XREF (ASX: XF1) – reference and background checking

 

COMPANY SCOREBOARD

Pro PlusProCon PlusCon
 
  • Moving towards subscription based revenue model
  • Management able to provide informative presentation
  • Large unearned revenue and unclear staff overheads
  • Dishonest accounting practice
  • Weak corporate governance

ABOUT COMPANY

Xref (XF1) (https://www.xref.com/) is developing human resources technology that automates the candidate reference process for employers. XF1 does Reference Checking, Background & ID Checks, Reference Templates, Talent Sourcing, Analytics & Insights, and Security and Compliance.

In July 2019, the company acquired RapidID for a total consideration of $1.5m (mix of cash and shares).

In November 2022, the company acquired workplace surveys & employee engagement company Voice Project for $4m including $2m upfront and $2m in script conditional on performance.

CAPITAL STRUCTURE

The company owns $5m loan at 12.66% interest rate, and recorded $11m unearned revenue as at 30 June 2022.

In March 2021, the co-founder, Tim Griffiths, was sacked after he arranged a short-term loan to himself carried out by the CFO, who is the former Xero accounting head. Two founders own 30.85m share each. Tim Griffiths is the CIO of JCS.

Time Griffiths started offloading his shares in April 2022.

BUSINESS

Below is the company’s past five years performance

The company capitalises software development costs (FY23: $6m)

XF1 client retention

The company is moving from pre-paid credit based revenue to subscription revenue. The platform migration will take more than 1 year to complete (i.e. FY25).

SUMMARY

The company’s cash generation is poor and has negative net asset.