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spk05: Good afternoon, ladies and gentlemen, and welcome to the Recruiter.com second quarter 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Chairman and CEO, Evan Sohn. Sir, the floor is yours.
spk04: Thank you, Operator. On the call today are Recruiter.com's CSO, Judy Crandall, and President and CLO, Miles Jennings. The company would also like to remind everyone that various remarks about future expectations, plans, and prospects constitute forward-looking statements for the purposes of safe harbor provision under the 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 of today's date, Wednesday, August 18, 2021, and 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 the conference call will also be available on Recruiter.com's website. And thank you again, operator, for the introduction. And to everyone on the call today, welcome to our first quarterly earnings call as a NASDAQ-listed company. It's been a very exciting time for us. In addition to completing our uplist on June 30th, we had a very successful oversubscribed uplist round led by Gunner & Associates, raising approximately $13.8 million to fuel our overall growth moving forward. Before we get into some of the specific details of our Q2 performance, I'd like to take a step back and provide an overview of Recruiter.com for those that are new to our story. Recruiter.com is at the epicenter of all that is going on in the talent acquisition market. When you think of recruiting, you might have used a headhunter to help fill a role, paying them 20% of the salary, or you may have seen ads on television for Indeed.com or ZipRecruiter that are focused more on the do-it-yourself job posting model. When companies are hiring, they really figure out if they want to recruit on their own or if they want to have someone help them. We give them a total solution. We have the largest network of on-demand recruiters that can help companies hire, and we offer our cutting-edge recruiting software so that companies recruit talent faster. So we provide people, recruiters on an on-demand basis. Think of it like Uber for recruiting. We currently have over 200 recruiters on assignment, ranging from large Fortune 100 companies to small businesses and everything in between. We also provide tools and technology solutions, to complement our network, and these tools are used by everyone from startup companies to some of the largest Fortune 100-type enterprises. During the second quarter, we continued our shift towards software and on-demand recruiting, reorienting the company toward high-margin, growth-oriented business. We are excited to report that our on-demand recruiting service grew 88% quarter over quarter in Q2, while a new software subscription delivered over $175,000 in recurring revenue. We expect strong growth throughout the second half of 2021 and beyond as we advance our mission of revolutionizing recruiting and talent acquisition into a rapid on-demand service. I will now turn the call over to our CFO, Judy Crandall, to go over our financial highlights in more detail. Judy?
spk06: Thanks, Evan. Our revenue for the second quarter of 2021 was $4.4 million, an increase of 38% from the first quarter of 2021, an increase of 136% from the prior year period. This increase resulted primarily from growth in our recruiters on demand business and the introduction of software subscriptions. Recruiters on demand now represented 41% of our revenue in the second quarter, up from only 3% of our revenue in the prior year period. Software subscriptions were 4% of our total revenue in the quarter. Our gross profit in the second quarter was $1.4 million, or a gross margin of 32.8%. This compares to 28.7% gross margins in the first quarter of 2021, and 23.5% gross margins in the second quarter of 2020. The increase in gross margin reflects the shift in the mix in sales for the period as our recruiters on demand revenue and software subscriptions have higher gross margins than our staffing revenue. We had total operating expense of 3.9 million in the second quarter, up from 1.9 million in the second quarter of 2020. The increase in operating expense was primarily due to the higher general and administrative expense, as well as higher amortization of intangibles expense. Our general administrative expense was $3.1 million in the second quarter, and it did include $1.1 million of non-cash stock-based compensation. The year-over-year increase in G&A was primarily attributable to increased compensation supporting and related to the growth of our recruiters' on-demand business and the addition of employees from our recent acquisitions of Scouted, Upsider, and OneWire. Net income in the second quarter of 2021 was $3.5 million, or 99 cents per share, which did include $7.5 million in non-cash income. After adjusting for bad debt expense, the gain in fair value of derivatives and stock-based compensation, our adjusted EBITDA loss was $776,000 for the quarter. As Evan mentioned, we completed our up-list capital raise in early July, and as of August 11th, our cash balance was $8.9 million. This concludes the summary of our second quarter results, and I would now like to turn the call back over to Evan.
spk04: Thank you, Judy. Our strengthened balance sheet should easily carry us through the next 12 months as we continue to execute on our growth strategy and scale operations. I couldn't be more proud of our entire team and the tireless work they've put into the position us for the long-term sustained growth. Before I make my closing comments, I would like to pass the call over to Myles Jennings to provide some more insight into our second quarter operational highlights.
