Nixxy, Inc. (NIXX) Q1 2022 Earnings Report, Transcript and Summary

Thank you, operator. Good afternoon, welcome to Recruiter.com's First Quarter Earnings Conference Call. [Operator Instructions] On the call today are Recruiter.com's Chairman and CEO, Evan Sohn; CFO, Judy Krandel; and President and COO, Miles Jennings. The company would like to remind everyone that various remarks about future expectations, plans and prospects made on today's call constitute forward-looking statement for the purposes of Safe Harbor provisions under this Private Securities Litigation Reform Act of 1995. Recruiter.com cautions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated including risks described in the company's filings with the SEC. Any forward-looking statements made on this conference call speak only as of today's date Monday, May 16, 2022. Recruiter.com does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A replay of today's conference call will be available through the Investor Relations section of Recruiter.com's website at investors.recruiter.com. With that, I'd like to turn the call over to Recruiter.com's Chairman and CEO, Evan Sohn for opening comments. Please go ahead.

Thank you, [Kiran], and welcome to everyone on the call today. I will start the call today with a few high level comments and then hand it off to Judy to review the financials. I will then go into some more details on our core business, and Miles will provide additional color around our clients. After that we will open it up to any questions the audience may have. As we reported, we more than doubled our total revenue year-over-year which was driven by a 339% increase in our Recruiters on Demand segment and introduction of a recruiting software product. We also reported a 39% quarter-over-quarter improvement in adjusted EBITDA by controlling costs and improving margins. We're equally excited to report that our operating income increased 200% and we are projected to hit monthly EBITDA breakeven in the fourth quarter of this year. I am also pleased to announce that we signed a very exciting partnership with the fastest HR tech unicorn in history, which I will elaborate on later in this call. We're very excited with our growth trajectory and the enormous growth opportunity ahead of us. Judy will now go through the numbers and I will go into some more specifics on how we're seeing the business develop. Judy, please go ahead.

Thanks, Evan. Revenue for the first quarter of 2022 totaled $6.9 million, a 170% increase compared to $3.2 million in revenue in the first quarter of 2021. This growth was primarily driven by a significant changes in the revenue mix as a company's focus shifted to higher margin faster growing business segments. Gross profit for the first quarter of 2022 was $2.7 million and approximate 200% increase compared to $0.9 million gross profit in the comparable period of 2021. The gross profit margin expanded to 39.2% compared to 28.7% a year ago. This increase reflects the shift in the sales mix to faster growing and higher margin business segments. Total operating expenses were $6.8 million, compared to $2.8 million for the first quarter of 2021, an increase of 141%. The increase was primarily due to higher sales and marketing, product development and general and administrative expense, as well as higher amortization of intangibles of $1 million compared to $159,000 in the year ago period. Recruiter.com had a net loss of $4.2 million in the first quarter of 2022, compared to a net loss of $6.3 million during the corresponding three-month period in 2021. The net loss in the first quarter of 2022 includes non-cash items of depreciation and amortization expense of $1 million, bad debt expense of $19,000 and equity-based compensation expense of $1.7 million. Regarding our cash management and cash plan, on March 31, 2022, Recruiter.com had $0.9 million in cash, cash equivalents and marketable securities, and accounts receivable of $4.8 million. It should be noted that 42% of our accounts receivable is from our top 10 clients, including such Fortune 1000 companies as ADP, Unilever, Moody's and Zoom, as well as California Corrections, top gaming company Scopely, TeleSign and First Agency. We announced earlier this month a $3 million factoring facility with Bay View Funding a subsidiary of Heritage Bank. As you see from our presentation, our Q1 cash burn was approximately $400,000 per month. This is a 42% improvement from Q4 of 2021. Our cash on hand as of tomorrow should be approximately $1.4 million, with an additional $1.4 million is expected shortly from factoring. Once that hits, we would have cash of approximately $2.8 million. As we continue improving our cash burn, this should more than cover our working capital needs through the end of the year. And of course, we have an additional goal to improve cash collections and we hope to reduce day sales outstanding from 79 to 42 days by year end. There were 14,784,000 common shares outstanding at quarter-end and management and insiders own approximately 14% of these outstanding shares. Now Evan will wrap up with some additional guidance. But for Q2 we are guiding to a base case of $7.2 million in revenue, or an increase of 5% from Q1 of 2022. Additionally, we expect a sequentially improved adjusted EBITDA loss over Q1 of 2022. And with that, I will turn it back over to Evan. Thank you.

