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February 23, 2023

Xref Interim Report H1 FY2023: Key acquisition, new products and sales growth

Directors' Report

31 December 2022

The directors present their report, together with the financial statements, for the consolidated entity (referred to hereafter as ‘the Group’) consisting of Xref Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the half-year ended 31 December 2022 (H1 FY23).


The following persons were directors of Xref Limited during the whole of the financial half-year and up to the date of this report unless otherwise stated:

• Thomas Stianos, Non-Executive Chairman

• Lee-Martin Seymour, Executive Director

• Nigel Heap, Non-Executive Director

• Lija Wilson, Non-Executive Director

Principal Activities

During the financial half-year, the principal continuing activities of the Group consisted of software development and service for the HR industry.

Review of Operations

Key operating results for H1 FY23 included:

Revenue up 8% to $9.6 m

NPAT loss of $1.465m

Group Sales up by 4% to $10.2m

Cash Collections from customers up 10% to $11.3m

Cash Balance at 31 December 2022 was $11.4m

Cash Generated from operations $1.1m

Cash Investment into platform development $1m

Acquired Engagement Platform Voice Project for $4m (50% Cash + 50% script, finalised January 2023)

Launched the all-new subscription platform - Xref Enterprise, the new website and the Trust Marketplace

Revenue Growth

Increasing client activity on the platform drove a 15% increase in revenues for Xref’s core referencing products in the first half to $8.1m. RapidID H1 revenue was, however, down 17% to $1.5m due to the decline in demand from cryptocurrency clients. Overall, this resulted in Group revenue growing by 8% to $9.6m.

In H1FY23, Xref launched its new platform offering a subscription-based service. We have begun to migrate clients from pre-paid credits to an annual subscription on this platform generating $0.7m in subscription sales during the second quarter. Full migration of customers is expected to take more than a year to complete. We are particularly focused on this migration as it is expected to steadily increase revenue as well as the predictability of revenue.

Revenue from clients using our channel integrations grew 24% to $3.3m in the half and represented 34% of overall Group revenue.

Revenues from Canada, USA and Europe grew by 36% to $1.42m and represented 15% of overall Group revenue.

RapidID revenue was down 17% compared to H1FY22 largely due to a 73% decline in revenue from the cryptocurrency sector. Revenue is, however, being replaced with new sector clients such as H&R Block, Coles and Etax. Rapid ID is now less dependent on revenues from the cryptocurrency sector which represented only 15% of revenue in H1FY23 compared to 49% in H1FY22.

Operating Results from H12023

First Half Result

The Group result for the financial half-year after providing for income tax was a loss of $1,465,411 (H1 FY22: Loss $36,987).

The result was due to a strategic increase in expenditure in the following key areas:

• Non-cash share based payments of $0.8m, up from $0.4m in H1 FY22 associated with the issue of options to employees to lock in key talent

• $0.2m of additional platform infrastructure costs associated with the implementation of the new Enterprise platform

• Marketing spend grew by 100% to $0.9m to increase lead flow and to launch the new website

• An increase in salaries of $1.1m compared to H1 FY22 which came as a result of an increase in headcount in the areas of sales, marketing and development in addition to salary adjustments such as annual reviews and a record number of promotions

The increase in expenditure was inline with budget and part of Xref’s planned investment for future profitable growth.

New Sales

H1FY23 saw slower growth of new customer sales with sales up 4% on the corresponding period last year. Xref signed a number of significant new customers during the half-year including Department of Communities and Justice (NSW), Visy, Department of thePrime Minister, Department of Home Affairs and Ausgrid in Australia, Gallager group in New Zealand, MullenLowe Group in the UK and Depop and Coast Medical in the US.

Our continual product development and the launch of our subscription service illustrate the scalability and flexibility of our platform. The new subscription model also provides an opportunity for further growth as it is expected to expand our customer base.

Cash Flow

Cash collected from customers during the half was up 10% to $11.3m and expenses were $10.2m resulting in an operating cash flow surplus of $1.1m.

