Recruiter.com Group, Inc.

Good afternoon and welcome to Recruiter.com's fourth quarter and year-end 2021 earnings conference call. This is Stephanie Prince from PCG Advisory. As a reminder, this call is being recorded and all participants are in a listen-only mode. We will open the call for questions and answers following the presentation. On the call today are Recruiter.com's chairman and CEO, Evan Sohn, and President and COO Miles Jennings. The company would like to remind everyone that various remarks about future expectations, plans, and prospects made on today's call constitute forward-looking statements for purposes of the safe harbor provisions 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 as of today's date, Thursday, March 31st, 2022. 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 today's conference call will be available through the investor relations section of recruiter.com's website at investors.recruiter.com. With that, I'd like to turn the call over to recruiter.com's chairman and CEO, Evan Sohn, for opening comments.

Evan. Thank you, Stephanie. And I'd like to welcome everyone on the call today. By every measure, Recruiter.com had a tremendous year in 2021. We grew revenue to over $22 million, a growth of 160%. During the year, we uplisted to NASDAQ, raised approximately $14 million in new capital, closed four key acquisitions, built out our management team and a solid operational foundation, introduced several important new product segments, and transformed our revenue mix. We began the year looking more like a traditional staffing company on top of a web-based media company and ended the year as a technology-led recruiting solutions company. Coincidentally, today is my third anniversary with the company, having joined as chairman of the board in 2019, and I couldn't be prouder of our accomplishments. Thank you to our team and everybody who has helped us get to this point. Before we get into more details, I'd like to briefly review our products and strategy for those new to recruiter.com. Recruiter.com provides software and services to solve hiring challenges for employers. We deliver talent solutions to employers working with companies from startups to the Fortune 100. Our artificial intelligence powered software provides employers with a steady stream of qualified candidates for their open roles delivered to them in their manner of preference. This software works by scanning over 160 million profiles in the United States alone, matching their candidates for these open jobs and then campaigning to them to get their interest. For companies that need extra help hiring, we also provide freelance recruiters on an on-demand or gig basis paid by the hour. Think of this like Uber for talent acquisition. We have recruiters on various projects at our clients getting paid for their services with no traditional headhunter fees. These are full or part-time positions whereby the independent recruiters in our network provide talent acquisition services to these employers to help them fill their open roles. Our revenue grew throughout the year as our new products gained traction, and we ended the year on a high note with fourth quarter revenue of $8.4 million, a 34% growth from the previous quarter. For the year, revenue grew 160% to $22 million. This growth was primarily fueled by good overall market trends for recruiting and hiring solutions, multiple acquisitions that help drive marketplace and on-demand services, and a strong demand for our subscription-based software. Miles will go into more detail in a few minutes. Our shifting revenue mix underscores the transformation we've undergone. In 2020, Recruiter.com's revenue was largely comprised of staffing services and advertising through our Recruiter.com marketplace. It was also the year we launched our recruiters on demand offering. As you can see on the slide, our product composition changed dramatically in 2021 with the change most pronounced in the fourth quarter. On-demand accounted for 62% of our revenue by the end of the year. Staffing was down to under 20%. And our software subscription, which we didn't have at all in 2020, already accounts for over 9% of our overall revenue. We believe this trend toward our technology products will continue, but that doesn't mean that our other businesses didn't grow. All of our segments generated growth during the year, as you could see on this slide. Some, particularly our on-demand and marketplace revenue, were accelerated by our acquisitions. The bar chart depicts our product segment revenue graphically, illustrating the year-over-year growth for each of our product segments, with the actual revenue numbers on the right. We continue to grow our customer base with a diverse mix of large and small companies across many industries. We now have 17 enterprise clients that spend over $50,000 with us monthly, ranging down to over 430 self-service customers that spend on average $400 monthly. As our investment in our software and our platform continues, we expect to see more customers using multiple services, especially the larger clients. We also expect these customer trends to continue as we start investing in marketing, raising awareness of our easy and effective on-demand services and software solutions. I'd now like to turn the call over to our COO, Miles Jennings, for a financial review.

