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Freelancer posts record revenue and user growth

Matt Barrie's Freelancer has accelerated growth in a record half year that saw the number of users increase to 16 million.
Freelancer posts record revenue and user growth

Freelancer Limited (ASX Code:FLN) has delivered financial results for the half year ended 30 June 2015 (1H15) and once again it did not disappoint posting record growth.

In fact, the half year saw an acceleration of growth in revenues, registered users and projects and contests posted.

The world’s largest freelancing and crowdsourcing marketplace posted a 41% increase in headline net revenue to $16.8 million.

The half year was driven by strong organic growth with no major acquisitions on the P&L.

Gross Payment Volume in 1H15 grew strongly to $64.1 million (up 30% on the prior corresponding period).

The company had positive operating cashflow of $1.1 million for the period.

As at 30 June 2015, the company held cash and equivalents of a healthy $31.1 million (+54% on prior period). During the year, a capital raising of $10 million of new shares was priced at a premium to last close.

Across the board, Freelancer posted impressive metrics for 1H15, driven by the large growth in registered users:

- Total number of registered users 15.9 million (12.4m previous year);
- New projects & contests posted 1.0 million (0.75m previous year);
- Total number of projects & contests posted 8.0 million (6.1 million previous year);
- Continued improvement in take rate to 26.2% (1H14:24.0%); and
- Gross margin of 88%, in line with prior periods.

Key revenue growth drivers:

– increased user, project & contest acquisition
– increased marketplace efficiency and conversion rate optimisation
– product development & increased take up of value-added services
– increased take-up and optimisation of memberships

The focus on re-investing for growth paid off as the company continued its focus on product development, improved user experience, user and project acquisition, and customer service.

Operating NPAT was $(0.8) million and operating EBITDA of $(1.0) million.

In 1H15, the company acquired Escrow.com – the leading provider of secure online payments for consumers and businesses on the Internet, with the acquisition expected to close in 2H15.

Freelancer’s CEO and chairman Matt Barrie said: “Freelancer is a high growth Internet company and consistently delivers high growth in net revenue each year. We are proud of having proved this track record of high revenue growth yet again, and at an accelerating rate.

"In 1H15 our focus was continued growth in project & contest volume, international growth in countries and languages, and growth in mobile usage.

"We built even better tools to communicate & collaborate, improved our internal algorithms including matchmaking. We improved the customer experience in multiple dimensions, including launch of our Showcase app and website - a cross-platform design gallery of millions of easily browsable portfolio items.

"We launched local jobs in 100 new categories of location specific work, increasing our total addressable market from $122 billion to several hundred billion dollars per annum. We continued to execute on our bolt-on acquisition strategy, acquiring two small marketplaces.

"We acquired Escrow.com, the leading provider of secure online payments on the Internet. This business had 2014 gross payment volume of US$265 million, 2014 net revenue of US$5 million, and 2014 US$1.2 million in EBITDA - with over US$2.2 billion in transactions to date.

"We also won four awards including Best Employment Website, Best Professional Services Website and the People’s Voice in both categories.”


Year ahead

Freelancer is continuing its focus on the product, user experience, scalability and expanding the features of the marketplace offering.

In addition, expanding the functionality and penetration of the platform across mobile devices, as well as expanding across regional and multilingual markets, and further across job categories is a key strategy.

Escrow.com is the world’s #1 company for secure online payments and has strong network effects with the Freelancer group.

This should enhance the ability to capture more of the value chain and provide value-added services.


Revenue model

For employers it is free to post a project, free to review bids, free to talk and review samples.

– 0-3% project commissions paid by employers when a project is awarded and accepted. For freelancers it’s free to view projects posted, free to bid on projects, free to talk to employers and provide samples of work.

– 3-10% project commissions paid by freelancers when a project is awarded and accepted.

Membership plans range from US$0.99 to US$199.95 a month, and provide additional features and benefits in addition to varied commission rates.


Analysis

The strong half year of organic growth and acceleration in the number of network users was impressive, standing at 16 million, adding 1.8 million users in 1H15.

Gross margins are consistently high, 88% in 1H15, in line with 88% in 1H14.

Looking ahead, the growth and momentum building should continue for the 2015 calendar year. The acquisition of Escrow.com is expected to contribute to 2H15 results, as well it is a strategic and operational inflection point for Freelancer.

Freelancer is changing and disrupting the global dynamics in the marketplace for people. According to McKinsey Global Institute, 160 million jobs, or about 11% of the projected 1.46 billion services jobs worldwide, could be carried out remotely, barring any constraints in supply.

The world’s largest freelancing and crowdsourcing marketplace has attained a global scale of users that underpins its current market valuation while providing a platform for it to grow further given it can scale across countries, languages, and across mobile usage for years to come.

Freelancer continues to be one of our top stock picks.

 

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX emerging companies with distribution in Australia, UK, North America and Hong Kong / China.

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