Human resources technology company Xref (ASX: XF1) has bucked the dire economic trend resulting from COVID-19 by announcing a successful trading update and “solid sales” for April – amidst an overarching cost-cutting drive in a bid to help the company grapple with a “defining period” in its history, according to Xref chairman Brad Rosser.
Xref reported that it achieved sales of $860,000 in April this year, up 31% on a year-on-year basis with cash receipts rising to $970,000, a 37% increase over April last year. The company also said that its credit usage was “maintained”, ticking up from $620,000 to $640,000 over the past 12 months.
In terms of new clients, Xref said it onboarded several new clients in April including Babcock Australia & New Zealand, Warrigal Care in Australia, US company Aerial Applications, the Norwegian Directorate for Children, Youth and Family Affair in Norway and XPO Logistics in the UK.
Interestingly, Xref presented several trends which the company thinks relate to COVID-19 and changing preferences among its clients. Given Xref’s focus on the so-called “trust economy” including serving clients in the health, government, not-for-profit and education sectors, the COVID-19 pandemic has impacted the type of customer Xref serves and in which sector.
Before COVID-19, 50% of all credit usage originated from clients in what has been designated as “essential services”. With the pandemic in full swing and infection rates climbing, quarantine measures have slashed demand for credit usage for non-essential goods and services down to 27%.
The company noted that while companies in non-essential sectors have reduced their recruitment during periods of lockdown globally, hiring for health, government, support and volunteer workers has grown.
Xref also declared that month-on-month credit sales growth reached 31% with 18% coming from new clients, 22% from its international offices in Europe and North America and 71% were from clients deemed essential services during COVID-19.
“During the COVID-19 pandemic, we have seen our systems scale with bulk uploads for the recruitment of support workers, new clients automatically onboarded, custom questionnaires designed with speed and ease using our Template Builder tool and integrations switched on in a heartbeat to aid workflows,” said Tim Griffiths, executive director of Xref.
“We have done this in multiple languages, across time zones and regional data centres,” he added.
As well as maintaining sales revenues and experiencing an adjustment to which market sectors it servers, Xref admitted that its primary focus for the past five months has been on preserving cash and reaching cash flow break even.
Key initiatives to drive down costs included introducing operational efficiencies, improving onboarding procedures, developing channel integrations, growing multi-regional capability, and self-serve features. More broadly, Xref said it also redirected marketing efforts from sales support to online lead generation.
Moreover, since December last year, Xref scaled back event costs, travel, development spend, office leases and slashed headcount from 98 to 61 people, including the closure of its Norwegian operation last month.
The human resources technology company stated that all its employees, senior management and executives opted to reduce standard working hours to a four-day week until the end of the June quarter, which is forecast to reduce quarterly staff salaries by 20%.
In total, Xref said it managed to reduce monthly cash expenses by 37% in April down to $1 million per month. Given the focus on cost-cutting, the company expects Q4 figures for the current financial year to be $2.2 million, significantly lower than the $4.6 million forecast around six months ago.
“It is the hard decisions that liberate a business and recent months have seen us having to make a number of difficult but critical moves to ensure the stability of the company,” said Xref executive director and chief executive officer Lee-Martin Seymour.
“The management team, board and executive have worked tirelessly to re-invent our cost structure while our operations teams have continued with their unwavering focus on sales and support,” he said.
Shares in Xref were up by more than 8% to $0.105 in morning trade.