Xref Limited (ASX:XF1), the human resources technology company, today reported a record third quarter of trading. The Group delivered records in revenue at $3 million, sales at $4 million and cash receipts from sales at $3.5 million for the quarter.
New clients acquired in the quarter contributed 13% of total sales. Xref further built on its success in healthcare globally and entered a new geographic market, South Africa. New clients in Australia included the Australian Prudential Regulation Authority (APRA), Cash Converters and the Children's Cancer Institute. In the United States and Canada, new clients included Granite Solutions Groupe, Baylis Medical and CrossMed Healthcare. In EMEA, Connect Health, Gray Healthcare and, South Africa-based, Mr Price Group were introduced to the platform. Details about these companies can be found in the appendix.
Record Revenue (Credit Usage)
Xref credits used during the quarter totalled $2.7 million and, together with RapidID’s net revenue of $0.3 million, contributed to a record quarterly revenue of $3 million. Xref credit usage grew 23% and RapidID’s net revenue grew 291% on the previous corresponding quarter (Q3 FY20).
* Xref credits are recognised as revenue when used
** RapidID Net Revenue is gross revenue less the cost of 3rd party checks
Xref monitors hiring recovery rates and hiring trends to predict the resilience of the industry and forecast activity. Australian clients usually take six weeks to return to peak credit usage levels following the Christmas and New Year break, due to the impact of the Australia Day holiday at the end of January. However, by week five of 2021, credit usage had already achieved 96% recovery and has continued to grow throughout the remainder of the Quarter. In the Northern Hemisphere, Christmas and New Year holidays are shorter and, over time, the Group expects its geographic expansion will result in less seasonality in overall usage.
Xref credits used via integration partners represented 29% of all credits used during the quarter and grew by 61%, to $0.8 million, when compared to Q3 FY20 and 14% when compared to Q2 FY21.
Strong Sales Growth
COVID-19 has accelerated the global demand for remote working and, as a result, employers' desire to improve governance is increasing. Accordingly, organisations are seeking better ways to perform candidate verification. Xref can now acquire clients via its self-serve platform, its in-house enterprise sales teams or via its 30 channel partners. As a result, Xref’s reliance on outbound, direct sales activities is fast being replaced by inbound, marketing-led demand. During the quarter, Xref witnessed a rise in inbound leads from, in the most part, channel partner integrations, an improved global digital strategy and the network effect generated through the numerous sectors and global regions Xref is used in.
Group sales reached $4 million during the quarter, up 62% on the previous corresponding quarter (Q3 FY20) and 46% when compared to Q2 FY21. New clients accounted for 13% of sales, while 12% came from Xref’s international offices in Europe and North America and 24% from RapidID. Sales (gross revenue) by RapidID grew by 608% when compared to the previous corresponding quarter (Q3 FY20).
Clients who joined Xref prior to FY17 accounted for 30% of sales during Q3 FY21 despite significant sales growth since then, demonstrating Xref’s ability to retain and grow clients over time. Clients that joined within FY21 represented 19% of total sales, demonstrating Xref’s ability to also acquire new, high-value clients.
Cost Control
Since December 2019, Xref has scaled back event costs, travel, development costs, and office leases and has reduced headcount from 98 to 64 people. This has driven a material reduction in cash expenses while continuing to support growth in sales. Operating cash outflows for the March quarter were down 17%, to $3.5 million, from $4.2 million in Q3 FY20. Cash receipts from sales were up by 44% on the previous corresponding quarter. Xref was able to achieve an operating cash flow surplus of $3,000.
* Government COVID-19 subsidy payments finished in early October 2020. Total subsidies were: Q4FY20 ($376k) Q1FY21 ($461k) Q2FY21 ($184k)
Xref forecasts operating cash expenses for Q4 FY21 to be consistent with Q3 FY21 at $3.5 million. Cash on hand at the end of March was $6.24 million.
Product Investment
Although the European and North American markets continue to be adversely impacted by the effects of COVID-19, Xref is preparing for the growth that is anticipated to come from millions of returning workers globally. Xref is working with some of its largest global clients to expand the current platform and support their future requirements. The enhanced platform will dramatically increase the global addressable market through the provision of additional services, allow for an entirely digital new client acquisition process and add a subscription-based ARR to the current credit-based model. During the quarter, Xref capitalised a proportion of internal and external development costs related to these platform features.
