Global HR tech platform Xref (ASX:XF1) today announced its business update for the financial year 2023 as well as its outlook for the coming year. All results in this release are unaudited. The Xref FY2023 Annual Report will be released in late August.
FY23 was a year of retention and transformation while Xref endured tough global economic conditions. During the year Xref launched numerous revenue-focused platforms, products and features, transitioned successfully to a SaaS business model, commenced marketing via a new website, acquired Voice Project, and won over 160 new enterprise clients.
Xref increased investment into product innovation, employees, internal system efficiencies and strategies for long-term market awareness in readiness for the next stage of its growth when the market recovers. Xref also continued to display strong levels of staff engagement and client satisfaction and has demonstrated the ability to innovate whilst balancing costs and short term cash flow in a demanding economic climate.
During the year Xref extended its pre-employment offering with the launch of a full-service, hire-to-retire enterprise SaaS platform for employers. Xref Enterprise includes References, Pulse Surveys and Exit Surveys. As Xref expands from servicing just recruitment it is extending its total addressable market tenfold and is shifting Xref’s global business model away from being solely usage-based to subscription. This will allow Xref to decouple its revenue recognition from recruiting trends. This platform will be further supported in FY24 by additional checks offered by Trust Marketplace and Advanced Engagement tools offered by Xref Engage.
Group sales of $21.3m were up 2.6% and revenue of $20.6m was up 11% on FY22. The acquisition of Voice Project added $1.9m to the sales result since acquisition in January 2023.
During the year Xref focused on transitioning clients to the new Enterprise Platform under SaaS subscription agreements. As a result, Annual Recurring Revenue (ARR) grew 430% during the year to $5.6m at June 2023. This included both migrated clients from Xref Recruiter and newly won Enterprise Platform clients.
Sales from Xref and Trust Marketplace were, however, down 5% and 14% respectively when compared to FY22 as a result of the difficult global economic environment and its impact on hiring.
Total expenses grew 27% due to strategic increases in expenditure in the following key areas:
The increase in expenditure was in line with the budget and was part of Xref’s planned investment to support future profitable growth.
A small operating cash surplus was achieved for the full year. The second half is, however, expected to record an NPAT loss reflecting slower credit usage and resultant revenue recognition during the period. Audited results will be released via the Annual Report in late August.
Xref now has over 16,000 active users across its three platforms, up 8% when compared to FY22. These users are part of 2,619 active accounts which grew 7% in FY23. During the year 1,000 users across 160 accounts joined the new Xref Enterprise Platform, launched in October 2022. 47 key accounts migrated from Xref Recruiter to Enterprise during the financial year in order to access the new products and features and 94% of all newly won clients chose Xref Enterprise over Xref Recruiter.
As a result of the uncertainty in the economy, Australian job vacancies decreased by -10% during FY23 when compared to FY22. In contrast, vacancies in FY22 grew 29% when compared to FY21 as a result of the recovery following the pandemic. Despite the weaker market conditions the average references taken by Xref clients grew 5% and the number of net new clients grew 9% when compared to FY22.
The adoption of our new survey products, Pulse and Exit, was encouraging with over 3,000 Exit Surveys launched during the year as well as 50 new Pulse Surveys, in the 4 weeks since its launch in May 2023. Clients have demonstrated adoption across all products within the Enterprise Platform and are now building insights across the entire hire-to-retire journey by using Reference, Pulse and Exit simultaneously.
It is expected that as a result of the launch of Pulse Surveys, Xref Engage and the coming addition of Trust Marketplace Checks in Q1FY24, the growth of new and existing clients moving onto the new platform will increase and accelerate Xref’s ARR growth. Pleasingly, North America now represents 18% of the Group's active users, 21% of references requested and 34% of the Pulse Surveys already launched demonstrating the demand in this important region for future growth.
Xref Engage sent 180,000 surveys during the full year on behalf of 214 existing and 58 new clients. The sales and marketing teams are now executing a go-to-market strategy to introduce the newly launched Xref Engage to all Xref’s global users.
Checks taken via Trust Marketplace dropped by 21% during the financial year due largely to the decline in the cryptocurrency sector. This revenue is, however, being replaced with new sector clients such as H&R Block, Coles and Etax. Trust Marketplace is now less dependent on revenues from the cryptocurrency sector which only represented 15% of revenue in FY23 compared to 49% in FY22. Trust Marketplace is currently being integrated into Xref Enterprise, which together with the addition of checks from newly signed partners such as Certn, will further aid the growth of this business in FY24.
Xref has invested considerable time and resources into product development during the year and has successfully delivered key milestones in its product strategy. These have included the launch of:
The Xref Enterprise, Trust Marketplace and Xref Engage platforms have provided the ability to build and launch integrated products such as Exit and Pulse Surveys and the ability to integrate all three with the goal of creating a best-in-class, hire-to-retire, feedback platform. As a result of the development completed during the year, Xref extended its codebase by 64% and was able to retain overall platform uptime during the year of 99.999%.
As Xref progresses development during FY24 it will focus on the features offered in those platforms as well as deeper integrations between systems and with channel partners. Detail of Xref’s product innovation history can be found on the recently released investor snapshot.
