Freelancer Limited (FLNCF) Q4 2023 Earnings Call Transcript

Freelancer Limited (OTCQX:FLNCF) Q4 2023 Earnings Conference Call February 26, 2024 7:00 PM ET

Company Participants

Matt Barrie – CEO

Shaun McMeeken – VP, Sales

Adam Byrnes – VP, Product and Growth

Neil Katz – CFO

Conference Call Participants

Matt Barrie

Hello and welcome to the Freelancer Limited Full Year of 2023 Financial Results Presentation. My name is Matt Barrie and I’m the Chief Executive of the company. Today with me in the room I have Neil Katz, the Chief Financial Officer. I have Andrew Bateman, who’s the Head of Enterprise Products. Shaun McMeeken, the VP of Sales. Adam Byrnes, who’s the VP of Product and Growth. And Cohen Wisniewski, who is the Head of Operations for Loadshift and for Freelancer.

As with all of our results presentations, you may address questions, to any of the executives in the room at the end in the Q&A, or to myself. And you may do so, through the facilities within Zoom.

So today, we delivered gross marketplace volume, of a bit over $1 billion $1020.7 million, down 4.8% on pcp. Freelancer was up 2.9%, to $132.1 million. Escrow was 888.6 million, down 5.8% on pcp. The group net revenue was $53.3 million, down 4.1% on pcp. Freelancer was down 2.8% on pcp, to $44.2 million. And the Escrow revenue was $9.1 million, down 9.9% on pcp.

The big result in these full year financial results, was a momentous turnaround in the net profit before tax, which lasted with negative $7 million. And this year, we egged out a small profit. And we continue, to build on that profit in the following in 2024. So the group, for those of you that are new investors, consists of three parts of the business. Freelancer.com, which is the world’s largest cloud workforce in the world, is about 72 million people.

Escrow, which is the world’s largest online escrow company, lies in about 55 jurisdictions all throughout the U.S., Canada and Australia. It facilitates and secures, large value payments and powers businesses, such as eBay Motors, which is the exclusive payment system. And Loadshift, which is Australia’s largest online freight marketplace, primarily dealing in heavy haulage freight.

All are market leading, broad, horizontal service offerings that consumers through the businesses and enterprises need every day in the fields of labor payments freight. So, we’re trying, to build a mini Amazon here of services. And these are all very, very big industries.

So going to the segment reporting. So in terms of Freelancer, as I said before, the revenue is $44.2 million, down 2.8% on pcp. Freelancer GMV was up 2.9%, to $131 million, or $132.1 million. And the segment was operating EBITDA positive in the year. The marketplace added 1.4 million new users and 201,000 new projects to the marketplace. The average project size was flat, effectively at $259 a little bit down. And that includes, all the customers in our Enterprise divisions and the Loadshift division, which balance out quite nicely, if you look across the distribution below.

Liquidity in the marketplace remained very strong, with the average bids per project at 42, which is flat on pcp. The liquidity in contests, has gone through the roof. We now get an astounding 341 entries, per contest. And with contests, it may start with something as very simple, as a $10 per contest to get some image, or logo design right up to the largest contest, we have running right now, which we’ve just awarded many prizes for. It’s AUD10 million for the National Institute of Health and NASA, for gene editing of the central nervous system of humans.

And I’ll show you a little bit later on, the sort of stuff we’re doing there. But you can really get anything done on the Freelancer, no matter, no job is too small, too large to get done on our platform. A big focus for the year of product engineering was really around four items. The first was personalization to drive the core marketplace conversion by AI. In the past, we really called it personalization, but it actually is AI. We didn’t want to give too much away in terms of what we’re doing here. But we think there’s a very, very bright future for us in 2024, applying AI technology to the platform. And I’ll talk about this a little bit later on.

The second is collaborative features, to really drive retention, engagement and growth. Every unit of retention is worth more than a unit, far more than a unit of acquisition. So we’re building a number of things, to really make it easy to work in teams, and larger groups on the platform, and really bring back the client, the Freelancers to make a part of their everyday workflow, to use our platform.

Also to improve acquisitions through organic channels. We believe that the world of Google and dominating customer acquisition on the internet, is rapidly drawing to a close with the advent of large language models and chat-based interfaces. And I believe that search engine marketing, and businesses that rely upon it, are going to have a challenging time in the future. So, we’re really focusing on organic channels. And it’s great that, we’ve also got our search engine marketing, to its highest probability ever, through quite a lot of work over the last number of quarters. And so we’ll talk about that in a second as well.