spk03: Myles? Hey, thanks so much, Evan. We really had a very exciting quarter in Q2. And I also just want to thank all of the staff and everyone who helped put in all the work to make it happen. We're now positioned at the forefront of recruiting technology with the resources to execute our growth plan. At a product level, we now have our own advanced AI technology, recruitment marketing software, job board creation software, and a network of now over 30,000 recruiters, which we announced recently. Most importantly, we're delivering what our clients actually want. For both high growth startups and some of the largest Fortune 100 companies, we're giving them great results and also helping them get great hires and recruit very talented staff. They're staying with us, these clients, and oftentimes expanding with us. We have a set of happy clients and a very high demand for talent in the job market. So we really believe we're in a great place to continue our growth story. One of the biggest challenges facing the economy right now is the shifting dynamics of the job market. It's in the news all the time. Companies are having a hard time finding talent. We've all seen this. Incredibly tight job market and highly skilled labor, a shift from in-person to remote work, opening up the work from anywhere theme, the lack of hourly workers is especially in the news. Those hourly workers seeking to reenter the job market and the increased voluntary employment churn resulting in the potential for a great resignation of employees. We're addressing these challenges head-on with our on-demand recruiting solution, which we believe reinvents the way recruiting is done, empowering companies large and small to extend their in-house hiring teams with experienced freelance recruiters on demand, along with AI-driven candidate search and engagement software tools. As Evan mentioned, our on-demand revenue line was very strong, growing 88% this quarter. So we're really starting to see the start of a very clear product market fit. A major operational highlight for us, of course, in the second quarter was our June 30th listing on NASDAQ. This was a big milestone for the company, which opens up quite a few new opportunities for us moving forward. We want to take this time to thank our investors, all stakeholders, our bankers, and the rest of our team, including the lawyers, for a successful listing process. Another key highlight for the quarter was our acquisition of OneWire, a leading SaaS-based financial services recruiting and sourcing platform. This acquisition included the OneWire SaaS platform as well as the candidate matching service called Matchbook. The acquisition of OneWire brings hundreds of thousands of highly skilled financial services and banking professionals into Recruiter.com's growing database of candidates and portfolio of proprietary recruiting tech. Following this acquisition, we began to integrate our people and assets to create a unified subscription-based hiring solution, allowing employers to source financial services candidates on their own or tap into our network of on-demand recruiting professionals for hiring help. We also formed a partnership with WeWork this quarter in April to bring on-demand hiring services to the WeWork startup ecosystem. With just under half of WeWork's member population Being small to medium-sized businesses and startups, Recruiter.com's new Flex membership program has a unique opportunity to help WeWork's community hire high-caliber, AI-matched, and video screen talent, all done at their own pace on demand. As noted by both Evan and Judy, our oversubscribed offering completed in conjunction with our uplist to NASDAQ actually closed in July, so it's not reflected in our quarterly results. as you review our 10Q. The upsized offering of 2.4 million units each included one share of common stock and one warrant at a price to the public of $5 per unit. It raised gross proceeds of $12 million before deducting underwriting discounts and other expenses. We also closed the sale of an additional 360,000 shares of common stock in July pursuant to the exercise of our underwriters over allotment option, raising additional gross proceeds of about $1.8 million. And so with the primary offering in total, we raised gross proceeds of about $13.8 million. Also after the quarter end, we acquired the technology division of Uncubed and Finalist, which gives us proprietary job board creation technology. This will really help us scale our marketplace and allow us to rapidly enter new sectors in the future. The purchase also included Media Bistro, which is a leading high traffic website and community for media content and creative professionals. Chris Johnson, they're very talented CEO joined our executive team and will now lead our marketplace division. With these two acquisitions, we now have a strong sector experience in particular in media and financial services. Another important highlight on the personnel side since quarter end, was the appointment of Zwan Smith as Chief Technology Officer. Zwan is a Stanford University grad. He has over a decade of technology leadership roles at startups, as well as very top-tier consulting firms. As recruiting and hiring shift toward leveraging artificial intelligence and big data, Zwan's going to be a big asset in helping Recruiter.com position itself to meet this tremendous market opportunity. Along with Zwan's appointment, Our former CTO and my original co-founder, Ashley Sadal, was appointed to the position of chief web officer, and he's going to focus on really making an impact in growing our web presence. I'll now pass the call back to Evan for some final closing comments.
