Nitro Software Limited
2019
Annual Report
Contents
2019 Highlights
Our History
Chairman’s Letter to the Shareholders
CEO’s Letter to the Shareholders
Better Together
Governance
Board of Directors
Senior Executives
Operating and Financial Review
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Statement of
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Appendix 1
Corporate Directory
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2
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5
6
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14
16
17
23
27
43
44
45
46
47
48
76
77
83
85
87
2019 Highlights
(All amounts are in US Dollars unless otherwise stated)
Licenced Users
2+ million
Business Customers1
10,982
Subscription Revenue
Growth Rate (2017–2019)
111%
Subscription
Retention Rate
90%
Net Revenue
Retention
126%
New
ARR Added
$6.7m
1. A unique customer account with 10 or more licences.
1
Nitro Annual Report 2019 Our History
Launched
Nitro Pro
500K
500,000
Licences Sold
1M
1 Million
Licences Sold
Launch of
Nitro Analytics
2009
2014
2012
2015
Opened Headquarters
in San Francisco
Opened
Dublin Office
2005
Founded
in Melbourne
2
Nitro Annual Report 2019 10K
2M
10,000 Business Customers
& 2+ Million Licences sold
1 Million
Licences Sold
Launch of
Nitro Analytics
Launch of
Nitro Productivity Suite
2017
2016
2018
2019
Opened
London Office
Listed on
the ASX
3
Nitro Annual Report 2019 Chairman’s Letter
to the Shareholders
“As companies around the world have
focused on employee safety and initiated
work-from-home mandates, never before
has the ability to be productive from
anywhere been more important”.
Dear Shareholder,
On behalf of your Board of Directors, it’s my pleasure to present
to shareholders Nitro’s inaugural full-year results and Annual
Report as a public company. As I write this letter, the world
is facing a period of great uncertainty. The global impact of
COVID-19 is unprecedented. At this time, our main priorities
are ensuring the health and safety of our global workforce,
continuing to serve our over 11,000 business customers, and
to protect the interests of our stakeholders.
As companies around the world have focused on employee
safety and initiated work-from-home mandates, never before has
the ability to be productive from anywhere been more important.
The Nitro Productivity Suite provides integrated PDF productivity,
eSigning and analytics through a software-as-a-service (SaaS)
and desktop software solution. Our offering boosts knowledge
worker productivity, accelerates business processes, and saves
our customers time and money, while enabling teams to do so
from any location, even from home.
Outlook
Our goal is to become a strategic partner to our customers by
providing document productivity and workflow solutions that:
•
Improve worker productivity, security and compliance
• Deliver business process acceleration
• Provide business intelligence and actionable insights
• Drive tangible and measurable ROI
We believe we have multiple opportunities and levers for growth
across our broad and diverse customer base, while expanding
our market share through an increasingly competitive offering
that provides mission-critical solutions for knowledge workers
in any industry. It is from this position that we are excited about
the future of Nitro and driving significant shareholder value, no
matter what environment and conditions we all face. Thank you
for your support.
Yours sincerely,
Kurt Johnson
Chairman
Nitro Software Limited
2019 Performance
In December, we listed on the Australian Securities Exchange
(ASX), raising $41.4 million (net) of new growth capital, and
began life as a public company. Our first financial results met or
exceeded our prospectus forecast, and now, with over 11,000
business customers, including 65% of the 2019 Fortune 500, an
extremely competitive product offering, and a robust balance
sheet, we believe we are well positioned to weather the current
storm and continue to drive business growth well into the future.
Our Team
Our employees are our number one asset. Our success is driven
by a passionate, diverse and exceptionally talented team of
over 130 professionals in our offices in San Francisco, Dublin,
Melbourne and London. We are also supported by a global
network of channel partners and resellers around the globe.
I would like to thank all Nitronauts worldwide for their dedicated
efforts in delivering fantastic results in 2019!
4
Chairman’s Letterto the ShareholdersNitro Annual Report 2019 CEO’s Letter
to the Shareholders
“Our mission is to provide document
productivity solutions that are highly
intuitive, can be used from any device,
are adaptable to any workflow, and
are integrated with the most-used
business applications”.
Dear Shareholder,
2019 was a monumental year for Nitro. In addition to our ASX
IPO in December, we continued to execute on our growth
strategy and transition from perpetual-based licencing to a
subscription-based recurring revenue business. For the year 37%
of total revenue came from subscription licences, up from 21%
in 2018. In the future we expect nearly all of our revenue to be
recurring.
Key highlights for 2019 include:
• $35.7 million in total revenue, in line with the
prospectus forecast
• Subscription revenue of $13.2 million,
an increase of 91% YOY
• Ending ARR of $16.9 million, up 66% YOY
• 90% subscription revenue retention rate
• 120% net revenue retention
• Subscription licence growth up 133% over 2018
Now, as we start 2020, companies around the world are facing
the challenges of the COVID-19 crisis and how to adapt to
supporting and empowering the productivity of remote team
members. At Nitro, we have implemented a global work-from-
home operation and our team is as productive as ever. To date,
we have not experienced any material impact on our business
arising from the pandemic or developing economic crisis, in large
part due to the recurring revenue characteristics of our business
model, and the fact that we enable remote work and therefore, in
some cases, are seeing new demand for our software solutions.
Opportunities for Growth in a Large Global Market
Our mission is to provide document productivity solutions that
are highly intuitive, can be used from any device, are adaptable
to any workflow, and are integrated with the most-used business
applications. We have a large addressable market with clearly
defined opportunities for growth, including:
• Expanding the use of the Nitro Productivity Suite across our
11,000-strong business customer base
• Winning new customers in the many global markets and
industries in which we operate
• Cross-selling and up-selling new features and services
• Expanding into new geographical markets
• Accelerating product development, increasing our customer
base, and expanding our resources through partnerships and
acquisitions
As we release our first Annual Report as a public company, we
are operating in an uncertain time, with a major health crisis and
volatile global markets. We don’t know how long the crisis will
last, but we know it will pass. For the benefit of our employees,
customers and you, our shareholders, we remain focused on
daily execution and ensuring we are well-positioned for the
future. We have a very strong balance sheet, products that
enable remote work and may experience rising demand in these
turbulent times, significant contracted and recurring revenues,
and a large and growing market.
We thank all our Nitronauts, customers, partners and
shareholders for their continued support and wish you safety
and health in these challenging times.
Yours sincerely,
Sam Chandler
Co-Founder and CEO
Nitro Software Limited
5
Nitro Annual Report 2019 Better Together
Since our founding 15 years ago, our focus at Nitro has been to serve our
customers. Their success is our success, and we have always known that we can
be even better together. We now serve millions of users every month and work
with some of the world’s largest and best-known companies.
We intend to deliver on our Promise to transform the way the world works
with documents.
We are constantly building on the Power in the Nitro Productivity Suite to
enable our customers to win.
We are committed to Partnership and delivering industry-leading levels of
service and support.
We stand by the Purpose in our vision of a world of 100% digital document
workflows because sustainability matters.
We are proud of our People, the not-so-secret ingredient to our success.
6
Nitro Annual Report 2019
OUR PROMISE
OUR POWER
OUR PARTNERSHIP
OUR PURPOSE
OUR PEOPLE
7
Nitro Annual Report 2019 Our Promise
Workflows + Digital Transformation
Do organisations have adequate and efficient document processes? Based on Nitro’s 2020 Productivity Report*, an overwhelming
majority of knowledge workers all over the world (97%) said they see significant room to improve document processes across their
organisations — a critical aspect to ensuring fully enabled remote work. One-third of respondents feel only slightly productive
and 43% feel stress at work often. Those who work with 10 plus documents per day report the highest level of stress. Without the
right document processes, most knowledge workers don’t feel as efficient as they could be — in fact, they feel more stressed, less
supported, less satisfied, and less able to meet customer needs.
Documents are an integral part of day-to-day operations for all collaborative ecosystems, across businesses of all sizes, industries, and
markets. The lifecycle of a document is complicated, especially within distributed workforce, because of the need to collaborate among
multiple stakeholders who might have disparate objectives and processes that involve several solution providers and end users.
Providing knowledge workers with a complete suite of PDF productivity and eSignature tools not only enhances employee productivity,
accelerates workflow efficiency, and drives digital transformation, but also supports each stage of a healthy document lifecycle.
These products digitise the necessary steps that enterprises need to take to ensure that interactions between all distributed parties
are as cohesive as possible.
Without Nitro
With Nitro
* Nitro partnered with Qualtrics to conduct a research study of 1,183 full- and part-time knowledge workers. This report dives into the relationship between
workplace productivity and the tools that drive it.
“We needed to give everyone access to the necessary tools so that
they can continue to embrace our digital strategy. Nitro is enabling us
to move quickly in this space.”
Andrew Clowes
CIO Australia and New Zealand, JLL
8
TransformEditCreateWet signatureScanPrintCollaborateShareStoreTransformEditCreateeSignCollaborateShareStoreTransforming the Document LifecycleWithout the right toolsWith the right toolsNitro Annual Report 2019 Our Power
PDF Productivity + eSigning + Analytics
The Nitro Productivity Suite empowers organisations and knowledge workers through a suite of tools that improve document
productivity by making it more efficient to create, convert, share, sign, and collaborate on documents on any device with a web
browser, including mobile devices. This serves the many modern organisations that have remote workers who need access to digital
document workflows and eSigning in one place. The Nitro Productivity Suite comprises three core products: Nitro Pro, Nitro Cloud,
and Nitro Analytics. Business Customers can manage users and licences through the Nitro Admin tool and we also offer on-boarding,
adoption, and change management capabilities through our Customer Success offering.
Product Strengths
• Single solution for both PDF productivity and
Key Differentiators
• Employee productivity gains: Nitro’s features drive
eSigning: Combining a PDF productivity tool with electronic
signing capability to deliver a single, easy-to-use solution that
accelerates digital transformation across organisations.
• Ease of implementation and fast adoption: Intuitive
user interface coupled with robust Customer Success support
to facilitate change management, accelerate user adoption,
and fast-track document productivity gains throughout
the business.
•
Implementation at scale: Nitro’s solution is highly scalable
and can be quickly and easily deployed without the need for
complex integrations or significant IT resources. Nitro’s largest
Enterprise Customers have upwards of 20,000 users1 and
deployments of over 10,000 users1 have been achieved in less
than four weeks.
• Unlimited eSigning: A licencing model that enables
organisations to more easily deploy electronic signature
capabilities by reducing the costs and friction associated
with per-signature licencing models.
• Real-time analytics: Analytics and reporting that enable
organisations to quantify the impact of the solution, highlight
opportunities to continuously optimise results, and prove
tangible ROI.
improvements in user productivity, as knowledge workers
are provided with the tools to easily combine and convert
documents, and complete workflows 100% digitally.
The typical knowledge worker wastes four hours per week
on paper processes that, if avoided, can translate to a 10%
increase in employee productivity YOY2.
• Advancement and acceleration of paperless
initiatives: Nitro’s end-to-end digital workflow solution
drives noticeable reductions in user print volumes. By tracking
printing statistics and successfully converting to paperless
initiatives, research has shown that companies can reduce
their printing-related expenditure anywhere from 10% to 30%3.
• Compliant, organisation-wide standardisation:
Nitro’s organisation-wide standardisation accelerates digital
transformation and reduces the risk of non-compliance,
security vulnerabilities, and IT management difficulties.
• Reduction in technology costs: By consolidating several
software applications into one platform, Nitro’s single solution
for PDF productivity and unlimited eSigning can significantly
help to reduce the number of vendors providing these
solutions otherwise, eliminating the associated complexities
and costs of using multiple technology providers.
1. Nitro’s internal information systems.
documents/2537615.
2. Nitro internal research, accessed at https://itbrief.com.au/story/aussie-
workers-ready-paperless-dx-productivity-gains-study (assumes 48 working
weeks per year).
3. Gartner research report, accessed at https://www.gartner.com/en/
“We looked very hard at ways we could standardise PDF productivity
across our organisation, and Nitro enabled us to equip users who
previously would not have had access to these capabilities. When Nitro
introduced eSigning in one integrated solution, it allowed us to standardise
on Nitro Cloud as well for a single and simple solution.”
David Floss
Global Client Support Manager, Zebra Technologies
9
Nitro Annual Report 2019 Our Partnership
Customers + Nitro
Commitment to customer success isn’t just a slogan for us, nor is it a task that is siloed off to one department. It is woven into every
decision we make, every product we offer, and it is the driving force behind our success for the last 15 years. Our promise to our
customers is simple: To help organisations of all sizes eliminate paper, accelerate business processes, and drive digital transformation.
We ended 2019 with nearly 11,000 business customers, including 65% of the Fortune 500 and two of the Fortune 10.
We attribute this success to three key initiatives:
1. Nitro delivers transformative document productivity solutions that accelerate business processes;
2. The Nitro Analytics platform provides actionable insights that enable our customers to further drive their digital transformation
initiatives and provide measurable, tangible ROI; and
3. Nitro provides its customers with best-in-class customer support to drive adoption and achieve measurable business outcomes.
CASE STUDY
eSigning + Nitro Analytics
In 2018 one of the largest non-profit healthcare
companies in the United States, with over 217,000
employees and 700 offices nation-wide, found
that their current PDF alternative was limited
and costly. The company participated in the Nitro
Pilot program to validate right fit and found that
unlimited eSigning and Nitro Analytics made
Nitro the clear, preferred choice. Within 60 days
the initial rollout was completed, and within
six months the company decided to increase
the total number of licences by 60%.
CASE STUDY
PDF Productivity + Customer
Success
In 2019 a Swiss financial services company
moved away from their legacy solution after
discovering the value of Nitro. Within six months,
the company moved 4,000 users over to Nitro,
displacing the legacy solution for most of
their workforce. Nitro has partnered with this
customer on product innovation to ensure that
the Nitro Product Roadmap is evolving along
with their changing business needs.
10
“The support provided by Nitro during
the testing and evaluation phase created
such a positive experience that it gave us
the confidence to move forward. We are
thrilled to be able to offer the full Nitro
Productivity Suite to our employees and
provide access to eSigning tools that
were too cost-prohibitive in the past.”
Director of IT
US Healthcare Company
“Nitro has really proven themselves to be
a true partner who is committed to the
successful adoption of Nitro among our
varied user groups. Nitro continuously
demonstrates genuine concern and
interest in helping us achieve our
business goals. We have high confidence
in Nitro’s product and look forward to
many more years of collaboration.”
Application Manager
Global Wealth Manager Group
Nitro Annual Report 2019 Our Purpose
Sustainability + Nitro
Sustainability is no longer a “nice-to-have” peripheral initiative in
the corporate world. According to a recent survey by AIIM, 49%
of CEO’s cite sustainability as a top-three initiative. They consider
it a priority for improving corporate reputation, employee morale
and efficiency, and for cutting costs.
Most businesses don’t keep track of how often their employees
print — and the result is more expensive than you would think.
On average, a business spends $432 per year per worker on
raw material costs for printing alone, and a single piece of
paper costs $1.12 to print. Given that the average office worker
prints more than 10,000 pages per year, these seemingly small
inefficiencies add up to crippling costs. Organisations with 10,000
knowledge workers could save a staggering $4.3 million per year
by going paperless. Even reducing printing by 25% would save
$1 million each year in material costs alone1.
Printing Costs
If this is not convincing enough, just look at the amount of waste
inherent in paper processes:
• 45% of paper printed in offices is thrown away by the end
of the day1
• 30% of print jobs are never picked up by the user1
•
In general, document workflow inefficiencies cost employees
20% of overall productivity1
Despite the benefits of going paperless, a shocking 53% of
knowledge workers still print documents multiple times per
day and 48% manually sign documents2. This level of printing
is not only unproductive and disruptive to workflows, but it
drains budget quickly and is impossible to track. This extent of
paper usage makes it more difficult for workers to stay on top
of work that matters most — ultimately depreciating workplace
productivity. It is up to the Office of the CIO to digitise processes
that make or break their businesses and position themselves for
digital transformation.
Nitro envisions a world of 100% digital document workflows,
the end of paper forms and signatures, delightful product
experiences for daily document tasks, better document security,
and powerful productivity for all.
1. References included in Nitro’s Deciphering Digital Transformation eBook,
https://www.gonitro.com/page/digital-transformation-hub
2. Refer 3 ways to improve document productivityhttps://cdn.gonitro.
com/documents/whitepapers/gonitro/Nitro-eBook-3-Ways-to-Improve-
Document-Productivity.pdf
“Our Global Office deals with countless documents every day, so being able
to provide a PDF productivity solution to every user was a critical requirement
for us. Nitro’s solution is easy to use, and we’re also working to identify more
ways to streamline our document workflows. We’ve already seen a positive
impact from implementing Nitro Cloud to facilitate everyday signature requests
that can now be completed much faster — and without involving paper.”
Adam Grainger
Director of IT and Projects, Baker Tilly
11
Nitro Annual Report 2019 Our People
Team + Culture
At Nitro we know that our success is only as good as the people
behind it, so we are hyper-focused on building a culture that not
only engages our Nitronauts but encourages them to innovate
and grow. You can find our 132 full-time employees all over the
globe: head-quartered in San Francisco, there are also offices in
Dublin, London, and Melbourne. Together, we push each other
as colleagues, inspire each other as individuals, and support each
other as friends.
Culture and philosophy
Nitro has always put people at the center of what we do whether
it is our customers or our employees. It comes back to one of our
core values. Be Good. Simply put, we love people and we love
helping them so we foster an environment where people can be
themselves and do their best work. We celebrate individuality
and diversity, and provide our employees with the opportunities,
the resources, and the support that they need to thrive and
flourish. We have a “performance-first” mindset to complement
our ambitious business goals.
Our philosophy is straightforward, tangible, and proven:
We believe software technology should be intuitively easy to
use, help make people better, and accessible to any knowledge
worker that wants to be more productive. Our team consists of
creatively intelligent and talented people who care about building
great products that delight our customers and make them more
productive, and we are doing it in a way that is very rewarding
and makes us proud to be part of Nitro.
Life at Nitro
Nitro has always put people at the center of what we do whether
it is our customers or our employees. It comes back to one of
our core values: Be Good. Simply put, we love people and we
love helping them so we foster an environment where people
can be themselves and do their best work. We have a dedicated
committee that meets bi-weekly to discuss upcoming events
and initiatives. Building a great place to work goes beyond
salary and vacation days so we focus on striking the perfect
balance between engagement, cohesion, and productivity.
The combination of health and wellness and professional
development helps us to stay fresh:
• Health and Wellness: Since we know that wellness does not
look the same for any two people, we offer a monthly fitness
subsidy that encourages employees to stay active however
they like.
• Professional Development: One of our guiding principles
is “always learning,” so throughout the year we offer a range
of workshops—from 401(k) education to motivational speaker
series—to promote financial and emotional health.
How Nitro Gives Back to Local Communities
The role we play in society at large is important. Nitro’s volunteer
program, Nitro Gives, captures a few core values and practices
that are essential to our culture: environment (going paperless
and improving productivity), education (always evolving), and
community (be good and helping others). The Nitro Gives
program offers:
• Volunteer time off: We provide up to five days of paid
volunteer time off to ensure that employees have the time
they need to do what they are passionate about
• Donation matching: Nitro will match 100% of employees’
charitable donations—up to $500 donation matching per
employee per year, and up to $500,000/year.
• Charity partnerships: We frequently partner with local
charities and programs, such as mentorship programs for
high schoolers, to support and engage with the community.
• Ambassador program: A global Nitro Gives committee
helps organise, run initiatives, and establish ambassadors for
the program so people across all departments are involved
and invested in opportunities they are passionate about.
Community Initiatives
• Techies for Temple Street: Nitro raised $1,700 and joined
members of the Irish tech and business communities for a
treasure trail in Dublin. The goal: making an impact on the
lives of sick children across Ireland.
• Rise Against Hunger: Nitro partnered with Rise Against
Hunger in San Francisco to package and ship over 20,000
meals for those less fortunate to 70+ poverty-stricken nations
around the world.
• Australian Red Cross: Over $12,000 in donations was
raised by Nitro and individual employees for the Australian
Red Cross due to the wildfires in Australia.
“Nitro has an incredible ‘can do’ customer-focused team culture. We work
extremely well as a global team with many of the biggest companies in
the world, and our ability and agility to respond quickly helps them get
the results they need.”
Michael Helder
VP Sales APAC
12
Nitro Annual Report 2019 Governance
Nitro is committed to meeting high standards of corporate governance to create long term and sustainable shareholder value.
The Board supports the need for strong corporate governance and this is reflected across the culture and business practice of the
organisation. Our policies are essential in enabling transparency and accountability across the organisation, and in protecting and
enhancing the interests of shareholders and other stakeholders. Nitro’s approach to corporate governance and our compliance with
the Recommendations of the ASX Corporate Governance Council are described in our Corporate Governance Statement, which is
available on our website at https://ir.gonitro.com/investor-centre/?page=corporate-governance.
