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Average Intrinsic Value
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#Quarterly update
Last edited 2 weeks ago

Nitro released a quarterly update today. It appeared to be good news and the share price got a decent bump. In this market that is probably overdue as Nitro is a SaaS stock trading on a vaguely sensible EV/Revenue multiple. With more or less AUD50-60m coming in the door last year and losses only more or less 10% of that Nitro's investors must have been wondering why the market cap wasn't cracking $1bn. The price-to-2035-EBITDA multiple looks great.

A few observations (figures are quoted from memory and might be off):

- Quarterly revenue was 11% up from last year. This seems promising until you realise their own prospecus late last year said their TAM has a CAGR of 11%. In other words, they didn't outperform the market. But their business is mostly holding up during the pandemic, which is probably the main reason for today's movement.

- In fairness, Nitro's revenue growth is held back by trying to grow ARR. Nitro is interesting in part because it is way behind much bigger competitors Adobe and DocuSign in its ARR percentage but catching up fast. In 2020 ARR is supposed to go from 37% of revenue to 50%, or c. USD20m (Adobe and DocuSign are 90%+, I think). It's on track for this.

- One of Nitro's advantages is net recurring revenue: 127% last year compared to DocuSign's c. 115%. This means revenue growth from customers is 27%. But that figure was down quite a bit last year, as was the customer retention rate (90% last year compared to its competitors', I think, 95%+). They didn't go into detail but apparently this is still slipping.

- Cash was at USD40.5m, against USD44m net cash all the way back in…December (USD47m total). Am I missing something? 

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#Bull Case
Added 3 months ago
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