When Matthew Blake was asked how many offices Nexem Corp. has nationwide, he hesitated before saying, “That’s a dynamic number. It might be more than 50.”
He’s also not sure exactly how many acquisitions he’s made in the past two years, saying it’s “15 or more.”
Of course, keeping track would be hard for anyone when revenue has exploded almost 2,000% in the past two years at the Newport Beach-based firm best known for staffing.
His firm’s sales have skyrocketed from $6 million in revenue for the 12 months ended June 2016 to $122 million for the 12 months ended June 2018. The number of Orange County employees has jumped from 4 two years ago to 64 as of June—and Nexem is now looking for bigger space.
“Once I recognized that we had a good formula, I went on an acquisition spree” in cities around the country, Blake said in an interview. “I’m looking for synergy—businesses with great clients.”
Nexem is ranked the fastest-growing company on the Business Journal’s annual list for firms topping $100 million in sales.
Blake, 48, is the sole owner of Cato Advisors, a holding firm of 10 companies which he began in 2014 when he completed his MBA in Finance at the business school of Columbia University in Manhattan.
“I was aspiring to be a holder of small businesses and then started operating them,” Blake said.
He’s in the process of rolling some of his other holdings into Nexem, which he’s building into six operating divisions such as legal, technology and the flagship staffing.
“We’re operating all these brands and I know that cross selling can result in 10% internal growth,” he said.
Into Lower Margin Business
For example, Franklin Data, a Texas-based firm that he began in 2000 to provide software to help legal firms shift from paper to digital data, will become part of Nexem Legal.
“We’re sun setting the brand [of Franklin Data],” he said. “We’ve spent 20 years building the brand. It’s one of those tough things.”
When asked why he would switch from a technology firm with typically high margins to staffing, which has much lower margins, Blake said he wanted to diversify his holdings. While he was trying to grow revenue at Franklin Data, a person approached him about the staffing business.
“When he brought it up to me, a light bulb went off,” he said. “Although I saw the low margins, I also saw the amount of money that can flow through the business.”
When he moved into outsourcing, he called it Staff Holdings Inc., growing the business through acquisitions and focusing on providing employees for light industrial, technology and clerical administration. It “has taken off nicely.”
He decided to rebrand the company to Nexem, which is short for Next Employee. It could also be considered a derivative of nexus, which means a connected group.
While Nexem Staffing is the flagship unit that provides the bulk of the revenue, Blake doesn’t want to be too heavily weighted in one industry and would rather provide services that complement each other such as analytics, healthcare and legal technology.
In August, Nexem bought an Atlanta company that provides small law firms with the latest client applications, cybersecurity and remote desktop services.
“The clients don’t want the expenses of a big law firm,” he said. “We created a fractional piece where they can run a law office for $500 a month.”
No IPO Needed
Blake plans to keep its headquarters in Orange County calling it a “great community” with “great talented people.” Plus, he said customers like to visit Newport Beach.
He might consider an initial public offering, although he has a “healthy credit facility” from Wells Fargo & Co.
“If the formula continues to work, then I don’t need the capital markets.”
The staffing unit’s website last week said it has 4,251 candidates working, 498 current job openings and 600 clients served this month. He’s also talking to a national client that might need 3,000 employees.
Blake is expecting to finish 2018 with about $137 million in sales and once his other brands are added into Nexem, the sales could be around $160 million.
Why the exploding growth?
“I attribute it to having a great staff,” he said. “My thesis was to build a brand that could provide our clientele with human capital, workforce solutions and project-based services.”