Shareholders
Board of directors
Chair: Kurt Johnson
Composition: 8 members
Audit and Risk Management Committee
Chair: Sarah Morgan
Remuneration and Nomination Committee
Chair: Lisa Hennessy
CEO
Responsible for day to day management
Executive team
Report to the CEO and responsible for execution of the strategic objectives
Board composition
– Diversity
Board composition
– Tenure
25%
75%
Male
Female
Executive team
– Diversity
40%
60%
Male
Female
50%
25%
25%
Less than
1 year
Between
1–5 years
More than
5 years
Executive team
– Tenure
20%
60%
20%
Less than
1 year
Between
1–5 years
More than
5 years
13
Nitro Annual Report 2019 Board of Directors
Kurt Johnson
Independent Chairman and
Non-Executive Director
Sam Chandler
Executive Director and
Chief Executive Officer
Sam co-founded Nitro in May
2005 and currently serves as the
CEO and as a Director. Sam is
an experienced entrepreneur,
starting his first company at
16 years old while still in high
school. Since then, he has
started two more companies, sat
on the board of the Australian
Communities Foundation, and is
currently an Investor and Mentor
in Startmate, a leading Australian
tech accelerator. Sam has over
20 years of global technology
leadership experience, including
11 years living and working in
Silicon Valley, and was named
Ernst & Young’s Australian
Emerging Entrepreneur of the
Year in 2014.
Current ASX listed company
directorships
• Nitro Software Limited (since
September 2010)
Kurt joined the Board as an
independent board member
in September 2010 and was
appointed Chairman in 2019.
Kurt has over 24 years of
professional management
experience, including public
and private company leadership
across a range of internet and
technology-based companies,
and is now an active angel
investor. He was previously an
investment banker with Olympic
Capital Partners, providing M&A
and financial advisory services
for middle-market companies in
the telecommunications, media,
and technology industries.
Special responsibilities
• Chair of the Board
• Member of the Audit and Risk
Management Committee
• Member of the Remuneration
and Nomination Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
September 2010)
Richard Wenzel
Executive Director and
Senior Vice President, Tax
and Treasury
Richard co-founded Nitro in
2005 and has been a Director
since. He also sits on the
boards of Nitro’s US and EMEA
entities. Richard is a pragmatic
entrepreneur who founded
his first company (ARTS PDF)
in 1998 after a career in
investment banking. ARTS PDF
was a leading developer of PDF
plugins and an instrumental
grounding in the path to
founding Nitro. Richard has 21
years of experience in document
productivity and currently the
Senior Vice President of Tax
and Treasury and is responsible
for key treasury functions and
tax compliance. He also serves
as the primary internal legal
advisor.
Current ASX listed company
directorships
• Nitro Software Limited (since
September 1999)
Andrew Barlow
Independent
Non-Executive Director
Andrew led the Seed investment
round in the Company in late
2006 and joined the Nitro Board
in January 2007. Andrew is
an experienced technology
entrepreneur and venture
investor, with more than
25 years private company board
and operational experience,
and 12 years public company
board experience. Andrew
has a wealth of capital raising,
corporate governance, and M&A
experience on both the sell-side
and buy-side. He is the Founder
and Executive Chairman of
Adslot Ltd, a leading provider
of automated digital media
trading platforms listed on the
Australian Securities Exchange.
Special responsibilities
• Member of the Audit and Risk
Management Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
January 2007)
• Adslot Limited (since
September 2011) Founder and
executive Chairman
14
Nitro Annual Report 2019 John Dyson
Non-Executive Director
Michael Brown
Non-Executive Director
Sarah Morgan
Independent
Non-Executive Director
Lisa Hennessy
Independent
Non-Executive Director
John joined the Nitro Board
in July 2018 representing
Starfish Ventures, the manager
of Starfish Technology Fund
II, LP, a major shareholder in
the Company. He has over 24
years of experience working
in the venture capital industry,
investing in and supporting
companies in the technology
sector. John co-founded Starfish
Ventures in 2001, and prior
to that was General Manager
(Australia) of JAFCO Asia for
six years. Prior to that he had
over 9 years of experience in
the investment banking and
stockbroking industries.
Special responsibilities
• Member of the Remuneration
and Nomination Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
July 2018)
• Audinate Group Limited (since
March 2017) Non-executive
director
Michael joined the Board in 2014
on behalf of Battery Ventures
after their participation in the
Series B fundraising. Since
joining Battery Ventures in 1998,
Michael has managed multiple
investments spanning the
enterprise software, financial-
services and technology-
enabled business-services
markets. He currently serves
on the boards of AuditBoard,
CarNow, Diametric Capital,
Istra Research, J. Hilburn, Joor,.
Michael was previously involved
with Battery’s investments in
companies like Bluestem Brands
(acquired Capmark Financial
Group), Bonfire (merged into
GTY Technology), ChemConnect
(acquired by InterContinental
Exchange), and; ExactTarget
(acquired by Salesforce.com).
He is currently on the board of
the US National Venture Capital
Association.
Sarah is an experienced public
and private company director,
particularly in an audit and
risk management capacity.
Prior to becoming a company
director, Sarah spent 15 years
as an executive director of
independent corporate advisory
firm Grant Samuel, specializing
in M&A, public, and private
capital raisings.
Special responsibilities
• Chair of the Audit and Risk
Management Committee
• Member of the Remuneration
and Nomination Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
November 2019)
• Adslot Limited (since January
2015) Non-executive director
and Chair of the Audit and Risk
Committee
• Whispr Limited (since January
2019) Non-executive director
and Chair of the Audit and Risk
Committee
• Future Generation Global
Company Limited (since June
2015) Non-executive director
Former ASX listed company
directorships in the last
three years
• Hansen Technologies
Limited (since October 2014
to December 2019) Non-
executive director and Chair of
the Audit and Risk Committee
Lisa is a highly experienced
executive and company director
with over 30 years of experience.
Lisa currently sits on the board
of a number of public and
private companies. Prior to
this, Lisa spent over a decade in
strategy and M&A roles in the
US, including Director of Strategy
and M&A for Del Monte Foods
and Director at GE Capital.
Special responsibilities
• Chair of the Remuneration and
Nomination Committee
• Member of the Audit and Risk
Management Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
November 2019)
Former ASX listed company
directorships in the last
three years
• Murray River Organics Limited
(since August 2016 to January
2018) Non-executive director,
Chair of the Remuneration and
Nomination Committee and
Member of the Audit and Risk
Management Committee
15
Nitro Annual Report 2019 Senior Executives
Gina O’Reilly
Chief Operating Officer
David O’Donoghue
Vice President, Engineering
Gina joined Nitro in 2009, initially
as a Senior Vice President
of Sales & Marketing, and is
currently the Company’s Chief
Operating Officer. Gina has
global responsibility for the
marketing, business, and people
operations functions, including
employee experience and
talent. She has over 20 years of
software industry experience,
having previously held the
roles of Director of Sales and
Marketing at activePDF, as well
as International Relations and
Marketing Manager at Software
Technology Resources.
David joined Nitro in 2018 in
the role of VP of Engineering.
David is responsible for
overseeing the global
engineering team across Dublin
and San Francisco, as well as all
Nitro products. David has over
30 years of extensive experience
developing, coaching, and
leading software engineering
organisations. He was previously
the Head of Engineering at
Zalando Ireland, Head of
Software Development at Full
Tilt Poker, Senior Development
Manager at Oracle, and Head of
R&D at Performix Technologies.
Kathy Miller
Chief Financial Officer and
Co-Company Secretary
Kathy joined Nitro in January
2019 in the role of Chief
Financial Officer. Kathy is
responsible for all global
financial, legal, IT, compliance,
and reporting functions within
Nitro. She has over 30 years of
leadership experience in finance,
accounting and operations,
holding several senior roles
across public and private
companies within the global
software and IT space. Examples
of these roles include Chief
Operating and Chief Financial
Officer of nCourt, Chief Financial
Officer of eSecuritel Holdings,
and Senior Vice President Global
Finance and Accounting of
Witness Systems.
Sam Chandler
Executive Director and
Chief Executive Officer
Refer to Sam’s full bio on
page 14.
Richard Wenzel
Executive Director and
Senior Vice President,
Tax and Treasury
Refer to Richard’s full bio on
page 14.
16
Nitro Annual Report 2019 Operating and Financial Review
for the year ended 31 December 2019
Operating and Financial Review (“OFR”)
This OFR is designed to assist shareholders understand the Group’s business performance and the factors underlying
its results and financial position. It complements the financial disclosures in the Consolidated Financial Statements on
page 44 to 75 of the Annual Report. The OFR covers the period from 1 January 2019 to 31 December 2019, including the
comparative prior period and the prospectus forecast for the year ended 31 December 2019. To conform to the current
period presentation, certain comparative figures have been reclassified where appropriate.
The OFR also includes SaaS metrics that we believe are critical to the understanding of the performance for the financial
year and the potential for growth in 2020. These SaaS metrics are non-IFRS measures and the manner in which these are
calculated and trends they convey are explained in Appendix 1 to the Annual Report.
17
Nitro Annual Report 2019 Operating and financial review
Nitro generates revenue through the sale of software licences, either on a right-to-access (subscription) basis, or on a right-to-use
(perpetual) basis, as well as through providing maintenance and support for customers who licence software on a perpetual basis.
SUMMARY OF FINANCIAL RESULTS (STATUTORY)
US$ MILLIONS
Subscription
Perpetual, maintenance and support
Revenue
Cost of sales
Gross profit
Sales and marketing
Research and development
General and administrative
Other income/(loss)
EBITDA before share based payments
Share-based payment expense2
EBITDA
Finance costs
Depreciation and amortisation expense
(Loss) before income tax
Income tax expense
(Loss) for the year
SaaS METRICS3
Gross Margin
Net Revenue Retention
Annual Recurring Revenue (ARR) US$ million
New Annual Recurring Revenue (New ARR) US$ million
Lifetime Value per Customer (LTV) US$’0005
Customer Acquisition Costs (CAC) US$’0005
LTV/CAC (ratio)5
2019
13.2
22.5
35.7
(3.7)
32.0
(18.5)
(7.0)
(10.7)
1.2
(3.0)
(0.8)
(3.8)
(1.8)
(2.0)
(7.6)
(0.4)
(7.9)
2019
90%
126%
16.9
6.7
123
44
2.8x
2018
6.9
25.5
32.4
(3.8)
28.6
(15.4)
(7.7)
(6.5)
(1.2)
(2.2)
(0.6)
(2.8)
(0.6)
(2.0)
(5.4)
(0.2)
(5.5)
2018
88%
149%
10.2
5.8
183
40
4.6x
CHANGE
CHANGE
%
2019F1
6.3
(3.0)
3.3
0.1
3.4
(3.1)
0.7
(4.2)
2.4
(0.8)
(0.2)
(1.0)
(1.2)
(0.0)
(2.2)
(0.2)
(2.4)
91%
-12%
10%
-3%
12%
20%
-9%
65%
200%
36%
33%
36%
183%
5%
42%
100%
44%
H1 20194
H1 20184
89%
127%
12.8
2.6
153
42
3.6x
88%
187%
7.0
2.6
198
40
4.9x
13.1
22.3
35.4
(4.0)
31.4
(18.4)
(7.4)
(10.7)
(0.2)
(5.2)
(0.9)
(6.1)
(1.8)
(2.0)
(10.0)
(0.2)
(10.1)
2017
87%
152%
4.4
2.6
182
60
3.1x
1. Statutory forecast results as per the IPO prospectus.
2. Share-based payment expense is classified to functional areas in the statutory Consolidated Statement of Comprehensive Income. Of the $0.8 million expense
in 2019, $0.2 million is classified to sales and marketing expense, and $0.6 million is classified to general and administrative expense. For 2018, $0.6 million was
classified to general and administrative expense.
3. Refer to Appendix 1 for detailed explanations of SaaS metrics. Non-IFRS information has not been audited or reviewed in accordance with Australian
Auditing Standards.
4. H1 2019 and H1 2018 represent the six months ended 30 June 2019 and six months ended 30 June 2018 respectively.
5. Prior period data has been adjusted to correct an error in previously reported values.
18
Nitro Annual Report 2019Operating and Financial Reviewfor the year ended 31 December 2019 Revenue
Subscription revenue
Subscription revenue was $13.2 million or 37% of total revenue for the year ending 31 December 2019, up 91% over $6.9 million
or 21% of total revenue for the same period in 2018. This increase was driven by new customer wins, including large enterprise
customers, licence expansions at existing customers, and the continued transition of existing perpetual customers to subscription-
based pricing during the year.
The Company measures growth in subscription revenue through new ARR added. New ARR added provides an indication of growth
in subscription licence sales during the period through sales to new customers who purchase the Nitro Productivity Suite on a
subscription basis, additional incremental licence purchases by existing subscription customers, and the conversion of existing
perpetual-based licence customers to the subscription-based licencing model. New ARR added during 2019 increased 16% on a
year on year basis to $6.7 million, up from $5.8 million in 2018. Consequently, ending ARR rose 66% during 2019 to $16.9 million from
$10.2 million at the end of 2018.
Perpetual, maintenance and support revenue
As the Company continues to migrate existing customers to subscription-based licences, perpetual revenue is forecast to decline as a
percentage of total revenue. In 2019, the sale of perpetual licences and accompanying maintenance and support contracts declined
12% to $22.5 million in revenue or 63% of total revenue. In 2018, perpetual, maintenance and support revenue was $25.5 million
accounting for 79% of total revenue. The Company expects perpetual, maintenance and support revenue to continue to decline as
a percentage of total revenue as we continue to migrate existing perpetual customers to the subscription-based licencing and as we
continue to add new enterprise customers who purchase subscription-based licences.
Gross profit and gross profit margin
Gross profit increased by $3.4 million, up 12% during 2019, to $32.0 million as compared to $28.6 million in 2018 and was favourable
to the prospectus forecast by $0.6 million. The gross margin was 90% for the year, compared to 88% for 2018 and 89% in the
prospectus forecast, largely due to lower cost of sales than planned. Cost of sales decreased as a percentage of revenue compared
to 2018 as a result of the greater portion of revenue coming from subscription revenue, which has higher margins than perpetual
revenue.
Cost of sales includes the cost of third party technologies that are used to host Nitro’s cloud-based products, third party technologies
that are embedded in the Company’s technology, third party hosting services for the Company’s online storefront and salaries,
benefits, bonuses and other operating costs associated with the Company’s customer support organisation.
Operating expenses
Sales and marketing
Sales and marketing expense of $18.7 million in 2019 was in line with the prospectus forecast. This compares to $15.4 million in
2018, an increase of $3.2 million or 21%. As a percentage of total revenue, sales and marketing expenses were 52% and 48% of
total revenue in 2019 and 2018, respectively. The increase in sales and marketing expense was driven by an increase in number
of full-time equivalents including quota carrying sales representatives, business development resources, and sales operations and
support, offset by attrition in sales, as well as increased marketing program spending focused on channel marketing, digital marketing
and SEO/SEM and demand generation activities. Total sales and marketing headcount was 57 at the end of 2019 versus 63 at the end
of 2018.
The Company measures the efficiency of sales and marketing by monitoring LTV/CAC ratios. The LTV/CAC ratio was 2.8x for 2019
versus 4.6x for 2018. The decrease in the LTV/CAC ratio was primarily attributable to several $1 million+ contracts being signed
in 2018 versus 2019, which skewed the 2018 results, as well as increased marketing program spending.
19
Nitro Annual Report 2019 Research and development
In 2019, research and development expense was $7.0 million, $0.4 million lower than the prospectus forecast and a decrease of
$0.7 million or 9% from $7.7 million in 2018. As a percentage of total revenue, research and development expenses decreased
to 20% of total revenue in 2019 versus 24% in 2018. This decrease was the result of reduced personnel costs as the Company
continued to transition its development team from San Francisco to Dublin and timing of hiring in the second half of 2019, partially
offset by increase in headcount. Total research and development headcount at the end of 2019 was 42, as compared to 39 in 2018.
During the year ended 31 December 2019, all research and development costs were expensed as they did not meet the recognition
and measurement criteria under the AASB 138.
General and administrative expenses
In 2019, general and administrative expenses were $11.3 million, an increase of $4.3 million or 61% from $7.0 million in 2018 and
in line with the prospectus forecast. As a percentage of total revenue, general and administrative expense increased from 22% of
2018 revenue to 32% of revenue in 2019. The increase in general and administrative expenses during 2019 was due to increased
professional services and consulting expenses in relation to the IPO, increased costs related to increased headcount in the accounting
and human resources teams, and compliance costs associated with becoming a public Company.
Other items impacting the results
Other income/expense
In 2019, other income was $1.2 million, an increase of $2.4 million or 200% a loss of $1.2 million in 2018. The increase was primarily
attributable to an unrealised foreign currency gain in 2019 of $1.2 million versus an unrealised foreign currency loss in 2018 of
$0.5 million, a loss on disposal of asset in 2018 aggregating $0.5 million and other expenses aggregating $0.2 million.
Finance costs
In 2019, finance costs were $1.8 million, an increase of $1.2 million or 171% from $0.6 million in 2018. The increase was primarily
attributable to the implied interest related to the 20% discount on convertible notes issued during 2019 of $1.3 million. These notes
were converted to equity upon completion of the IPO.
Cash flows
Cash and cash equivalents were $47.0 million as at 31 December 2019.
Operating cash flow of $0.4 million in 2019 was slightly higher than the operating cash outflow of $0.3 million in 2018. Gross receipts
from customers in 2019 aggregated $40.2 million as compared to $35.8 million in 2018. Investing activities included $0.7 million in
acquisition of assets in 2019 relating to IT infrastructure.
Cash flow from financing activities included, $44.8 million primary capital raising before costs, $5.0 million convertible note instrument
(issued in 2019) converted to equity on completion of the IPO, $1.8 million from preference shares issued in December 2018 and
$4.5 million repayment of borrowings.
Nitro Strategy
The key aspects of Nitro’s strategy are as follows:
Winning new Enterprise Customers
Nitro expects to continue to attract enterprise and mid-market customers around the globe for the Nitro Productivity Suite. Our new
customer acquisition strategy is supported by field and inside sales, sales development resources, marketing campaigns and brand
awareness, channel partners and existing customer referrals.
Expansion within existing customers and expanding revenue contribution from large enterprise customers
Nitro is focused on increasing the value it derives from existing customers in two ways — through an increase in the number of
licences, and through increase in the average selling price per licence. Customers typically add more user licences as their employee
base grows organically or inorganically, or if a decision is made that Nitro’s capabilities are required by an expanded number of
knowledge workers or workflows. Nitro expects to increase the average selling price per licence over time by cross-selling and up-
selling new products and expanded features.
20
Nitro Annual Report 2019Operating and Financial Reviewfor the year ended 31 December 2019 Product development
Nitro is focused on continuing its geographical and vertical expansion by winning new customers, including from competitors, to drive
increased penetration of the Company’s global addressable market. Nitro continues to focus on expanding the revenue contribution
from enterprise customers to drive greater revenue per customer, increase the profile of Nitro’s solutions, and enhance the network
benefits of using Nitro’s products between organisations.
Nitro believes there are additional growth opportunities both in the core markets of PDF productivity and eSigning, as well as
adjacent markets in document productivity and workflow. Nitro is committed to the following short-to medium-term product
development ambition:
• Seamless, simple and delightful document productivity from any device;
• Faster document processes with intuitive experiences and no-code automation;
• eSigning workflows optimised for individuals and teams;
• Developing integrations with the most-used business apps;
• A vibrant ecosystem built around enterprise grade document productivity and eSigning services; and
• Rich insights that make productivity visible for individuals and businesses.
Mergers and acquisitions
In addition to organic growth drivers explained above, Nitro may from time to time evaluate opportunities to acquire companies
or assets to accelerate product development, time to market for new features and functionalities and/or to add complimentary
products to the Nitro Productivity Suite.
Proactive approach to risk management
Nitro’s Board and Executive Team deal with a variety of business risks, which are actively assessed and managed as part of
the company’s risk management framework. Nitro’s core risks and the way they are managed are described below. This is not
a comprehensive list of the risks involved or the mitigating actions that have been adopted.
Strategic risks
Nitro has a clear strategy to ensure the continued growth of the organisation. The strategic direction, together with its ability to
successfully execute on that strategy, is critical to its future success. Nitro devotes a significant amount of time and resources
to developing, monitoring and reviewing its strategic direction. This process involves a number of activities, including:
• dedicated strategy days at Board and Executive level;
• regular engagement with external subject matter experts and consultants, including competitive intelligence;
• development of an organisation and reporting structure conducive to the execution of the strategic plans; and
• ongoing monitoring and review of strategy within the organisation.
