Special Report: With positive net operating cash-flows, Xref is now primed for further growth in 2021.

HR-tech platform Xref (ASX:XF1) is benefitting from a wave of momentum as the global economy emerges from COVID-19.

The company’s December quarter trading update this morning showed more strong results across a number of key business metrics.

That included a new record high for quarterly revenue of $2.6m, driven by increased demand for Xref’s market-leading employee reference-checking platform.

As more clients used their credits in the provision of Xref services, the increased activity also flowed through to cash receipts of $2.9m, up 19 per cent from the previous quarter.

The top-line revenue figure was complemented by Xref subsidiary RapidID, a real-time ID verification platform, which reported an increase in quarterly revenues of 58 per cent.

The company added major new clients across Australia, the US and Canada, and Europe.

New client wins included Woolworths, the NSW Department of Education, DHL Express and Norwegian Air.

Along with its new clients, the company said 41 per cent of quarterly sales were generated from customers that have been with the platform since 2017, “demonstrating Xref͌’s ability to retain and grow clients over time”.

Commenting on the surge in activity, Xref attributed the pick-up to the ongoing shift towards remote working solutions in the wake of the pandemic.

“Accordingly̩ organisations are seeking improved ways to perform candidate verification,” Xref said.

And in line with that trend, a key feature of the recent growth is that it’s being driven by inbound marketing leads as companies seek out best-practice HR tech platforms – as opposed to outbound sales efforts.

Cash flow breakthrough

While revenue has been climbing, Xref also used the COVID-19 disruption to focus on tightening up its cost base.

The result is that between June and December 2020, quarterly costs fell by more than 40 per cent.

Combining the company’s 19 per cent increase in cash receipts along with the last instalment of the COVID-19 government subsidy, Xref achieved an operating cash surplus of $127,000 in the December quarter.

For over a year now, Xref’s management team has clearly communicated its commitment to build a business model with sustainable break-even cash flows, and its latest results show the company is following through on its forward guidance.

Investors have reacted, as Xref shares climbed last year from April lows beneath 10c to a December high of almost 40c.

While its strong results mean Xref will no longer be eligible for JobKeeper subsidies, “further growth in sales and revenues are expected to move Xref towards cash́ flow breaḱ-even in H2 FY21”, the company said.

Commenting on the result, Xref CEO Lee-Martin Seymour said the company is now primed for an exciting year ahead in 2021.

“Achieving an operating surplus while growing our sales is achievement enough but adding integrations̩ new client wins and platform development is exceptional,” Seymour said.

“We are now lean and keenly focused on bringing new products to market at a time when the opportunity is expanding̮͊.”

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.