RCRT: Recruiter.com is on Track to Profits as its Model Garners Interest and Customers Spend Even More
NASDAQ:RCRT
READ THE FULL RCRT RESEARCH REPORT
Recruiter.com (NASDAQ:RCRT) continues on track to cash flow breakeven and higher margins due to exceptional growth and product mix shifting to its high margin products away from its legacy staffing business. It is attracting more customers and its current customers are generating more revenues. Its small self-service clients increased their spending by 20% and the enterprise clients spent about 30% more. There are more than 500 self-serve clients who spend about $500 a month. Clients range from those to its five top companies that spend more than $160,000 a month. We know that its top client spent $782,000 in Q2 2022. Marketing continues to push clients to use more of its services.
While revenues going forward are slightly lower than originally expected, that is due almost entirely to the fall off in legacy staffing, which has declined faster than anticipated by almost complete neglect. This business only generates low double digit gross margin at best. It is still 13% of revenues.
Hiring remains tight and Recruiter.com has such as small part of the market, we believe it can continue to grow in the face of a hiring slowdown should that occur. It has seen no slow down to its business and looks forward to increasing its international offering with its new partnerships.
Recruiter.com now trades at an enterprise value of $24 million, or an EV/2022 Sales of 0.8x times compared to the blended multiple of 3.9 times of its peers. We believe growth, expanding margins, the elimination of cash burn, and more analyst coverage, could increase the stock’s appeal and cause price appreciation.
The Revenue Mix Continued to Shift to Higher Margin Products in Q2 2022
Revenues for Q2 2022 came in at $7.1 million versus $6.3 million in Q2 2021. This is growth of 62.4% versus the year ago quarter. Most of the upside came in revenues from its core Recruiter on Demand platform, which contributed 66% of revenue in Q2 and grew to $4.7 million in revenues versus $1.8 million in revenues in Q2 2021. Software subscriptions added $808,000 to revenues Source: Recruiter.com in the quarter and it is a business that only launched in Q2 of 2021 and generated $176,000 in that quarter. It contributes approximately 90% gross margins compared to a company average closer to 35%. Permanent placement fees grew 66% to $313,000.
The surprise in the quarter was that staffing dropped down to $940,000 from the $1.3 million Q1 2022. This was a year over year decline of 56%. The company has stopped focusing on this business and is letting current customer staffs roll off without trying to replace them particularly with its largest customer. We expect that to continue to decline throughout the year. Also, a surprise was Marketplace growing 488%. This segment now includes a number of specialty job boards from acquisitions that are adding to revenues.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
