HR tech platform Xref gets set for lift-off after laying the groundwork for global expansion
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Special Report: HR tech platform Xref is tracking towards cash flow breakeven as it takes advantage of international growth opportunities.
For recruitment technology business Xref (ASX: XF1), the last three years has been about building a scalable platform for global growth.
And with an international database of almost 7,000 active users and a suite of multinational customers, 2020 is shaping up as an inflection point in the company’s growth cycle.
Xref’s origins trace back to 2010 when it was founded by recruitment professional Lee-Martin Seymour and IT specialist Tim Griffiths who had pinpointed inefficiencies in the recruitment market.
Their aim was to speed up the recruitment process by providing a secure, automated solution around employee reference checks, ID verification and performance feedback.
Despite being almost 10 years old, Xref only listed on the ASX in early 2016. And speaking with Stockhead, Seymour said the move coincided with the company’s first steps towards a global application.
“What we found is that by 2016, our product was increasingly being used in global markets — the US, UK and across Europe,” Seymour said.
“And the reason for that is often when a high-skilled worker provides two referees — you might have one in New York and the other based in London — we still wanted to complete the process within a quick time-frame.”
“So we had a given amount of leads and as a business we needed to respond to that. But at the time our capital base didn’t support a global rollout, which is why we moved to the public markets. We were a private profitable business before we listed and we want to move back to profitability as soon as possible.”
At that point the company had 25 staff with around 1,000 active users on its platform. Three and a half years later, it employs more than 90 staff with an active customer base of almost 7,000 professionals.
Its core group of enterprise clients includes companies such as Qantas, KPMG and Snapchat.
In line with that expansion, the company has built out its product offering the strategic acquisition of RapidID, which added a real-time ID verification capability along with anti-fraud protection.
The key takeaway is that while the company initially found avenues for exponential growth in global markets, it now has the product range and network partners to convert those pathways into actual sales.
In line with its client acquisition strategy, Xref has also adopted a systematic approach towards product sales.
The company runs a credit-based business model, where clients purchase credits up front — effectively an option to use the platform — in return for a cash payment.
When reference checks are requested, the credits are consumed — at which point Xref books recognised revenue on its income statement.
In the 2019 financial year, Xref’s gross sales credits rose 42 per cent to a record high of $10.1m, while overall credit usage rose to $8m – an annual increase of 66 per cent.
“For us, both of those growth metrics are the best way we can illustrate our history and how the two factors — credit sales and credit usage — are related,” Seymour told Stockhead.
“Ultimately, what it tells you is that clients consistently use the credits we sell.”
And the trend shows that Xref is now well-positioned for its next phase of growth.
Capital has been deployed to establish a framework that can comfortably handle a global client base, which means customer numbers are now growing at a lower rate of per-unit cost per acquisition.
It means the company is now targeting cash flow breakeven. And it’s a reason why some blue-chip investors — including the $160 billion Australian Superfund — have taken sizeable stakes in the company.
Ultimately, the opportunities for increased efficiency in recruitment means the sector is right for disruption.
And after almost 10 years of building its position in the global marketplace, Xref is well-placed to drive cashflow and profitability.