Thank you, Judy. Now let's get into some more details on the direction of the business and the growth we are experiencing. We are on the cusp of major transformations within the talent acquisition industry as the tightness of the labor market, the job hopper economy where employees are comfortable leaving a company every 12 to 18 months, the evolution from work from anywhere, are forcing companies of all sizes to rethink their talent acquisition and retention priorities and budgets. The old ways of either paying a headhunter a 30% of the salary or finding the talent yourself has forever been changed. Paying a headhunter fee of 30% made sense when the employee was planning to stay with the company for five years, but doesn't work for six to 18 months. Finding your own talent made sense when you're hiring one person every few months, but does it work when you have to hire someone every four to five weeks? Recruiter.com answers this transformation with two core offerings, our on-demand recruiter services, a freelance marketplace matching independent recruiters across all industry sectors and experience levels with customer needs and our software platform, artificial intelligence software to proactively engage passive candidates and career communities to attract active candidates. Our on-demand recruiter services revenues introduced in 2020 now accounts for 61% of our overall revenue, and has grown year-over-year by 339%. Despite the seasonality reported earlier in the year, this segment is meeting our monthly expectations in terms of growth. This highly scalable segment serving top named clients as mentioned earlier capitalizes on the demand for recruiters as well as the gig economy. There is a link in the slide if you wish to hear from Jennifer Goodfriend, our Head of Enterprise Sales on how on-demand recruiter works. Our software and career community platform revenues now account for 15% of our overall revenue and have more than tripled year-over-year. This highly scalable segment capitalizes on the challenges businesses of all sizes space in finding and engaging qualified candidates. There is a link in the slide if you wish to hear from Xuan Smith, our CTO on how our software works. While this segment showed a loss for the quarter, the costs include all R&D expenses, with a new Head of Finance onboard we'll now be shifting to capitalize on these expenses going forward. We are very excited to report that we improved our adjusted EBITDA loss by approximately 39% sequentially from Q4. Additionally, our overall Q1 cash burn improved by approximately 41% sequentially from Q4, reducing our cash loss from $2.1 million in Q4 to approximately $1.2 million in Q1 as we march towards our goal of achieving monthly positive cash EBITDA. This is a direct result of our continued shift to higher quality and margin revenues and in taking advantage of the cost synergies emanating from the four acquisitions that we made in 2021. Now Miles will go into more specifics around our client base and how that is evolving. Miles?

Thanks so much Evan. It really was an important quarter for Recruiter.com. We grew our client roster to over 641 unique customers. We now have eight marquee clients spending in excess of $125,000 monthly with Recruiter.com across multiple recruiting solutions in over 550 businesses self-serving on our platform, and spending about $400 per month on average. Of our top 100 clients, 27% are now subscribing to more than one service, which is a great trend to see, such as subscribing to our recruiting software, plus our on-demand recruiting services. Our sales strategy of land and expand with clients into multiple services just continues to play out really nicely. We've had some great client wins that we want to highlight on this call. The first is the international expansion of a major consumer beverage company that is now leveraging Latin American recruiters from Recruiter.com to search for talent, both internationally and in the U.S. The second is a new client in the health technology sector and a Fortune 500 company that signed up for both on-demand recruiters and software services. We match them with qualified and experienced freelance healthcare recruiters in under 48 hours, and this client continues to expand. Our client strategy is working and the quality of our client engagements is continuing to improve. Most importantly, employers are recognizing the differentiated value that recruiter.com brings to the table. The results speak for themselves. Now back to Evan.