Nitro is confident that its thorough approach to the development, review and execution of its strategy greatly reduces its risk in
this area.
Cybersecurity, data protection and third-party dependence
The use of information technology is critical to Nitro’s ability to deliver products and services to customers and the growth of its
business. Nitro’s products also involve the storage and transmission of its customers’ confidential and propriety data, which may
include confidential personal or business information, information regarding the employees of Nitro’s customers, and other forms of
confidential information. By their nature, information technology systems are susceptible to cyber-attacks, with third parties seeking
unauthorised access to data, financial theft and to cause disruption to business-as-usual services. Any of these events could cause a
material disruption to Nitro’s business and operations.
21
Nitro Annual Report 2019 Nitro has based its data protection and cyber security protocols on the ISO 27000 suite of standards, the U.S. National Institute of
Standards & Technology Special Publication 800-53 and the EU GDPR regulation on data privacy. These standards enable Nitro to
maintain its certifications for SOC2 Type 2, HIPAA and Privacy Shield. These are important accreditations that customers expect when
dealing with software providers in the industries in which Nitro operates. In certain circumstances, such accreditations are also required
to be maintained in order to allow Nitro to tender for, and offer its product offering to, certain clients (e.g. government entities).
Nitro’s systems are designed, built and managed to reduce the potential for security or data privacy breaches. Nitro Cloud is
dependent on the performance, reliability and availability of its own technology platforms, third party data centres and global
communications systems including servers, the internet, hosting services and the cloud environment in which it provides its products.
Nitro uses Tier 1 service providers for the provision of data centres for its key cloud services. These partners host this data in highly
secure, fully redundant data centres, and communications infrastructure is similarly secure. Nitro’s relationships with these providers
are designed to maximise reliability and connectivity, with ongoing systems testing and monitoring.
Talent management
The success of the Company is dependent upon the ongoing retention of key personnel, including the current senior executive, sales
and product teams. In addition, Nitro needs to attract and retain highly skilled software development engineers. Competition for such
personnel is intense.
Nitro’s success depends on its ability to attract and retain talent. Nitro continues to develop leadership, learning, development and
engagement initiatives to drive and deliver a results-oriented and high-engagement culture. A best in class approach to remuneration,
leave, wellness and healthcare benefits and identifiable value system has ensured, that risks emanating in relation to talent
management are mitigated suitably.
Outlook
The COVID-19 pandemic has had a significant impact on the general business environment, equity and currency markets. While the
extent of the post balance sheet date impact on the Group’s business is not yet known, a prolonged economic recession could have a
material negative impact on our customers and prospects which, in turn, may impact the Company’s ability to achieve the prospectus
forecast. Additionally the Company maintains cash in foreign currencies and is experiencing losses related to adverse movements
in currency exchange rates. The Company has, pursuant to its foreign exchange risk management policy detailed in note 14(b)(i) on
page 68 of the Annual Report, instituted measures, including foreign currency hedging instruments to mitigate risks arising from the
adverse movements in currency exchange rates on some, but not all, foreign denominated cash balances.
22
Nitro Annual Report 2019Operating and Financial Reviewfor the year ended 31 December 2019 Directors’ Report
The Directors present their report on the consolidated
entity (referred to as “the Group”) consisting of Nitro
Software Limited and the entities it controlled at the end
of, or during, the financial year ended 31 December 2019.
23
Nitro Annual Report 2019 Principal activities
The principal activities of the Group during the year were the provision of software and software support services relation to
document productivity through the portable document format (‘PDF’).
Corporate information
Nitro Software Limited is a company limited by shares that is incorporated and domiciled in Australia. The company’s registered
office is Level 4, 246 Bourke Street, Melbourne, Victoria, Australia and principal place of business is 150 Spear Street, Suite 1500,
San Francisco, California, United States of America.
Directors and meetings of directors
The table below sets out the directors of the Group and details the number of board and committee meetings held and attended
by those directors, during the financial period ended 31 December 2019. All persons below were directors of the Group during the
whole of 2019 and up to the date of this report, unless otherwise stated.
Sam Chandler
Richard Wenzel
Kurt Johnson
Andrew Barlow
John Dyson
Michael Brown
Sarah Morgan1
Lisa Hennessy2
BOARD MEETINGS
NUMBER OF MEETINGS HELD DURING
THE TIME THE DIRECTOR HELD OFFICE
AND WAS ELIGIBLE TO ATTEND AS A
MEMBER
NUMBER OF MEETINGS ATTENDED
4
4
4
4
4
4
1
1
4
4
4
4
4
4
1
1
1. Appointed as a member of the Board and the Remuneration and Nomination Committee and chair of the Audit and Risk Management Committee on
21 November 2019. Appointed in consulting capacity to the Board from 20 July 2019 until the date of appointment to the Board and respective committees.
2. Appointed as a member of the Board and the Audit and Risk Management Committee and chair of the Remuneration and Nomination Committee on
21 November 2019. Appointed in consulting capacity to the Board from 20 August 2019 until the date of appointment to the Board and respective committees.
The Audit and Risk Management Committee and Remuneration and Nomination Committee of the Board were formed, and the
respective charters adopted on 21 November 2019 pursuant to the Company becoming a public company and no meetings were
held prior to the year ended 31 December 2019. All duties and responsibilities of these committees prior to their formation were
performed by the Board of Directors.
The qualifications, experience and roles and responsibilities of directors, including current and recent ASX listed directorships, are
detailed on pages 14 to 16 of the Annual Report.
The remuneration, interests in securities and share options are detailed in the Remuneration report on pages 27 to 42 of the
Annual Report.
24
Nitro Annual Report 2019Directors’ Report
Company Secretaries
Kathleen Miller (Co-Company Secretary)
Kathy joined Nitro in January 2019 in the role of CFO and was appointed the Co-Company Secretary effective 21 November 2019.
Kathy’s qualifications, experience and roles and responsibilities of are detailed on page 16 of the Annual Report
Mark Licciardo (Co-Company Secretary)
Mark was appointed the Co-Company Secretary effective 21 November 2019. Mark Licciardo is the founder and Managing Director
of Mertons Corporate Services Pty Ltd. As a former company secretary of ASX 50 companies, Transurban Group and Australian
Foundation Investment Company Limited, his expertise includes working with boards of directors in the areas of corporate
governance, business management, administration, consulting and company secretarial matters. He is also the former Chairman
of the Governance Institute of Australia Victoria division, Academy of Design (LCI Melbourne) and Melbourne Fringe Festival and a
current non-executive director of a few public (including ASX listed) and private companies. Mr Licciardo holds a Bachelor of Business
Degree (Accounting) from Victoria University and a Graduate Diploma in Company Secretarial Practice, is a Fellow of the Australian
Institute of Company Directors, the Institute of Chartered Secretaries and Administrators and the Governance Institute of Australia.
Officers
The names and roles of other Officers of the Company during 2019 are shown in ‘Key Management Personnel’ of the Remuneration
Report on page 28 of the Annual Report.
Insurance of Directors and Officers
The Company has agreed to indemnify the current Directors and certain officers of the Company and its controlled entities against
all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors
and officers of the Company and its controlled entities, except where the liability arises out of conduct of acts or lack thereof which
constitute an indictable offence or are fraudulent, dishonest or a wilful default of the directors’ duties as a director of the Company.
The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Under the
terms of the agreement, the Company will meet the full amount of any such liabilities, including legal fees.
Insurance premiums
The Group has paid insurance premiums in respect of Directors’ and officers’ liability and legal expenses insurance contracts,
for current and former Directors and officers, including senior executives of the Company and Directors, senior executives and
secretaries of its controlled entities. The insurance premiums relate to legal costs and expenses incurred by the relevant officers in
defending proceedings and other liabilities that may arise from their position, with the exception of conduct involving a willful breach
of duty or improper use of information or position to gain a personal advantage or to cause detriment to the Company. The terms of
the insurance contract require that the amount of the premium paid be kept confidential.
Auditor and non-assurance services
PricewaterhouseCoopers (“PwC”) continues in office in accordance with section 327 of the Corporations Act 2001. It is the Group’s
policy to engage PwC on assignments additional to their statutory audit duties where their expertise and experience with the Group
are important. These assignments are principally due diligence reporting on acquisitions and tax advice.
Details of the amounts paid or payable for non-assurance services in relation to the IPO by PwC are disclosed in note 16 ‘Auditor’s
remuneration’ to the Consolidated Financial Statements on page 74 of the Annual Report. The Board of Directors has considered the
position and is satisfied that the provision of the non-assurance services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-assurance services by the auditor
did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-assurance services have been reviewed by the Audit and Risk Management Committee and the Board to ensure they do
not impact the integrity and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 43
of the Annual Report.
25
Nitro Annual Report 2019 Proceedings on behalf of the Company
No proceedings have been brought or intervened in on behalf of the Company, nor have any applications for leave to do so been
made in respect of the Company, under section 237 of the Corporations Act 2001.
Environmental regulation
The operations of the Group are not subject to any particular or significant environmental regulations under a Commonwealth,
State or Territory law.
Significant changes to state of affairs of the Company
Effective 11 December 2019, the Company was officially listed on the Australian Securities Exchange. The listing was pursuant to an
IPO through which new equity of $44,833K (before transaction costs) was raised.
Other information
The following information, contained in other sections of this Annual Report, also forms part of this Directors’ Report:
• Operational and Financial Review on pages 17 to 22 of the Annual Report
• No dividends have been paid, declared or proposed
• Likely developments in the operations of the Group are outlined in the ‘Outlook’ section of the Operational and Financial Review on
page 22 of the Annual Report; and
• Remuneration Report on pages 27 to 42.
Rounding of amounts
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in
accordance with that instrument, amounts in the consolidated financial report and Directors’ report have been rounded off to the
nearest thousand dollars, unless otherwise stated.
This report is made in accordance with a resolution of directors.
Kurt Johnson
Chair
31 March 2020
Sam Chandler
Executive Director, Founder and CEO
31 March 2020
26
Nitro Annual Report 2019Directors’ Report
Remuneration Report (Audited)
Message from the Chair of the Nomination and Remuneration Committee
Dear Shareholder,
On behalf of the Board, I am pleased to present Nitro Software Limited ’s Remuneration Report for the financial year to December 31,
2019. Although we only listed in December the report covers the full year.
The intent of structure and content of this, our first Remuneration Report, is to provide transparency and clarity on the journey we
have begun. In this context the key themes of this transition cover:
• Our absolute commitment to ensure our remuneration arrangements are fit for purpose, appropriate to the markets in which we
compete for talent and aligned with shareholders’ expectations.
• Ensure a remuneration structure that delivers challenging stretch financial performance while enabling the executive team to share
in the long-term value creation.
• Evolve the remuneration structure, policies and framework to drive us toward the business we want to become.
• How we intend to strike a balance between competitive executive remuneration expectations in our key international markets with
the market practices and governance obligations of an ASX-listed company.
For 2019, the Committee and the Board determined and reviewed remuneration arrangements for the Executive Directors and
the Executive Team. This included a market review prior to listing to determine if the amount and mix of fixed and variable at-risk
remuneration opportunities were appropriate to their position, responsibilities and contribution and competitive in the local market
context. As a result of the review the Board determined adjustments were required to remain competitive and increased the variable
at-risk opportunity for Executives. Upon release of the full year results a review was conducted to ensure the actual incentive plan
outcomes for the year were appropriate to the results delivered.
We will continue to look for opportunities to improve our approach as we grow. Fundamental to this is fostering an ongoing dialogue
with our shareholders and we would welcome your comments or feedback on any aspect of this Report.
Lisa Hennessy
Chair, Remuneration and Nomination Committee
Nitro Software Limited
31 March 2020
27
Nitro Annual Report 2019
Contents
1. Introduction
2. Overview of Executive Remuneration
3. Performance Pay Outcomes (Linking Group performance to performance pay outcomes for 2019)
4. Actual Performance Pay (statutory and actual tables)
5. Governance (Committee structure)
6. Service Agreements
7. Non-Executive Remuneration
8. Additional Statutory Disclosures (other equity and KMP transactions required to be disclosed)
Introduction
The Directors of Nitro Software Limited (Nitro) present the Remuneration Report (the Report) for the Company and its controlled
entities (the Group) for the year ended 31 December 2019. This Report forms part of the Directors’ Report and has been prepared in
accordance with section 300A of the Corporations Act 2001. The content in this report has been audited by PricewaterhouseCoopers,
the Company’s external auditor.
The Report details the remuneration arrangements for the Group’s Key Management Personnel (KMP) identified in the table below:
NAME
Non-Executive Directors
Kurt Johnson
Andrew Barlow
John Dyson1
Michael Brown1
Sarah Morgan
Lisa Hennessy
Executive Directors
Sam Chandler
Richard Wenzel
Other Key Executives
TITLE
Chair
Director
Director
Director
Director
Director
Chief Executive Officer (CEO)
Senior Vice President Tax and Treasury
INDEPENDENT
TERM
Y
Y
N
N
Y
Y
Full financial year
Full financial year
Full financial year
Full financial year
21 November 2019
21 November 2019
Full financial year
Full financial year
Kathleen Miller
Chief Financial Officer (CFO)
14 January 2019
1.
John Dyson and Michael Brown are considered not independent due to their ongoing relationships with major shareholders in the Company, being Starfish
Technology Fund II, LP and Battery Investment Partners X, LLC and Battery Ventures X, L.P. respectively.
Key Management Personnel are those persons who directly or indirectly, have authority and responsibility for planning, directing and
controlling significant activities of the Company and the Group.
References in the Report to Executives only refer to ‘Executive Directors’ and ‘Other Key Executives’ identified above.
Subsequent to balance date the following changes were effective 31 March 2020 – Appointment of Kurt Johnson to Executive Director,
resignation of Richard Wenzel from his management role noting he will continue as a Non-Independent Non-Executive Director, and
resignation of Kathleen Miller from her position of Chief Financial Officer and Co-Company Secretary.
This Report is presented in the Company’s presentational currency of USD. In limited instances where there have been translation of
balances into Australian Dollars (AUD), the exchange rate applied is AUD1=USD 0.685.
28
Nitro Annual Report 2019Remuneration Report Overview of Executive Remuneration
Remuneration principles
Executives receive fixed and variable at-risk remuneration consisting of short and long term incentive opportunities.
The Group’s remuneration strategy aligns with the Company’s values of ‘Performance First, No BS and Be Good’ through the 5 key
reward principles that provide the foundation for reward design and quantum decision. The following table illustrates the link:
REWARD PRINCIPLE
VALUE
Aligned to investor interests
Performance First
REWARD COMPONENT
Variable at-risk remuneration
Pay for performance
Generate strong alignment between employees and shareholders outcomes,
encouraging a focus on long -term decision making .
Enable meaningful accumulation of Nitro shares that drives an ownership
mentality and shareholder alignment.
Fair and competitive
No BS
Attract, motivate and retain
Offer fair and competitive packages in the markets in which the Group
competes for talent.
Transparency
Be Good
Have the structure and transparency expected of an ASX listed company and
meet the expectations of all stakeholders when determining pay.
Fixed remuneration
Fixed and variable at-risk
remuneration
Total Remuneration
Remuneration structure
Applying the principles above, the Group aims to reward Executives with a level and mix of fixed and variable at-risk remuneration
appropriate to their position, responsibilities and performance in a way that supports the 5 pillars of business strategy.
5 PILLARS OF BUSINESS STRATEGY
HOW IS THIS INCORPORATED IN THE STRUCTURE?
1. Expansion of existing customers
2. Winning new enterprise customers
3. Expanding revenue contribution from
larger enterprise customers
Pillars 1-3 are implicit in the Annual Recurring Revenue (“ARR”)1 and Revenue
growth metrics measured and assessed as part of variable at-risk remuneration
for Executives’ through both the STI plan (financial objectives) and 2019 LTI plan
(revenue performance hurdle).
4. Continued investment in product development
Achievement against Pillar 4 is measured and assessed annually in the relevant
Executives’ STI non-financial objectives.
5. Acquisitions
2020 LTI Plan (revenue and relative Total Shareholder Return (“TSR”)
performance hurdle)
Executive remuneration was reviewed prior to listing and will be reviewed annually with reference to the reward principles and market
movements by the Nomination and Remuneration Committee and Board. A number of changes have been identified which will be
incorporated as the Group continues its transition as a public listed company.
The table on the following page provide a summary of the executive remuneration framework detailing the structure in 2019 and
proposed changes for 2020.
1. Refer Appendix 1 for detailed explanations of SaaS metrics. Non-IFRS information has not been audited or reviewed in accordance with Australian Auditing
Standards.
29
Nitro Annual Report 2019 Key Executive Remuneration mix
The target remuneration mix for Executives in 2019 is shown below with long-term incentives based on the value granted during the year.
CEO
CFO
Other Exec
23%
30%
47%
26%
22%
52%
FIXED
STI
LTI
29%
12%
59%
Summary of Executive remuneration framework
2019
D
E
X
I
F
COMPONENT
PERFORMANCE MEASURE
PERFORMANCE RANGE
Fixed
Market review
Actual payments reflect individual’s skill,
experience & market conditions
E
L
B
A
R
A
V
I
S
I
R
-
T
A
K Short term incentive
Performance against Board pre-agreed weighted
financial and non-financial KPIs (i.e balanced
scorecard) with a financial gateway applied
0 to 112% of target remuneration structure
Long term incentive
Vesting conditional on IPO and future revenue
performance hurdles as outlined in the
Prospectus
Grant size determined based on an assessment
of pre-existing awards and competitive
positioning against market prior to IPO.
2020
D
E
X
I
F
COMPONENT
PERFORMANCE MEASURE
PERFORMANCE RANGE
Fixed
Market review
Actual payments reflect individual skill, experience
& market conditions
E
L
B
A
R
A
V
I
K Short term incentive
S
I
R
-
T
A
Long term incentive
Performance against Board pre-agreed weighted
financial and non-financial KPIs (i.e balanced
scorecard) with a financial gateway applied
0 to 112% of target remuneration structure
Vesting conditional on future performance
hurdle (relative TSR and revenue measure)
Grant based on a pre-determined % of fixed
remuneration
30
Nitro Annual Report 2019Remuneration Report The chart below demonstrates the evolution of Executive remuneration from 2019 to 2020.
2019
K
S
I
R
-
T
A
D
E
X
I
F
2020
K
S
I
R
-
T
A
D
E
X
I
F
33.5% vesting – performance period (revenue)
33.5% vesting – performance period (revenue)
33% vesting IPO
Performance Period
LTI
(options)
STI
(cash)
Fixed
(cash)
Dec 19
Mar 20
Dec 20
Dec 21
LTI
(performance rights)
100% vesting – performance period (relative TSR and revenue)
Performance Period
STI
(cash)
Fixed
(cash)
Dec 20
Mar 21
Dec 21
Dec 22
Remuneration element
Fixed remuneration
Fixed Remuneration consists of base salary, statutory superannuation / pension contributions where applicable and other non-
monetary benefits and is designed to reward for:
• The scope of the Executive’s role; and
• The Executive’s skills, experience and qualifications.
Variable at-risk remuneration
Short term incentive (STI) plan
The STI plan (“The Plan”) is designed to award participants annually for the achievement of challenging specific financial and non-
financial objectives approved by the Board prior to the beginning of the year.
To ensure alignment with shareholders the Board has determined a minimum level of Group financial performance (Financial
Gateway) that needs to be achieved prior to participants being eligible to receive an award under the plan.
The number of employees that participate in The Plan are 71 and include the Executives.
31
Nitro Annual Report 2019 Key features of The Plan
How is it paid?
How much can
Executives earn?
How is it funded?
Cash
Executives have a target opportunity that varies by role and has been set with reference to comparable roles
in similar companies.
The maximum STI opportunity an Executive can earn is 112% of the target.
The pool funding is determined by the Board through an assessment of Group Performance (Financial
Gateway).
For 2019 the achievement of the Financial Gateway resulted in 100% target funding of the pool.
What is the Financial
Gateway?
The Board has determined a minimum level of financial performance to be achieved by the Group prior to
Executives being eligible to receive an award through the establishment of an EBITDA gateway hurdle.
For 2019 the requirement was 100% of EBITDA loss as per the Prospectus forecast of $6.1 million.
How is performance measured?
Balanced Scorecard
A participant’s award is determined based on their achievement of financial and non-financial objectives.