During FY23 Xref focused on adding value to its clients, employees, partners and shareholders through planned product innovation and development and a laser focus on costs as a pathway to profitable growth.
Xref now has 16,000 users across its 3 platforms and 50% of clients have been with Xref for more than 3 years with a further 15% joining in FY23, demonstrating Xref’s global credibility and market standing. Xref was further endorsed during the year by multiple awards from G2, including Leader and Best Usability and Xref was ranked in the Australian Financial Review Top 50 Fast Global list. Xref also continues to rank highly on customer ratings on G2, Getapp, and Google. In June 2023, Xref conducted a customer survey which resulted in a 92% satisfaction score as well as an overall Net Promoter Score (NPS) of +35.
Xref now has 31 channel partners with direct integrations into their applicant tracking systems (ATS) such as Bullhorn, Oracle or Workday; 24% of active customers consume Xref via integration with an ATS. In FY23 37% of reference requests were made via an integration and represented 30% of revenue from reference checking. Clients using Xref via an integration grew 22% in FY23 to 504 despite overall reference requests remaining flat for the year. This demonstrates that despite recruitment being slower, clients and channel partners continue to see the value in integrating Xref into their business-critical systems.
There are now 114 employees in the Group, this has grown through acquisition and organically during the year without the use of external recruiters and relying purely on Xref’s strong employer brand. Overall employee retention remained at 85% and in May 2023 a company-wide employee engagement survey returned an overall engagement score of 82%. In order to further drive engagement, Xref has launched meaningful employee initiatives such as a revised ESOP, better internal processes and policies including our new industry-leading parental leave policy, targeted training budgets, and multiple health and well-being initiatives. During the year Xref also announced its gender and equality statistics and details of these can be seen in the recently released investor snapshot.
Xref turned cash flow positive in FY21 and continued to generate free cash flow during FY22, which provided a strong cash position as we entered FY23. Whilst Xref continued to endure tough market conditions it invested in product innovation and transitioned to a traditional SaaS-based subscription model. In doing so, Xref has considerably increased its addressable market, grown ARR 430% and has positioned the business for further growth once the market recovers. During its transition, Xref has grown revenues, continued to attract new clients and staff and has taken time to measure and improve employee engagement and client satisfaction.
During FY24 Xref will continue to focus on executing its product innovation strategy, delighting its customers and rewarding and retaining its employees. By leveraging its current clients it will increase share of wallet by offering its extended services and continue to attract new clients to increase revenue growth.
At the same time, focusing on cost efficiencies and maximising recurring revenue to build a pathway to sustainable and growing profit. Xref will measure its progress against these strategic priorities by reporting on the following opportunities:
To partially offset this expense growth, Xref will focus on other cost efficiencies including;
Founder and Chief Executive Officer, Lee-Martin Seymour will host a virtual investor meeting to provide a business update on Wednesday, 19th July at 11:00 am AEDT.
Zoom Meeting Details: Meeting ID: 995 6111 9750
Passcode: 567418
If you wish to dial in go to: https://xref.zoom.us/u/aeCT2Lx1oZ
Xref CEO and Founder, Lee-Martin Seymour, said
“It has been difficult to compare FY23, a year of economic disruption, to that of pandemic recovery in FY22. That being said, we have delivered changes this year that allow us to sell into a much larger addressable market. The opportunity to increase revenues with the clients we already have, that love us, is an exciting prospect. We set out in FY23 to be bold and invest in long-term growth with available cash, whilst balancing expenses in a difficult economic market. We have continued to innovate and are changing habits one client at a time. We continue to do what we said we would do every single day, we know the market, are leading the narrative and are confident that as the market recovers our scale and profitability will reward us.”
This announcement has been approved by the Board of Directors of Xref Limited.
To learn more or ask questions, please visit
Website: xref.com
Investor Centre and Presentation: xf1.com
Twitter: @xf1
Xref was first to market, became best in class and is now rated #1 globally for automated reference checking. Since its establishment, Xref has extended its offering to respond to the changing world of work. Xref’s new Investor Snapshot provides an overview of our past successes, our current position and explores how the future of talent will evolve with Xref.
Headed up by Founder and CEO Lee-Martin Seymour, Xref supports over 16,000 active users from 2,600 entities across over 1,300 organisations servicing large global enterprises and sectors within the trust economy such as Healthcare, Aged Care, Not For Profit, Government and Education.
Xref allows employers to verify a candidate’s references and ID, together with other key checking services, bringing all these onto one platform, via a partner marketplace. Xref’s growth trajectory continues as employers want to safeguard their company from breaches in fraud, privacy and discrimination. The marketing-led, data-driven organisation ranks #1 in reference checking globally.
With talent acquisition becoming remote on a more permanent basis, business-critical platforms such as Xref are in high demand. Reference surveys, identity verification, and other pre and post-employment checks are crucial to give organisations confidence in their hiring and retention strategies and Xref is meeting that demand with its continuing product development roadmap.
The evolution of Xref’s business reflects the leadership team’s unwavering focus towards an enhanced platform that increases Xref’s global addressable market. Xref will continue to meet the changing needs of recruitment and HR teams globally.
