Nvoi Ltd

Jennifer Maritz is the Chief Executive and Executive Director of Nvoi, a company that's sitting between companies that are looking for professional skills and the people who have got those skills. It's an online oriented platform, it's small, but it's beginning to show growth.

Jennifer, tell us about why you decided to start this company and where you intend to take it.

Thanks very much, Malcolm.  I actually wasn't the founder of the company, the company was founded by a father and son, a couple of years before I joined out of a desperation for and frustration, of the existing recruitment process and labour sort of hiring process.  They listed the company back in June of 2016, and I joined in December.

That was Lindsay and Mark Rowlands.

That's correct.  At the time of the listing, we were really in a concept phase of developing the platform.  We spent much of the last two years developing the platform, it's a dual marketplace.  Where we directly connect hiring managers and employee, people looking for work, in an attempt to provide an enhanced user experience and to put enjoyment back into employment.  Really by representing oneself, one can be the most transparent and get the most out of a working experience.  You know exactly what you're letting yourself in for, and you're likely to work harder at something that you're going to be enjoying. 

So the platform has evolved and been built over the past two years or so.  We've, at the same time, been testing the market through releasing minimum viable product, and then having some users start adopting the platform, and conducting hiring and working of the contractors through the platform, including the payrolling of them, providing the reports and the compliance because Nvoi is the employer of record.  And then we've tweaked the platform to meet the needs based on the feedback of those clients, those initial early adopters, and I'm pleased to report that we now have a product that is ready to go. 

We've tested our business approach, where we had started off going completely digital.  However, we do realise that we are disrupting an industry here.  We are driving significant change, where we are asking people to move from a manual process to a digital one.  And so last year, we built a small sales team.  Well it's not really a sales team, it's a change management team to help customers make that transition from the current manual processes to digital process.

That has started to get us some good results.  Coupled with the enterprise version of the platform that we've built, we now believe we're really well poised to commercialise and build the volume successfully off the lessons we've learned, the experiences we've gained, and the testing that we've done.

We'll have a look at the numbers a little bit later.  It's very early days yet, but you did describe the December half as a breakout period, one that shows, I think, where you expect to be going.  But let's just have a look at it from, on the employee side, your target is professionals.  On the employer side, I sense that your target is groups that maybe don't have the backroom processes, or don't want the backroom processes in their own enterprise.  You take them over, and you say that's unlike traditional contract work for management systems.  You're the employer of record.  You provide the engagement but you also provide automated back office processing.

I'm shocked.  I would have, it's a great thing.  But I'm surprised other people aren't doing this already.

Let me clarify, there are people who conduct this interim process.  Usually using multiple parties and including manual components to the process.  In other words, very labour-intensive.  If you think about current recruiting, the recruitment companies have an army of people out there searching for candidates, sifting through CVs, and so do companies for that matter in their talent acquisition teams.  Effectively, think about it as what CommSec did to the broking industry, in terms of digitising the process. 

What it does, the benefit it does, is it drives a level of transparency and puts control back into both the employer and employee.  The employer doesn't need to worry about too much paperwork, they fill in the skills they're looking for and then have a choice that our algorithm will match the skills that they're looking for to people with those skills.  With some other fairly technical matching criteria around locations, et cetera.  And they then can message them instantly over an instant messenger, and they can make offers, sign a digital contract and within hours can actually employ somebody to get work done.  From the employer...

I'm sorry, and the paperwork around that is yours, not theirs.

Correct and it's all digital.  Correct, all you do is click a few buttons.  From an employee's perspective, contracting is people are looking for flexibility in the workplace these days.  They want to be able to be valued for the skillsets that they've acquired, and by directly connecting with people, not only can they ensure that the work that they are being offered is what they're looking for, but also, they can negotiate the rate of which they're being paid to satisfy themselves that they're being fairly remunerated for the efforts that they're putting in.  This direct negotiation and control and flexibility is being mentioned throughout much of the research that's done on a new contingent workforce, the gig economy, and the way, the future of people, and how they want to work. 

What we're doing is supporting the changes that are being conducted in the workforce and with the way people want to work.

You say you're the employer of record.  Does that mean that the people that are on the site are drawing their income from Nvoi?

Correct.  We, effectively we provide a service to a customer and then we employ the contractor and we pay the contractor.  They're guaranteed to get their income, they don't have to worry about the paperwork, chasing debtors, looking for their next contracts, because that will automatically be served upon them via our platform if there are roles available.  We take the paperwork away from the contractors, as well as obviously from an employer's perspective, all they do is sign a service agreement, they don't have to worry about all the employment paperwork.

Are you passing on the income that the employer is prepared to pay, is that how it works?  Is it geared to the value that the employer places on the person that they decide to pick up?

Absolutely, we operate on a completely transparent pricing model.  Nvoi has a fee of $2.99 per billable hour, and that's the only charge that we have that is directly into the Nvoi profits of shareholders.  We pass through, if you could call it that, the cost of payroll tax, workers' compensation, the statutory charges that are required, and then the contractor negotiates their own rate with the company.  There is no hidden costs and there is no additional ticketing, if you will, of value through the process.  I believe that we've got to make sure people get value for money, and as much as possible employees can earn the maximum amount that they are worth.