A summary of the measures and weightings are set out below:
WEIGHTING
MEASURES (KEY PERFORMANCE INDICATORS)
Financial
Between 80-100%
Revenue1 (up to 70%)
EBITDA (up to 30%)
Non-financial measures
Up to 20%
Management by Objectives role specific
1. Revenue represents the total of subscription, perpetual licence and support revenue.
Within the Financial measures the achievement against:
• Revenue target assessed on sliding scale with the ability for a participant to earn a score resulting in
120% of the target in recognition of outperformance
ACHIEVEMENT
90%
90 – 100%
100 – 110%
SCORE
80%
Straight line 80% – 100%
Straight line basis 100 – 120%
• EBITDA assessed on a pass/fail basis.
Malus and Clawback
When is it paid?
Malus and claw back applies to any awards made under this plan as outlined on page 35 of the
remuneration report.
Paid to Executives by 15 March of the financial year immediately following the performance period, following
the sign-off of statutory accounts or the announcement of the Group’s full year financial results. This was
paid on 28 February 2020.
What happens if an
Executive leaves?
If an executive resigns or is terminated for cause prior to the end of financial year, no STI is awarded for
that year.
If an executive ceases employment during the performance period by reason of redundancy, ill health, death
or other circumstances as approved by the Board, the executive will be entitled to a pro-rata cash payment
based on assessment of performance up to the date of ceasing employment for that year.
32
Nitro Annual Report 2019Remuneration Report What changes are planned for 2020?
The Board has reviewed the operation of plan and made the following changes for 2020.
Financial Gateway and Pool
Funding
The minimum level of Group financial performance required for participants to be eligible to receive an
award under the plan is 90% achievement of Board approved EBITDA (gateway).
Upon achievement of the EBITDA gateway, the pool size will be determined by the Board through the
assessment of Group Performance as follows:
1. Financial Performance against EBITDA gateway, setting ranges:
• Between 90-99% of EBITDA — 70–99% of the target pool vests;
• At 100% of EBITDA — 100% of target pool vests; and
• Above 100% of EBITDA up to 112% of target pool vests; and
2. Other financial and non-financial performance measures.
Where the Board has discretion to determine pool funding within a range it will consider other financial and
non-financial measures for the performance period with the intention to reward executives for significant
performance against strategic priorities.
Balanced Scorecard
Financial Objectives will be limited to 80% of Balanced Scorecard in addition to ARR being added to Revenue
as a financial measure.
Financial
WEIGHTING
Up to 80%
MEASURES (KEY PERFORMANCE INDICATORS)
Revenue (up to 40%)
ARR (up to 40%)
EBITDA (up to 20%)
Non-financial measures
Up to 20%
Management by Objectives role specific
One-time IPO cash award
In recognition of the additional effort a one-time IPO cash award approved by the Board was offered to Executives contingent on an
ASX listing event as detailed in the Prospectus. In December 2019, the Board assessed this as being met and the awards were paid to
two Executives
Long term incentive (LTI) plan
Since the Company was established, LTI plans have been designed to award participants with the opportunity to:
• Allow a meaningful accumulation of shares over time to inspire an ownership mentality; and
• Generate a strong alignment with shareholder outcomes by encouraging a focus on long-term decision making.
The type and nature of these awards has evolved with the growth and maturity of the Company as well as changes in ownership. As a
result, three LTI plans are referred to within this Report:
1. Historical LTI plan (outstanding awards granted prior to April 2019);
2. 2019 LTI plan (awards granted in November 2019 to coincide with the IPO); and
3. 2020 LTI plan (reflecting proposed changes to awards to be granted post the IPO).
33
Nitro Annual Report 2019 Historical LTI Plan
Prior to IPO the Company granted options and share awards to attract and retain key individuals with terms that were prevalent with
market practice for a private technology company based in the United States.
The Company ceased granting new awards under this plan in March 2019. Options and shares previously granted continue to be
governed by the terms that were amended at the time of the IPO to comply with the ASX Listing Rules.
The following table summarises total outstanding awards held by Executives at 31 December 2019 including those still subject to
vesting criteria and vested but not yet exercised.
Executives
Grant date
Number of options granted
25 Nov 11
3,159,900
Options vested as at 31 December 2019
3,159,900
Unvested options
Exercise price Currency
Exercise price
Performance hurdle
Vesting period
Vesting conditions
0
AUD
0.2048
NA
NA
NA
Sam Chandler (CEO)
Kathleen Miller (CFO)
28 Feb 16
1,586,421
1,308,798
277,623
USD
0.3089
NA
60 months
25 Mar 19
2,064,582
1,032,291
1,032,291
USD
0.3856
NA
48 months
Options vest on a straight line basis
over the vesting period subject to
accelerated vesting conditions. Under
plan rules accelerated vesting may
occur on change of control, subject to
Board Discretion being exercised. .
25% of Options vest 12 months
following grant date after which the
remaining vest on a straight line basis
over 36 months. Under plan rules
accelerated vesting may occur on
change of control, subject to Board
Discretion being exercised. Under plan
rules the Board exercised its discretion
to accelerate vesting at the listing.
Cessation of employment
The terms of the award stipulate that all unvested options will vest immediately if the executive
leaves for good reason within 12 months of board approved change-of-control or employment is
terminated other than for Cause
2019 LTI Plan
Under the 2019 LTI plan a grant of share options with three tranches were made to Executives at the time of the IPO to align
remuneration with shareholder outcomes over the longer term.
How is it paid?
Executives are eligible to receive share options (being an option to acquire an ordinary share in the upon payment
of a pre-determined exercise price).
Consistent with market practice in the United States, the Board may permit exercise of options by way of a
Cashless Exercise. Under this arrangement the Company will only issue or transfer such number of shares that
have a value equal to the total market value of shares that would have been issued or transferred if the options
had been exercised other than by way of Cashless Exercise, less the total amount of the exercise price that would
otherwise have been payable on exercise.
Share options will expire 10 years from the grant date, unless determined otherwise earlier by the Board.
How much can
Executives earn?
The grant size was determined based on an assessment of pre-existing awards and competitive positioning against
market prior to IPO.
When is performance
measured?
The grant has been issued in three tranches with performance period commencing 1 January 2019 for tranches 2
and 3 as follows:
TRANCHE
WEIGHTING
PERFORMANCE PERIOD
1
2
3
33%
33.5%
33.5%
Immediately vested and exercisable upon completion of IPO
24 months ending 31 December 2020
36 months ending 31 December 2021
34
Nitro Annual Report 2019Remuneration Report How is performance
measured?
TRANCHE WEIGHTING
PERFORMANCE PERIOD
1
2
3
33%
33.5%
33.5%
Event based: IPO completion 100% vest and exercisable.
Gateway 2019 Revenue outlined in the Prospectus with Vesting Outcomes
subject to 2020 Revenue as outlined below.
Performance against Board approved target 2021 Revenue will be assessed
subject to Vesting Outcomes as outlined below.
Revenue performance against targets for tranches 2 and 3 will be assessed as follows:
TARGET REVENUE
Below 100%
Up to and including 100% percentile
VESTING OUTCOME
0%
50%
Greater than 100% but less than 120%
Pro rata straight line basis 50 – 100%
Equal to or greater than the 120% percentile
100%
Tranches will not be subject to retesting.
Clawback and Malus
Awards are subject to Clawback and Malus as detailed in the plan rules (clauses 20 and 21) lodged with the ASX.
What happens if an
Executive leaves?
If a participant ceases employment in a ‘bad leaver’ or ‘good leaver’ circumstance, the treatment of the unvested
options will be in line with the plan rules in relation to the same.
Notwithstanding the above, the Board may also, subject to any requirement for shareholder approval, determine
to treat awards in a different manner to that set out above.
What happens if there
is a change of control?
The Board may in its sole and absolute discretion, and subject to the Listing Rules determine the treatment on
unvested instruments.
Are Executives eligible
for dividends?
Under this offer, executives are not entitled to any dividends on shares.
What changes are planned for 2020?
The Board has reviewed the LTI plan post IPO and proposes a number of changes to the terms and vesting conditions of future LTI
awards to be consistent with market expectations for an ASX listed company.
Future awards will be made annually rather than periodically, subject to a three year performance period and revised performance
conditions. For 2020 awards, the hurdles will include a relative Total Shareholder Return (TSR) hurdle (market based metric) and
Revenue hurdle and issued in performance rights. Future awards may be subject to different hurdles as the business matures.
The Board views the proposed changes as key in driving vesting performance outcome for executives that align with the creation of
sustainable growth and shareholder wealth in the longer term.
The 2020 AGM notice will contain a resolution for approval of the 2020 CEO and Executive Director LTI awards. The details of the
award and specific performance criteria will be detailed in that resolution and will reflect the terms of 2020 awards to be granted to
other KMP who are not directors.
Performance Pay Outcomes
(Linking Group Performance to Performance Pay for 2019)
The Group achieved a strong set of financial results in 2019 with the following highlights:
• Growth of Revenue of 10% to $35.7 million, ahead of prospectus;
• ARR of $16.9 million, up 66% exceeding prospectus;
• An increase in subscription revenue to 91% to $13.2 million;
• EBITDA loss of $3.8 million, $2.3 million better than forecast; and
• successfully listing on the ASX in December.
35
Nitro Annual Report 2019 The 2019 STI scorecard outcomes for Executives reflect this and are detailed in the table below.
Actual Outcome
Maximum
SCORECARD
OUTCOME
TARGET
OPPORTUNITY
(% OF FIXED) % OF FIXED
ADJUSTED
%1
OPPORTUNITY
(% OF FIXED)
$
ACUTAL
EARNED AS
A MAXIMUM
OPPORTUNITY
$
92%
89%
87%
63%
43%
21%
58%
38%
18%
58%
60%
20%
184,586
208,575
48,275
70%
69%
25%
82%
86%
79%
EXECUTIVE
Sam Chandler
Kathleen Miller1
Richard Wenzel1
1. For Executives eligible to receive the one-time IPO cash award (Kathleen Miller and Richard Wenzel) the value is included in the calculation of ‘Adjusted %’
and ‘Maximum’.
As required, information about the Groups’ earning and movements in shareholder wealth in US dollars for the past five years up to
and including the current financial year as required are set out in the table below.
Revenue ($m)
NPAT ($m)
Share price at year end ($)
Basic EPS
Dividends
2019
35.67
(7.93)
1.63
(0.11)
—
2018
32.41
(5.52)
N/A
(0.08)
—
2017*
26.74
(13.50)
N/A
N/A
—
2016*
28.39
(17.45)
N/A
N/A
—
2015*
28.88
(10.77)
N/A
N/A
—
* Does not include the impact of AASB 15 Revenue from contracts with customers and AASB 16 Leases
During 2019 the Group:
• continued the process of transitioning to subscription-based licencing (37% of revenue) delivering top quartile SaaS results
including compound growth rate in ARR of 111% over the last 3 years;
• spent $7 million in the development and innovation of its products to enhance user experience and deliver further value for its
customers.
The Board does not intend to declare a dividend in the near future as outlined in the Prospectus and will continue to use funds raised
for future activities and growth.
Actual Pay
Realised Remuneration
The actual remuneration earned by Executives in 2019 is set out below. This information is considered to be relevant as it provides
shareholders with a view of remuneration actually paid to Executives for performance in 2019 and the value of LTI that vested during
the period. This differs from the remuneration details prepared in accordance with statutory obligation and accounting standards as
per the table directly following, that include the value of options that have been awarded but which may or may not vest.
EXECUTIVE
Sam Chandler
Kathleen Miller
Richard Wenzel
Note
FIXED
1
329,676
357,529
261,694
STI
LTI VESTED
TOTAL
2
3
=1+2+3
184,939
355,809
870,425
75,000
51,235
813,652
1,246,180
—
312,929
Includes Salary and Fees, superannuation, other monetary and non -monetary benefits.
1.
2. STI amounts paid during 2019. For Kathleen Miller and Richard Wenzel this includes the payment of the one-time IPO bonus of $75,000 and $5,000
respectively. The remaining amounts relate to 2018 STI awards paid in 20192019.
3. Calculated as the intrinsic value of LTI that vested during the year. Intrinsic value is calculated as the difference between the IPO price and exercise price of
the options.
36
Nitro Annual Report 2019Remuneration Report Executive remuneration statutory accounting method
The amounts shown in this table are prepared in accordance with AASB 124 Related party disclosures and do not represent actual
cash payment received by Executives for the year ended 31 December 2019. Amounts shown under Long term benefits reflect the
accounting expense recorded during the year with respect to prior year awards that have or are yet to vest. For performance payment
and awards made with respect to 2019 refer to the Performance Pay Outcomes section of the Report.
Short Term
Long Term
SALARY
AND
FEES
STI CASH
BONUS
OTHER
MONETARY
BENEFITS
NON
MONETARY
BENEFITS
YEAR
TOTAL
ANNUAL
LEAVE
2019 300,000 184,586
18,000
11,676 514,262
35,383
OPTIONS
AND RIGHTS
(TIME BASED
VESTING)
OPTIONS AND
RIGHTS (PER-
FORMANCE
BASED)
TOTAL
SHARE
BASED
PAYMENTS
%
PERFOR-
MANCE
RELATED
TOTAL
9,923 494,862
35,383
36,641
55,949
222,473
259,115
808,760
— 55,949
586,193
27,721 566,104
4,276
285,624
74,162
359,786
930,165
2018
300,000 184,939
2019 329,808 208,575
2018
—
—
—
—
—
2019 225,000 48,275
18,000
18,694 309,969
25,962
2018
250,962
46,235
—
18,697 315,894
25,962
—
—
—
—
—
—
—
—
—
37,081
37,081
373,012
—
— 341,855
2019 854,808 441,436
36,000
58,092 1,390,336 65,620
322,265
333,716
655,981 2,111,937
2018
550,962 231,174
—
28,620 810,756
61,344
55,949
— 55,949
928,048
50%
32%
30%
0%
23%
14%
Sam
Chandler
Kathleen
Miller
Richard
Wenzel
Total
Executive
Governance
The following diagram below represents the Group’s remuneration decision making framework:
Board
Review and Approval
Nomination and Remuneration Committee
Group-wide remuneration framework and policy Executive & NED remuneration outcomes
CEO
Recommendations on remuneration
outcomes for executive team
Management
Implementing remuneration policies
Remuneration Advisors
External independent remuneration
advice and information
The composition of the Remuneration and Nomination Committee is set out on pages 14 and 15 of this annual report.
Further information on the Committee’s role, responsibilities and membership can be viewed at https://ir.gonitro.com/investor-
centre/?page=corporate-governance.
The Nomination and Remuneration Committee operates independently from management, and may at its discretion appoint external
advisors or instruct management to compile information for as an input to decision making only.
During the year the Committee appointed Aon Australia (Hewitt Pty Ltd) to provide remuneration advisory services. Such services
were provided to the Committee free from any undue influence by management.
ADVISOR
Aon Australia (Hewitt Pty Ltd)
Aon Australia (Hewitt Pty Ltd)
DESCRIPTION OF SERVICES
Remuneration Advisory
Benchmarking Data
FEE
$20,550
$41,100
37
Nitro Annual Report 2019 In additional to the characteristics already outlined, remuneration is also subject to the following:
• Board discretion to reduce, cancel or clawback any unvested STI or LTI In the event of serious misconduct or a material
misstatement in the Group’s financial statements; and
• a securities trading policy that applies to all NEDs, Executives and any other persons designated by the Board from time to time.
This is set out on the Company website at https://ir.gonitro.com/investor-centre/?page=corporate-governance.
Service Agreements
The Executives are based in San Francisco, California, USA and their employment arrangements have open-ended employment
contracts and not bounded by specified time frames:
• Employment may be terminated by either the Company or the executive upon providing:
– 6 months’ written notice in relation to the CEO and CFO; and
– 3 months’ written notice in relation to the other Executive; and
• The Company may elect to pay the executive in lieu of all or part of such notice period with any such payment to be based on the
executive’s FAR over the relevant period. The Executive may also be required to serve out the whole or part of the notice period on
an active or passive basis at the Board’s discretion;
• Any payments made to the Executive upon termination of employment will be limited to the maximum amount permitted by the
Corporations Act;
• The Executive’s employment may be terminated by the Company without notice in certain circumstances such as un-remediated
material breach of their contract, serious misconduct (including dishonesty, fraud or willful breach of duty), bankruptcy, failure to
comply with a reasonable direction from the Board, and if a personal profit is made at the expense of the Company to which they
are not entitled;
• There is no non-solicitation or non-compete obligations under the CEO, CFO and VP Tax and Treasury’s agreements, as such
obligations are not enforceable under Californian law;
• The Executives are entitled to participate in the LTIP and Historical LTIP’s of the Company at the discretion of the Board. The impact
of this on the future compensation is as follows:
– An amount, if any, with respect to the annual incentive award opportunity for the fiscal year in which termination of employment
occurs, as determined under the terms and conditions of annual incentive program(s) then in-effect; and
– All outstanding equity awards will be subject to the terms and conditions of the applicable equity incentive plan and any
corresponding award agreement.
Non-Executive Remuneration
Nitro’s Non-Executive Director (NED) fee arrangements are structured and set by reference to the following key considerations:
•
•
•
to attract and appropriately compensate suitably qualified directors, with experience and expertise appropriate to an international
technology Company;
to reflect the time commitment expected in fulfilling their Board responsibilities and their contribution to Committees; and
to acknowledge Australian market practice and governance expectations for comparable ASX listed companies.
The Nomination and Remuneration Committee will periodically review whether fees are appropriate having regard to information
provided by independent remuneration consultants.
NEDs receive fees and are not entitled to participate in any performance-based awards. NED fees consistent of base and committee
fees with the payment of committee fees recognising the additional time commitment required by NEDs.
NEDs are engaged under a letter of appointment and are subject to ordinary election and rotation requirements as stipulated in the
ASX Listing Rules and Nitro’s constitution. NEDs are not entitled to any compensation on cessation of appointment. NEDs are paid
fees in the local currency of the Country which they reside as indicated in their letter of appointment.
NEDs, where required and in accordance with the relevant legislation are paid superannuation and pension related contributions
of the country which they reside. The Group pays superannuation to Australian-based NEDs in accordance with Australian
superannuation guarantee legislation. NEDs do not receive a cash equivalent amount in lieu of superannuation.
NEDs are entitled to be reimbursed for all travel and related expenses reasonably incurred in performing their duties.
38
Nitro Annual Report 2019Remuneration Report Additional remuneration may be paid if a non-executive directors are called upon to carry out duties or services that the Board
considers to be in additional to the ordinary duties of the office. These special duties may include serving on ad hoc projects or
transaction-focused committees.
During the year ended 31 December 2019, the Directors’ fees were paid based on fees that were set prior to the Company’s listing on
the ASX. The table below details the fees payable to the non-executive directors with effect from 1 July 2019 excluding superannuation
and pension related contribution:
BASE FEES
Non-executive Chairman
United States Non-executive Directors
Australian Non-executive Directors
COMMITTEE FEES
Audit & Risk
Remuneration & Nomination
126,000
57,600
A$80,000
COMMITTEE
CHAIR
COMMITTEE
MEMBER
A$15,000
A$15,000
A$5,000
A$5,000
All paid committee chairs and members are currently based in Australia.
The actual total remuneration paid to the Nitro NEDs during FY’19 is reported in the statutory remuneration table disclosed below.
SHORT TERM BENEFITS
SALARY AND FEES
POST EMPLOYMENT
SUPERANNUATION
Kurt Johnson (Chairman)
Andrew Barlow
John Dyson1
Michael Brown1
Sarah Morgan2
Lisa Hennessy2
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
89,958
24,000
54,703
24,000
3,455
—
3,252
—
33,602
—
27,170
—
212,140
48,000
—
—
2,693
—
—
—
—
—
748
—
748
—
TOTAL
89,958
24,000
57,396
24,000
3,455
—
3,252
—
34,350
—
27,918
—
4,189
216,329
—
48,000
1.
John Dyson and Michael Brown are considered not independent due to their ongoing relationships with major shareholders in the company, being Starfish
Technology Fund II, LP and Battery Investment Partners X, LLC and Battery Ventures X, L.P. respectively, fees payable for services are paid to the underlying
shareholder they are associated with and only commenced at ASX listing.
2. For Sarah Morgan and Lisa Hennessy the 2019 value disclosed included payments of $25,727 and $19,296 respectively in recognition of services rendered
prior to their appointments to the Board effective 21 November 2019.
Maximum aggregate Fee Pool
The current maximum aggregate fee pool is US$1,000,000. Denominating the fees and the fee pool in US$ reflects the fact that
business operations are run from outside Australia. Shareholder approval will be sought if the aggregate amount needs to be
increased with the Board confirming it will not seek an increase at the 2020 Annual General Meeting.
