Nitro Software : Q2 2022 Quarterly Activities Report and Appendix 4C

For personal use only

26 July 2022

FY2022 revised guidance and commitment to cash flow breakeven

Q2 2022 Quarterly Activities Report

Nitro Software Limited (ASX: NTO) ('Nitro' or the 'Company'), a global leader in document productivity and eSignature SaaS solutions for business, provides an update to the Company's FY2022 guidance, together with commentary on the Company's financial and operating performance alongside its Appendix 4C Quarterly Cash Flow Report for the quarter ended 30 June 2022.

FY2022 revised guidance

Nitro's FY2022 revised guidance is summarised as follows:

Revised guidance

Previous guidance1

(US$m)

(US$m)

Ending Annual Recurring

57-60

64-68

Revenue (ARR)

(YoY Growth 24%-30%)

(YoY Growth 39%-47%)

Revenue

Unchanged

65-69

(YoY Growth 28%-36%)

Operating EBITDA2 Loss

10-13

15-18

Cash flow breakeven3

2H 2023

Expects to move toward a cash

flow breakeven profile in 2H 2023

• Last Company Guidance dated 29 April 2022.

• Operating EBITDA excludes stock-based charges, foreign exchange gains and losses, Connective integration costs,

transaction costs and other non-recurring items.

• Refers to cash flows from 'operating activities' excluding Connective integration costs, transaction costs and other non-recurring items, less capital expenditure and AASB 16 lease repayment costs.

For personal use only

Nitro has responded to macroeconomic and market conditions by reducing its cost structure, increasing efficiencies throughout the business, protecting its strong cash position and accelerating its return to cash flow breakeven.

Nitro is in the process of implementing several cost savings and efficiency initiatives, including a restructure of the Company's Go-to-Market (GTM) sales and marketing functions, deferral of planned new hires in R&D and a reduction in general overhead costs. These changes are expected to deliver cash cost savings of approximately US$5.0 million against the Company's 2H 2022 internal cost plan. Accordingly, there is expected to be a corresponding material improvement in the Company's FY2022 Operating EBITDA Loss, given no change to FY2022 revenue guidance.

Commenting on the Company's FY2022 revised guidance, Nitro Co-Founder and Chief Executive Officer Sam Chandler said:

"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.

"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."

For personal use only

Q2 2022 highlights4

• ARR at 30 June 2022 up 52% YoY to US$51.5 million
• Cash receipts from customers up 43% to US$16.2 million
• Strong financial position, with cash of US$35.2 million at 30 June 2022 and no debt5. Commenting on the Company's Q2 2022 performance, Mr Chandler said:

"Nitro continued to grow ARR in Q2 2022, with strong ARR expansion sales and ongoing growth in new customer acquisition. In parallel, we continued to focus on the Connective integration to ensure the Company is best positioned to realise the full benefits of this transformative acquisition, with its market-leadinghigh-trust,enterprise-grade eSigning, eID and workflow capabilities. We're very pleased with how quickly we have been able to integrate the Connective team into the Nitro organisation, and the strength of the cultural fit."

Performance in Q2 2022 and 1H 20226

Revenue and ARR growth

Nitro achieved unaudited revenues of US$32.7 million in 1H 2022, up 36% compared to 1H 2021 (excluding Connective, up 22%).

Revenue growth in 1H 2022 was underpinned by momentum in subscription revenues, up 55%, compared to 1H 2021 (excluding Connective, up 39%). Both subscription revenue and perpetual, maintenance and support revenue exceeded Nitro's internal expectations over 1H 2022.

Nitro ended 1H 2022 with ARR of US$51.5 million, up 52% compared to 30 June 2021 (excluding Connective, up 32%).

Added ARR during 1H 2022 was US$5.3 million (including US$0.6m for Connective), in line with 1H 2021.

• Percentage changes expressed relative to 1H 2021 (YoY).

• Excluding AASB 16 right-of-use leased assets and corporate credit cards.