And also taking the UX & design, to the next level from consistent to delight. So that was last year. And I think we achieved each of those four items, I think, in a pretty solid way. On the first, personalization to drive core marketplace conversion. Throughout the year of last year, and we operate in a calendar year, the product team had a big focus on really optimizing the funnel, through the use of AI.

And those of you who use the website quite frequently, will see that, when you post a project now, that flow is rapidly becoming a very, very delightful experience in terms of how you get jobs done. In fact, this morning and a couple of days ago, someone was posting stuff on Twitter that, I’ve retweeted about how surprised, and excited they were about how easy the site is to use, and how much we assist now with AI.

In the fourth quarter, we completely redesigned the job posting flow, and we deployed some updates to the AI model. There’s a lot to go here. We actually have a pretty amazing experience that we’ve got in our internal prototype. But the great thing is when we apply AI to our particular business, which is very much a text chat based business, we get great conversions. I mean, LLMs are very, very much suited towards our business.

And the other thing is that Freelancer traditionally, has had a huge amount of content on the internet. So we’ve got 72 million users, each of those users is a web page. We’ve done 22 million, 23 million projects. Each of those projects is a web page, and then we translate those pages into 30 something languages. We have it diced up into a whole different number of ways, with the various project listings and other views that we show.

As a result, we have a gigantic amount of content in the foundational models for AI. In fact, far more than our competitors, in terms of just the breadth of information, about Freelancer versus our direct competitors. And so, all that – data that’s going into those foundational models, coupled with the data we have internally around the world of work and how people communicate and get things done means that we’re getting pretty tremendous results when we apply this technology.

And let me tell you, by the end of the year, the product is going to be absolutely wild, in terms of what you’re about to do. And we’ve got some internal demos, we’ve been showing off to people, and it’s almost voodoo magic, in terms of how the experience is going to change. We also provided more personalization, around the ability, to modify profile pages, bid with specific profiles and so forth, which has been taken up quite strongly by the Freelancers. It’s been about half a million bids created from the new profile, multi-profile pages that we’ve created.

With collaboration, we’ve done quite a number of things in FY ’23. With the bulk of our efforts, improving our groups’ products, and this is really a bit like Facebook groups, where you can have a group on a particular topic. It may be Freelancers from Pakistan, or it might be AI Freelancers, or a special interest group, or it might be a workroom on a project. We allow lots of people to work together.

That group’s functionality now, some groups have in excess of 8 million, 9 million people in them. So, these groups scale quite well for a variety of different use cases as well as for having a large number of Freelancers. There are a couple of Freelancers that started producing some very high quality video content, which they can post directly into the groups to educate people on the platform, how to use it and so on. So that’s going to double down and increase over the course of this year.

We’ve also got a project update feature, which is currently in beta testing, and will go fully live on the platform, in the next week or two. We believe that’s going to drive engagement, really makes it easier for Freelancers to check in and shop their work and have the client be informed of that. And we also launched package services. So, this is really your Fiverr style model of click to purchase, although we’re doing it, in, I think, a fairly more sophisticated way.

We’ve built on top of our quote functionality and with a quote you can quote – send a quotation out as a fixed price, an hourly engagement, or as a subscription, or as a combination of those three. And so – we think we’ve got a more robust offering, here in terms of services. There’s some pretty exciting things, happening in the next month, or two building upon this, to take it to the next level. Already there’s thousands of these services that, have been created, and Freelancers are sharing those links over the internet.

We also have been focusing, on improving our acquisition, through organic channels, while at the same time lifting what’s called our ROAS, which is a return on ad spend through our paid channels. We’ve been investing in viral acquisition, which has resulted in distinct active referring users up 70% year-on-year in the fourth quarter. And we continue to double down on that, over the next couple of weeks.

So our return on ad spend, is actually the best it’s ever been. In fact, I saw the numbers this morning, and it’s a huge step up. What this actually means is, we’ve been able to cut $3 million out of our ad spend budget, on an annual basis, and still have an uplift in return and actual revenue, from that program. So that’s been phenomenal, and helped someone with profitability. And we did that through our data science team basically launching a long-term predictor, which we reported on previous quarters.

