On 1/18 , RCRT preannounced 4Q21 revenue, up 40% sequentially and 275% y/y, ahead of expectations.
Importantly the higher-value segments of software subscriptions and on-demand recruiting services each grew 4Q21 revenue 60%+ sequentially. In addition, a partnership with Raise should help the company shift revenues toward high-margin segments, in our view.
Fundamentals are healthy as job demand and openings remain strong.
We raise our 2021 revenue estimate to reflect the preannouncement; we forecast revenue growth of 67%, 66%, and 59% in 2022-2024, respectively.
RCRT trades at an EV/EBITDA multiple of 8x based on our 2023 adjusted EBITDA estimate. Our $9 PT is based on 30x our 2023 adjusted EBITDA estimate.
Strong revenue preannouncement highlights momentum and shift to higher-value offerings. On 1/18, Recruiter.com preannounced 4Q21 revenue of $8.8M, ahead of our estimate of $6.7M and consensus of $7.7M. The $8.8M represents 40% sequential growth and 275% y/y growth. Importantly, 4Q21 revenue from software subscriptions and on-demand recruiting services increased 61% and 60% from 3Q21. In addition, a partnership with Raise Recruiting (private), announced on December 15, will allow the company to transfer its legacy lower-margin staffing business while picking up the higher-value software and on demand businesses. RCRT is making the shift to a more product led, solutions provider with AI software. Postings for recruiter jobs more than doubled in 2021 according to Ziprecruiter (ZIP – NR). The “Great Resignation” economy is creating job turnover and demand to fill positions, especially in the professional-type jobs that RCRT is focused on.
We project rapid revenue growth and a shift to profitability. A favorable macro environment, customer focus, scale, compelling competitive offerings, and an expanded sales force with enterprise focus should provide tailwinds. We project 2021 revenue of $22.6M in 2021 ($20.5M prior), up 166% y/y, rising to $99.5M in 2024; our forecast represents growth of 67%, 66%, and 59% in 2022-2024, respectively. With a deemphasis on traditional staffing and greater growth in the higher-margin software subscriptions, marketplace, and on-demand recruiting, we project adjusted EBITDA loss improving from ($4.4M) in 2021, to ($2.6M) in 2022, and then turning positive to $4.3M and $17.7M in 2023 and 2024, respectively. The company ended 2021 with $5.3M in cash and $4.9M in debt (mostly associated with recent acquisitions). We expect the company to fund organic growth through 2024 without the need to raise capital.
Compelling valuation. RCRT trades at an EV/EBITDA multiple of 8x based on our 2023 adjusted EBITDA estimate, a discount to the peer group average of 43x. Our $9 PT is based on 30x our 2023 adjusted EBITDA estimate. We believe a valuation discount is warranted due to RCRT’s smaller size and acquisition integration risk. We believe investor sentiment should improve as the higher-value segments become a greater percent of total revenue, and that the stock should start to trade more like technology marketplace and SaaS companies. Our rating also reflects our positive view on the industry, large TAM opportunity, and strong competitive position.