• Financial metrics provided are unaudited results for the quarter and half year ended 30 June 2022. Financial metrics provided include Connective, unless explicitly indicated otherwise.

For personal use only

Added ARR attributable to Expansion 7 sales in 1H 2022 was particularly strong, driven by continued high demand from Nitro's existing customer base. Nitro's market-leading customer service and product experience continues to power a very high Net Promoter Score (NPS), with customer service NPS at 70 and product NPS at over 50 for both the PDF and Sign products.

Nitro's customer retention rates remain strong, with very limited additional churn experienced across its customer base. Nitro recorded a Gross Retention Rate (GRR) of 94% and Net Retention Rate (NRR) of 113% for 1H 2022, which was broadly in line with 1H 2021.

Strong growth in Expansion ARR was offset, in part, by added ARR attributable to Flip8 sales reducing significantly in 1H 2022 from 1H 2021, due to the effective completion of the conversion from maintenance and support licensing agreements to subscription contracts in Nitro's Business sales9 channel in 2H 2021.

Added ARR from New10 sales was below internal expectations as sales cycles lengthened and customers delayed purchases given the uncertain macroeconomic environment. Nitro's GTM restructure is anticipated to lower costs, improve performance and drive greater efficiencies in the Company's sales and marketing function.

Key customer wins in Q2 2022 included Festo, Thales, ABM, Time Warner Cable, Nestlé, Julius Baer, GE, Grant Thornton, UGL and Workcover Queensland.

Commmentary to Appendix 4C Cash Flow Report

Nitro recorded cash receipts from customers of US$16.2 million in Q2 2022, a 43% increase over Q2 2021. Cash receipts from customers in 1H 2022 amounted to US$33.2 million, up 43% compared to 1H 2021. Trailing 12-month cash receipts from customers at 30 June 2022 were US$61.4 million, up 31% over the prior corresponding period. Increased cash receipts were primarily attributable to an increase in billings arising on multi-year subscription contracts to customers.

Net cash outflow from operating activities for Q2 2022 and 1H 2022 was US$4.7 million and US$9.5 million respectively. Excluding non-recurring integration and other one-time expenses,

• Added ARR generated from existing customers, net of churn.

• Added ARR generated from the conversion of maintenance and support perpetual licensing agreements.

• Nitro Business sales comprise sales executed by Nitro's Sales team and exclude online/eCommerce sales. 10 Added ARR generated from new customer sales.

For personal use only

the adjusted cash outflows from operating activities for Q2 2022 and 1H 2022 were US$3.9 million and US$7.2 million respectively.

These outflows primarily reflect Nitro's strategic investments in areas that will drive future growth, such as personnel, product development and scaling of the GTM engine. This investment underpinned a continued increase in SaaS subscription revenues, which increased to 72% of total revenues in 1H 2022, compared to 63% in 1H 2021.

Nitro has retained a strong financial position, with cash of US$35.2 million at 30 June 2022 and no debt11.

Connective

The Connective business continues to perform broadly in line with Nitro's internal expectations on a local currency (EUR) basis, with USD reported revenues increasingly being impacted by the weakness of the EUR.

Nitro completed the implementation of a new Company-wide organisational structure that integrated the Connective team. Nitro has fully integrated Connective's employees into its global team on a function-by-function basis to ensure strong collaboration, accelerate product integration and maximise cross-sell potential.

During 1H 2022, Nitro deployed US and Australian local cloud environments and specialist support teams to also enable the sale of Nitro Sign Premium (previously Connective) in specific high-trust customer use cases in those regions, typically in highly regulated industries and government, which require local data sovereignty.

Key sales enablement activities have also been completed in the first half, and following those, Nitro began creating a sales pipeline for cross-sell opportunities and closing new sales that contribute to Connective synergy goals. The cross-sell opportunity pipeline is well distributed across Nitro's global markets, serving as key proof points beyond Connective's core European markets.

11 Excluding AASB 16 right-of-use leased assets and corporate credit cards.