Because when you go through these paid ad programs, you have to make an estimation, of the value of the customer, through a number of – small number of payments they make within the 30-day window of signing up. And so it requires a fair bit of sophistication, to be able to extrapolate and figure out, what the customer is going to do, over a longer time horizon. So, we put a fair bit of investment into that, and we launched that some time ago, and that’s paying off now in space and the team now, is just continuing to optimize that.

In terms of the design, for those of you who use the platform, you will see this. The platform for a long period of time had a UX that was lagging simply, because when we took this business public, we did so very early in the life of public company. We only raised $1.5 million before going public, and – which is probably the smallest pre-raisings probably in the history on the ASX. And as a result, we used that money not for operating capital, we used that money to buy a platform.

So when we took the business public, we didn’t really have a platform that, was robust enough for hundreds of millions of users, and so forth. We managed to rebuild all of that while being a public company, and we’ve taken a bit of punishment in terms of the share price by doing so, because companies don’t usually do that. They usually kind of do that privately, and before they go public.

We took a bit of a beating, but for those that use the platform now, you will see it is absolutely – I think we probably nailed the consistent delight in FY ’23 and day-by-day-by-day, it keeps getting better. And let me tell you, by the end of this year, it’s going to be winning awards and that’s one of our targets for this year, is to start winning awards for the designers. It’s really becoming a delightful and engaging platform to use, and we’ll see that flow through in the stats.

The other thing we did was we really – and this is a really major achievement that, happens behind the scenes. We cleaned up the marketplace, from a bad actors perspective a tremendous amount. We pretty much broke, the back of two forms of bad actors. One is people spamming projects on the platform, either to take them off site, or to cheat the Freelancers, by pretending like they’ve got work, and getting them to pay a job application fee.

In particular, in Nigeria, there are many, many, many thousands of people that are on all the platforms and it’s not just the work platforms. You see it on Facebook, you see it on LinkedIn, you see it all over the internet, you see it on Dribbble. They’re spamming to basically commit a sort of fraud. Our trust and safety team, really destroyed Freelancer as a viable platform, to do that in a big way in FY ’23 that required a lot of work.

We’ve identified 180,000 proxy domains we’ve blocked. We’ve blocked thousands and thousands of SMS proxy phone numbers, which allow people to send SMSs without buying a SIM card. We figured out – we’ve got some software running, and some pretty state-of-the-art analysis as a detector sort of fraud, to the point now that our team actually speaks, to a topic at conferences internationally on forums, on basically international fraud online.

We will continue to fight these bad actors, but we’ve really reduced this, to a trickle and you can see week-by-week-by-week, those remaining are giving up. And so it’s a minority on the site and it was a tremendous achievement, to happen in 2023 in terms of cleaning that all of that up. And I think it will also provide a bit of a competitive advantage, because these fraudsters never really truly give up. They just go to a platform that’s, easier to go work on it. And so, they’ll be going to our competitors now, to give them a bit of pain.

The four major items for product focus for this year for the Freelancer platform, is to turn Freelancer from a painkiller into a narcotic. They always say, you don’t want to sell vitamins. It’s nice to sell vitamins, but people forget to take them. You want to sell a painkiller. Well what’s better, the painkiller, or the narcotic and that’s a platform, or an application that is so good to use, so engaging that the customer has withdrawals, and they can stop using the platform.

So for example of that would be Uber. Uber is so easy to use, getting cars and so forth that if I had to stop, using Uber and go back to a traditional way of using taxis, it would be somewhat, of a painful experience to go back to the old world. And that’s what we plan to do with Freelancer. We’re doing that with personalization. We’re doing it with collaboration. We’re doing it with the Delight platform, among other things.

We also want to reinvent the world, of work in the AI revolution. And I’ll talk about little bit in two seconds, when I get the forward-looking statement. But we, I think, are phenomenally placed. And I know every company in the world, is trying to attack AI somewhere into their presentations, and on their homepage. But I’ll explain in a second why, we really are a phenomenal winner in this whole revolution.

Our third thing, is to rethink client acquisition and well without Google. We are really on top of that, in terms of the paid channels. We’ve really got that return, on ad spend really doing a great return for us. And we’re spending a lot of time, looking at the viral channels, organic channels and we’ve had some great success. I’ve talked about this recently with the viral channels in the fourth quarter. And then we want our design to win awards. And that’s a big one to me. I think we’re getting close to that sort of level.