Highest Rating Reference Checking Platform - Globally
During the quarter, Xref was again named a leader by independent software review site, G2, appearing as its highest-rated and easiest to use reference checking solution. With a 4.7 star rating on G2, Capterra and Google, Xref is ideally placed to be found and trusted by new clients globally.
Business Update: Investor Call - 6th April
Chief Executive Officer, Lee-Martin Seymour, will host an investor call to discuss Xref’s Q3 FY21 results on Tuesday, 6th April 2021 at 11:00am AEST. The number for Australian investors is 1800 093 431 and for international investors is +61 2 8047 9393. The conference ID is 99387097#.
Management Comments:
Executive director / CEO Lee-Martin Seymour said: “Our annualised revenue run rate, generated by credits and checks used by existing clients, is now over $15 million and as we enter the busiest quarter of the year, we are excited about being very well positioned to achieve our first cashflow break-even quarter by the end of this financial year. In addition to sales growth and cost control, we are now also heavily focused on delivering our newly built and extended verification platform in Q1 FY22, which will help us scale our business even further.”
Brad Rosser / Chairman said: ”The evolution of Xref from a sales-led to a marketing-led business is paying off. In Q3 our marketing efforts generated $2.4 million in new opportunities, with 73% of new customers coming via our website, free template builder tool or online content. Paid advertising accounted for 4% and 23% came from clients who had used Xref Lite and requested an enterprise account. As we prepare to launch into a much larger addressable market, we can further leverage the channels that have proven to perform best for us.”
Appendix 4C item 6 explanatory note
As required by listing rule 4.7C.3, the amount of $318,000 shown at item 6 within this quarter’s 4C is payment of directors fees and salaries to executive directors, plus statutory entitlements. This includes payout of entitlements to T.Griffiths during the quarter.
Investor and media enquiries:
Presentation: xf1.com
Investor Centre: xref.com/en/investor-centre
Twitter: @xf1
Email: investors@xf1.com
Authorised by the Board: Xref Limited (ASX : XF1)
Xref Limited, Suite 13, 13 Hickson Road, Dawes Point, Sydney NSW 2000 Australia
Appendix – New Clients
Australia and New Zealand
APRA - The Australian Prudential Regulation Authority (APRA) is an independent statutory authority that supervises institutions across banking, insurance and superannuation and promotes financial system stability in Australia. APRA employs more than 730 staff across Australia.
Cash Converters - Cash Converters International is a franchised retail network listed on the ASX (CCV). It generates revenues from franchising, store operations, personal finance and vehicle finance. From its head-office in Perth, Western Australia the Company controls 700 stores across 16 countries, helping customers meet their financial needs.
Children's Cancer Institute - Children’s Cancer Institute is the only independent medical research institute in Australia wholly dedicated to curing childhood cancer. It now employs more than 300 researchers, students and operational staff and is recognised as one of the leading international child cancer research institutes.
The United States and Canada
Granite Solutions Groupe - Granite Solutions Groupe provides financial services decision makers with effective people and solutions. It has four offices on three continents, with more than 250 team members deployed across the U.S. at Fortune 500 companies and high-performing Fintech firms.
Baylis Medical - Baylis Medical is a world leader in the conception, development, production and distribution of state-of-the-art medical products that improve the lives of people around the world.
CrossMed Healthcare Staffing Solutions - CrossMed Healthcare provides staffing solutions to nursing and allied health care professionals.
EMEA
Connect Health - Connect Health is a leading community services healthcare provider encompassing mental health, IAPT, psychological interventions, rehabilitation, MSK (musculoskeletal) conditions, chronic pain, orthopaedics, rheumatology and occupational health services, serving over 375k NHS patients pa across 50 NHS CCGs/Trusts and 100+ occupational health physiotherapy services.
Gray Healthcare - Gray Healthcare is the UK’s leading specialist provider of individually tailored community-based support. Its front-line workers include highly skilled support workers and team leaders who use their extensive knowledge and skills to plan and deliver support based on people's needs and desired outcomes.
Mr Price Group - Mr Price Group Limited is a publicly traded retail company based in South Africa. It trades predominantly in South Africa as well as through owned and franchise stores across 13 African markets. It targets a wide range of customers and is well known for fashion-value offering.