39
Nitro Annual Report 2019 Additional Statutory Disclosures
During the year ended 31 December 2019 and as at that date, an amount aggregating US$119,520 (31 December 2018: US$nil)
was receivable from Kathleen Miller in relation to exercise of share options vested and exercised. These options were exercised on
11 December 2019 prior to IPO. The amount outstanding as at 31 December 2019 was repaid on 9 January 2020.
During the year ended 31 December 2019, loans provided to Sam Chandler and Richard Wenzel in order to exercise share options
under the Historical LTIP outstanding as at 31 December 2018 aggregating US$9,902 and US$5,128 respectively were repaid in
September 2019. Theses loans were interest bearing and linked to the Division 7A – benchmark interest rate provided by the Australia
Taxation Office.
The following tables summarises the equity shares and options as at the date of the Report.
KMP Equity holdings
Reconciliation of ordinary share movement during the year
Number of ordinary shares
Non-Executive Directors
Kurt Johnson
Andrew Barlow
John Dyson1
Michael Brown2
Sarah Morgan
Lisa Hennessy
Executives
Sam Chandler
Kathleen Miller
Richard Wenzel
Total equity shares held
ACQUIRED
THROUGH
EXERCISE OF
OPTIONS
SOLD
31 DEC 19
—
—
—
740,520
(1,106,122)
4,562,528
—
—
—
—
—
(6,004,910)
26,216,244
(2,568,134)
24,872,515
—
—
37,275
37,248
—
9,191,880
309,996
(309,996)
—
—
(2,222,252)
9,650,188
1 JAN 19 PURCHASED
—
4,928,130
32,221,154
27,440,649
—
—
—
—
—
—
37,275
37,248
9,191,880
—
11,872,440
85,654,253
—
—
—
74,523
1,050,516
(12,211,414)
74,567,878
1.
2.
Includes shares held by Starfish Technology Fund II, LP who hold 26,076,463 shares subject to voluntary escrow restrictions until the release of the Company’s
financial results for 2020.
Includes shares held by Battery investment Partners X, LLC and Battery Ventures X, L.P. who hold 248,721 and 24,623,794 shares respectively subject to
voluntary escrow restrictions until the release of the Company’s financial results for 2020.
40
Nitro Annual Report 2019Remuneration Report
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41
Nitro Annual Report 2019
Shares issued on exercise of options1
NAME OF EXECUTIVE
Kathleen Miller
Andrew Barlow
1. These shares issued upon exercise of options were sold at the IPO.
Executive option holdings – future vesting profile
NUMBER
EXERCISED
309,996
740,520
VALUE AT
GRANT
DATE
VALUE OF
AT DATE OF
EXERCISE
65,099
244,339
86,234
771,029
YEAR
2019
2011
EXECUTIVE PLAN
YEAR
GRANT
AMOUNT
% VESTING
PREVIOUS
PERIODS
% VESTING
2019
%
INCENTIVE
AT RISK
VESTING
% 2020
VESTING
% 2021
VESTING
% 2022
Sam
Chandler
Kathleen
Miller
Richard
Wenzel
Sam
Chandler
Kathleen
Miller
2019 LTI
2019
968,814
2019 LTI
2019
322,938
NA
2019 LTI
2019
161,469
Historical
LTI
Historical
LTI
2016
1,586,421
2019
2,064,582
57%
NA
33%
33%
33%
26%
50%
67%
17%
50%
Subject to performance hurdles and
vesting conditions detailed on
pages 34 and 35 of the Report
15%
22%
2%
13%
0%
13%
42
Nitro Annual Report 2019Remuneration Report Auditor’s Independence Declaration
for the year ended 31 December 2019
43
PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Auditor’s Independence Declaration As lead auditor for the audit of Nitro Software Limited for the year ended 31 December 2019, I declare that to the best of my knowledge and belief, there have been: (a)no contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit; and(b)no contraventions of any applicable code of professional conduct in relation to the audit.This declaration is in respect of Nitro Software Limited and the entities it controlled during the period.Niamh Hussey Partner PricewaterhouseCoopers Melbourne 31 March 2020 Nitro Annual Report 2019 Consolidated Statement
of Comprehensive Income
for the year ended 31 December 2019
US$ (’000) EXCEPT PER SHARE AMOUNT
Revenue
Cost of sales
Gross profit
Sales and marketing
Research and development
General and administrative
Other income/(loss)
Finance costs
Depreciation and amortisation expense
(Loss) before income tax
Income tax expense
(Loss) for the year
Other comprehensive income
Item that may be reclassified to profit or loss
Adjustment from translation from foreign controlled entities
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss) for the year
Loss per share attributable to equity shareholders
Earnings per share
Basic loss per share1
Diluted loss per share1
NOTE
3, 4(a)
5(a)
13(b)
6
7
7
2019
35,672
(3,650)
32,022
2018
32,406
(3,846)
28,560
(18,659)
(15,435)
(7,016)
(11,325)
1,175
(1,761)
(2,013)
(7,577)
(354)
(7,931)
(7,670)
(7,021)
(1,188)
(649)
(1,958)
(5,361)
(160)
(5,521)
(169)
(169)
239
239
(8,100)
(5,282)
(0.11)
(0.11)
(0.08)
(0.08)
1. Basic and diluted earnings per share in the comparative period has been restated following the 9 for 1 share split undertaken on 18 November 2019.
44
Nitro Annual Report 2019
Consolidated Statement
of Financial Position
for the year ended 31 December 2019
US$ (‘000)
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax receivables
Other current assets
Total current assets
Non-current assets
Receivables and contract assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Right of use assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Deferred revenue
Lease liability
Total current liabilities
Non-current liabilities
Borrowings
Deferred revenue
Deferred tax liability
Lease liability
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Contributed equity
Other reserves
(Accumulated losses)
Total equity/(deficiency in equity)
NOTE
2019
2018
9
8, 4(b)
47,017
6,663
91
—
4,049
6,004
28
305
53,771
10,386
8, 4(b)
17,485
16,049
10
11
6
13(c)
13
4(b)
13(c)
13
4(b)
6
13(c)
564
64
189
3,058
209
21,569
75,340
5,569
—
18,930
1,393
25,892
—
14,167
344
1,540
16,051
41,943
33,397
90,209
1,705
(58,517)
33,397
41
923
163
—
255
17,431
27,817
3,748
2,700
15,703
—
22,151
1,742
10,919
—
—
12,661
34,812
(6,995)
42,555
1,036
(50,586)
(6,995)
45
Nitro Annual Report 2019
Consolidated Statement
of Changes in Equity
for the year ended 31 December 2019
NOTE
CONTRIBUTED
EQUITY
WARRANT
RESERVE
US$ (’000)
As at 1 January 2019
Loss for the year
Other comprehensive
income
Exchange differences
from translation of
foreign operations
Total comprehensive
income for the year
2(f)
Transactions with owners
of the Company
Shares issued on IPO
Shares issued to
convertible note holders
12
13(b)
Share options exercised
15(a)-(c)
42,555
—
—
—
44,833
6,199
289
Employee share
options granted
Expenses directly
attributable to the
issue of shares
As at 31 December 2019
15(a)-(c)
—
(3,667)
90,209
US$ (’000)
As at 1 January 2018
Loss for the year
Other comprehensive
income
Exchange differences
from translation of
foreign operations
Total comprehensive loss
for the year
Transactions with owners
of the Company
40,430
—
—
—
2(f)
Issue of preference shares
12
2,054
Expenses directly attributable
to the issue of shares
15(a)-(c)
Employee share
options granted
15(a)-(c)
As at 31 December 2018
71
—
42,555
46
NOTE
CONTRIBUTED
EQUITY
WARRANT
RESERVE
EMPLOYEE
EQUITY
BENEFITS
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
(ACCUMULATED
LOSSES)
TOTAL
EQUITY
3,711
—
(2,751)
—
(50,586)
(6,995)
(7,931)
(7,931)
—
—
—
—
—
838
—
4,549
(169)
(169)
—
(169)
(7,931)
(8,100)
—
—
—
—
—
—
44,833
—
—
—
6,199
289
838
—
(3,667)
(2,920)
(58,517)
33,397
EMPLOYEE
EQUITY
BENEFITS
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
(ACCUMULATED
LOSSES)
TOTAL
EQUITY
3,148
—
(2,990)
—
(45,065)
(4,401)
(5,521)
(5,521)
—
—
—
—
563
3,711
239
239
—
—
—
—
239
(5,521)
(5,282)
—
—
—
2,054
71
563
(2,751)
(50,586)
(6,995)
76
—
—
—
—
—
—
—
—
76
76
—
—
—
—
—
—
76
Nitro Annual Report 2019
Consolidated Statement
of Cash Flows
for the year ended 31 December 2019
US$ (’000)
Cash flows from operating activities
Loss for the year
Add back
Depreciation and amortisation
Share-based payments
Finance costs
Loss on sales of asset
Asset write-offs
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in deferred tax assets
(Increase)/decrease in tax receivable
Increase/(decrease) in trade and other payables
Increase/(decrease) in deferred income
Income taxes paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Receipt of loans from shareholders
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of convertible notes
Proceeds from issue of preference shares
Proceeds from exercise of share options
Transaction costs related to issue of shares
Finance cost paid
Payment for leases
Repayment of borrowings
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movement in exchange rates on cash held
Cash and cash equivalents at the end of the year
2019
2018
(7,931)
(5,521)
2,013
838
1,761
—
—
(1,491)
1,958
563
649
544
38
467
(3,188)
(8,198)
318
36
1,556
6,475
(99)
358
(689)
—
31
(658)
(31)
32
725
8,779
(210)
(269)
(52)
23
—
(29)
44,833
2,125
5,000
1,750
121
(3,446)
(511)
(1,182)
(4,466)
42,099
41,799
4,049
1,169
—
—
—
—
(649)
(249)
(2,809)
(1,582)
(1,880)
5,926
3
47,017
4,049
47
Nitro Annual Report 2019
Notes to the Consolidated
Financial Statements
for the year ended 31 December 2019
The notes include information which is required to understand the consolidated statement of comprehensive income, consolidated
statement of financial position, consolidated statement of changes in equity and the consolidated statement of cash flows, together
referred to as the consolidated financial statements and is material and relevant to the operations and performance of the Group.
The notes are organised into the following sections:
• General information;
• Financial performance and results;
• Capital structure, financing and financial risk management;
•
Investing activities; and
• Other matters.
Note 1: General information
(a) Reporting entity
Nitro Software Limited (the ‘Company’ or ‘Nitro’) is a company domiciled in Australia.
These consolidated financial statements for the year ended 31 December 2019 comprise the Company and its subsidiaries (together
referred to as the ‘Group’).
The Group is a for-profit entity and its principal activity during the financial year was providing software and support services in
relation to document productivity.
(b) Authorisation for issue
These consolidated financial statements have been authorised for issue by a resolution of the Board of Directors on 31 March 2020.
Note 2: Basis of preparation
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (‘AASBs’) issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001.
The consolidated financial statements also comply with International Financial Reporting Standards (‘IFRS’) issued by the International
Accounting Standards Board (‘IASB’).
(b) Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Nitro Software Ltd (‘company’ or
‘parent entity’) as at 31 December 2019 and the results of all subsidiaries for the year then ended.
Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date
that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The consolidated financial statements incorporate the assets, liabilities and equity of the following subsidiaries in accordance with the
accounting policy described in this note.
48
Nitro Annual Report 2019 NAME OF THE ENTITY
Nitro Software Inc
COUNTRY OF INCORPORATION
United States of America
Nitro Software EMEA Limited
Ireland
EQUITY HOLDING
2019
100%
100%
2018
100%
100%
(c) Going concern
The consolidated financial statements have been prepared on a going concern basis which assumes that the Group will be able
to continue its operations and pay its debts and obligations as and when they become due for payment. This assumption is based
on the Group’s projection of future cash outflow, cash inflows from operations and cash and cash equivalents as at the date of the
balance sheet.
(d) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for share-based payments which are
measured at fair value.
(e) Functional and presentation currency
These consolidated financial statements are presented in United States Dollars (USD), the Company’s functional currency, consistent
with the predominant functional currency of the Group’s operations. The Group is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts in the consolidated
financial report and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
(f) Foreign currency
Transactions related to the Group’s worldwide operations are conducted in a number of foreign currencies. The majority of the
subsidiaries have assessed USD as the functional currency, however, some subsidiaries, have functional currencies other than USD.
Transactions and monetary items denominated in foreign currencies are translated into USD as follows:
FOREIGN CURRENCY ITEM
Transactions
Monetary assets and liabilities
Non-monetary assets and liabilities
APPLICABLE EXCHANGE RATE
Date of the underlying transaction
Period-end rate
Date of the underlying transaction
Foreign exchange gains and losses resulting from translation are recognised in the income statement, except for qualifying cash flow
hedges (which are deferred to equity) and foreign exchange gains and losses that relate to borrowings which are presented in the
consolidated statement of comprehensive income within finance costs. All other foreign exchange gains and losses are presented
in the consolidated statement of comprehensive income on a net basis within other income or other expenses.
On consolidation, the assets, liabilities, income and expenses of non-USD denominated functional currency entities are translated
into US dollars using the following applicable exchange rates:
FOREIGN CURRENCY ITEM
Income and expenses
Assets and liabilities
Equity and reserves
APPLICABLE EXCHANGE RATE
Date of the underlying transaction
Period-end rate
Historical rate
Foreign exchange differences resulting from translation are initially recognised in the foreign currency translation reserve and
subsequently transferred to the income statement on disposal of a foreign operation.
49
Nitro Annual Report 2019 (g) Use of judgements and estimates
In the preparation of these consolidated financial statements, the Group management has identified a number of critical accounting
policies under which significant judgements, estimates and assumptions are made. This can affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ for these estimates under different assumptions and conditions. This may materially affect financial results
and the carrying amount of assets and liabilities to be reported in the next and future periods.
All judgements, estimates and underlying assumptions are based on most current facts and circumstances and are reassessed on
an ongoing basis. The effect of revisions to these estimates are recognised prospectively.
Accounting policies, and information about judgements, estimates and assumptions that have had a significant impact on the
amounts recognised in the consolidated financial statements are disclosed in the relevant notes as follows:
• Revenue recognition (Refer note 4); and
• Share-based payments (Refer note 15).
(h) Significant accounting policies
Accounting policies are disclosed within each of the applicable notes to the consolidated financial statements to which these policies
relate. The Group’s accounting policies have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities, except as detailed below:
• Except as explained in note 13(c) — on account of adoption of AASB 16 Leases; and
• To ensure consistency with the current period, comparative figures have been restated where appropriate.
(i) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting
periods and have not been early adopted by the group. These standards are not expected to have a material impact in the current or
future reporting periods and on foreseeable future transactions.
Note 3: Segment reporting
This note provides results by operating segment for the year ended 31 December 2019. The operating segments are reported
in a manner consistent with the internal reporting to the CEO. The CEO is the Chief Operating Decision Maker (‘CODM’).
The CODM assess the Group’s performance on a product/service perspective and has identified two reportable segments:
• Subscription — being the sale of ‘software-as-a-service’ to businesses providing access to a licence.
• Perpetual licence and support — being the sale of perpetual licence products (including optional support services) both direct
to customers and to businesses.
The CODM, primarily uses a measure of gross profit to assess the performance of the operating segments.
The assets, liabilities, other operating expenses and treasury operations are reviewed by the CODM in aggregate basis and are not
allocated to the operating segments. Operating segment assets and liabilities are hence not disclosed.
50
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019 USD$ (’000)
Revenue
Cost of goods sold
Gross profit
Gross margin %
2019
2018
SUBSCRIPTION PERPETUAL
TOTAL
SUBSCRIPTION PERPETUAL
13,193
(1,172)
12,021
91%
22,479
(2,478)
20,001
89%
35,672
(3,650)
32,022
90%
6,887
(944)
5,943
86%
25,519
(2,902)
22,617
89%
TOTAL
32,406
(3,846)
28,560
88%
The geographical split of revenue is unavailable and would be prohibitive to obtain. In general, a large amount of revenue is generated
by customers that are global, from transactions that cross multiple countries and where the source of revenue can be unrelated
to the location of the users accessing the software. The CODM, does not monitor or review the geographical breakdown of the
operations given the nature of the products and operations of the Group in relation to document productivity through the portable
document format (‘PDF’).
There were no customers contributing more than 10% of revenue during the current and comparative period.
Note 4: Revenue and contract balances
(a) Revenue
The Group’s revenue is derived from the sale of cloud-enabled software subscriptions, cloud-hosted offerings, term-based/
subscription and perpetual software licences, associated software maintenance and support plans, consulting services, training and
technical support.
Revenue from contracts with customers is disaggregated by the nature of product and services and timing of recognition which are
most reflective of the impact of the industry and economic environment in which the Group operates.
DISAGGREGATED BY PRODUCT CHARACTERISTICS USD ($’000)
Subscription
Perpetual licences and support revenue
Total revenue
DISAGGREGATED BY TIMING OF REVENUE RECOGNITION USD ($’000)
Products and services transferred at a point in time
Products and services transferred at over time
Total revenue
2019
13,193
22,479
35,672
15,003
20,669
35,672
2018
6,887
25,519
32,406
17,916
14,490
32,406
Accounting policy: Revenue
Revenue is recognised when a contract exists between the Group and a customer and upon transfer of control of products or services
to customers in an amount that reflects the consideration the Group expects to receive in exchange for those products or services.
We enter into contracts that can include various combinations of products and services, which may be capable of being distinct and
accounted for as separate performance obligations, or in the case of offerings such as cloud-enabled subscription licences, accounted
for as a single performance obligation. Revenue is recognised net of allowances for returns and any taxes collected from customers,
which are subsequently remitted to governmental authorities.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with
customers, including significant payment terms and related revenue recognition policies.
51
Nitro Annual Report 2019 REVENUE RECOGNITION POLICIES
• Revenue from perpetual licences
is recognised at the point in time
the software is available to the
customer, provided all other
revenue recognition criteria are
met.
• Revenue from maintenance and
support contracts is recognised
on a straight-line basis over the
support term as the underlying
service is a stand-ready
performance obligation.
• Revenue from the Company’s
subscription services is
recognised over time on a
straight-line basis over the
contract term beginning on
the date that the Company’s
application suite or product is
made available to the customer.
•
In relation to automatic renewals,
revenue is recognised over time
on a straight-line basis based
on the amount the Company
expects to receive in relation to
these services
TYPE OF PRODUCT OR SERVICE
Sale of perpetual licences for
on-device or desktop software
NATURE AND TIMING OF SATISFACTION OF
THE PERFORMANCE OBLIGATIONS, INCLUDING
SIGNIFICANT PAYMENT TERMS
• Customers obtain control of the software upon
delivery of the software licence key and their
acceptance or when the acceptance provisions have
lapsed.
• The delivery of the software licence key is contingent
upon payment by the customer in advance.
• Some contracts include maintenance and support
of the product, the pricing for which is distinct and
detailed separately from the price of the software
licence. The maintenance and support agreements are
generally for a 12-month period.
• Customers are able to generate new user licence keys
for additional users after initial delivery of the initial
software licence key through issuance of a order.
This is treated as an amendment to the contract and
invoiced accordingly.
Subscription agreements for
•
In relation to on device or desktop software, customers
obtain control of the software upon delivery of the
software licence key and their acceptance or when the
acceptance provisions have lapsed
•
In relation to SaaS, customers are granted access
to the software, without taking possession of the
software.
• Support and maintenance arrangements are built into
all subscription agreements
• Subscription periods are typically entered into for
36 months and are billed annually in advance.
• All contracts have automatic renewal for a period of
12 months unless otherwise notified in writing prior
to expiration of the contract term.
• Subscription services represent a single obligation
to provide continuous access to the software,
maintenance and support including upgrades on an
‘if and when available’ basis.
• As each day of providing access to the software
is substantially the same and the customer
simultaneously receives and consumes the benefit
as access is provided, the Group has determined
that its subscriptions services arrangement include
a single performance obligation comprised of a series
of distinct services.
• Customers are able to generate new user licence keys
for additional users after initial delivery of the initial
software licence key through issuance of an order.
This is treated as an amendment to the contract and
invoiced accordingly.
• on-device or desktop
software; and
•
fully hosted subscription
services (‘SaaS’)
52
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019 (b) Contract balances
CONTRACT BALANCES USD ($’000)
CONTRACT ASSETS
Trade receivables, net of loss allowance
Contract assets
Capitalised contract acquisition costs
Total contract assets
CONTRACT LIABILITIES
Deferred revenue
Total contract liabilities
2019
4,755
13,424
4,061
22,240
2018
3,650
12,403
3,646
19,699
33,097
33,097
26,622
26,622
During the year ended 31 December 2019, approximately $15.7 million of revenue was recognised that was included in balance of
deferred revenue as of 31 December 2018.
Remaining performance obligations were approximately US$33.1 million as of 31 December 2019. Approximately 57% of the
remaining performance obligations are expected to be recognised over the next 12 months with the remainder recognised thereafter.