So, I’ve had the forward-looking for the year. And let me tell you, you know, I’ve done a fair bit, of speaking around the world on the topic of AI. Last year in July, JPMorgan invited me to speak, at their Global Chief Investment Officer Summit on the topic of AI, which was some a bit of a life achievement, because in that room there were 100 people, managed $7.8 trillion. Jensen Huang 16.16 was first up, Bill Browder, [John McEnroe] , Jamie Dimon and myself.

So that was a pretty, you know, pretty, pretty amazing forum. I did an opening keynote last week, again, on the topic of AI. The reason why is, because Freelancer is probably the biggest user, of AI in the world. You have 72 million people on the platform, and all the Freelancers using ChatGPT, and Midjourney, and Stable Diffusion, and all the other solutions that’s coming out. Our marketplace is probably the biggest user, as an online community globally.

And what’s happening there, is all the skills in the marketplace are leaping dramatically. You can be an average designer. Now you can be an exceptional designer with Midjourney. You can be an average copywriter. Now you can be an exceptional copywriter with GPT. This year, something will come out in the software tooling space, where you can be an average programmer, you can be an exceptional programmer. And already people are using GPT and the like, to kind of help write code. But this year, there will be a Midjourney moment happening in software development.

So, number one, all the skills in the marketplace now are lifting very rapidly to the elite level. And so, if you compare and who’s going to lose here, well, the Western world is going to lose, because if you’ve got now a Freelancer, say in the Philippines, or in the middle of Pakistan, or what have you with AI tooling, they can in some circumstances and increasingly compete with the top elite Western freelancers, because of the AI tooling.

So it really does lift the skills, for the largest low-cost workforce in the world. And it’s low cost, because it’s not just from emerging markets, but also it’s on demand. The other thing is that every business in the world, will want to transform to be AI powered. For those of you that are old enough listening in the call, I mean, 1994 was the year that your grandmother, so the geeks had email addresses. And 1995 was the year that your grandmother, had an email address.

And between 94 and 95, the world changed dramatically and led to the dot-com boom through the late 90s. Every single business in the world, small business, large business, wants to become an internet business. And what does that involve? It involves building websites. So you had this huge industry of website development, a lot of the cottage industry, one man band, small agencies, right up to the larger companies like your sausage software and so forth, were doing web development.

And today, web development is a very, very big category on Freelancers, maybe 30%, if you consider it at a gross level. And then we’ve had waves since then. We had a whole wave of mobile phone app development that happened, when the iPhone came out and led to a revolution and sort of apps, the mobile experience.

The next revolution, which I think is going to be 10 times bigger, will be the AI revolution. Every business in the world will want to apply AI, to make their business better. And where are they going to go? Right. They’re – going to go, it’s just like web development. They’ll get a small one man band. They’ll get agencies and they’ll be larger companies that will do the transformation. And all of those companies that are doing that transformation will be on Freelancer on the platform.

So we will be the place. I’m very confident where every business will want, to figure out how to apply AI, to grow their business. And it’s a bit more complicated, because it’s not as discreet as you go on a website and so, you kind of clearly know what the project is. It’s going to cross, all the functional areas. It’ll be used to basically replace customer support functions, or enhance customer support functions. It’ll be used, to enhance lead generation for sales. It’ll be used in the B2B funnel, for sales. It’ll be used in marketing to overhaul all the content on people’s websites, graphic design – for text.

And so, it will be used for training videos. It’ll be used for so many different things. It’ll be used for enhancing all the operations side of the business. And so, we’re getting ready and we’re getting prepared, in order to fulfill all of that. And look forward this year, to see a number of offerings come out from Freelancer. Really making this easy to understand and really easy to adopt, and really easy to get going and transform. It’s going to be pretty crazy world the next couple of years.

Now, I’ve talked about the combination of low cost Freelancers leading to unprecedented levels of productivity with the AI tooling. Jensen Huang who spoke before me at the JPMorgan Conference and said, AI won’t steal your job. But someone using AI tools will. And our Freelancers equipped with AI, are the ultimate combination to drive business success. Our platform, is not just a marketplace, it’s a launch pad for businesses of all sizes to lead into the future.

I’ve talked about all the data we produce. It’s not just the public data that’s going into the foundational models. It’s the private data. We have all the private data, the 23 million projects of 72 million people working together, on how jobs get done. That’s extremely valuable for our fine tuning of our own internal models. And our core marketplace also has numerous areas of opportunity to apply AI, to solve real significant marketplace and customer problems, which were intractable previously.