Just having a look at the numbers now.  In the December half, you announced that gross platform billings were up, well, massively up.  Because it was really just 32, 33,000 odd in the December 2016 half up to $928,000 or so.  Net platform income was up by a similar amount, a massive amount, the percentage is over 2000.  To $56,000.  So it's still pretty small at the moment.  But tell me, I mean you've obviously got fixed costs as you’ve developed this thing and put it in place and as you say, you're really just at the point where you're ready to launch seriously.  That ratio between platform billings and platform income is going to be very, very important as you go forward.  You would think I assume, that as this business grows, fixed costs become a progressively smaller percentage and the margin improves.  Is that the way it's going to work?

Yes, absolutely.  I mean I think the other aspect to that is, as the volumes grow, the cash that we'll be managing will almost be generating an adjacent revenue stream for us because of the time delay when you pay the bill.  Because we are looking to get payment early in the cycle, prior to us paying contractors.  So far, that in itself will yield significant cash reserves, albeit as you say the Nvoi fee is a much smaller proportion.

Yeah.  Now, tell me about the market that you're targeting.  Are you hitting a niche, or do you think that this is scalable right across the employment landscape?

Look, it is scalable across the landscape.  However, we have started where we think we can get early successes quickly to get returns for shareholders.  We have focused in on specifically IT services companies, where they will get the benefit of using contractors, not only at a reduced cost to them because of our fee being low, but also at the incremental income that they can get from hiring quickly and billing those people out.

We're focusing on customers that are looking for, particularly in the large IT innovation-transformation projects.  We're looking at people in the marketing and media and telco space, where they're also doing a lot of digital work and are, in many cases, looking for the same type of skillsets.  Which helps us, because if you build the volume in a set of skills, we can offer them out to multiple people.

We are targeting telco and media, financial services, IT services companies specifically.  And I'll tell you now that people like the health and education industries are not far behind.  With the enterprise version of the product, we now are able to do ad hoc hours during the week, which opens up a whole range of opportunities.  But to your point earlier, we are focused on skilled professionals, not yet looking into the blue collar worker.  Although that is a potential opportunity for us in the future.

Tell me about the competition.  Who do you consider the competition to be?  We all know about the whales that are out there, such as SEEK but I think that's probably not who you would think would be the prime competitive focus for you.

You're right.  There are a lot of people in our, in what I call it, the playground.  SEEK does a component, they do the sourcing component of the process.  You've got people like LiveHire that do talent pooling, but don't do the end part.  Then you've got payroll providers who do just the payroll but not the sourcing.  I would say to you that, as far as we can tell, there aren't any known competitors to us who do the full spectrum that we do.  But there certainly are a number of niche players in the process, that can, if they had to consolidate, give us some competition.  We watch very carefully, and part of our aggressive stand towards growth now is focused on staying ahead to ensure that, should any of those guys decide to consolidate, we'll be well on our way to success before they do.

It's a little bit off topic, but I'm sure you've noticed, there's been some discussion up in Parliament House recently about whether or not casualisation of the workforce is growing or declining.  You're almost uniquely placed to comment on that.  Tell me, what do you think's going on?  And also, it's interesting, the debate on both sides has been sort of assuming that casualisation is a bad thing.  I don't see it that way, and I'm pretty sure you don't either.

I don't, you're absolutely right.  In fact, if I could be bold enough to say, I think our labour laws really do need a little bit of a shake-up.  I mean, what we are responding to is what the employers and employees are seeking.  The fact that our labour laws and some of the research that's been produced, or the media articles around, you know, putting this in a negative manner just doesn't seem to align to the feedback that we've been getting directly.  So our position is that the casualisation of the workforce is the right way to go.  My background was in process outsourcing and we've seen that whole outsourcing model. 

It was fit for purpose at the time, it reduced the cost, but now we need to move to the next era of the future of work and that is all about maximising the use of skills, sharing them around, staying ahead of competition.  Not building a whole fixed cost of employment.  And frankly even, when you look at full time employment or permanent employment as they label it, I mean with the young people today who are having three or four jobs in a year...  I mean, is that really permanent employment?  You know, I'm not sure it is any more. 

I believe that what we're certainly seeing is that there is a shift and a demand for this more flexible workforce, for them to be more in control and the companies that are aggressively taking on contractors to reduce their fixed costs and become more variable and more responsive to the market, are getting ahead from both a cost perspective and an innovation perspective.  We see it as a very positive move, but I think our laws do have a little bit of a way to catch up with us.

As for the debate about whether or not casualisation is growing or declining, that's again something that I'm sure you've got an opinion on, because it's the raw material of the business really, isn't it.  Is it growing?

It is.  For us it's growing, but I do have to caveat that, that it's also a relatively small base.  However, that being said, one of the tests that we did was, for two months we did a digital marketing campaign and we were acquiring people at a rate of 1000 a week.  The interest and the desire for this type of working environment is certainly proven to us, through the acquisitions that we have had.  Now it's up to employers to catch on, and be willing to convert some of their, what they call full time roles, into contracts.  But I mean, if you look under the covers, you'll find a lot of people have been doing six-month contracts and rolling them, every six months.  I think that contracting is actually a lot more pervasive than people have been willing to acknowledge at this stage because of the compliance risks of doing so.