Thanks Miles. I often refer to Recruiter.com as a tech startup inside of a NASDAQ company. We are on a three-year mission. Last year our goal was to align our offering to our audience as a destination site for all things recruiting. We demonstrated our ability to scale our revenue, acquire businesses, invest in product development and create a repeatable sales process. We started in 2021 with the objective of reaching $20 million in revenue up-listing to NASDAQ and having a path towards profitability. In 2022, our objective is very clear and we know this is extremely important to our investors. This clear goal is to manage our growth towards achieving monthly positive EBITDA. I'm pleased to report that we are on track to achieve this objective as we reduced our operating loss by over 40% since Q4 of 2021, to improve margins and realizing operating efficiencies. My role as CEO began in June of 2020 at the height of the pandemic. We knew then that the pandemic would forever change the face of the job market. Let's look at the next evolution. As we predicted in this past December, the work from anywhere phenomenon that was fueled by the pandemic has created the job hopper economy and it's become easier than ever to find and apply for a job. Work life balance has become a top priority for many employees who know - who have no reservation to leave one job for another that provides a better working environment and all the cost of increased salaries. This has fueled a number of companies to outsource their tech workers to countries outside the U.S. not only to save money, but also because the tech talent is far less available so, what happens next. Next comes hire from anywhere, this next era is accelerated by the talent shortage, especially for but not limited to tech talent, and will continue to be fueled by the possible recession. As more and more companies shift their workforce to lower salary talent outside the U.S. international capabilities will be in focus. To prove this is where the proverbial hockey puck is going, there are many recent unicorns or billion dollar valuations in the hire from anywhere platforms. These companies are funded by both venture capital and private equity. They allow businesses to pay contractors and employees in more than 150 countries without the need to establish formal offices in these locations. They make it easier to hire from anywhere in the world. But one company achieved this unicorn status faster than any other unicorn in history. We announced this morning that Recruiter.com is partnering with Oyster. Oyster raised $150 million this past April added over $1 billion valuation making Oyster the world's fastest growing global employment platform and a unicorn less than two years after launch. Oyster is the global employment payment platform to Recruiter.com's global talent platform. We allow businesses to recruit the world's talent and Oyster allows businesses to hire them. Simply put, we find the talent and they pay the talent. It is a great partnership and opportunity for both companies. The world of talent has forever been changed by the pandemic. The old ways of either paying a headhunter 30% of the salary or finding the talent yourself has forever been changed. The job hopper economy where employees are comfortable switching jobs faster than ever has created great opportunities for us. Recruiter.com is reinventing how companies find talent in the post pandemic world. I will wrap up with a few words around our guidance and tell -- and how we are continuing to tells us exciting story. We're keenly managing our growth with a clear focus on profitability as both are key to winning. As Judy mentioned for Q2, we are guiding to a base case of $7.2 million in revenue or an increase of 5% from Q1, 2022. We expect a sequential improved EBITDA loss from Q1, 2022. For the full year 2022, we're providing guidance of revenue in excess of $30 million and expect to reach profitable adjusted monthly EBITDA by the fourth quarter of this year. I'd like to end by reiterating how truly excited we are with the growth trajectory and momentum we are experiencing, and how we'll be sharing this exciting story. As you can see on this slide, we have mapped out a busy next couple of months of non-deal road-shows with our Investor Relations partners and I'll be meeting with investors in just about every major financial center across the U.S., as well as presenting at the upcoming LD Micro Conference in June. Feel free to contact us if you're interested in meeting. Thank you again for your time today and your interest in Recruiter.com. Now let's open it up to any questions. Operator?

Thank you, Evan. [Operator Instructions] I see three questions so far. We'll start with the first one. Talking has been permitted, sir please go ahead and ask your question.

Hi, this is Alan Clay, is this for me?

Yes, please go ahead.

Okay, great. I have a few questions. The system -- I hope you're going to let me do a few. I wanted to start off with -- you talk about the faster growing segments or higher margin, software did very well and increased. If I guess one related to software -- how do you think about this, do you believe that that can continue to have a sequential momentum through the year and what will be the driver of that? And then secondly on the Recruiter on Demand segment do you view that as also as a as a segment that has above average margin? And how do you think about the outlook there? Thank you.

Thanks, Alan, for your question. And let's double click on a few of those things. So first off, I think one of the -- one of our key core assets or secret sauce if you will, is what Miles mentioned of land and expand. We signed a client on for one of our services and through our client success team, our enterprise client success team we're able to then stick if you will additional services. So you can have a client that comes in on our career community. And we're upgrading them to our Recruiters on Demand and our software. We have a client that comes in leveraging our software and we're able to stick on to them additional Recruiters on Demand. So we're able to see this lifetime sort of value of a client and we're seeing that unfold. I think Miles mentioned that 27% of our top 100 clients use multiple services. And we're really seeing that on a recurring basis. So that's probably the best way to sort of answer those questions. The two are related to each other. Our sales team really tries to get multiple services sticking to different clients. So we are seeing growth across our clients, we do see occasional churn of clients as well whether it's on-demand the project being over or scaling up and scaling down, which is one of the benefits of an on-demand platform.

And can you hear me now?

Yes.

Okay. For Oyster, can you -- will this be -- I'm a little confused on this. Will this have an opportunity to increase your sales or is this more than your current customers? You offer more to through the partnership could you explain that thing?

Yes, so it's a great question. So if you think about it, Oyster is a very well-funded company. We just announced, you know, they raised $150 million, $1 billion plus valuation. So companies are coming to Oyster because they want to hire employees outside the U.S. They're mostly U.S. companies looking to expand outside the U.S. But if you said to them, hey, look we at maximum are looking to open up an office -- a back office financial people over in Argentina, they would say, great, we can easily handle that, because we're set up in Argentina. But if you said to them, do you actually have the people that we could hire? They would say no, we're not, we don't find the talent for you go use our partner Recruited.com. And so they really are a lead generator for us. That's why the two of us really have our lanes, we find the talent and they pay for the talent. Does that answer your question Alan?

