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The Xref (ASX:XF1) share price is surging 16% today. Here’s why

Man looking excitedly at ASX share price gains on computer screen against backdrop of streamers
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The Xref Ltd (ASX: XF1) share price is surging today after the company announced its revenue has increased by 36% this year while its costs have remained flat.

The Xref share price has risen 16% today to 29 cents per share.

Xref is a human resources technology company that automates the candidate reference process for employers. Essentially, it provides a data-driven analytics process that replaces the human, phone-call references that most people are familiar with.

It gathers data on the employee, the company and the role and then uses this to provide a report to hiring directors, letting them know whether the employee is suitable for the role they’re advertising.

It derives most of its revenue from Australia but also has a presence in Canada, the United Kingdom, Norway, New Zealand, and the United States.

Xref third-quarter update results

Xref released its third-quarter update today, showing revenue has increased 36% to $3 million, and sales have increased by 62% to $4 million. Meanwhile, its cash expenses have decreased by 17% to $3.5 million, and its cash balance has increased to $6.4 million.

New clients acquired in the quarter contributed 13% of total sales. Xref has built a strong customer base in the healthcare industry and has now entered a new geographic market in South Africa. Its new clients in Australia include the Australian Prudential Regulation Authority (APRA̼̩),  Cash Converters, and the Children’s Cancer Institute.

Its expanding profile of blue-chip clients outside the healthcare industry is partly behind the strong Xref share price performance.

Xref has simultaneously scaled back event and travel̩ development costs and office leases and has reduced its headcount from 18 to 64 people. This has driven a material reduction in cash expenses while continuing to support growth in sales.

The Australian company is also aiming to transition its credit-based cloud-based platform service to an annual recurring revenue (ARR) subscription model.

Xref share price snapshot

The Xref share price has risen 18% this week, 23% this month and 163% over the past year, but is down 20% overall in 2021 so far. It’s beaten the ASX technology sector by 69%.

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Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xref Limited. The Motley Fool Australia has recommended Xref Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Lucas Radbourne