Accounting policy:
Trade receivables
A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is
required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers.
Certain performance obligations may require payment before delivery of the licence or service to the customer.
Contract assets
A contract asset is recognised when a conditional right to consideration exists and transfer of control has occurred. Contract assets
are typically related to subscription and maintenance and support contracts where the transaction price allocated to the satisfied
performance obligations exceeds the value of billings to date. Included in receivables and contract assets on the consolidated
statement of financial position are unbilled receivable balances which have not yet been invoiced and are typically related licence
revenue or services which are delivered prior to invoicing.
Contract assets are included in trade and other receivables for the current portion and receivables and contract assets for the long-
term portion on the consolidated statement of financial position.
Contract liabilities
Contract liabilities represents deferred revenue which primarily consists of billings or payments received in advance of revenue
recognition from subscription services, including non-cancellable and non-refundable committed funds and deposits. Deferred
revenue is recognised as revenue when transfer of control to customers has occurred. Customers are typically invoiced for these
agreements in regular instalments and revenue is recognised on a straight-line basis over the contractual subscription period.
The deferred revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice
duration, invoice timing, size and new business linearity within the quarter. Deferred revenue does not represent the total contract
value of annual or multi-year non-cancellable subscription agreements.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days.
In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally
do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified
and predictable ways of purchasing our products and services, such as invoicing at the beginning of a subscription term with revenue
recognised on a straight-line basis over the contract period, and not to receive financing from our customers. Any potential financing
fees are considered insignificant in the context of our contracts.
Significant movements in the deferred revenue balance during the period consisted of increases due to payments received prior
to transfer of control of the underlying performance obligations to the customer, which were offset by decreases due to revenue
recognised in the period.
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognised,
which includes deferred revenue and unbilled amounts that will be recognised as revenue in future periods.
53
Nitro Annual Report 2019
Contract costs
The Group recognises an asset for the incremental costs of obtaining a contract with a customer if the Group expects the benefit of
those costs to be longer than one year. The Group has determined that certain sales incentive programs meet the requirements to
be capitalised.
The costs capitalised under the AASB 15 include sales commissions paid to our sales force personnel and channel partners, resellers
and third parties. Capitalised costs may also include portions of fringe benefits and payroll taxes associated with compensation
for incremental costs to acquire customer contracts and incentive payments to partners. Capitalised costs to obtain a contract
are amortised over the expected period of benefit, which is determined, based on the Group’s analysis, to be 3 years. The Group
evaluated qualitative and quantitative factors to determine the period of amortisation, including contract length, renewals, customer
life and the useful lives of our products. When the expected period of benefit of an asset which would be capitalised is less than one
year, the Group expenses the amount as incurred. These expenses and amortisation of capitalised contract cost are classified under
sales and marketing expense in the consolidated statement of comprehensive income. The group regularly evaluate whether there
have been changes in the underlying assumptions and data used to determine the amortisation period.
RECONCILIATION OF CARRYING AMOUNTS USD ($’000)
At the beginning of the year
Additions
Amortisation
At the end of the year
Capitalised contract costs included in
Non-current receivables
2019
3,646
2,619
(2,204)
4,061
2018
1,838
2,947
(1,139)
3,646
4,061
3,646
Loss allowance
The Group has two types of financial assets that are subject to AASB 9’s expected credit loss model which are trade receivables
and contract assets. The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables and contract assets. Loss allowances in previous periods have not been material.
Historical loss rates have been adjusted to reflect current and forward-looking information on factors impacting the ability of the
customers to settle the outstanding debt.
ON TRADE RECEIVABLES AND CONTRACT ASSETS USD ($’000)
2019
2018
Loss allowance at the beginning of the year
(Reversal)/provision for loss allowance
Write-offs
Recovery of balances written off
Loss allowance at the end of the year
87
(41)
(30)
9
25
76
—
(3)
14
87
54
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
Note 5: Other income and expenses
(a) Other income
DISAGGREGATED BY NATURE USD ($’000)
Net (loss)/gain on disposal of property, plant and equipment
Net foreign exchange gains/(losses)
Interest income
Other (loss)/income
Total other income/(expense)
2019
—
1,136
40
(1)
2018
(544)
(467)
34
(211)
1,175
(1,188)
Interest income
Income is recognised as the interest accrues (using the effective interest method), which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.
(b) Expenses
The loss before income tax includes the following material specific expenses:
EMPLOYEE BENEFIT EXPENSES USD ($’000)
Wages and salaries
Superannuation
Share-based payments
Employee benefit expenses
NOTE
15 (a)-(c)
2019
21,194
77
838
2018
20,209
51
563
22,109
20,823
Cost of sales
Cost of sales includes all expenses incurred attributable to the generation of revenue. These costs typically include payments made
to retail merchants to manage revenue from online stores, third party technologies that are embedded in our product, services to
ensure our services are able to be delivered (e.g. public cloud services), and personnel costs which are directly related to delivering
post-contract customer support.
Finance costs
Finance costs represents borrowing costs and includes interest, amortisation of discounts or premiums relating to borrowings
and amortisation of costs incurred in connection with the arrangement of new borrowings facilities. Finance costs are expensed
immediately as incurred. No finance costs have been capitalised.
Note 6: Income taxes
(a) Income tax
The income tax expense or credit for the year is the tax payable on the current year’s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
(b) Current tax
Current tax is the expected tax payable on the taxable income for the financial year, using applicable tax rates (and tax laws) at
the balance sheet date in each jurisdiction, and any adjustment to tax payable in respect of previous financial years. The Group
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
55
Nitro Annual Report 2019
(c) Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. The following temporary differences are not
provided for:
• The initial recognition of goodwill; and
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit.
(d) Measurement, recognition and presentation
Measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle
on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is
also recognised in other comprehensive income or directly in equity, respectively.
INCOME TAX EXPENSE USD ($’000)
Current tax expense
Deferred tax expense
Income tax expense
NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE USD ($’000)
Loss before income tax
Tax at the Australian Tax rate of 30% (31 December 2018: 30%)
Tax effect of amounts which are not deductible in calculating taxable income
Share-based payments expense
Other non deductible expenses
Transaction costs on issues of shares
Finance costs in relation to convertible note
Effect of lower tax rates in USA, Ireland and UK
Current year losses for which no deferred tax is recognised
Income tax expense
2019
36
318
354
2019
(7,577)
2,273
(75)
(22)
(888)
(375)
252
(1,520)
(354)
2018
167
(7)
160
2018
(5,361)
1,608
—
—
—
—
160
(1,928)
(160)
56
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
DEFERRED TAX USD ($’000)
Deferred tax asset/(liability)
Share issue expenses
Provisions and accruals
Unrealised exchange rate differences
Property, plant and equipment
Intangibles
Net deferred tax asset/(liability)
Deferred tax asset
Deferred tax liability
DEFERRED TAX USD ($’000)
Deferred tax asset/(liability)
Share issue expenses
Provisions and accruals
Unrealised exchange rate differences
Property, plant and equipment
Intangibles
Others
Net deferred tax asset/(liability)
Deferred tax asset
Deferred tax liability
BALANCE AT
1 JANUARY
2019
RECOGNISED
IN THE INCOME
STATEMENT
RECOGNISED
IN EQUITY
BALANCE AT
31 DECEMBER
2019
(31)
84
(347)
(79)
55
(318)
—
—
—
—
—
—
42
63
4
55
—
163
163
—
11
147
(343)
(24)
55
(155)
189
344
BALANCE AT
1 JANUARY
2018
RECOGNISED
IN THE INCOME
STATEMENT
RECOGNISED
IN EQUITY
BALANCE AT
31 DECEMBER
2018
42
36
—
3
63
12
156
168
12
—
27
4
52
(63)
(12)
7
—
—
—
—
—
—
—
42
63
4
55
—
—
163
163
—
The Group has unused tax losses of US$58.74 million (31 December 2018: US$49.05 million) which has not been recognised as a
deferred tax asset. The unused tax losses were incurred by the Group’s United States operations and is not likely to generate taxable
income in the foreseeable future. The Group is currently undertaking an assessment of the eligibility to carry forward these losses in
the future.
Note 7: Earnings per share (‘EPS’)
Basic EPS is determined by dividing profit/(loss) after tax attributable to members of the Company and Group, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted EPS is determined by adjusting the profit/(loss) after tax attributable to members of the Company and Group, and the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. Dilution occurs when
employee share options are included in outstanding shares.
USD ($’000)
Net loss attributable to ordinary equity holders
Net loss used in calculating diluted earnings per share
2019
(7,931)
(7,931)
2018
(5,521)
(5,521)
57
Nitro Annual Report 2019
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES ON ISSUE USED IN THE CALCULATION OF:
Basic earnings per share
Diluted earnings per share
EARNINGS PER SHARE USD
Basic
Diluted
2019
SHARES
2018
SHARES
73,133,789
65,832,314
73,133,789
65,832,314
2019
(0.11)
(0.11)
2018
(0.08)
(0.08)
The Group’s only potential dilutive ordinary shares are share awards granted under the employee share ownership plans and
convertible notes. Diluted earnings per share calculation excludes instruments which are considered anti-dilutive. For the year
ended 31 December 2019, the effect of shares in relation to the Historical and Current LTIP could potentially dilute basic earnings
per share in the future, but were not included in the calculation of diluted earnings per share because they are anti-dilutive for the
period(s) presented.
Note 8: Trade and other receivables
TRADE AND OTHER RECEIVABLES USD ($’000)
Trade receivables and contract assets, net
Contract acquisition costs, net
Prepayments
Other receivables due from related parties
Others
Trade and other receivables
Current
Non-current
Note 9: Cash and cash equivalents
USD ($’000)
Bank balances
NOTE
4(b)
4(b)
15(e)
2019
18,179
4,061
1,324
120
464
24,148
2018
16,053
3,646
288
15
2,051
22,053
6,663
17,485
6,004
16,049
2019
47,017
2018
4,049
Accounting policy
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position.
58
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
Note 10: Property plant and equipment
RECONCILIATION OF CARRYING AMOUNTS
AS AT 31 DECEMBER 2019 USD ($’000)
Carrying value at the beginning of the year
Additions
Amortisation
Disposals
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2019
Cost
Accumulated depreciation
Carrying value at the end of the year
RECONCILIATION OF CARRYING AMOUNTS
AS AT 31 DECEMBER 2018 USD ($’000)
Carrying value at the beginning of the year
Additions
Amortisation
Disposals
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2018
Cost
Accumulated depreciation
Carrying value at the end of the year
PLANT &
EQUIPMENT
FURNITURE,
FITTINGS &
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
4
150
(29)
—
—
125
595
(470)
125
18
25
(13)
—
—
30
154
(124)
30
19
514
(123)
—
(1)
409
569
(160)
409
TOTAL
41
689
(165)
—
(1)
564
1,318
(754)
564
PLANT &
EQUIPMENT
FURNITURE,
FITTINGS &
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
TOTAL
40
—
(22)
(14)
—
4
510
(506)
4
26
12
(20)
—
—
18
133
(115)
18
658
40
(125)
(554)
—
19
81
(62)
19
724
52
(167)
(568)
—
41
724
(683)
41
Accounting policy: Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any
accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than its estimated recoverable
amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses are recognised
either in profit or loss as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of
recoverable amount is made when impairment indicators are present. Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a
separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting
59
Nitro Annual Report 2019
period in which they are incurred. Depreciation of furniture and fixtures and computer equipment is measured using the straight-line
method over estimated useful lives of the assets, generally 3 to 5 years. Leasehold improvements are amortised over the lesser of the
estimated useful life of the asset or the remaining lease term. The depreciation rates used for each class of depreciable assets are:
• Leasehold improvements
• Furniture and fittings
• Office equipment
20%
33%
33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of
those assets to retained earnings.
Accounting policy: Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs of disposal and value-in-use. For the purposes of assessing impairment, assets are Grouped at
the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other
assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed
for possible reversal of the impairment at the end of each reporting period.
Note 11: Intangible assets
(a) Reconciliation of carrying amounts
AS AT 31 DECEMBER 2019 USD ($’000)
Carrying value at the beginning of the year
Additions
Amortisation
Disposals
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2019 USD ($’000)
Cost
Accumulated depreciation
Carrying value at the end of the year
INTELLECTUAL
PROPERTY
SOFTWARE
COMMERCIALISED
SOFTWARE
DOMAINS
TOTAL
2
—
(1)
—
—
1
21
(20)
1
—
—
—
—
—
—
681
(681)
—
921
—
(844)
—
(14)
63
—
—
—
—
—
—
923
—
(845)
—
(14)
64
11,466
(11,403)
63
43
(43)
—
12,211
(12,147)
64
During the year ended 31 December 2019, all research and development costs were expensed as they did not meet the recognition
and measurement criteria under the AASB 138.
60
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
AS AT 31 DECEMBER 2018 USD ($’000)
Carrying value at the beginning of the year
Additions
Amortisation
Disposals
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2018
Cost
Accumulated depreciation
Carrying value at the end of the year
INTELLECTUAL
PROPERTY
SOFTWARE
COMMERCIALISED
SOFTWARE
DOMAINS
64
—
(58)
(4)
—
2
24
(22)
2
18
—
(18)
—
—
—
723
(723)
—
2,696
—
(1,743)
(32)
—
921
—
—
—
—
—
—
TOTAL
2,778
—
(1,819)
(36)
—
923
11,480
(10,559)
921
43
(43)
—
12,270
(11,347)
923
During the year ended 31 December 2018, all research and development costs were expensed as they did not meet the recognition
and measurement criteria under the AASB 138.
Accounting policy
Software development costs
Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible
assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate
future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs,
including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures
that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and
amortised from the point at which the asset is ready for use on a straight-line basis over its useful life, which varies from 3 to 5 years.
The amortisation rates used for each class of intangible assets are:
•
Intellectual property
• Software
• Capitalised software
• Domains
20%
33% – 40%
50%
33%
Software development costs include costs directly attributable to the development phase and are only recognised following
completion of technical feasibility and where the Group has an intention and ability to use the asset.
61
Nitro Annual Report 2019
Note 12: Contributed equity
Preference shares
ORDINARY SHARES
SERIES A
SERIES B
SERIES C
SERIES D
SHARES
USD
$’000
SHARES
USD
$’000
SHARES
USD
$’000
SHARES
USD
$’000
SHARES
USD
$’000
66,045,285
628 18,227,160
789 14,986,017
6,600 21,443,481
14,730 23,215,851
19,808
38,249,649
44,833
—
—
—
—
—
—
—
—
77,872,509
41,927 (18,227,160)
(789) (14,986,017)
(6,600) (21,443,481)
(14,730) (23,215,851)
(19,808)
5,304,699
6,199
1,456,854
289
—
(3,667)
188,928,996
90,209
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2019
Balance at the
beginning of the year1
Issue of shares
during the year2
Conversion to
ordinary shares
Issue of shares on
conversion of notes
Shares issued on exercise
of options and warrants
Expenses directly attributable
to issue of shares
Balance at the
end of the year
1. The number of shares at the beginning of the year have been adjusted for the impact of 9:1 stock split on 18 November 2019.
2. On 11 December 2019, the Company completed a $44 .83 million capital raise (before costs), through an IPO of 38,249,649 new fully paid ordinary shares
at the offer price of A$1.72. The Company incurred a total of $6.63 million in transaction costs of which $3.67 million which are directly attributable to the
issue of the shares was recorded in the consolidated statement of changes in equity and the balance $2.96 million recorded in the consolidated statement of
comprehensive income.
Preference shares
ORDINARY SHARES
SERIES A
SERIES B
SERIES C
SERIES D
SHARES
USD
$’000
SHARES
USD
$’000
SHARES
USD
$’000
SHARES
USD
$’000
SHARES
USD
$’000
65,594,529
498 18,227,160
789 14,986,017
6,600 21,443,481
14,730 21,262,680
17,813
2018
Balance at the
beginning of the year
Issue of shares
during the year
Shares issued on exercise
of options
Cancellation of ESP
—
358,002
(251,046)
—
71
(68)
128
Employee share plan issue
343,800
Expenses directly attributable
to issue of shares
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,953,171
2,000
—
—
—
—
—
—
—
—
—
—
—
(5)
Balance at the end
of the year
66,045,285
628 18,227,160
789 14,986,017
6,600 21,443,481
14,730 23,215,851
19,808
The balance of shares outstanding and issued have been adjusted for the impact of 9:1 stock split on 18 November 2019.
(a) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person
or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the
company does not have a limited amount of authorised capital.
On 18 November 2019, by a resolution of the members of the Company, the existing equity shares were split in a ratio of a 9 for 1
stock split.
62
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019 (b) Preference shares
Series A, B, C and D Preference shares are entitled to receive any dividend declared by the Board as it they are equal to the number
of Ordinary Shares which may be issued upon their conversion into Ordinary Shares. The preference share were converted to
ordinary shares prior to the completion of the IPO.
(c) Options
As at 31 December 2019 there were 15,873,129 (31 December 2018: 17,375,229) vested and unvested options on issue
(refer note 15(b) for details). These have been adjusted for the 9:1 stock split on 18 November 2019.
(d) Reserves
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
The employee share benefits reserve is used to record the value of share-based payments provided to employees, including KMP as
part of their remuneration.
The warrants reserve is used to record the value of warrants issued to third parties against the shares of the company.
Note 13: Loans and borrowings
USD (’000)
Current liabilities
Bank loans
Lease liabilities
Total current loans and borrowings
Non-current liabilities
Bank loans
Lease liabilities
Total non-current loans and borrowings
Total loans and borrowings
NOTE
2019
2018
13(a)
13(c)
13(a)
13(c)
—
1,393
1,393
—
1,540
1,540
2,933
2,700
—
2,700
1,742
—
1,742
4,442
Accounting policy
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or
loss over the year of the borrowings using the effective interest method. Amortised cost is calculated by taking into account any issue
costs and any discount or premium on settlement.
Borrowings are removed from the consolidated statement of financial position when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished
or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other income or finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part
of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference between the
carrying amount of the financial liability and the fair value of the equity instruments issued.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the reporting period.
63
Nitro Annual Report 2019
(a) Borrowings from Silicon Valley Bank (‘SVB’)
During the year ended 31 December 2019, the Company has repaid the borrowings from SVB and there were no obligations in
relation to these as at the date of the balance sheet. There were no breaches of financial covenants under the borrowing agreement.
(b) Convertible notes
In August 2019, the Company issued $5 million of convertible notes at a face value of $1 each. These notes had a maturity date
of 31 December 2020 and were convertible on defined exit events. In this case the exit event was the IPO. The conversion price
accordingly was, either:
• 80% of the Per Share Value; in case the IPO completed before 31 December 2019, or
• 75% of the Per Share Value; in case the IPO completed between 1 January 2020 and the maturity date, or
•
the Per Share Capped Value which is implied by a total equity valuation of the Company equal to US$200 million.
Accordingly, the cost of US$1,250K has been recognised as finance cost in the consolidated statement of comprehensive income
which represents a 20% discount on per share value.
(c) Leases
The Group leases property and equipment. Lease terms are negotiated on an individual basis and contain a range of different terms
and conditions. In 2019, the Group entered into two non-cancellable lease agreements for their office facilities in San Francisco,
United States of America (USA) and Dublin, Ireland. These liabilities were measured at the present value of the remaining lease
payments, discounted using the lessee’s incremental borrowing rate. The weighted average lessee’s incremental borrowing rate
applied to the lease liabilities at their inception was 7.75% for USA and 5% for Ireland.
The Group also assessed leases existing as at 1 January 2019 in Australia, USA and Ireland (‘2018 operating lease agreements’). As of
the application of AASB 16, the 2018 operating lease agreements, had a lease term less than one year. As such, these were classified
as short-term leases using the practical expedients in AASB 16 and excluded from the recognition and measurement principles under
the standard. Similarly, leases for other plant and equipment are considered as low value leases using the practical expedients in
AASB 16 and excluded from the recognition and measurement principles under the standard.
Financial disclosures AASB 16
RIGHT OF USE ASSET RECONCILIATION OF CARRYING AMOUNTS
AS AT 31 DECEMBER 2019 USD (’000)
Carrying value at the beginning of the year
Additions
Amortisation
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2019 USD (’000)
Cost
Accumulated depreciation
Carrying value at the end of the year
PROPERTY
—
4,105
(1,003)
(44)
3,058
4,064
(1,006)
3,058
64
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019 LEASE LIABILITIES — MATURITY ANALYSIS
AS AT 31 DECEMBER 2019 USD (’000)
Contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities as at 31 December 2019
Lease liabilities included in the statement of financial position
— Current
— Non-current
PROPERTY
1,513
1,621
—
3,134
2,933
1,393
1,540
The Group seeks to include extension options in its leases for operational flexibility. At the inception of the lease, the Group has assessed
that it is not reasonably certain that the extension options will be we exercised given the size of the business and future growth.