For example, it was previously hard to customize the funnel and the project experience for the 10,000, or more different types of work we could do on our platform. With generative AI now, that’s very straightforward. Before, it was very hard to have one of our agents provide induction for all the Freelancers, because we get 28,000, or so something up a day. And it would be an intractable problem to be able to welcome to the platform, guide them through using all the tooling on the platform, how to get going, how to get on jobs, fill their profile in, et cetera.

We can now tell the generative AI, in fact, I personally have written an agent to do that. So there are a lot of things that we can do and the very nature, of the platform being very chat-based, very text-based, very visual means – that the affinity with AI here is phenomenal. We also believe that AI will drive an explosion in entrepreneurship, because starting businesses will get easier and easier, and also less expensive.

And we also believe that there’s going to be a fair bit of, in the macro environment, dislocation in full-time traditional jobs. And as we’ve seen in the past, where you do have that dislocation, like COVID or the GFC, you get a lot of people going online looking for work. You get a lot of business, looking to cut costs online, and you get a lot of start-up businesses being created. And I do think that, there is going to be a fair bit of disruption, from AI in traditional jobs, such as customer support, which I think probably the first place it’s going to happen, where the support team is going to be incredibly empowered with AI technology.

But businesses will need less people in the jobs, they were doing previously. So people need to move up the stack, to become managers, or find new roles, or reskill or retrain. But I think in more of the traditional companies like banking and insurance and what have you, you will see quite a lot of dislocation and that will lead to a lot of entrepreneurship.

On the Enterprise side for Freelancer, I don’t know if I should, Shaun, but we welcome back Shaun McMeeken and leading the team. Did you want to have a go or?

Shaun McMeeken

So last year we deepened a number of our strategic engagements, with our partners around the world. I returned during the fourth quarter. In that quarter we delivered 55% revenue growth on pcp, resulting in overall growth for the year, double-digits, 12%. In terms of some of the highlights in some of the sectors, so in oil and gas, we finalized negotiations, with one of the world’s largest oil and gas companies in direct partnership, with their managed service provider in the United States. The scope of work, has been defined and sets a rollout in the first half of this year, which we’re excited about.

In the FMCG space in November, we finalized the commercials, and on-boarded one of the leading beauty companies in the world, out of Europe. They’re an iconic brand, and they selected us, as they’re looking for an alternative sourcing strategy, and more flexibility in their hiring initiatives, which is a common theme that, we’re seeing for multinational companies. That company is going through their vendor onboarding at the moment, and activating their first projects in the first quarter.

In terms of in-flight proposals, we ended the quarter with a number of proposals in progress, not just for the core marketplace, but also across engineering services and project management, including a transformation opportunity with one of the biggest BPO leaders globally. In terms of new partners, we have a very positive outlook for the first half of this year as we’re making future, or more inroads into global talent management.

We’ve got a number of agreements that are being discussed around the U.S., EMEA and through APAC. And there’s a lot of companies around the world that are really looking to explore emerging markets for talent, and they’re looking to Freelancer to provide that talent.

We’ve also overhauled our activation program for new clients, to really take them from posting their first projects, to kind of really scaling up over time. And so, we’ve got a number of clients that are going through that process at the moment. And the major goal there is, to really take them from first-time users of the platform, as Matt was talking about earlier, really using our platform as a daily habit, when it comes to hiring staff in their company.

In terms of government engagements outside of NASA, there’s also a lot of work going on with a lot of governments, particularly in EMEA. We’re looking at how to best utilize their workforce and create a digital economy heading into 2030. There’s a lot of strategic engagements around, how they best utilize the workforce. And so there’s a lot of governments who are talking to us, about how best to utilize our global talent, to fit those objectives.

We also continue our engagement with Deloitte MyGigs, which has been going for over seven years now. In addition to the U.S., we’ve now got member firms in EMEA and APAC also, asking about how they can deploy their own instance of MyGigs. And so, discussions will continue, with those member firms in the first half of this year.

On the field services front, with our partnership with the technology company globally, we’re now in 47 cities across five countries. Our project volumes increased, by over 150% in 2023, and we’re currently planning how to surge those volumes even further. We’re going to concentrate our efforts particularly on the bigger cities in India, but also look to open up other countries, such as the U.S. And we’re now approaching, in the last few years, we’ve now completed almost 50,000 work orders for our engineers who are being deployed, in hard to reach areas on a very flexible, and on-demand basis.

