Xref Ltd (ASX: XF1) shares could see a big movement today with the HR technology company reporting record results in Q1 FY20. Here’s what you need to know.
About Xref
Xref is a Sydney-based human resources technology company that allows prospective employers to seamlessly and professionally conduct pre-employment reference checks on suitable candidates through an online candidate-referencing system.
Q1 Results
Xref released results this morning for Q1 and said the company is positioned to deliver record performance in FY20.
Quarterly credit usage hit a record high of $2.24 million during the quarter, and cash receipts also reached a record of $3.53 million as a result of record sales achieved in Q4 FY19.
Credit sales fell in Q1 although they were still 23% higher than in Q1 FY19. Xref tends to see lower sales in Q1 because of seasonal fluctuations in the Australian recruitment industry.
Xref reported that the 103 new clients acquired during Q1 FY19 are all still active and revenue from these customers has grown by 188% over the year. This is positive news that suggests Xref is able to increase revenue from existing customers over time, which should lead to higher organic growth.
It wasn’t all good news though. Xref’s net cash outflow increased from $1.519 million in Q4 FY19 to $1.946 million in Q1. With $5.245 million left in the bank, it’s starting to look as though a capital raise in FY20 could be likely.
Xref CEO Lee-Martin Seymour said accelerated growth is now within the grasp of the company.
“We have always been focused on continuing to add value to the service we offer clients, and we have done that in spades during Q1 FY20 with the introduction of multiple new products and features, including RapidID, Template Builder, People Search, new integrations, and, most recently, Xref Lite,” he said.
Time To Buy?
Xref looks positioned for strong growth although the cash burn is a concerning factor. Given that net cash outflows have increased, I’ll be keeping Xref on my watchlist instead of in my portfolio until there’s a clear sign that the company can become cashflow positive.
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Disclosure: At the time of writing, Max does not have a financial interest in any of the companies mentioned.