I'm just looking at the results again and you mentioned in there that you benefited from R&D benefits, from the federal government.  I’m very pleased to see that, it's good to see the government supporting companies that are having a go in areas like this.  What's the situation there, and is that continuing or is it basically something that you'll be drawing on, primarily during the development phase, which is drawing to a close now?

We're also very grateful to the government, you're quite right.  We have been utilising this facility, but now that the product is ready to go, we see that that will decline quite significantly as we repurpose our cash and spend it on sales and marketing efforts but also we're not going to make use of something that we don't need.  So as we develop and grow, then there will be some further research done, I'm quite sure, as we bring more AI into the business and really develop the algorithms and stuff.  But for the moment, what we intend to do is focus on sales and marketing, growing the volumes, but we will be decreasing our R&D and see how we go before we would increase it again.

Now you say in the December report that, as you transition from the R&D phase into fully-fledged sales and marketing, you're going to continue to incur operating losses for a while as you invest in growth.  That means that you are burning cash, and that's something that the auditors know.  They say that, hang on, let me just return to it, it's the usual reference in a situation like this, that you’re running as a going concern basis.  But the group had working capital of just under $3 million and incurred a loss for the year of $1.7m.  The ability of the group to continue as a going concern is subject to further capital raisings being undertaken, or, and this is obviously your plan, the commencement of profitable operations.  That's where it's at really, you're on course but you need to stay on course.  What is the course?  Plot it out for us.

You're quite right, we actually are going to be, our current plan is with the launch of the product, is to build up the sales team or double it over the next quarter and then really go for targeted growth.  We are expanding our offering to do transitioning in existing workforces as well as fulfilling new contractor roles, to beef up the volume more quickly than we might otherwise.  We're also targeting the corporates, who have a larger contractor base and need, not just small businesses, which is where we've been playing in the initial phases.  So those actions, between the sales team that we're building up and expanding the target companies that we're going for, but we do expect the volume to increase over the next six to nine months.  We will become cash flow breakeven probably sooner than we are accounting profit wise, and then we would use that cash to reinvest in the business.

Yeah.  It'd be nice to keep on increasing the main numbers by 2000 plus per cent each time, but that's not going to happen.

It's not going to happen, but I've also got a caveat.  2000% is also a very, very low base.  I hope that my base will grow much more quickly to be something that, the percentages will be lower.

Now I know that as I've reported on ASX companies for many decades, there is a continuous disclosure requirement.  But while being conscious of that, you're three months into the June half now, so how have you been travelling?

So as expected, in December, January, early February, we did see a lull.  If you look at sort of the September quarter, we had a bigger uptake on the platform and then through towards the end of December we saw the holiday period kicking in, and we saw people reducing their hiring needs.  That carries through the January holidays, the Chinese New Year and so the first quarter was...

We all hit the beach!

…as we thought it would be.  Sorry?

We all hit the beach!

Yes.  I love it about Australia.  The first quarter was a little slow, but that was what we were expecting.  We are expecting to see April picking up quite dramatically, and the rest of the quarter.

And that will be sort of a seasonal element in the results, I guess.  The first quarter will always be a little bit soft.

Correct.

What's your shareholder base like?  And by that I mean, who have you got on board, and how stable has it been?

We have a shareholder base of about 700 people, although with that in mind the Rowlands own 20%.  We have another major shareholder who owns about 19%, he in fact did invest, in a conversation I had with him last year, he invested another million dollars to fund the small sales team that we did put on board.  To test the market as to whether that was an effective way to grow the business more rapidly and I'm pleased to say that was money well spent, because that has proven to be successful.  He is still very supportive of us going forward and is looking forward obviously to us expanding that.  We have a 10% or so, is held by the original backdoor listed company, and then a bunch of brokers from there, manage the rest of the book.

All right… Sorry, go on.

If I can say, it's pretty stable, I talk to the brokers on a very regular basis.  We haven't had much share trading in the last six months, a very minimal amount.  I think they're all waiting to see how we can turn this around.

On the jaws that the auditors set out, on the going concern comment you need to increase revenue and profit, or you need to raise more money.  Are you confident that you won't be going to shareholders, that you're on track?  I know it's very early days, and it's a slightly unfair question because of that but it's something that the Constant Investors love to know.

Look, I'm not sure to be frank how much we would need and whether we were going to investors.  My focus right now this quarter, and certainly going into April, is on sales and generating the revenue.  I believe in building a sustainable business, and that means generating growth within the business.  If we, depending on how the next few months goes, will depend on whether we do need to do a capital raise or not.  As I say, I'm quite close to most of the shareholders so should the need arise, we should be...  I'm fairly confident that I have their support.

All right.  Well, Jennifer, I've hopped onto the site and had a hunt around, I think it looks like a really good and easy to use site and we wish you the best of luck. Thanks very much.

Thank you, very much.

Thank you.

Thank you very much for your time today.

Thank you, and thanks for coming in and talking to us.