After Freelancer Group's (ASX: FLN) losses doubled to $1.9 million in 2021, it was left to CEO and founder Matt Barrie to allay fears about how the online workforce and freight marketplace company can convert growing expectations into profit.
After record sales growth during the first quarter, Barrie blamed the subsequent slow-down on droves of gig economy workers abandoning the Freelancer.com marketplace during the northern hemisphere summer to take advantage of lifting Delta COVID restrictions.
Facing increasing competition from rival Upwork and citing issues with freelancers on the platform applying for hundreds of jobs at a time while playing loose with ‘copy and paste’ solutions, the business was forced to make significant improvements to its core product, merging codebases and overhauling its mobile interface.
The Sydney-based business also revamped the revenue models behind its marketplace platform including its predictive ad targeting to improve customer acquisition, which it hopes will allow for improved profitability by cutting advertisement spending.
“We made some significant changes to our paid advertising acquisition model,” CEO and founder of Freelancer.com Matt Barrie said.
“That was the bugbear of the year here, in the fact that the model is a big improvement in terms of paid acquisition, but when we deployed it, it reduced a lot of the spends that we made in the pay channels, and it took a while to get that spend back up again.”
“That really knocked the wind out of our sails for the second half of the year from a freelancer core marketplace perspective, but we are back positive year on year,” he added.
Breaking the billion dollars cash-sales ceiling for the first time, posting an all-time gross payment volume record of $1.2 billion that was up 41.3 per cent, was one positive milestone for the business.
However, overall revenue dropped 5.2 per cent to $134.5 million over the same period.
Marketplace and payment sales dropped $4.3 million to $43.3 million as Freelancer’s primary business segment, Freelancer.com - the world’s largest freelancing and crowdsourcing marketplace by the total number of users and jobs posted - underwent a rebuilding phase.
The escrow segment of the business stood out in terms of performance, posting gross recording revenue of $11.3 million, up 37.3 per cent over the same period, including an overall EBITDA profit of $1.7 million.
“Escrow.com is the world's largest online escrow company, and we've completed US$5.5 billion to date, in payment volume, through that business,” Barrie said.
“From the fourth quarter, we are on a run rate of over US$1 billion a year in volume through the business.
“It's growing like crazy at the moment, and we are really knocking the lights out - enabling large value transactions, so anything from selling oil to jet parts online.”
The escrow business ended the quarter with off-balance sheet cash of US$47 million due to regulatory constraints in terms of reporting.
The gross load value of the freight division jumped $48 million to $326 million in FY21 on the back of the business acquiring Loadshift, a heavy haulage freight marketplace, for $7.7 million in May 2021. The company also received a $3.7 million investment from Wes Maas, CEO and founder of Maas Group (ASX: MGH).
Despite the poor results, Barrie says he has never been more comfortable or happier with the business, having paid down a lot of technical debt for the Freelancer division.
The founder also hinted that the whole process might have been easier had the group simply stayed private.
“Effectively, we rebuilt the entire business while being a public company which was very rare to do - normally you stay private, then go public after all that is done,” Barrie said.
“When we IPO’d the business, we'd only ever raised US$1.5 million in the capital, and that wasn't used for operating capital, that was used to acquire a business.
“I think we’ve been pretty damn efficient in terms of capital raises, and so forth, and bootstrapped this business, for the most part, all the way along. As a result, it's been a little bit tough rebooting the platform on the public markets, but from here, I really think we're in a great place.”
The 2022 focus on the freight side is to convert the posted loads into a commission-based model, replicating what is done on the freelancer side and turning that into revenue. Barrie says the business could surprise everyone in terms of the overall revenue contribution of the segment and the speed at which it will be done.
On the freelancer side, the business intends to double down on the customer acquisition fronts, build out the collaborative tools to overhaul the user experience and focus on retention, trust and safety.
The business has had success winning several enterprise contracts in the past year and is now able to get gross merchandising value (GMV) moving quickly.
“These engagements can be huge in scope, as you're seeing with Deloitte, with the [un-named] computer company, with NASA, with the Saudis, so it's really figuring out operationally how, in the account management and the change management side, to really get those accounts moving in a big way,” Barrie said.
“We have more than enough business coming in day-by-day, and now we've got to figure out how to deliver our labour at scale to match the latent demand that comes to these companies.
“We are unique in our positioning, and the reason why we're winning a lot of these big high-end multinational accounts is that we are a multinational business, and our competitors have decided not to go multinational go backwards - from a marketplace model to more of an agency model.”
When asked at the press meeting whether he was paying enough attention to the growing escrow segment of the business, Barrie was at pains to provide reassurance that this was probably taking up the majority of his recent time.
The escrow business is beginning to scale upwards, bringing in David Diamond, brother of Zip (ASX: Z1P) founder Larry Diamond, to work in the marketing department and is looking to increase the sales department where there is currently only two members.
Barrie confirmed there are no acquisitions planned for the upcoming year.
FX was called out as a headwind as 74 per cent of the business’ revenue comes from the US, with the Australian dollar appreciating against the USD over the past year by 8.9 per cent.
Following the announcement of the financial results, shares in The Freelancer Group (ASX: FLN) dropped 1.85 per cent to $0.53 for the day.
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