I'm sorry, I'm not - no, I actually don't understand that. Who is driving more clients? I mean, will your clients go up -- will your revenues go up as a result of this partnership, because you'll be getting more business or?

We'll get more business yes.

I'm not sure I understood?

Yes, net-net -- Oyster for us as a lead generator, they will be sending us clients that want to use our services, because they have clients that need to find talent. And so for us, it is a lead generation partnership for us.

Okay, thank you. And then just the factoring arrangement, does that have the impact on the -- that doesn't impact the revenues, does it or -- it's more that you get to collect the money upfront quicker? So it helps you with working liquidity, working capital management is that the way to think about it?

Yes, that's correct. You know, there -- the challenge of working with companies like we mentioned before, ADP, Unilever, and others, is that and certainly the projects that we engage with them, where, as you saw, we had eight enterprise clients spending more than $125,000 a month with us, those tend to have larger receivables, and partnering and leveraging a factoring facility like Bay View from Heritage Capital is a good source of non-dilutive capital.

Great. And then when you talk about that of your top 100 customers 27% subscribe to one or more of your services. Could you give us perspective of what that was from some other time periods so we can?

Yes I was thinking about that.

We can get a feel for how?

I was thinking about that, as you asked that question. We probably could do that in our call in our subsequent call, because I think we had that data at the last call of who's using multiple services. So we'll pull that out for you as a subsequent call.

Okay. So the way to finally I guess -- so as the business grows, is a way to think of it probably software is maybe the fastest growing segment, followed by Recruiter on Demand. And as we go through the year, and again, for Recruiter on Demand, do we think that the gross margins there how they compare to the company's current average? Thank you.

Miles, you want to address that?

Yes, sure. Thanks, Alan. Yes I would say that software has been our fastest growing segment. We introduced our software through an acquisition, in basically Q2 of 2021. And it's really become a central aspect of our total recruiting solution. We really, you know, oftentimes now pair it with our Recruiters on Demand service and it also should be said that we eat our own dog food too. We use our own software internally, to source recruiters for Recruiter on Demand, for example, because we have to do it in a very efficient kind of fast turnover method to find these recruiters for our customers. So yes, I would say our software has very good margins, we actually have two segments that you'll see in our in our product lines, the career communities or marketplace revenue, and our software lines. We're recording those both as 100% gross margin, so a very scalable business. And then the on-demand segment as I believe we don't break that down in particular, but it's about 40% margins.

Does that answer your question Alan?

That's great, thank you. Yes, that's fantastic. Thank you. So it sounds and then maybe my last question, just if the Fed is successful in slowing down the economy, how do you think about the impact that might have on your business?

So the impact of the recession if you will.

Yes, I think that happened yes.

Yes, so I was hearing about this, this morning. We were thinking about it this afternoon. They were talking about it, you know, I think on CNBC yesterday, you know, with the high attrition rates in the in the labor market, and the low unemployment, we still expect to see a high demand for recruiters and talent. We're also really seeing an increase in demand and talent outside the U.S. so where there's lower salary, tech talent, for instance. So I think that as we discussed in this call, the recession is going to have an impact on the overall job market. I don't think that we're really going to be impacted by it in terms of people not actually moving, are people going to stop moving their jobs? I don't think that's going to happen certainly now with this new generation where work life balance and slightly increased salary and remote work are really driving the overall shifting of the labor pool.

That's great. Thank you so much.

Thanks, Alan.

Thank you. [Operator Instructions] Talking has been permitted, please go ahead.

Hi, this is number ending in 4045?

Yes, please go ahead, sir your question.

Hi John [indiscernible].

Hi, how are you, John?

Hello.

Hi John.

I'm good. You want me to ask my question now?

Yes, please.

Okay, are we looking forward, should we model in seasonality here in the first part of the year?

So part of, I think the seasonality that we saw at the beginning of the year, this was really our first, let's call a full year with some of the acquisitions that we made back in 2021. And so, I think there's, some things that we should be doing from an overall sales perspective and client relationship side in order to smooth out that seasonality. But the end of the day here at the beginning, end of December, beginning of January, less hiring actually takes place, often beginning of January, people or companies are thinking about gee, what are their hiring going to look like for the year, and they started having those programs then rolled out throughout Q1. So I think there was some seasonality and they'll probably continue to be seasonality in the on-demand business. I think the software business will be a little bit smoother in terms of overall seasonality, I would --

So you would expect Q1 to be the low part of the year end?

