Freelancer (ASX:FLN)

Matt Barrie
CEO & Chairman
Market Cap (AUD): 334.05M
Sector: Industrials
Last Trade (AUD): 0.735 +0 (+0%)
Tab Bar

1. About

Freelancer.com is the world's largest freelancing and crowdsourcing marketplace by a number of users and projects. The Company connects over 27,831,688 employers and freelancers globally from over 247 countries, regions, and territories. Through its marketplace, employers can hire freelancers to do work in areas such as software development, writing, data entry and design right through to engineering, the sciences, sales and marketing, accounting and legal services.

2. Business model

 

The Group operates the following divisions:[1]

 

Division

Revenue ($’000)

% of Revenue

% of Profit/ (Loss) (before Tax)

Profit drivers[2]

Online Marketplace

$43,850

87.23%

(56.03%)

  • The Company achieved Net Revenue of $50.3 M in FY17 (down 5% on the previous corresponding period), and Gross Payment Volume of $587.5 M
  • Revenue excluding Escrow.com amounts to $43.9 M (down 3% on the previous corresponding period, GPV excluding Escrow.com amounts to $159.4 M (flat on the previous corresponding period)
  • The Company’s gross margin of 87.5% in FY17 improved by 1.4% compared to the previous corresponding period (FY16: 86.4%) and has been within a consistent range since 2011
  • The Company’s cost of sales predominantly consists of transaction costs that are incurred from the various gateways relied upon to process user payments, as well as various provisions taken for credit card chargebacks and fraud risks

Online Payments

$6,420

12.77%

(43.97%)

3. Strategy

 

Key strategies include:[3]

 

  • FY17 was a challenging year and already FY18 is looking brighter
  1. For Freelancer.com, marketplace health is improving and growth is returning to trend. The Company is excited in particular about the build-out of collaborative tools, usability improvements, mobile, performance, managed service, API and enterprise offerings
  2. For Escrow.com, China volume has returned to trend and while volume has churned due to a more rigorous AML/KYC program, the Company is highly optimistic about opportunities and growth with the new Escrow.com API and ecosystem the Company is developing around this API
  • The Company will increase profitability to above breakeven in FY18
  • Freelancer’s marketplace business is acyclical. The global financial crisis led to the original emergence of the online crowdsourcing and freelancing industries
  1. Employers looked online to hire freelancers rather than full-time staff
  2. Workers looked to the Internet to find new sources of employment
  • The potential for significant macroeconomic volatility provides further additional upside to Freelancer’s opportunities

4. Markets

    

The Group operates in the following markets:[4]

 

Industry

Industry Revenue

Growth Rate

Professional Services (Australia)

$157 Billion (2017)

1.6% (annual 13 -18)

Crowdsourcing Service (US)

$1 Billion (2017)

37.1% (annual 12 -17)

Graphic Designers (US)

$13 Billion (2016)

1.7% (Annual 12-17)

Web Design Services (Australia)

$1 Billion (2016)

3.3% (annual 12 -17)

5. Competition

 

Major competitors include:[5]

 

  • REA Group Limited (ASX: REA)
  • Melbourne IT Limited (ASX: MLB)
  • SEEK Limited (ASX: SEK)
  • Carsales.Com Ltd (ASX: CAR)

6. History

 

2009[6]   

In January the Company was incorporated

In May, initial financing was raised from Startive Capital. GetAFreelancer (Sweden) was acquired

In October, domain name freelancer.com was acquired. Changed name to Freelancer. Entered list of top 1000 websites worldwide (Alexa)

In November 500,000 projects were posted

 

2010   

In April, became a part of Alexa top 500

Freelancer Marketplace, a virtual content marketplace was launched

In November Freelancer.co.uk (United Kingdom) was acquired

In December LimeExchange (USA) was acquired, hit 2,000,000 users

 

2011   

In March Freelancer CEO Matt Barrie was named inaugural BRW Entrepreneur of the year

In April 1,000,000 projects posted

In May, 2 Webby Awards were won

      

2012  

In July Freelancer.com, the world's largest outsourcing, and crowdsourcing marketplace announced that it had acquired Scriptlance, Canada's largest freelance marketplace and the fifth largest in the world.

In November Vworker/Rentacoder (USA) was acquired

 

2013   

In August, Gold, Silver and Bronze Stevies in the International Business Awards were won

In November, Initial Public Offering was completed. Freelancer was floated on the ASX

 

2014   

In March Freelancer acquired leading Polish freelancing marketplace

Freelancer acquired virtual content marketplace Fantero.com

 

2015   

In November Escrow.com acquisition was completed

Wins Webby Award for Best Employment Site and People's Voice Award

 

2016   

Freelancer Limited’s Escrow.com acquires Escrow Angel

Opens office in San Francisco, USA

Acquires Nubelo and Prolancer

 

2017   

Website is currently available in 34 active languages, 52 domains, 22 currencies

Opens office in Buenos Aires, Argentina

7. Team

 

Board of Directors[7]

 

Matt Barrie – Chief Executive Officer & Chairman

Darren Williams – Non-Executive Director

Simon Clausen – Non-Executive Director

 

Management Team

 

Neil Katz – Chief Financial Officer

Amir Massoudi – Director of Growth

Christopher Koch – Deputy Chief Financial Officer

Amir Massoudi

Peter Phillips – Vice President, Compliance    

Greg Robinson – Vice President, Compliance

Adam Byrnes – Senior Director, International

Sarah Tang – Head of Global Operations

Sebastian Siseles – Director, International

Helma Kusuma – Regional Manager, Asia


read more

8. Financials

 

2018 Half Year Results Presentation

 

Financial Year 2016/2017 (ended 31 December):[8]

 

Division

Revenue ($’000)

% Change

Profit/(Loss) (before Tax) ($’000)

% Change

Online Marketplace

$43,850

(2.92%)

($2,095)

(3841.07%)

Online Payments

$6,420

(15.31%)

($1,644)

(455.84%)

Total

$50,270

(4.70%)

($3,739)

(821.81%)

9. Risk

 

Major risks include:[9]

      

Market Risk

Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currencies. Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group has not entered into forward foreign exchange contracts to protect against exchange rate movements. The Directors are of the view that the cost of hedging the Group’s short-term foreign exchange exposure outweighs the risk of adverse currency movements.

The Group had net assets of $453,000 denominated in foreign currencies as at 31 December 2017 (comprising assets of $30,964,000 less liabilities of $30,511,000). The Group had net assets of $4,470,000 denominated in foreign currencies as at 31 December 2016 (comprising assets of $34,782,000 less liabilities of $30,312,000). The analysis below reflects management’s view of possible movements in relevant foreign currencies against the Australian dollar in the short term subsequent to 31 December 2017. The table summarises the range of possible outcomes that would affect the Group’s net profit and equity as a result of foreign currency movements on year end foreign denominated assets and liabilities

 

Price risk

The Group is not exposed to significant equities price risk.

 

Interest rate risk

The Group is not exposed to any significant interest rate risk

 

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. Credit risk is managed by a risk assessment process for all customers, which takes into account past experience.

 

Liquidity Risk

Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.

 

Capital risk

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current parent entity’s share price at the time of the investment. The Group actively pursues additional investments as part of its growth strategy. The capital risk management policy remains unchanged from the 2016 Annual Report.