Demand for the company’s disruptive reference checking technology has delivered record revenues for the quarter, putting it in a good position to break even this year.

Disruptive human resources tech company, Xref (ASX:XF1), which focuses on automating the candidate reference checking process for employers, has delivered record revenues and sales for the first quarter of 2021.

The company reported that revenues increased by 36 per cent during the period to $3 million, while sales were up by 62 per cent to $4 million. This resulted in cash receipts from sales rising by 46 per cent to $3.5 million, and increasing the company’s cash balance to $6.24 million.

What’s equally important was that cash expense decreased by 17 per cent to $3.5 million during the period, which will go a long way towards improving the bottom line as it strives for breakeven.

New strategic clients and markets

Xref says that new clients acquired during the quarter represented 13 per cent of total sales.

In Australia, newly acquired clients  include some well-known names including Australian Prudential Regulation Authority (APRA), Cash Converters, and the Children’s Cancer Institute.

In North America, healthcare companies such as Baylis Medical and CrossMed Healthcare, and financial Granite Solutions Groupe were also signed up as clients.

Xref has also broken into the South African market during the quarter, where it acquired the publicly listed fashion retail company, Mr. Price Group, as a new client.

Strong demand led to record revenues

The company reported that Xref credits used for the quarter totalled $2.7 million.

Xref operates on a credit-based payment model, where one credit accounts for the references required for each candidate. First-time users of its  platform Xref Lite will be allocated one free credit.

According to its own internal analysis, Australian clients usually take six weeks to return to peak credit usage levels following the Christmas and New Year break. However, by week five of 2021, credit usage had already achieved 96% recovery, implying a strong demand for its services.

As demand for candidate verification increased substantially due to increased remote working, Xref has also built the capability to acquire new clients via its self-serve platform and the 30 channels it partners with.

As a result, reliance on outbound direct sales activities are fast being replaced by inbound marketing-led demand. Speaking exclusively to Stockhead last month, Xref’s CEO Lee Martin Syemour said that as a result of this digital investment, it has managed to reduce staff by 40 per cent, while making 56 per cent more sales.

Xref’s chairman Brad Rossr, echoed the statement, saying that restructuring over the past years has paid off handsomely.

”The evolution of Xref from a sales-led to a marketing-led business is paying off. 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”, he said.

Leaner costs and improved technology

Xref’s move towards leaner costs had started back in December 2019, which has now resulted in headcount being reduced from 98 to 64 people. Other measures had included cutting event, travel, and office leasing costs.

The company is also preparing for growth in North America and Europe, as millions of people are returning to the workforce. It’s now working on enhancing its existing platforms to dramatically increase the global addressable market by adding additional services and features.

The technology is also being improved to allow client acquisition to be entirely done digitally, which will add a subscription-based ARR to the current credit-based model.

Seymour is optimistic about the new improved technology, as the company strives towards break-even later this year.

“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,” Seymour said.

“We are excited about being very well positioned to break-even 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,” he added.

The Xref price has surged by more than 150 per cent over the past year, and the shares are trading hands at 29c today.

This article was developed in collaboration with Xref, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.