That's correct. That's correct.

Okay.

Thanks John.

Thank you.

Thanks John, for asking.

Okay, we'll take our next caller. [Operator Instructions] Caller, please go ahead.

Kiran, I would just call out the last four digits might be easier for them to know who it is.

Sure, the number ending in 4686. Your talking has been permitted. [Operator Instructions]. Please go ahead.

Hello, hi it's Lisa Thompson at Zacks.

Hi, Lisa how are you?

Good. So I was wondering about the first quarter, I thought there was going to be a little bit of a hangover from what happened in Q4, where margins might be a little lower. But yet you had seemed to have record margins. So is there any impact in Q1.

On the positive side?

Yes, meaning that you had, you know, you had to pay some recruiters that you didn't get paid for?

We did have a small….

Very small.

We had a small impact a continued hangover from the fourth quarter, we did. But clearly, the mix of business and the focus on more profitable clients certainly, you know, helped a great deal. And that's our focus going forward.

Okay. And is there any update on what's happening with collecting that debt?

Sure right now, where they counterclaimed, without any real merit, we responded, they denied those claims. You know, this is a process. And we appreciate everyone's patience as we sort of deal with this matter. I think more importantly --

Okay, I just wanted --

Yes, that's okay. That's great.

Yes I just wanted to see what the latest was. So do you have a feel for where gross margins ought to be by year-end based on how the product mix is turning out?

Judy, you want to talk about gross margins?

Yes, I mean, we feel very good about the gross margins of each of our business lines, they continue to be very strong. Our gross margins going forward really will just depend on the mix of business. Again, we're continuing to focus on higher margin business, things like software solutions, extremely high margin. And we're deemphasizing, you know, core staffing with low margins. So we certainly hope the mix and customer choice will continue to keep our margins very strong.

Okay. So no number guesstimate?

No, but I think what you see is, you know, that sort of high 30s, low 40s, very comfortable in that range. Beyond that, we'd have to see a really solid mix more towards software. And over time, we hope to get there, and that we just want to continue to improve it.

Great, that helps. And I'm very impressed that you're -- use of raising of cash to keep the business going. Do you have what you need is there anything that's going to be slowed or hurt by having not as, like unlimited cash to use?

Right. So you know, I think if you looked at what our mission is for 2022, that has always been our mission for 2022 very focused, controlled growth, and really with an eye towards monthly positive cash flows and EBITDA et cetera. So I think that's always been our goal. It's a really big milestone for a company. And I think it's timely in terms of the overall market itself. So we were, this has really been our strategy. We had no intention of sort of buying more companies, if you will, and leveraging our stock to do that. So we are running it, like I said, like a startup inside of a NASDAQ company, just really with an eye towards profitability to deliver the value for our shareholders.

All right. And I guess my last question is as far Oyster goes, when do you think that that's going to start generating revenue? How long does that take?

So we actually started getting some leads from them. This morning, I think that might have been our second lead from them, we're doing some joint marketing with them, I would probably look at seeing relative impact, probably, you know, at least one quarter out. We'd love to have, you know, a first client engagement with them let's say within the next one to two quarters. I look at some of the larger enterprises that we've signed, some have taken three to six months, and I look at some other clients that we've signed, and it's taken within 30 days. So it really depends on the opportunity.

All right, great sounds wonderful.

Thank you so much Lisa.

Keep up the good work.

Thank you very much. Really, really appreciate it. Thank you.

And we'll take our next caller that ends in 4234. [Operator Instructions] This is for a caller ending for 4234. Your line is open. Talking has been permitted. [Operator Instructions] You may be having some trouble with this line here.

Yes, there's only one more caller anyway right?

That's correct, sir.

All right.

[Operator Instructions] Otherwise, we'll hand the call back over to Evan for any closing remarks. Okay, Evan should we wrap up.

Yes, it's running a little late. So I'll just let everyone -- let everyone know that follow-up is available, you can visit investors.recruiter.com for this recording, as well as updated presentations, you could check out Recruiter.com. I actually got some text of people that are listening the call saying they need help hiring. There is a lot going on in the talent acquisition industry. This is $100 billion industry. And it's about to get even bigger as companies large and small start addressing the needs that they're having regarding talent, finding the right talent and retention of the right talent. And Recruiter.com really is the destination site for all things talent, all things recruiting. I want to thank all of our -- all the listeners today, which include many of our Recruiter.com team members for their dedication and support to making our first quarter a success and look forward to continuing to share our success with you our shareholders and our interested parties. So thank you very much, everybody, and have a great day.