Xref shares rip higher on a booming Q4 cash result
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The company is heading into FY22 with huge operating momentum after cash flows and revenue surged in Q4.
As a new financial year gets underway, investors will be shining a spotlight on Q4 updates to see how companies closed out FY21.
And HR-tech platform Xref (ASX:XF1) caught the market’s attention this morning with an impressive set of quarterly numbers.
The company booked record sales of $6.37 million across a global client base, as it takes advantage of industry tailwinds in the wake of the pandemic and a multi-channel distribution strategy.
But the highlight of the result was a quarterly surge in operating cash flows, as Xref booked cash inflows $5.93 million – a 149% surge against the prior corresponding quarter.
At the same time, cash outflows amounted to just $3.43 million, leaving Xref with a material cash surplus of $2.5m for the quarter.
And adjusted for development costs and interest payments, net cash inflows for the quarter came in at a robust $1.95m.
In response, investors sent Xref shares more than 30% higher in morning trade to a multi-year high of almost 50c.
The strong cash result is a reflection of the company’s FY21 turnaround strategy to drive revenue growth while reigning in its cost-base – a strategy CEO Lee-Martin Seymour clearly communicated to the market over the course of the last 12 months.
Speaking with Stockhead following this morning’s trading update, Seymour said Xref is now positioned for further growth as the global economy emerges from the COVID-19 pandemic.
“I suppose what this result does is it gives the market confidence that yes, we’re a critical platform at a time when world is seeing a mass migration of talent,” he said.
“People think companies that lost staff will just rehire and the jobs market will go back to the way it was – it won’t.”
On a global scale there are hundreds of millions of people that still need to return to the jobs market. In addition, millions more will look to change jobs once restrictions and borders reopen.
“The world’s changed. There’s going to be a lot of talent movement and we’re positioned to facilitate that movement with our network and technology,” Seymour said.
Xref’s core focus is its reference-checking platform, from which the company generates around two-thirds of its annual revenues.
The company now acquires net clients through a range of channels including its Xref Lite self-serve platform, its in-house enterprise sales team, or its global network of more than 30 channel partners.
“Over recent years we have focused on building Xref’s online brand presence, third party ratings and self-serve products,” Seymour said
And that digital focus has been “vital to our growth in 2021 as global employers search online for better ways to verify and measure talent”.
Looking ahead to the second half of this year, Xref will expand its product offering with the release of an exit survey platform across its suite of more than 1,300 clients.
New clients added in the June quarter included NIB Group, Prospa and General Pants Group in Australia; the Ministry of Health in New Zealand; Brighton & Hove Albion FC and Ferrovial Construction in the United Kingdom; and Eurofins Scientific and engineering group Mott Macdonald in the USA.
For Seymour, the strong gains in Xref’s share price are a reflection of the company’s “natural maturity”, having been founded 10 years ago and listed since 2016.
“The institutional investors that back us have been with us for a long time,” he said.
“We’ve spent 10 years ticking those boxes around profit, growth and product development. So the conversations we’re now having are about how we can leverage our operating momentum to find that step-change.”
With a strong bank balance of more than $8m, Seymour said Xref has “the resources to execute on our agenda over the next couple of years”.
“That’s to become the best of breed globally, and highest credited platform providing a critical service in a market with strong tailwinds.”
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.