1-Page Ltd (ASX: 1PG) has released its earnings results for the half-year ended 31 July 2015, revealing a 70% rise in revenue, to $158,900, but a loss of $8.5 million, down more than 950% from the prior corresponding period.
Should investors be worried about the loss?
In July this year, Rod Drury, founder of cloud accounting software provider XERO FPO NZ (ASX: XRO), said that local investors don't understand tech companies.
Revenues can be growing at a phenomenal speed while the company can be expanding its customer base rapidly, yet investors still tend to focus on the bottom line, stressing about the losses being incurred by the company.
But almost every tech start-up begins its life this way. To make money, you have to spend money, and that is exactly what 1-Page is doing – spending big on marketing and product development to better ensure its long-term success in the global jobs market. If all goes to plan, the losses incurred today will help the company achieve much stronger profits in the future.
1-Page immediately caught the market's attention when it debuted on the ASX in October 2014. Since then, its shares have risen from 34.5 cents to $4.60 – a return of 1,233% – despite the company's lack of profitability.
Who is 1-Page?
Indeed, it is the vision of what 1-Page could go on to become that has the market so excited. The company is striving to revolutionise the way in which companies source, hire and promote talent, by asking applicants to complete a one-page real-life challenge as part of the application process. This reduces the need for resumes, thus saving those companies both time and money.
In fact, some estimates suggest 1-Page's process could reduce the time to hire from 11 weeks down to just four. It also captures an enormous portion of the jobs market by connecting enterprises to 'passive' candidates, being those who are already employed but would be willing to move for the right job.
According to a presentation from 1-Page earlier this year, this 'passive' segment represents 70% of high-demand candidates, compared to 25% who are unwilling to change jobs and 5% actively looking for work via platforms such as seek.com.au, owned by SEEK Limited (ASX: SEK).
SEEK virtually revolutionised the way ordinary people look for new employment opportunities, strangling companies such as Fairfax Media Limited (ASX: FXJ) and News Corp (ASX: NWS) in the process. 1-Page is now looking to do the same.
Indeed, it already has some of the world's biggest companies on its client list, including Amazon.com, Accenture and a 250,000-employee telecommunications company. It also has more than 240 companies in its active pipeline while its retention rate is "significantly above" its target rate of 92.5%.
Although this company is still very young, it's easy to see why the market likes it so much, but is it a buy today?
Should you buy 1-Page?
I want to make it very clear that 1-Page is still a very speculative bet. To begin with, there is no guarantee that its process will continue to catch on with companies around the world, while there is also the risk a rival will introduce a superior product that clients prefer. Reputational risk is also high – if there are faults in one of its new product updates, that could be very damaging for the brand.
Those are just a few of the risks facing 1-Page. A risk also facing investors is the price of the shares, which have skyrocketed since the company debuted on the ASX, as highlighted above.
Although the company ended the half-year with just over $10 million in cash (up from $36,000 as at 31 July 2014), that was predominantly thanks to a $9.6 million share issue completed during the period. There is a chance the company will need to raise even more cash to fund its growth in the future, which could have an impact on the share price.
As a shareholder myself, I am happy with the company's growth and believe in its future. While it could be a decent option for long-term investors looking to put a small amount of capital to work however, other investors who prefer to minimise the risks would be wise to stay away at its current price.