Matt Barrie

Yes, that’s a pretty big footprint we have now across India, Malaysia, Australia, New Zealand, and we plan on getting live in the U.S. We were supposed to do it last year, but it’s been pushed forward to this year. So, I think we’ve now, really proven ourselves that the Freelancer model, for field services works extremely well. And the great thing about this, particular program is, we do everything here. So, we do training, we do the QA, we do parts distribution and warehousing in a Freelancer model, which is really innovative and breakthrough and new.

We also do the work, we then do the follow-up QA and happy calls and so forth. And we do all of this, just with Freelancers. We have one person in our company here in Sydney managing a network of hundreds of people. So it just shows you how easy and scalable the model is. And now we look forward to that taking it to the next level. One thing I will mention about the government programs is the other thing we’re doing with government, which we’re developing a solution for. It’s very early days, but all the major governments of the world have a problem with unemployment benefits.

They pay billions of dollars a year in unemployment benefits, to a range of workers, a range of skills, and a range of environments, and so forth. And all of them are looking for ways, in trying to mobilize the unemployed, particularly the bottom 20% socioeconomically, to stand on their own two feet, and generate income in the future for themselves.

And we’ve got a bit of a plan, of how we’re going to do this, but this could be quite lucrative for us, because all governments have this particular problem and are begging for a solution, because traditional ways of just providing handouts don’t really encourage people to get into the world of work. Well, if you do micro work in the cloud, you can kind of edge your way into it. And it’s great for people who can’t work full time for whatever reason, are in remote areas, are disabled, or have other issues, elderly or what have you, which restrict them from working full time.

Onto NASA, I’ll do this one. Another good year for NASA and the U.S. government team. We are continually showing the power of the platform in delivering highly complex and high-end projects with very, very high-end service providers performing on them. We also broadened outside of NASA to team up with the L2 Consortium to do an innovation challenge for Australia, for the first lunar rover arm design.

Over the course of the year, we did challenges, such as teaming up with Harvard around – just creating a sustainable future. We delivered for NIST a heads-up display for first responders for million dollars going into emergency situations such as bombings, or other disasters. For the Department of Reclamation, we designed a better precipitation measurement device, which is out in the field now, being measured for the final award.

We delivered a 30 to 60 times speed-up in computational fluid dynamics modelling for river sedimentation, also for the Bureau of Reclamation in basically optimizing linear equations, sparse metrics, and solvers. As I mentioned before, we did some work with the Australian Space Agency, and we delivered some of the prizes for the targeted genome editor delivery challenge, which is for editing genomes in the human central nervous system, both in vivo and ex vivo.

And you look at some of the winners of these prizes, and it just shows you the extent of stuff you can get things done. You’ve got here, the School of Medicine at the University of Pennsylvania. You’ve got PhDs. You’ve got the Beth Israel Deaconess Medical Centre. You’ve got India School of Medicine. You’ve got a bunch of commercial companies, Columbia University, the Broad Institute at MIT and Harvard. You name it, right?

So, I mean, you can get anything done on Freelancer. It scales up so very, very simple work right through to very, very sophisticated work. And as you increase the prize money in contests, or the project size, the quality and the sophistication of the Freelancers goes through. And you can see that this is only just the beginning of what is being delivered under this particular program.

I think it’s about $1.375 million to $6 million. And you can see here this incredible amount of innovation that’s been delivered under this particular program. So, we will increasingly be productizing innovation contests and applying them to governments and also to large enterprises, around the world, to deliver breakthrough innovation results.

MyGigs’ got about 50,000 U.S. consultants on the platform. This has gone on for a long period of time, but we look like we’re about to get into Europe and into Australia. The big thing here is really activating the external side of the marketplace. At the moment, they’ve really been focusing on the internal side.

You’ve got to – just very, very slow going, because there’s a lot of stakeholders on their side now, ensuring success. So, we’re just inching forward slow, but slow, but slowly. But the great thing is that we’ve got a platform which has gone through extensive QA, extensive review – by compliance, HR, legal, consulting this, that the other. And that’s a platform that’s learned from all of that, to be able to be provided to other companies around the world.