New Platform Launch - Xref Enterprise and The Trust Marketplace

Xref has extended its pre-employment offering with the launch of a full-service, hire-to-retire enterprise SaaS platform for employers called “Xref Enterprise”. The Xref Enterprise platform extends Xref’s addressable market tenfold and will shift Xref’s global business model away from being solely usage-based to subscription, allowing Xref to decouple its revenue recognition from recruiting trends.

In unison with our new platform launch, we have launched the Trust Marketplace that encompasses ID checks from RapidID, the new Graduate Verification Scheme and additional checks such as Criminal, Right to Work and Employment checks via our partner network. The Trust Marketplace brings together a range of Online Trust products in an agnostic API-only Marketplace. All Trust Marketplace products will be available via Xref Recruiter and the new Enterprise platform.

“Recruit, Retain, and Remember your people” - this is how the all-new website introduced the Exit Survey product. The Pulse Survey product will also be added in H2FY23. The site also showcases testimonials and Xref’s impeccable ratings from all around the world and celebrates our history and the people that have driven our success.

Voice Project Acquisition

Xref has established a global leadership position in automated applicant reference checking. Last year, Xref launched its Exit Survey product, and now with the acquisition of Voice Project, it accelerates the launch of our Pulse and Engagement Survey offering to complete the hire-to-retire product portfolio.

The acquisition, completed in January 2023, creates opportunities for cross-selling by giving Voice Project’s 900 plus clients access to Xref’s complementary services and offering Voice Project’s services to Xref’s 1,300 enterprise clients and 15,000 users.

Furthermore, the Voice Project acquisition bootstraps our launch into Pulse and Engagement and will add $4 million in revenue in a full year.

Most importantly, the acquisition accelerates Xref’s product strategy and growth potential. Xref will integrate the Voice Project portal, containing its comprehensive suite of market-leading surveys, into Xref’s platform, so employers will be able to view every single piece of information about a candidate, employee, or ex-employee in one place, and identify actionable insights.

Product Development

Xref will continue to invest in growth through data-driven digital marketing with the self-serve initiative continuing to bring inbound leads. Through digital marketing, product innovation and leading customer service, Xref aims to be a thought-leader and trusted partner to talent acquisition and HR teams globally. The Company plans to invest a further $1.0m in product development in the second half.


As Xref continues to invest in product development and improving our offering, much of this work is aimed at generating profitable growth well beyond the current financial year. In the meantime, we aim to fund these developments from operating cash flow.

During the first half we invested $1m in product development. We intend to invest a further $1m in the second half to fill out the features of the new subscription platform. Many existing clients have indicated their preparedness to migrate to the new platform once these features are available.

There are also significant revenue opportunities in FY2024 and beyond resulting from the new platform. The product development investments scheduled in H2FY23 are necessary to fully capture this opportunity. Again, the cost of these investments will be funded from operating cash flow.

As part of increasing the scale of the business, we are focused on the following priorities in the year ahead:

Product Innovation. Completing the development of the newly launched enterprise platform with the addition of Pulse Surveys and self-service, completing the build of Trust Marketplace API’s as well as integrating the newly acquired Voice Project into Xref’s platform

• Internal processes, incentives and reporting. These need to be updated as a result of the changing business model from credit-based sales to subscriptions and the newly acquired Voice Project business

Marketing. Executing go-to-market strategies to align with the newly launched Enterprise Platform and to cross sell Voice Project services. This includes new brand assets such as the new explainer videos, online help guides

We are confident of continued revenue growth for the remainder of the financial year as well as positive operating cash flow. We expect this will be achieved despite the disruption from migrating to the new operating model and subscription platform and the integration ofVoice Project. Notwithstanding the planned ongoing investment in product development during H2 FY23, with the second half of the financial year traditionally being Xref’s strongest, the business forecasts a return to a small NPAT profit in the second half.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors’ report. This report is made in accordance with a resolution of directors, pursuant to section 306 (3) (a) of the Corporations Act 2001.

On behalf of the Board of Directors

Lee-Martin Seymour, CEO, Founder, Director

23 February 2023

Full report including Financial Statements

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