Evan, thanks very much. Next slide. There you go. Recruiter.com had a strong fourth quarter. Revenue increased from $6.3 million in the third quarter to $8.4 million in the fourth. which was 100% organic growth. Our higher margin, higher growth software and marketplace subscriptions and our recruiter on demand segments accounted for almost 75% of total revenue in our fourth quarter of 21 compared to 66% of our total revenue in the third quarter. Our strongest growth was in two product lines during the fourth quarter, including software subscriptions, which grew 64% from the previous quarter sequentially. Recruiters on demand, our largest revenue segment, was strong too, with revenue increasing over 50%. Our gross profit dollars increased by 14% over the third quarter and 262% compared to last year's fourth quarter. The gross margin percentage in Q4 was 31% compared to 37 in the third quarter. This decrease in gross margin was primarily due to our first larger collections and bad debt issue. Specifically, we had to expense all of the costs related to one now former client, but we couldn't recognize all of that revenue. Without this issue, our margins remain roughly steady. This collectability issue will also affect our revenue in Q1, although to a lesser degree. With numerous acquisitions and high organic growth, we were bound to have a collections issue. We used it as an opportunity to review and tighten up our customer financial controls and checks and balances on extending our customers' credit. We're confident that we've improved our credit evaluation process for the future. General and administrative expenses were up in the quarter, reflecting increases in compensation, reflecting our growth, an increase in stock-based compensation, and the one-time bad debt expense of approximately $650,000 associated with the collection issue I just discussed. Next slide. The EBITDA loss for 2021 was $5.3 million, as adjusted for stock-based compensation, interest in finance expense, depreciation, amortization, and other non-cash items. Next slide. For the fourth quarter, the EBITDA loss was $2.2 million. This loss includes the bad debt issue I just discussed, totaling $650,000. Without the one-time bad debt expense, EBITDA in Q4 would have been close to the third quarter, despite the increased G&A expenses previously mentioned. We're focused on continuing on the path to profitability. Looking at the fourth quarter... Revenue grew by 34% over the third quarter sequentially and gross profit dollars expanded by 14% to 2.6 million. We expect to continue to shift from lower margin staffing revenue to higher margin software on demand and marketplace revenue combined with ongoing gross profit expansion that is trending to meet our operating expenses in the quarters ahead. Next slide. So when we look back on this year, as Evan mentioned, we really went through a dramatic transformation at our company. The capital we raised last summer, in conjunction with our listing on NASDAQ, played a really essential role in helping us complete our third quarter acquisitions of the Novo Group and the technology division of Uncube. The Novo Group acquisition helped grow our on-demand revenue in Q3, and we continued that with organic growth in Q4. The uncubed asset purchase brought us job posting technology, which we successfully integrated into Recruiter.com, and now we operate multiple career communities with that technology software. With a dramatically expanded customer base and some completely new product offerings, we really are a very different company than we were the previous year. We've covered some of the highlights from the quarter and the year, but as a quick recap... Total revenue grew by 160% year over year, which was fueled by acquisitions, organic growth, and a tight labor market and good hiring demand. Highest margin segments, including software subscriptions, grew at 64% sequentially. Our marketplace solutions were roughly flat for Q4 after a large growth from the uncubed acquisition in Q3. This revenue includes primarily job posting product revenue. On-demand recruiting now makes up in total 62% of our business. Software and marketplace solutions are now over 12% of our overall revenue mix. Next slide. Some of our more recent updates from the past quarter, we released job market and hiring trends research in partnership with Revelio Labs, highlighting the growing demand for recruiters and talent acquisition professionals throughout the year. we announced a partnership with Deal, a platform that streamlines compliance and payments for international teams, allowing companies to hire contractors and employees globally. We really picked up our PR and marketing exposure this past year. We participated in a number of investor conferences and appeared in many major media outlets. Evan, who was on CNBC earlier this month and throughout the year, has been discussing changes in the job market in real time and driving a lot of really good conversation and interest to our company. This is going to continue to be important this year to get our story better known to the market as we are a new publicly listed company as of 21. Also, a bit after the year end, we were awarded trademark registration for the wordmark recruiter.com. We believe it's an important protection for our brand, which we feel is an incredibly valuable asset for our company. Next slide. We were also really proud last year to launch a number of new product innovations, such as our Amplify product for job posting and a revamped AI software. We continue investing in product development and brought on some key new team members in our software development and product management teams, including our CTO and a new director of product. We improved our AI software by adding to the database of candidates that we index and improved how we match candidates to open client jobs. And finally, we launched our career communities based on the job posting software that we brought in through acquisition last year. We launched our first career community aimed at talent acquisition and recruiting. And these career communities will be an important part of our online engagement strategy and marketplace revenue going forward. That ends my comments. I hope I've conveyed how excited we are about the opportunities for Recruiter.com this year and beyond. I'll pass the call back to Evan for some comments on industry trends and the more macro environment.