On the Escrow front, we had in the fourth quarter GPV of $217.9 million, which is up 15.1%. In U.S. dollars, it’s up 14.2%. It was down for the year, but we had a good fourth quarter, turning it around. Escrow as a business was profitable for the year. The GPV was AU$897.7 million down 5.9% in Aussie dollars, a little bit more in U.S. dollars. And if you look at the overall GPV trajectory of the business, we had that silly period in 2021 where in the zero interest rate environment, you had some very large purchases being made, et cetera.

But, you know, the trend is intact from pre-COVID. And the big thing we’re really focused on now that, we’re throwing all our resources into it, we’re about to go live, in one of the largest shopping cart platforms in the world. The shopping cart platform, will be the first payment method ever to be able, to do large value complex transactions. It’s a household name. And the volumes here should be pretty decent, I would think. It really allows a new class of shop, to go inside this shopping cart platform. And it has huge reach. So that’s happening in the next month, or two. It’s going live, and it’ll be out there, and we’ll see the volumes pick up, hopefully, from that.

We’ve been spending a lot of time, in automating and streamlining our operational process and preparation for that. In terms of partner activity, we signed partner agreements with the Fortune 500 e-commerce platform, and another with the NASDAQ-listed e-commerce platform. We actually have quite a few of shopping carts now. That’s going to be a big focus, to turn on one after the other, which is great. We’ve been doing pretty well with M&A Marketplaces and brokers, growing that portfolio.

And in automotive, we’ve been solidifying our relationship with eBay Motors and looking at expansion, and getting into things like financing and so forth. And we also, we just had the NADA show, which is the National Automotive Dealers Association show. And we’ve got a bunch of automotive things that we’re doing there. And I do think that the next 24 months, you’re going to see the entire automotive industry go, thinking about payments and putting up their roadmap concretely.

Domain name ease slightly in the end of the year. Domain names really track venture capital financing and that kind of dried up a fair bit. Although I do expect a big rebound to happen with AI shortly. And when it does so, it will pick up the high value domains and the lumpiness will kind of come back into the GPV.

On the Loadshift front, Loadshift had a great year, phenomenal year. We had to transition a bulletin board model to marketplace model. As of today, Loadshift just operates in the Freelancers enterprise code base. You post a job, you post a load. Drivers bid on the load. Freelancers bid on the job. You put a milestone payment in, you release the milestone payment. The commissions are the same 3% on the shipper side, 10% on the driver side.

We saw a big uplift in GMV for the year as we did that conversion. The number of loads posted eased a little bit, but it’s a bit hard to look at those numbers, because we actually, as more loads got awarded, the repost rate dropped and we also banned, a bunch of people who were freight brokers, who were not basically paying through the site and so forth. But the number of quotes went up 220%.

Liquidity went up massively. Went from 1.5 quotes per job, to 5.6. So it really is quite, and actually the number has been higher than that, actually closer to eight in the last week or so. The percentage of awarded jobs went from basically zero to about 22.8%. That number will continue to grow, as we convert more and more, of the loads to pay through the marketplace, and the marketplace model. And we produce more products and features, features in the product to enable it to happen, particularly around things like the audio calling and so forth.

And so there are about 17 million kilometers posted on the platform, and at $4 per kilometer, we’re up to about 70 million in notionally posted volumes. We’re just trying to eat into it as much as we can, as fast as we can. Overall, the group level, we made significant progress in extracting about $8 million, $8.8 million of cost efficiency out of the business. And in fact, it surprised me that there’s actually a fair bit to go in terms of what we can do in terms of cost optimization.

There’s always places you look where you go, wow, there’s actually, we can reduce the cost there. So overall cost were 18% lower, and as a result, the group was EBITDA positive in FY ’23. The group is now structurally lower cost base and well in a position to increase that net profit before tax in 2024, and we will be doing so.

We also fixed a longstanding problem we have with our OTCQX listing. And this has been a, I don’t know how this happened, but when we originally went OTCQX, it’s quite a complicated process. So this is best markets, its top ranked listing on the OTC, and the U.S. stock exchanges. But we had to lodge a share of stock, and this is more of a ceremonial thing, rather than an actual practical thing. And when we lodged our stock with OTCQX, we lodged one share of FLNCF, which is the OTCQX ticker.

As it turns out, that was not the stock we should have lodged. We should have lodged FLN, and none of the service providers we’re working with picked up on that. And the listing worked fine, for a few months and then just broke. And we were completely at a loss, to figure out what was going on there, until eventually we found out that, without any notice, without – anything being sent to us, without anyone being aware it was, because someone decided – that the listing was not valid, because the wrong stock was lodged.

