Based on a blended enterprise value to sales multiple of its peers of 5.85 times, we believe the stock is worth $9.15 per share.
Recruiter.com, headquartered in NYC, is a pure play in hiring. It provides a platform for companies to hire recruiters on a temporary gig or project basis (Recruiters on Demand) as well as providing a
traditional staffing business.
As more of its revenues move to its faster growing, higher margin, scalable platform and SaaS businesses we expect margins to expand and growth to accelerate We expect the company to reach cash flow breakeven in 2022.
While its staffing business is still growing, it is focusing efforts on expanding its AI enhanced platform to more verticals and geographies in the US
Recruiter preannounced revenues for Q4 2021 coming in at $8.8 million versus our estimate of $7.2 million. This is growth of 275% versus the year ago quarter. Most of the upside came in revenues from its core
Recruiter on Demand platform, which contributed 63% of revenue in Q4 and grew to $5.5 million in revenues versus $500,000 in revenues in Q4 2020. Software subscriptions added $750,000 to revenues in the quarter and it is a business that only launched in Q2 of 2021 and contributes approximately 90% gross margins compared to a company average closer to 35%. The company did not break out the results for the rest of the businesses.
In our model our estimated revenue breakdown put gross margin for the quarter at near 39% compared to a gross margin of 32% in last year’s quarter. For the year revenues grew to $22.6 million, up 52% for the year. The Recruiter on Demand business grew to $11.4 million compared to slightly less than a million last year. Software subscriptions added $1.4 million to the year’s revenues.
Our model shows a gross margin for the year at 36% versus 28% last year. When the company reports we will get the actual number. If we are accurate this shows gross margin dollars grew 240% on only 52% revenue growth as the business shifts away from staffing to its higher margin platform model.
We are raising our Q4 and 2021 revenues accordingly. The service mix and higher revenues raises forecasted gross margins and as a result, we are raising Q4 2021 EPS to a loss of $0.50 from a loss of $0.55 and raises the year to a loss of $2.37. The revenue increase leads to an increase in our valuation price to $9.15.
We will adjust 2022 numbers when Q4 is reported.
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