Why is the Nitro share price crashing 29% on Tuesday?

Nitro shares are being hammered on Tuesday…

| More on:
Disappointed woman at the falling share price with her hand oh her had.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Nitro share price is crashing on Tuesday
  • This is despite the release of a quarterly update which revealed strong growth during the second quarter and first half
  • Management's guidance appears to have spooked investors

The Nitro Software Ltd (ASX: NTO) share price is having a day to forget on Tuesday.

In morning trade, the document productivity software company's shares are down a disappointing 29% to $1.16.

Why is the Nitro share price crashing?

Investors have been selling down the Nitro share price following the release of the company's second quarter and first half update.

Although that update revealed yet another strong quarter of growth, it was management's commentary on the second half that sent investors to the exits.

According to the release, for the 12 months ending 31 December, Nitro now expects to report annual recurring revenue (ARR) of US$57 million to US$60 million. This represents year on year growth of 24% to 30%.

As a comparison, the company was previously guiding to ARR of US$64 million to US$68 million, which would have been year on year growth of 39% to 47%.

That's despite the company reporting stellar first half FY 2022 ARR growth of 52% year on year to US$51.5 million this morning. This indicates an expectation for a sharp slowdown in growth during the second half, which appears to have spooked investors.

The good news

Despite what the Nitro share price performance would indicate, it wasn't all bad news.

Firstly, Nitro has trimmed its operating EBITDA loss guidance. Instead of US$15 million to US$18 million, it now expects a loss of US$10 million to US$13 million.

In addition, instead of moving "toward a cash flow breakeven profile" in the second half of FY 2023, it now expects to be cash flow breakeven at that point.

It also finished the first half of FY 2022 in a strong financial position, with cash of US$35.2 million and no debts. This should provide it with more than sufficient cash to reach its breakeven point.

What's happening at Nitro?

Management revealed that its revised guidance reflects its decision to balance its pursuit of ARR growth while accelerating its cash flow breakeven goals.

Nitro's co-founder and chief executive officer, Sam Chandler, explained:

Given the current environment, Nitro is carefully balancing its pursuit of ARR growth with extracting greater efficiencies from existing resources and protecting our strong cash position. We are also focused on accelerating our return to cash flow breakeven.

While in the near term these operating strategies will lower Nitro's ARR growth, they will underpin a significantly reduced Operating EBITDA Loss in FY2022. With our revenue guidance unchanged, we firmly believe this is the correct financial profile for today's macroeconomic and market conditions.

Chandler also reminded investors of the massive market opportunity that the company has to grow into in the coming decades.

We are committed to generating positive cash flow for the second half of 2023. While there are currently many uncertainties in the world, Nitro has a multi-billion-dollar market opportunity that will play out over the years and decades ahead, and our confidence in the scale of that opportunity is unchanged.

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 Scott Phillips.

More on Technology Shares

Man holding a calculator with Australian dollar notes, symbolising dividends.
Technology Shares

$10,000 invested in DroneShield shares 5 years ago is now worth…

You might be laughing all the way to the bank if you had done this.

Read more »

Happy woman working on a laptop.
Technology Shares

Up 60% since April, why this $40 billion ASX 200 tech stock remains a 'compelling buy' today

A leading expert believes this $40 billion ASX 200 tech stock has a lengthy growth runway ahead of it yet.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
AI Stocks

Why Macquarie forecasts a big rebound for these 2 quality ASX All Ords tech stocks

Macquarie expects a big rebound is coming for these AI linked, ASX All Ords tech stocks.

Read more »