AMOUNTS RECOGNISED IN PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2019 USD (’000)
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low value assets, excluding short term leases of low value assets
AMOUNTS RECOGNISED IN THE STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019 USD (’000)
Total cash outflow for leases
PROPERTY
164
359
8
PROPERTY
1,182
Changes to significant accounting policies
A new standard became applicable for the 1 Jan 2019 and the Group had to change its accounting policy as a result of adopting
AASB 16 Leases.
As a result of the change in accounting policy, the Group has applied AASB 16 using the modified retrospective approach and
therefore the comparative information has not been restated and continues to be reported under AASB 117. The cumulative effect
of initial application is recognised in retained earnings at 1 January 2019.
On adoption of AASB 16, the Group elected to apply the practical expedients noted below:
Identification of a lease:
The Group applied AASB 16 only to contracts that were previously identified as leases under AASB 117 and IFRIC 4. Therefore, the
definition of a lease under AASB 16 was applied to contracts that were entered into and changed on or after 1 January 2019.
Recognition and measurement of leases previously classified as operating leases under AASB 117
The Group has not applied the recognition and measurement principles of AASB 16 in relation to short-term leases with a lease term
of 12-months or low-value assets. These are expensed on a straight-line basis over the lease term.
Impact of transition
As a lessee, the Group leases a number of assets including property and IT equipment. The Group previously classified leases as
operating or finance leases based on its assessment of whether the lease transferred significantly all risks and rewards of ownership.
Leases previously classified as operating leases
Under AASB 16, as at 1 January 2019, the Group has no leases that would be classified as right of use assets as they are either low
value assets or have a lease term of less than 12 months based on the practical expedients adopted by the Group on the application
of the standard. Accordingly, there is no impact on the transition date.
65
Nitro Annual Report 2019 Leases previously classified as finance leases
The Group has no assets that were classified as finance leases under AASB 117, accordingly, there is no impact on the transition date.
Accounting policy from 1 January 2019
At inception of a contract, the Group assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
At the commencement or modification of a contract that contains a lease, the Group allocates the consideration in the contract to
each lease component on the basis of its relative stand alone prices. However, for leases of property, the Group has elected not to
separate non-lease components and account for the lease and non-lease components as a single lease component.
Leases are recognised as right-of-use assets and a corresponding liability at the date at which the leased asset is available for use
by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost if charged to profit and loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payments that are based on an index or a rate
• amounts expected to be payable because the lease is reasonable certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the lease exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lease would have to pay to borrow the funds necessary to obtain an asset
or similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
•
the amount of the initial measurement of lease liability
• any lease payments made at or above the commencement date less any lease incentives received
• any initial direct costs, and
• restoration costs,
over the period of the lease.
Financial disclosures AASB 117
Commitments for minimum lease payments in relation to non-cancellable leases within the next 12 months is $0.08 million
(31 December 2018: $0.21 million).
66
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019 (d) Reconciliation of movements of liabilities to cashflows arising from financing activities
USD (’000)
Balance as at 1 January 2019
Proceeds from issue of convertible notes
Payment for leases
Repayment of borrowings
Changes from financing cashflows
Effect of changes in foreign exchange rates
Other changes
Finance costs
Finance costs paid
Conversion to ordinary shares
Other (payables)/receivables
New leases
Subtotal other changes
Balance as at 31 December 2019
USD (’000)
Balance as at 1 January 2018
Payment for leases
Repayment of borrowings
Changes from financing cashflows
Effect of changes in foreign exchange rates
Other changes
Finance costs
Finance costs paid
Subtotal other changes
Balance as at 31 December 2018
LEASE
LIABILITIES
—
—
(1,182)
BANK
LOANS
4,442
—
—
—
(4,442)
(1,182)
(4,442)
26
—
164
(164)
—
—
4,089
4,089
2,933
LEASE
LIABILITIES
249
(249)
—
(249)
—
4
(4)
—
—
339
(339)
—
—
—
—
—
BANK
LOANS
6,956
—
(2,514)
(2,514)
645
(645)
—
4,442
CONVERTIBLE
NOTES
—
5,000
—
(24)
4,976
—
1,250
—
(6,199)
(27)
—
(4,976)
—
CONVERTIBLE
NOTES
295
—
(295)
(295)
—
—
—
—
TOTAL
4,442
5,000
(1,182)
(4,466)
(648)
26
1,753
(503)
(6,199)
(27)
4,089
(887)
2,933
TOTAL
7,500
(249)
(2,809)
(3,058)
—
—
649
(649)
—
4,442
(e) Net debt
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented. Net debt is calculated
as cash and cash equivalents and liquid investments less borrowings.
NET DEBT USD (’000)
Cash and liquid investments
Borrowings — repayable within one year
Borrowings — repayable after one year
Net debt
2019
47,017
(1,393)
(1,540)
44,084
2018
4,049
(2,700)
(1,742)
(393)
67
Nitro Annual Report 2019
Note 14: Financial risk management
(a) Risk management framework
The Company’s Board of Directors have an overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board of Directors have established the Audit and Risk Management Committee which is responsible for developing
and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and
analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits.
Risk management policies are reviewed regularly to reflect changes in the market and the Group’s activities. The Group monitors
capital with the objective of safeguarding its ability to continue as a going concern and provide return to shareholders. The Group
does not have a target debt equity structure and pursuant to the IPO all external borrowings, except those relating to leases under
AASB 16 are outstanding on the date of the balance sheet.
(b) Market risk
Market risk is the risk that changes in market prices — such as foreign exchange rates and interest rates — will affect the Group’s
income or the value of its holdings of financial instruments. The Group uses derivatives to manage market risk related to foreign
currencies. All such transactions are carried out within the guidelines of the Group’s risk management policies.
(i) Foreign exchange risk
The Group’s reporting currency is the US$ and it is exposed to currency risk on accounts receivable and payable denominated in the
Australian Dollar (AUD), Euro (EUR) and British Pound (GBP). In respect of other monetary assets and liabilities denominated in foreign
currencies, the Group’s policy is to ensure the net exposure is kept to an acceptable level by buying or selling foreign currencies at
spot rates when necessary.
Exposure to foreign currency risk
The summary quantitative data about the Group’s exposure to foreign currency risk is as follows:
AS AT 31 DECEMBER
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Loans and borrowings
2019
2018
AUD’000
EUR’000
GBP’000
AUD’000
EUR’000
GBP’000
58,502
1,452
1,646
—
557
899
990
1,680
101
210
58
—
110
2,994
415
—
217
750
686
—
61
276
105
—
The cash and cash equivalents in AUD include proceeds from the IPO on 11 December 2019. The loans and borrowings as at
31 December 2019 represent the right to use liabilities in relation to property leases.
Sensitivity analysis
A 10% strengthening or weakening of foreign currencies to US dollar exchange rate would have increased/(decreased) the net assets
denominated in foreign currencies by the amounts shown below. This analysis assumes that all other variables, in particular, interest
rates, remain constant.
2019
(3,794)
4,637
2018
(229)
280
USD (’000)
10% increase
10% decrease
68
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019 (ii) Interest rate risk
The Group is exposed to changes in interest rates as it relates to the Company’s borrowings and short-term deposits.
Interest rate risk on borrowings
As at 31 December 2019, the Company had no borrowings outstanding as these were repaid during the year.
AS AT 31 DECEMBER USD (’000)
Variable rate borrowings
2019
—
% OF TOTAL
BORROWINGS
—
2018
4,442
% OF TOTAL
BORROWINGS
100%
The borrowings as at 31 December 2018 relate to variable rate loan from SVB. The interest rate for the year ended 31 December 2018
was 8%.
Interest rate risk on deposits
The Company monitors changes in interest rates regularly to ensure the best possible return on deposits. Changes to interest rates in
this context are not considered a significant financial risk.
(iii) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to
customers, including outstanding receivables.
Impairment of financial assets
The Group has trade receivables and contract assets which are subject to the expected credit loss model.
Cash and cash equivalents
The Group held cash and cash equivalents with banks and financial institution counterparties which are rated, BBB- to AA-, based on
Standards & Poors ratings.
Trade receivables and contract assets
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate to work contracted greater than 12 months and have substantially
the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the
expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2018 or
1 January 2019 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to
settle the receivables and accordingly adjusts the historical loss rates based on expected changes in these factors.
AGEING – TRADE RECEIVABLES AND
CONTRACT ASSETS USD (’000)
Current
0 to 30 days overdue
31 to 60 days overdue
61 to 90 days overdue
More than 90 days overdue
Total
2019
17,181
778
121
124
—
18,204
LOSS
ALLOWANCE
20
4
0
1
—
25
RATE
0.12%
0.52%
0.26%
0.52%
—
2018
2,760
905
62
10
—
0.14%
16,140
LOSS
ALLOWANCE
65
21
1
0
—
87
RATE
0.43%
2.31%
2.37%
2.13%
—
0.54%
69
Nitro Annual Report 2019 LOSS ALLOWANCE
ON TRADE RECEIVABLES AND CONTRACT ASSETS USD (’000)
Loss allowance at the beginning of the year
(Reversal of)/provision for loss allowance
Write-off
Recovery of write-off
Loss allowance at the end of the year
2019
2018
87
(41)
(30)
9
25
76
—
(3)
14
87
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset. The Group’s objective is to maintain a balance between continuity of funding and
flexibility through the use of its cash and funding requirements. The Group continually monitors forecast and actual cash flows and
the maturity profiles of assets and liabilities to manage its liquidity risk.
As at 31 December 2019, the Group had no access to borrowing facilities and the borrowings outstanding as at 31 December 2018
had been repaid.
Exposure to liquidity risk
The tables below present the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for
all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due
within 12 months equal their carrying balances as the impact of discounting is not significant.
MATURITIES OF FINANCIAL LIABILITIES
31 DECEMBER 2019 USD (’000)
12 MONTHS
OR LESS
BETWEEN
1 AND 3
YEARS
BETWEEN
3 AND 5
YEARS
TOTAL
CONTRACTUAL
CASH FLOWS
CARRYING
AMOUNT
LIABILITIES
Non-derivatives
Trade and other payables
Lease Liability
Total non-derivatives
31 DECEMBER 2018 USD (’000)
Non-derivatives
Trade and other payables
Borrowings
Total non-derivatives
5,569
1,393
6,962
3,748
2,700
5,871
—
1,540
1,540
—
1,742
1,742
—
—
—
—
—
—
5,569
3,134
8,703
3,748
4,442
7,613
5,569
2,933
8,502
3,748
4,442
7,613
70
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
Note 15: Employee benefit expense
(a) Employee stock option plans
Awards, in the form of the right to receive ordinary shares in the Company, have been granted under the following employee share
ownership plans in the Historical Long-Term Incentive Plan (Historical LTIP) and Current Long-Term Incentive Plan (Current LTIP)
Awards under the plans do not confer any rights to participate in a share issue; however, there is discretion under each of the plans
to adjust the awards in response to a variation in the share capital of the Company. The table below provides a description of each of
the plans.
PLAN
Type
Overview
Performance
hurdles
Vesting
conditions
HISTORICAL LTIP
CURRENT LTIP
Long-term incentive
Long term incentive
The Historical LTIP is a
plan for the KMP and
all employees of the
Group.
There are no
performance hurdles
other than continuity
of service.
Service conditions
only; Vesting period
is between 48 to 60
months; and
Have a 10-year
contractual life.
The Current LTIP is a plan for executive KMP and senior executives who are not KMP.
The number of share rights awarded is determined by a participant’s role and grade.
Specific event: Completion of the IPO and the Company’s fully paid ordinary shares
listing on the ASX no later than 31 December 2019.
Revenue targets in relation to 2019 and 2020 of US$35.4 million and US$40.5 million
respectively are achieved.
Options which have not lapsed will vest and become exercisable on the date on which
any vesting conditions applicable to the options have been satisfied (or waived by the
Board) or as per the plan rules. The vesting conditions are outlined below.
• 33% have no vesting conditions and will be immediately exercisable upon
completion of the IPO;
• 33.5% are subject to the satisfaction of 2020 revenue performance hurdles
(2020 Options); and
• 33.5% are subject to the satisfaction of 2021 revenue performance hurdles
(2021 Options).
Vesting
conditions
continued
Service conditions
only; Vesting period is
between 48 months to
60 months; and have a
10-year contractual life.
None of the 2020 options will vest unless the Company’s revenue for the period
ending 31 December 2019 is equal to or exceeds the forecast revenue for that the
same period in the Prospectus; and the proportion of 2021 options that will vest
will be determined by reference to the Company’s revenue for the period ending
31 December 2021.
PERFORMANCE
CONDITION
2020 and 2021
performance hurdle
VESTING CONDITIONS
OBJECTIVE
PERFORMANCE RELATIVE
TO THE FORECAST
PERCENTAGE OF OPTIONS
VESTING
Below the 100th percentile
Nil
100th percentile
50%
Greater than the 100th
but less than the 120th
percentile
Equal to or greater than the
120th percentile
50% to 100% on a pro-rata
straight-line basis
100% of the options will vest
71
Nitro Annual Report 2019 (b) Employee share awards as at 31 December 2019
DATE OF
GRANT
DATE OF
EXPIRY
EXERCISE
PRICE PER
OPTION
OUTSTANDING
AT THE
1 JAN 2019
GRANTED
DURING
THE PERIOD
FORFEITED
DURING
THE PERIOD
EXERCISED
DURING
THE PERIOD
OUTSTANDING
AT 31 DEC 2019
EXERCISABLE
AT 31 DEC
2019
REMAINING
CONTRAC-
TUAL LIFE
(YEARS)
$0.00
NUMBER OF SHARES
Historical LTIP
25 Nov 11
25 Nov 21
AUD 0.20
4,905,900
2 Dec 11
25 Nov 21
AUD 0.20
1,481,040
24 Aug 12
30 Aug 22
AUD 0.22
30 Nov 13
30 Nov 23
AUD 0.25
12 May 14
4 May 24
AUD 0.41
17 May 14
4 May 24
AUD 0.41
28 Feb 15
27 Feb 25
USD 0.30
10 Aug 15
9 Aug 25
USD 0.31
29 Nov 15
28 Nov 25
USD 0.31
72,000
139,500
881,190
575,460
144,000
283,500
204,741
28 Feb 16
28 Feb 26
USD 0.31
1,586,421
1 May 17
30 Apr 27
USD 0.35
1,980,675
1 Jan 18
31 Dec 27
USD 0.37
2,304,666
25 Jul 18
24 Jul 28
USD 0.37
2,816,136
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,905,900
4,905,900
(740,520)
740,520
740,520
(18,000)
—
—
(49,500)
(18,000)
(575,460)
—
—
54,000
90,000
54,000
90,000
863,190
863,190
—
—
—
(36,000)
108,000
108,000
(85,500)
(99,000)
99,000
99,000
(20,241)
—
—
—
184,500
184,500
1,586,421
1,586,421
(1,139,103)
(3,411)
838,161
602,289
(857,313)
(51,345)
1,396,008
765,819
(2,567,547)
(7,110)
241,479
109,881
25 Mar 19
24 Mar 29
USD 0.39
—
3,110,832
(27,000)
(336,240)
2,747,592
874,944
Current LTIP
1.91
1.91
2.67
3.92
4.35
4.35
5.17
5.61
5.92
6.17
7.34
8.01
8.57
9.24
13 Nov 19
11 Dec 29
AUD 1.72
—
2,018,358
—
—
2,018,358
660,090
9.96
17,375,229
5,129,190
(5,308,164)
(1,323,126)
15,873,129
11,644,554
The information in relation to the stock option plans above have been adjusted for the impact of 9:1 stock split on 18 November 2019
Employee share awards as at 31 December 2018
DATE OF
GRANT
DATE OF
EXPIRY
EXERCISE
PRICE PER
OPTION
OUTSTANDING
AT THE
1 JAN 2017
GRANTED
DURING
THE PERIOD
FORFEITED
DURING
THE PERIOD
EXERCISED
DURING
THE PERIOD
OUTSTANDING
AT 31 DEC 2018
EXERCISABLE
AT 31 DEC
2018
REMAINING
CONTRAC-
TUAL LIFE
(YEARS)
$0.00
NUMBER OF SHARES
Historical LTIP
25 Nov 11
25 Nov 21
AUD 0.20
5,175,180
2 Dec 11
25 Nov 21
AUD 0.20
1,481,040
24 Aug 12
30 Aug 22
AUD 0.22
30 Nov 13
30 Nov 23
AUD 0.25
12 May 14
4 May 24
AUD 0.41
28 Feb 15
27 Feb 25
AUD 0.41
10 Aug 15
9 Aug 25
USD 0.30
29 Nov 15
28 Nov 25
USD 0.31
28 Feb 16
28 Nov 25
USD 0.31
112,500
270,000
881,190
575,460
176,994
330,750
457,218
1 May 17
30 Apr 27
USD 0.31
1,586,421
1 Jan 18
31 Dec 27
USD 0.35
2,361,933
—
—
—
—
—
—
—
—
—
—
—
(22,500)
(246,780)
4,905,900
4,905,900
—
—
1,481,040
1,481,040
(22,500)
(18,000)
72,000
72,000
(130,500)
—
—
(32,994)
—
—
—
—
139,500
139,500
881,190
881,190
575,460
575,460
144,000
142,488
(34,128)
(13,122)
283,500
265,671
(216,477)
(36,000)
204,741
170,964
—
—
1,586,421
1,586,421
(338,094)
(43,164)
1,980,675
1,081,989
1 Jan 18
31 Dec 27
USD 0.37
25 Jul 18
24 Jul 28
USD 0.37
—
—
2,702,421
(396,819)
2,817,936
(1,800)
(936)
—
2,304,666
624,015
2,816,136
18,882
13,408,686
5,520,357
(1,195,812)
(358,002)
17,375,229
11,945,520
2.91
2.91
3.67
4.92
5.35
6.17
6.61
6.92
6.92
8.34
9.01
9.01
9.57
The information in relation to the stock option plans above have been adjusted for the impact of 9:1 stock split on 18 November 2019.
72
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
(c) Fair value and assumptions in the calculation of fair value for awards issued
EMPLOYEE
STOCK
OPTIONS
2019
2019
EMPLOYEE
STOCK
OPTIONS
2018
2019
DATE OF
GRANT
DATE OF
EXPIRY
EXERCISE
PRICE
FAIR VALUE AT
GRANT DATE
EXPECTED
PRICE
VOLATILITY %
DIVIDEND
YIELD%
RISK FREE
RATE
REMAINING
CONTRACTUAL
LIFE (YEARS)
25 Mar 19
24 Mar 29
USD 0.39
USD 0.21
13 Nov 19
11 Dec 29
AUD 1.72
AUD 0.69
60%
42%
0%
0%
1.3%
1.0%
9.24
9.96
DATE OF
GRANT
DATE OF
EXPIRY
EXERCISE
PRICE
FAIR VALUE AT
GRANT DATE
EXPECTED
PRICE
VOLATILITY %
DIVIDEND
YIELD%
RISK FREE
RATE
REMAINING
CONTRACTUAL
LIFE (YEARS)
1 Jan 18
31 Dec 27
25 Jul 18
24 Jul 28
USD 0.37
USD 0.37
USD 0.21
USD 0.22
60%
60%
0%
0%
2.7%
3.1%
9.01
9.57
During the year ended 31 December 2019, the Group has recognised US$0.84 million (31 December 2018: US$0.56 million) as share-
based payment expense. The difference in the expected price volatility for the options granted in 2019 is on account of the change in
the Company’s profile from a private company to a public listed company. The determination of the volatility included benchmarking
with peer group of companies.
(d) Recognition and measurement
The fair value at grant date of equity-settled share awards is expensed over the vesting period of the awards. The fair values of awards
granted were estimated using a Black-Scholes option pricing technique and consider the following factors:
• exercise price;
• expected life of the award;
• current market price of the underlying shares;
• expected volatility using an analysis of historic volatility over different rolling periods;
• expected dividends;
• risk-free interest rate, which is an applicable government bond rate.
The above inputs used in the measurement of share based payments expense include Level 1 and Level 2 inputs as per the fair value
hierarchy under AASB 13 Fair value measurements:
• such as quoted prices (unadjusted) in active markets and
•
inputs other than quoted prices included within level 1 that are observable for either directly (as prices) or indirectly (derived from
prices), respectively.
Where awards are forfeited because non-market-based vesting conditions are not satisfied, the expense previously recognised is
proportionately reversed.
