic milestone for Nitro. Adding Mac and mobile capabilities to our platform enables us to serve businesses and individuals on any device or operating system when a digital transformation has never been more relevant or urgent for organisations worldwide. It represents a major advance in Nitro’s vision to make document productivity easy, powerful and available to all.”
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