spk04: Thank you, Miles. We are confident and steadfast in our ability to rapidly scale our business and continue to recruit talent faster. I want to thank our shareholders for their continued support and thank everyone on the call today for their time and interest in Recruiter.com. We would like to now open up the call for questions, and I ask the operator to see if there are any questions from the attendees.
spk05: Absolutely. Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please indicate so now by pressing star 1 on your touchtone phone. Pressing star 2 will remove you from the queue should your question be answered. And lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star 1 if you have a question or a comment.
spk01: Okay, we have no questions in queue. Once again, ladies and gentlemen, it's star one if you have a question or a comment.
spk05: Okay, we have a question coming from Walter Shanker from MAZ. Walter, your line is live.
spk02: Yes. Well, first, it's a comment first, which is, as a matter of practice, I'm sorry, Brianne, one second. I believe it's inappropriate to wait two days after you report to do a conference call. There may have been special circumstances, but I think in the future it would be much appreciated by shareholders, myself included, if you have a conference call on the day you report or if you report after the close early the morning thereafter instead of waiting two days to hear you discuss what happened in the quarter.
spk04: Thank you, Walter. We will certainly take that under advisement. There are some scheduling conflicts in terms of getting a call scheduled. And we also felt that as our first phone call as a NASDAQ listed company, we didn't want to be bundled together with all the other companies that were filing on Monday. So we filed on Monday and scheduled the call for Wednesday. But certainly we'll take your comments under consideration going forward. So thank you, and I appreciate your continued support, both under the comments as well as your investment.
spk02: Okay, and just now is actually, that was a comment, that was a question. At what broad level, I'm not asking you when you're going to get there, but as you look at your business, what level of revenues is required to get to cash flow break-evens?
spk04: It's an excellent question, and let's take a step back just for a second. The answer is around $3 million of monthly revenue. That gets us around there. If you look at our numbers now, we're certainly vectoring towards that direction. At the beginning of the year, Walter, we really set out with a couple of objectives. One was to uplift NASDAQ with a successful uplift round and having a pretty substantial positive treasure. trust in our bank account. So I'm glad we accomplished those two first things. The third is to really have a scalable revenue model that lets us grow with more aggressive operating margins, as well as a model that delivers faster to the bottom line. And as Miles and Judy both reported, our growth of our on-demand business, both in terms of on-demand people and on-demand tools, is really driving those incremental gross margins. at a much faster rate than we even outside expected at the beginning of the year. And finally, we really want to be cash flow positive on a cash in, cash out basis before the end of the year. And we are certainly focused on that. We have a very trim operation. And again, we really focus a lot on delivering incremental revenue at a lower operating expense model. So we are certainly moving in that direction. uh the good news walter is if you look at the results we're burning less money month over month quarter over quarter uh and it's not just because uh we've reduced our operating expenses but really increased our revenues and increased our overall margins uh without affecting lots of lots of operating expenses we do have the uh the burden of being a public company and a company of our size that is uh that is a substantial burden we want to make sure we could deliver quality reports on a regular basis. So we have added to our financial team to really make sure we can stay in compliance. We're also using proceeds from our round to increase our overall sales team and marketing team and making some additional investments. But yet we're still tracking to be close towards cash flow positive before the end of the year. So Walter, I hope that answers your questions. And again, thank you so much. You are our first question. as a NASDAQ public company. So thank you, Walter.
spk01: You're welcome.
spk05: Okay. If there are any remaining questions, please indicate so now by pressing star 1.
spk01: Once again, that's star 1 if you have a question or a comment. Okay. We have no remaining questions in queue.
spk05: I'd like to turn the floor back to CEO Evan Sohn and team for closing remarks.
spk04: Thank you very much, Operator. And really, I want to thank everyone for joining us on our first quarterly conference call as a NASDAQ company. As Miles indicated in the call, we really are at the epicenter of the overall job market, whether it's talking about the job market on various media, as you might have seen me in various places. We are really serving as a guide to helping our clients, both large and small, as they address the challenges that's facing just about every company, which is how to be source, routine, and hire talent faster. We're in this unprecedented world as we are still struggling with the overall pandemic, but not a day goes by where you don't hear about jobs and candidates and jobs, and we are really helping companies address this need by allowing them to both either Recruit like an expert, leveraging our on-demand recruiters or leveraging our tools as well. And we really appreciate you joining us on our call today, and we look forward to sharing with you our continued success in the months, quarters, and years to come. So thank you very much, everyone. And I'll turn it back to the operator to close the call out.
spk05: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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