Special Report: In a tough operating environment, Xref drove Q1 revenue growth of 19 per cent while cutting costs by $1.1m.

Recruitment technology service Xref (ASX:XF1) posted a strong set of quarterly numbers this morning as it pushes towards cashflow break-even in 2020.

The company Q1 sales of $2.47m, which included a steady increase of $500,000 in the last two weeks of March when markets felt the brunt of the impact from the economic fallout of COVID-19.

At the same time, a targeted focus on costs saw the company’s monthly cash-burn rate fall sharply to an average of $600,000. Cash outflows for March were just $530,000 and importantly, Xref said outflows are “expected to drop further during the June quarter”.

The strong results are a by-product of a strategic pivot by the Xref executive team, which acted quickly to streamline the company’s operations and scale up more efficiently.

With a leaner model, the company has been able to drive sales and add new customers while also reducing staff head count by around one third slashing overheads.

Business resilience

That operational efficiency was particularly important in Q1 (a seasonally quiet period on the Australian calendar), as Xref outperformed despite the dual impacts of bushfire season and the coronavirus outbreak.

Amid the uncertainty, the company added a suite of blue chip clients including Fujitsuc, TAFE Australia, and Rest Industry Super.

Xref also booked a number of global client wins including US e-commerce platform Etsy, Douglas Pharmaceuticals in New Zealand and Babylon Health in Canada.

The results illustrate Xref’s value proposition in an environment where many companies have been forced to shutter operations or request government assistance due to the disruption caused by COVID-19.

But as CEO Lee-Martin Seymour points out, that proven application isn’t something that’s happened overnight. Rather, it’s the result of a business that has spent more than 10 years building its platform to serve different sectors and regions.

The company now has a model that can “not only withstand the impact of this market turbulence, but also prove itself as an essential tool for businesses recruiting worldwide in difficult circumstances”, Seymour said.

More than one third of the company’s clients have been deemed “essential services” for the purposes of maintaining operations during the pandemic – businesses on the frontlines of healthcare, education, transport and communications (including the Zoom video conferencing platform).

As a result, Xref has seen demand shoot higher across those channels, as clients rely on its market-leading tech to efficiently conduct employee reference testing and police background checks.

Among other highlights in the quarter, sales from the company’s RapidID division (acquired in July 2019) rose to $140,000 in the March quarter, a q/q increase of almost 350 per cent.

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Xref was also awarded Leader Status on the G2 marketplace – considered the global industry benchmark for price and service comparisons of enterprise technology software platforms.

With the foundation now laid out by its executive team, Xref remains on track for a big second half of the year in 2020. The company has established a resilient and flexible business model, with costs now steadily falling as sales continue to climb.

Xref closed the March quarter with a healthy cash balance of $3.5m and remains debt free. Company CEO Lee-Martin Seymour will be holding an investor conference call on Monday, April 6, to provide more analysis of the latest results.

This story was developed in collaboration with Xref, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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