(e) Key management personnel:
Key management personnel compensation comprises remuneration paid/payable to the board of directors and other senior
executives identified as KMP:
USD (’000)
Short term employee benefits
Post-employment benefits
Share-based payments
Others
Employee benefit expenses
2019
1,508
4
656
160
2,328
2018
830
—
56
90
976
Transactions and balances with key management personnel
During the year ended 31 December 2019 and as at that date, an amount aggregating $0.12 million (31 December 2018: $nil) on
11 December 2019. These amounts were repaid on 9 January 2020 was receivable from one KMP in relation to exercise of share
options vested and exercised.
73
Nitro Annual Report 2019 During the year ended 31 December 2019, loans provided to KMP in order to exercise share options under the Historical LTIP
outstanding as at 31 December 2018 aggregating $0.02 million were repaid in September 2019.
Transactions with related entities
A number of Directors of the Group hold or have held positions in other companies (personally related entities) where it is considered
they control or significantly influence the financial or operating policies of those entities. There were no reportable transactions
with those entities and no amounts were owed by or owed to the Group to/by personally related entities at 31 December 2019
(31 December 2018: $nil).
For more information on remuneration and transactions with key management personnel, refer the remuneration report on page 40
of the annual report.
Accounting policy
Short-term and other long-term employee benefit obligations
Liabilities for annual leave and any accumulating sick leave accrued up until the reporting date that are expected to be settled within
12 months are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for long service leave are
measured as the present value of estimated future payments for the services provided by employees up to the reporting date and
disclosed within employee benefits. Liabilities that are not expected to be settled within 12 months are not discounted as the impact
of the same is immaterial. Liabilities for unpaid wages and salaries are recognised in trade and other payables.
Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity.
At the end of each reporting period, the group revises its estimate of the number of equity instruments expected to vest. The impact
of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value
of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability
is remeasured, with any changes in fair value recognised in profit or loss for the year.
Note 16: Auditors’ remuneration
During the year the following fees were paid for services provided by the Group’s auditors, PricewaterhouseCoopers (PwC) Australia,
and its network firms:
USD (’000)
Assurance services
Audit and review of financial statements
Other assurance services1
Total assurance services
Non-assurance services
Tax compliance services
Total non-assurance services
Total remuneration
PwC Australia
Network firms of
PwC Australia
Total
2019
2018
2019
2018
2019
2018
238
635
873
37
37
909
137
19
156
16
16
193
22
—
22
41
41
63
21
—
21
6
6
6
260
635
895
78
78
972
158
19
177
22
22
199
1. Other assurance services for the year ended 31 December 2019 relates to IPO-related activities.
74
Nitro Annual Report 2019Notes to the ConsolidatedFinancial Statementsfor the year ended 31 December 2019
Note 17: Parent entity information
Accounting policy
The financial information for the parent entity, Nitro Software Ltd, has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the consolidated financial statements of
Nitro Software Ltd. Dividends received from associates are recognised in the parent entity’s profit or loss when its right to receive the
dividend is established.
Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the
fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.
Share-based payments
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the group is
treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference
to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a
corresponding credit to equity.
USD (’000)
Result of the parent entity
(Loss)/profit for the year
Total comprehensive (loss)/profit for the year
Financial position of the parent entity as at 31 December
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Accumulated losses
Total equity
2019
2018
(3,555)
(3,555)
55,736
89,453
1,108
1,498
56
56
10,434
44,111
273
292
87,955
43,819
90,209
(4,101)
1,847
42,555
(4,138)
5,402
87,955
43,819
Note 18: Commitments and contingencies
The Group had no contingent liabilities as at 31 December 2019 (31 December 2018: Nil). The Group has no significant commitments
as at 31 December 2019 other than those disclosed in note 13(c).
Note 19: Subsequent events
The declaration of the COVID-19 pandemic after the date of the balance sheet does not provide additional evidence of conditions
that existed as at 31 December 2019, where only a few cases of an unknown virus were reported to the World Health Organisation.
Further, there were no other subsequent events after the date of the balance sheet that would have an impact on the financial
statements as at 31 December 2019.
Subsequent to balance date the following changes were effective 31 March 2020 – Appointment of Kurt Johnson to Executive Director,
resignation of Richard Wenzel from his position of SVP Tax & Treasury and continuation as a Non-Independent Non-Executive Director
and resignation of Kathleen Miller from her position of Chief Financial Officer and Co-Company Secretary.
75
Nitro Annual Report 2019
Directors’ Declaration
In the directors’ opinion:
a. the consolidated financial statements and notes as set out on pages 44 to 75 and the Remuneration report on pages 27 to 42
forming part of the Directors’ report, are in accordance with the Corporations Act 2001 including:
i. giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its performance for the financial
year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
c. The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A
of the Corporations Act 2001 for the year ended 31 December 2019.
d. The directors draw attention to Note 2(a) to the consolidated financial statements on page 48 which includes a statement of
compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Kurt Johnson
Chair
31 March 2020
Sam Chandler
Executive Director, Founder and CEO
31 March 2020
76
Nitro Annual Report 2019
Independent Auditor’s Report
77
Nitro Annual Report 2019PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report To the members of Nitro Software Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Nitro Software Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a)giving a true and fair view of the Group's financial position as at 31 December 2019 and of itsfinancial performance for the year then ended(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have audited The Group financial report comprises: •the consolidated statement of financial position as at 31 December 2019•the consolidated statement of comprehensive income for the year then ended•the consolidated statement of changes in equity for the year then ended•the consolidated statement of cash flows for the year then ended•the notes to the consolidated financial statements, which include a summary of significantaccounting policies•the directors’ declaration.Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 78
Nitro Annual Report 2019Independent Auditor’s ReportOur audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality Audit scope Key audit matters •For the purpose of our auditwe used overall Groupmateriality of $0.36 million,which representsapproximately 1% of theGroup’s total revenue.•We applied this threshold,together with qualitativeconsiderations, to determinethe scope of our audit and thenature, timing and extent ofour audit procedures and toevaluate the effect ofmisstatements on the financialreport as a whole.•We chose Group revenuebecause, in our view, it is thebenchmark against which theperformance of the Group ismost commonly measured.•We utilised a 1% thresholdbased on our professionaljudgement, noting it is withinthe range of commonlyacceptable thresholds.•Our audit focused on wherethe Group made subjectivejudgements; for example,significant accountingestimates involvingassumptions and inherentlyuncertain future events; as wellas on specific matters thatarose as a result of the Group’sinitial public offering.•The Group operates acrossAustralia, USA & Europe.Acting under our instructions,component auditors performedan audit of specific financialinformation of Nitro SoftwareEMEA Limited. The remainingaudit procedures wereperformed by us.•Amongst other relevant topics,we communicated the followingkey audit matters to the Auditand Risk Committee:−Revenue recognition−Share-based payments−Lease accounting andadoption of new accountingstandard AASB 16 Leases•These are further described inthe Key audit matters section ofour report. 79
Nitro Annual Report 2019Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter How our audit addressed the key audit matter Revenue recognition (Refer to note 4) [$35.7 million] Revenue recognition is a key audit matter due to: -the significance of revenue to the Group'sfinancial results-the extent of deferred revenue and contractassets recognised by the Group and the relatedrevenue recognition during the year-the level of judgement applied in the keyassumptions used to capitalise and subsequentlyamortise contract acquisition costs.We performed the following procedures, amongst others: -developed an understanding of the processundertaken by the Group to recogniserevenue from the sale of perpetual licensesand subscriptions, including factorsinfluencing whether the revenue is recognisedon principal or agency basis-testing the operating effectiveness of keycontrols over the cash allocation process toallocate cash receipts to the appropriateinvoice/customer-performed risk-based targeted proceduresover revenue transactions and agreed asample to supporting documents-used data assurance software to analyserevenue transactions-recalculated the impact of revenuerecognition on the deferred revenue balanceby testing a sample of contracts-obtained the contract acquisition costcalculation, performed mathematicalaccuracy checks, and assessed thereasonableness of the estimate of the usefullife and amortisation in light of the latestavailable information of contract periods andrenewals-evaluated the adequacy of the disclosuresmade in Note 4 in light of the requirements ofAustralian Accounting Standards. 80
Nitro Annual Report 2019Independent Auditor’s ReportKey audit matter How our audit addressed the key audit matter Share-based payments (Refer to note 15) [$0.84 million] Alongside its existing short term and long-term incentive plans, the Group approved a new long-term incentive plan during the year ended 31 December 2019. As such, the Group recognised share-based payment expenditure of $0.84 million during the year relating to options granted over shares that vested upon completion of the Group's initial public offering. This was a key audit matter due to the judgement in the key assumptions and estimates used in determining the fair value of the share-based payment expense. We performed the following procedures amongst others: -developed an understanding of the nature ofthe incentive schemes-read the terms and conditions of the variousincentive plan agreements-evaluated the Group’s assessment of thelikelihood of meeting the vesting conditionsattached to each of the agreements-assessed the Group's methodology forcalculating the fair value of share options, andagreed the valuation inputs to supportingdocuments including external data andemployee offer letters-evaluated the adequacy of the disclosuresmade in Note 15 in light of the requirements ofAustralian Accounting Standards.Lease accounting and adoption of new accounting standard AASB 16 Leases (Refer to note 13c) [$3.1 million] The Group adopted Australian Accounting Standard AASB 16 Leases (AASB 16) as at 31 December 2019. The new policy and related transition impact are disclosed in Note 13. This was a key audit matter due to the: -significance of the impact on transition to thefinancial report-judgement involved in applying the new AASB16 requirements to determine an incrementalborrowing rate to discount lease payments.We performed the following procedures amongst others: -assessed whether the Group's new accountingpolicies are in accordance with therequirements of AASB 16.For all lease agreements we: -evaluated the lease calculations against theterms of the lease agreement and therequirements of Australian AccountingStandards-assessed the incremental borrowing ratesapplied to the lease calculations againstexternal quotes from lenders in closeproximity to the lease commencement dates-tested the mathematical accuracy of the leasecalculations-evaluated the adequacy of the disclosuresmade in Note 13 in light of the requirementsof Australian Accounting Standards. 81
Nitro Annual Report 2019Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 31 December 2019 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's report. 82
Nitro Annual Report 2019Independent Auditor’s ReportReport on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 27 to 42 of the directors’ report for the year ended 31 December 2019. In our opinion, the remuneration report of Nitro Software Limited for the year ended 31 December 2019 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Niamh Hussey Partner Melbourne 31 March 2020 Shareholder Information
for the year ended 31 December 2019
Additional information
As required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as
at 29 February 2020.
Distribution of ordinary shares:
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
TOTAL
HOLDERS
SHARES
% SHARES
832
777
300
413
484,775
1,965,682
2,277,045
10,098,649
74
174,440,678
2,396
189,266,829
0.25
1.04
1.20
5.34
92.17
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares is 99 aggregating 26,197 shares. The minimum
parcel size is 299 shares based on a share price of AU$1.6750 per share.
Substantial shareholders
The following have disclosed a substantial shareholder notice in the period to 29 February 2020:
NUMBER OF ORDINARY SHARES IN
WHICH THE HOLDERS (OR THEIR
ASSOCIATES) HAVE A RELEVANT INTEREST
% OF
VOTING
POWER
DATE OF
INTEREST
NOTICE
SUBSTANTIAL HOLDER
Sam Chandler
Richard Wenzel
Starfish Technology Fund II, LP
Battery Ventures
Regal Funds Management Pty Ltd
Australian Ethical Investment Limited
Unlisted employee share options
As at 29 February 2020, there were a total of 15,463,1880 unlisted share options on issue.
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Voting rights:
Ordinary shares:
Refer note 12(a) to the financial statements on page 62 for details.
Employee share options
There are no voting rights attached to the employee share options.
9,191,880
9,650,188
26,309,432
24,872,515
14,576,389
9,525,819
4.87
13-Dec-19
5.11
13-Dec-19
13.92
13.16
7.72
5.04
13-Dec-19
13-Dec-19
13-Dec-19
5-Feb-20
SHARE
OPTIONS
% OF
TOTAL
TOTAL
HOLDERS
1,962
76,509
74,475
1,834,056
13,476,186
0.01
0.49
0.48
11.86
87.15
2
20
9
57
15
15,463,188
100.00
103
83
Nitro Annual Report 2019
On-market buy-back
There is no current on-market buy-back of shares.
Securities subject to voluntary escrow
The details of shares subject to voluntary escrow are as follows:
DATE ESCROW PERIOD ENDS
11 June 2020
Refer Note 1
Total
NUMBER
OF SHARES
20,331,503
74,809,154
95,140,657
Note 1: All shares will remain in escrow until the Company releases the full year financial results for the year ended 31 December
2020, except 16,966,009 shares which are subject to early release conditions, which are as follows:
•
•
the 2020 half year results to 30 June 2020 first having been released to the ASX, and;
the volume-weighted average price (VWAP) in any 10 consecutive trading days following release of those financial results exceeds
the IPO Offer price by more than 20%.
The Company has 12,030,971 unlisted options that are in escrow until the Company releases the full year financial results for the year
ended 31 December 2020.
Twenty largest shareholders
NAME
STARFISH TECHNOLOGY FUND II LP
BATTERY VENTURES X LP\C
NATIONAL NOMINEES LIMITED
VISTRA TRUST (SINGAPORE) PTE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED — A/C 2
RICHARD CROCKER
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
UBS NOMINEES PTY LTD
REGAL FUNDS MANAGEMENT PTY LTD
SAM CHANDLER
CITICORP NOMINEES PTY LIMITED
CHRIS DAHL
VENTURIAN PTY LTD
M&S SKYLEISURE PTY LTD
GLENEAGLE ASSET MANAGEMENT LTD
CRAIG CHANDLER + DI CHANDLER
BUTTERSS RESOURCES PTY LTD
FROSTHEATH PTY LIMITED
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
84
SHARES
26,076,463
24,623,794
20,171,289
12,954,988
6,856,174
6,760,011
5,788,666
5,454,189
5,233,145
5,154,228
4,198,014
3,830,400
3,727,460
3,354,252
3,132,203
2,836,624
2,030,000
1,992,375
1,822,860
1,768,961
% OF
SHARES
13.78
13.01
10.66
6.84
3.62
3.57
3.06
2.88
2.76
2.72
2.22
2.02
1.97
1.77
1.65
1.50
1.07
1.05
0.96
0.93
147,766,096
78.07
Nitro Annual Report 2019Shareholder Informationfor the year ended 31 December 2019
Appendix 1
85
Appendix 1Nitro Annual Report 2019 SaaS metrics
Nitro uses certain information, measures and ratios to manage and report on performance which are prepared on a basis that is not
in accordance with all relevant accounting standards (‘Non-Statutory Information’). This Non-Statutory Information may exclude certain
transactions, or present transactions or balances on a different recognition and measurement basis from that required or permitted
by accounting standards. These measures do not have prescribed definitions and therefore may not be directly comparable to
similarly titled measures presented by other entities.
Annual Recurring Revenue (‘ARR’) is the annual amount of revenue the Group will recognise from subscription-based licencing
agreements with customers who have entered into multi-year agreements for the right to access the Group’s software. The typical
subscription contract length is three years. ARR represents the annual value of subscription revenue under such contracts.
Nitro’s multi-year subscription-based licencing contracts provide visibility into revenue in future periods due to the recurring nature
of those revenue streams. ARR is calculated by multiplying the monthly subscription revenue in the last month of the financial
reporting period by 12;
New ARR added measures the incremental ARR added during a financial reporting period. The growth in ARR provides additional
predictability and visibility into future revenue for the Group. New ARR added is calculated by subtracting the total monthly
subscription revenue in the last month of the last prior reporting period from the total monthly subscription revenue in the last
month of the current financial reporting period, multiplied by 12;
Net Revenue Retention (‘NRR’) is the revenue generated in the current financial reporting period from subscription customers
who were using the Group’s software in the prior financial reporting period, net of churn. NRR measures the incremental recurring
revenue the Company generates from its existing subscription customers as they expand their usage of the Group’s solutions, which
may be a result of adding additional licences within their organisation, or by expanding usage into new areas of their organisation
that previously did not use Nitro’s solution. NRR greater than 100% is a potential indicator of customer satisfaction, and implies that
customers are expanding their use of the Group’s software solutions over time. NRR is calculated by dividing the subscription and
maintenance ARR from subscription customers in the last month of the period, by the subscription and maintenance ARR from the
same cohort of subscription customers over the same period in the prior year;
Customer retention rate is the percentage of customers that renew their subscription agreements at the expiration of their current
contact term as measured on an annual contract value basis. The Group believes customer retention rates can be indicative of
customer satisfaction with Nitro’s software solutions and customer service. The inverse of the customer retention rate is commonly
referred to as customer churn;
Quota carrying sales representatives are the number of sales representatives that are directly engaged in the sales process;
Lifetime Value/Customer Acquisition Cost (‘LTV/CAC’) measures the ratio of ‘lifetime value’ per customer to ‘customer acquisition
cost’. The LTV/CAC ratio compares the value of a customer over their lifetime, compared to the cost of acquiring them.
LTV/CAC is calculated as follows:
– LTV = (new bookings/number of new customers)/(1 — customer retention rate); and
– CAC = (selling expense + direct marketing expense + marketing personnel expense)/number of new customers;
Gross profit is revenue less cost of sales. Gross profit represents the amount the Company is able to retain after paying the cost
directly associated with the sales of its products. Gross margin is gross profit expressed as a percentage of total revenue;
EBITDA before share-based payments is earnings before share-based payments, interest, taxation, depreciation and amortisation.
Nitro uses EBITDA before share-based payments to evaluate the operating performance of the Company without the non-cash impact
of depreciation and amortisation, and before share-based compensation, interest and taxation;
EBITDA is earnings before interest, taxation, depreciation and amortisation. Nitro uses EBITDA to evaluate the operating performance
of the Company without the non-cash impact of depreciation and amortisation, and interest and taxation;
EBITDA should not be considered as an alternative to measures of cash flow under AASB and investors should not consider EBITDA in
isolation from, or as a substitute for, an analysis of the results of Nitro’s operations.
Although the Directors believe that these measures provide useful information about Nitro’s financial performance, they should
be considered as supplements to the measures that have been presented in accordance with the AASB’s and IFRS and not as a
replacement for them. Because Non-Statutory Information is not based on AASB’s, IFRS, or any other recognised body of accounting
standards, it does not have prescribed definitions, and the way Nitro calculates these measures may differ from similarly titled
measures used by other companies. Investors should therefore not place undue reliance on Non-Statutory Information.
86
Nitro Annual Report 2019Appendix 1 Corporate Directory
Registered office
Level 4, 246 Bourke Street,
Melbourne, VIC, 3000
Australia
Corporate office:
Suite1500
150 Spear Street
San Francisco, CA 94105
United States of America
Independent Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Australia
Investor relations
Email: InvestorRelations@gonitro.com
Shareholder enquiries
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Australia
Website
https://ir.gonitro.com/Investor-Centre/
Disclaimer
The material contained in this presentation is intended to be general background information on Nitro Software Limited (‘Nitro’) and its activities.
The information is supplied in summary form and is therefore not necessarily complete. It is not intended that it be relied upon as advice to investors or potential
investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular
needs. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified.
No representation or warranty is made as to the accuracy, completeness or reliability of the information.
All amounts are in US dollars unless otherwise indicated.
Unless otherwise noted, financial information in this presentation has been prepared in accordance with the recognition and measurement principles prescribed
in Australian Accounting Standards and other authoritative pronouncements adopted by the Australian Accounting Standards Board, which are consistent with the
International Financial Reporting Standards as issued by the International Accounting Standards Board.
This presentation may contain statements that constitute ‘forward-looking statements’ within the meaning of Section 21E of the US Securities Exchange Act of
1934. Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements appear in a number of places in this
presentation and include statements regarding our intent, belief or current expectations with respect to our business and operations, market conditions, results
of operations and financial condition.
We use words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’, ‘probability’, ‘risk’, ‘aim’, or other
similar words to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and are subject
to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control, and have been made based upon management’s
expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in
accordance with our expectations or that the effect of future developments on us will be those anticipated. Actual results could differ materially from those which
we expect, depending on the outcome of various factors. Factors that may impact on the forward-looking statements made include, but are not limited to, those
described in the section titled ‘Risk factors’ in Nitro’s prospectus dated 21 November 2019 available at https://ir.gonitro.com/. When relying on forward-looking
statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties and events. We are under
no obligation to update any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise, after
the date of this presentation.
This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or in any other jurisdiction.
The Nitro logo, Nitro Productivity Suite™, Nitro Pro™, Nitro Cloud®, and Nitro Analytics™ are trademarks and/or registered trademarks, of Nitro Software, Inc. or
its affiliates in the United States and/or other countries.
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Nitro Annual Report 2019 Nitro Software Limited