Background screening and verification company, CV Check Limited (ASX: CV1), offering check products to employers, industry associations and individuals via its proprietary online platform, has delivered solid revenue performance in the March Quarter 2020 despite the events impacting Australia, New Zealand and globally in recent months, on the back of it is expanding business and growing revenue streams.
March Quarter 2020 – Key Highlights
- Consistent Revenue Growth
The revenue for the reporting period has grown 6% to $ 3.3 million as compared to the prior corresponding period (pcp) with B2B segment revenue increasing to $ 2.4 million and B2C revenue to $ 0.9 million.
Source: Company’s March Quarterly Update
The Company’s Booked Annual Recurring Revenue (ARR) increased to $ 10.2 million for 12 months to 31 March from $ 9.8 million reported in pcp on the back of both the number of B2B accounts and Average Revenue Per Account (ARPA) whilst the client retention has also remained high
First revenue was booked from CVCheck’s new customers such as SoftwareONE, Assembly Payments, Big Sky Corporate, Autism Camp Australia and Absolute Caring Professionals. In addition, the recent tender wins have already produced first orders for the June quarter 2020.
- Covid-19 Impact, Adopted Measures Buffer Revenue By 35%
As the non-essential services such as hospitality, tourism, gaming and retail were closed in Australia, and a more comprehensive shutdown occurred in New Zealand, the events have triggered differing effects on the mix of overall revenue for CVCheck. Fortunately, the Company has low exposure to the most impacted industry sectors whilst it has benefitted from contract wins in the care sector and a surge in screening orders amidst the mass talent acquisition activity that has been outsourced to labour hire and recruitment firms.
At the same time, the Company executed extensive cash conservation measures to buffer itself against a potential revenue fall of over 35% across the subsequent quarter. For the month of April 2020 too, CVCheck’s revenue has been resilient with Group revenue to date tracking 23% lower as compared to April 2019. More so, the Company is strongly positioned for the recovery when things get back to normal as and when they do.
Source (Company’s Report)
Over the years, CVCheck has always monitored its cash position and has a strong market footing as it continues to invest in growth, its people and technology. Therefore, the Company has pro-actively executed its response to COVID-19 induced turbulence to ensure that CVCheck endures with balance sheet strength and then thrives to retain the strength of its core teams. The Company is confident to come out of this phase in a stronger, leaner position, well-poised for growth.
- Platform Integrations
Platform Integrations with providers of human resource information systems (HRIS) and applicant tracking systems (ATS) has been a key component of CVCheck’s strategy is to deliver growth and reach a larger client base. In line with that, the Company co-announced with LinkedIn Talent Hub in March 2020 about their integration to streamline the hiring process workflow from sourcing candidates to employment background checks.
The integration with LinkedIn Talent Hub makes CVCheck the 1st background screening company in the APAC region to do so. The integration includes enhancements added to CVCheck’s platform that enable the automated ‘self-serve’ onboarding of small businesses from LinkedIn Talent Hub.
During the reporting period, CVCheck also announced the launch of its Phase 1 integration with Xref whereby CVCheck was made available exclusively inside the Xref platform across Australia and New Zealand. The combined business development activities undertaken by both parties resulted in a number of clients onboarding for both the companies and the first revenues were also booked during the March quarter.
CVCheck has indicated to release its Phase 2 integration whereby Xref reference checks would be made available from inside the CVCheck platform with a formal client launch currently underway.
- Q3FY20 Cash Burn
Despite generating near record receipts from customers of $ 3.3 million, CVCheck observed cash burn for the quarter to be ~ $ 0.9. The operating and investing cash outflows were inflated by:
- Around $ 510,000 of product and marketing costs for carried over invoices from the prior quarter.
- $ 256,000 of staff costs including recruitment fees arising from the build out of the Company’s C-Suite and business development teams, the additional cost of those team members and restructuring costs taken late in the quarter.
- $60,000 of administration and property costs resulting from the shift to working from home arrangements made late in the quarter as the business prioritized the health and safety of its workforce.
While, creditors were reduced markedly during the quarter, debtors remained steady. There was also a late March temporary dip in upfront customer receipts which contributed to the cash burn outcome of Q3FY20. The ongoing shutdowns across Australia and New Zealand from 23 March saw the Company’s upfront cash receipts from customers dip below 50% in late March 2020 but the shift has proved temporary with the average rising to 56% across April 2020, which would eventually benefit cashflow in Q4FY20.
Stock Information: The CV1 stock settled the day’s trade on 30 April 2020 at $ 0.098, moving up 32.4% by $ 0.024, with market cap of $ 21.61 million. CV1 has also generated positive returns of 23.33% in the last one month and 10.45 % in the last five days.
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