Xref Limited (ASX:XF1), the human resources technology company, today reported credit sales for the first half of the 2018 financial year of $2.6 million, up 69% compared to $1.5 million in the previous corresponding period. During the period the Company also saw cash receipts, representing client payments, rise to $2.8 million, up 118% from $1.3 million during the first half of FY17.
Under Xref’s business model, when clients purchase credits (credit sales) to use the candidate referencing platform, the value of their purchase is recognised as unearned income (unearned income). When they pay for the credits, the cash is recognised as cash receipts (cash receipts). Once the credits are used by the client (usage), Xref recognises the value of them as revenue (recognised revenue).
Highlights of the first half included:
- Acquiring 156 new clients globally, including Snap Inc. (US), Exertis and Sanctuary Group (UK) Tim Hortons (Canada), Bank of Queensland, Manpower, Queensland Treasury and WSP Australia (Australia)
- Maintaining strong repeat business, with client renewals now representing more than 60% of credit sales
- Introducing a dedicated office and team in Oslo, to serve the Nordic region
- Deploying integrations with a number of large-scale partners, including Workday, SnapHire and Equifax
- Securing a partnership with Checkr, a market leading, automated background checking platform - a major vehicle for growth in the United States and Canada
- Adopting a new sales approach that has significantly expedited client adoption, having reduced the sales cycle by 55%
- Launching the Xref Sentiment Engine, a value added service built on AI technology
- Completing a $7.5 million share placement to support growth initiatives
Xref provides the first dedicated, automated solution for the candidate referencing process. It is capitalising on its first-mover opportunity by investing in the development of marketing and sales teams in new, key markets to accelerate international growth. The global addressable market for Xref’s services includes more than 180 million people in North America, 120 million people in Europe, and 15 million people in Australia and New Zealand.
Strong client portfolio and usage growth
Xref continues to double its client base each year. Between January and December 2017, the Company added 284 new clients, up 100% from the previous calendar year - of these clients acquired, 91 were added between October and December 2017.
During H1 FY18, Xref added 156 new clients across Australia, New Zealand, the United Kingdom, Europe, the Middle East, Canada and the United States. Xref now supports more than 700 organisations worldwide, including 36% of the ASX 50.
The average size of an Xref client in Australia is 1,600 employees. The Company’s global expansion presents opportunities to work with larger organisations, such as those in North America and Northern Europe, and has resulted in an increase in average client size of 120% over the last three years.
Oslo office driving Nordic growth
Following high levels of unsolicited demand, Xref opened a dedicated office in Oslo, Norway, to support the Nordic countries (Norway, Denmark, Sweden, Iceland and Finland). The Company recruited a highly experienced team led by general manager, Hans Jørgen Wang, previously a director of one of the world’s leading recruitment specialist agencies, Adecco.
Trials are underway with large government, banking and recruitment organisations, and the office has already reported its first client sales.
Channel expansion drive sales
Xref’s integration partners support more than 20,000 organisations worldwide, and the Company is working closely with partners’ sales and marketing staff to drive sales through joint marketing campaigns in multiple countries. This provides a cost-effective way for the Company to build sales and on-board new clients.
The partnership with San Francisco headquartered Checkr, announced in September 2017, has also opened up an additional revenue stream, with Xref receiving a percentage of earnings from each Checkr background check taken via the Xref platform. This ‘reverse’ integration provides a vehicle for growth in Canada and the United States, enabling the Company to offer a one-stop shop for candidate background checking from the Xref platform.
After balance date, Xref also announced an integration with Lever and launched a public API (application programming interface).
Technology and operational innovation
During the half, Xref introduced a new sales process combining demonstration, proposal, agreement and invoicing, which has significantly reduced the average time taken to secure a new client. The sales cycle time has been reduced by 55%, expediting client adoption and reducing average cost per sale.
Xref continued to improve its platform, increasing scalability, features and multi-language capabilities. The new Sentiment Engine has also been well received by the market. The algorithm - built on Xref’s AI-powered platform - analyses references to provide employers with an easy to understand sentiment score, thus reducing the chance that a reference is misinterpreted and providing a new indicator to detect the possibility of fraud.
Credit sales for H1 FY18 were $2.6 million, up 69% from $1.5 million in the previous corresponding period. Xref’s growth is traditionally higher in the second half of the financial year reflecting the seasonality of the Australian recruitment sector.
Unearned income, which represents unused credits, was $3.2 million at 31 December 2017 compared to $1.3 million at 31 December 2016, demonstrating the increased scale of client renewals. Cash receipts were $2.8 million for H1 FY18, continuing to grow at a rate exceeding 100% year-on-year. The value of credits used during H1 FY18 was $1.8 million, up 93% from H1 FY17.
Expenses were within management expectations as the Company continues to invest to build global growth and scale. The net loss for the half year was $5.1 million.
In August 2017, the Company raised $7.5 million before costs through a placement, which closed substantially oversubscribed, to Australian institutions and sophisticated investors.
The Company received a $1.39 million refundable research and development tax offset from the Australian Taxation Office during H1 FY18.
At 31 December 2017 the Company held $7.7 million cash and had no debt. These funds are supporting Xref’s global growth and expansion through channel partnerships.
Xref maintains a strong growth trajectory. Its fully automated platform offers human resources professionals a vastly more efficient and cost-effective alternative to traditional telephone-based referencing. With high satisfaction and employee engagement, Xref has a significant opportunity to capture a segment of the growing US$14 billion global human resources market.
As Xref’s channel grows and more human resources professionals become familiar with the governance, cost and time benefits offered by its platform, market penetration is expected to accelerate, driving further strong growth.
Investor and media enquiries:
Ashley Rambukwella, FCR
Tel: +61 (0)2 8264 1004 / +61 (0)407 231 282
"The strength of our first half is a result of our heightened focus on three key performance metrics, client acquisition, client adoption and average revenue per account (ARPA). These are the areas that we are confident will shape our success across the remainder of FY18 and beyond. With the people, product and resources we now have in place across the markets we operate in, we are extremely optimistic about our ability to leverage the future growth opportunity ahead of us.”
Lee-Martin Seymour - Executive Director / CEO
"Integrations with Equifax, Workday and SnapHire were deployed during the first half, increasing total live integrations with leading applicant tracking systems and HR technology partners to 11. Our channel strategy continues to drive growth, and the availability of Xref’s public API will further expedite future integrations, allowing complementary HR technology providers to offer clients the best of breed services they wish to include in their HR tech stack. Currently, we have 34 key clients using Xref through integrations. Enabling users to connect via their platform of choice has been a strong contributor to increased client adoption and usage.”
“This was an outstanding first half with strong client growth in Australia, Europe and North America. Xref has a sound business model and is carefully controlling expenses as it expands. The new Nordic office is performing well with several important trials underway. Xref is highly scalable, with a very large global addressable market, and continues to build its technology services platform to increase penetration in key markets. We anticipate a strong second half as the company continues to scale globally.”
Chairman Brad Rosser