We finally fixed that, which involved going through a whole new listing again, but that was a bit of an egg on the face, and I don’t know how that happened. But that should operate a lot better now, and we’ve got some market makers, market makers of stock in the U.S.

Overall, the group had positive operating cash flows of $1.9 million for FY ’23, which is a big turnaround from negative $4.2 million the year before and cash, capital, cash flows was $21.2 million, down 9.4% of FY ’22, and that should be going up this year.

Now what I’ll do is open up the Q&A to the audience. Please state your name and your question, and [Alex Dorey], who’s driving the Zoom, will rely on the questions. As always, you can address it to myself, or anyone in the room. We’ve got Neil Katz, the Chief Financial Officer. I’ve got Andrew Bateman, who’s the Head of Enterprise Products. Shaun McMeeken, who’s the Head of Enterprise Sales and Escrow Sales. Adam Byrnes, who’s the VP of Product and Growth. And Cohen Wisniewski, who runs our Managed Services, as well as Loadshift. And then stepping into Drew today, who’s the Chairman of Andrew’s Sic, and also the Managed Services Society Freelancer. So please ask questions, and Alex will relay them to the team. Don’t be shy.

Question-and-Answer Session

Q – Unidentified Analyst

My name’s Brandon McKinnon. I’m just wondering, you’ve talked a lot about all the improvements you’ve made to the Freelancer platform, but we’re still down 2.9% on pcp?

Matt Barrie

Yes, I think that’s a good point. We have made a number of improvements, and we have made a number of funnel improvements. I think the big – in my mind, and maybe Adam, you can chip in in a second, your thoughts about this, it’s really about retention. And I hate to say something about the macro, but coming out of COVID, a lot of people didn’t have work. And a lot of people, I think we see the downturn and people kind of starting businesses.

I see anecdotally amongst people I know that people kind of wanted to go and spend a whole day in Europe, or go skiing or this at the other end. And I think generally there has been a – we’ve been coming, out of a drop. I think that’s turning around. The beginning of this year, we saw our enterprise customers, coming to us very early on, for the year. In fact, we got a tender document sent to us, on Boxing Day of last year. I think people want, to work this year.

I think people realize macro-economically, we’re heading into reasonably tough times. Those tough times will be a good environment for us. Those are the three reasons I said previously. But the big thing we need to do, is just increase the retention. I think we had some retention effects, just from people just generally, losing a bit of puff in terms of wanting, to start businesses coming out of COVID. Really, I think the big thing – Adam, I don’t know if you want to contribute to that.

Adam Byrnes

Yes, absolutely. Look, I mean, retention is a huge – for us as a business. It is why, it’s the number one thing on the product focus. It’s the biggest revenue driver in my opinion. Really, it’s about turning from a painkiller, to a narcotic. And really what we mean by that is, basically making the product a lot more, sticky than where it is today. A lot of the time people come on, they post jobs. And then we perhaps don’t provide as much value, as we could towards the, working portion of the job, like when the job is actually being conducted.

And I think there’s a huge opportunity there for us. And we have been slowly working away – at this for some time now, but there’s a real opportunity for us to accelerate that. And in particular, I want to come back to what Matt was saying on the macro trends moving forward, which is around in the AI space. Particularly AI, you know, I mean, as Matt said, every business really wants to put AI in their reports and filings and so on, and so forth. But it actually is really fundamentally beneficial to us.

We actually have real revenue opportunities, you know, really deep problems that this, business has faced for many years. For example, the one that we put in the report, is historically it’s been impossible for us, to design essentially customized project posting funnels. It’s just been an intractable problem, right? There’s over 10,000 skills that we do work in on the platform. And historically, it’s just been an intractable data science problem to try and build essentially a customized funnel for each of these.

So, we have this sort of very historically generic funnel. Today, with the introduction of generative AI, what was previously, a completely intractable, and exceedingly difficult problem, is basically trivially easy. And you’re seeing that now in some of the job posting process. But it’s not just job posting. We can break projects down into tasks. We can estimate project budgets. We can basically create breakdowns and reminder schedules for projects.

But we can pretty much now dissect, a lot of the text input that, we were previously getting and use it, to create essentially micro-revenue opportunities. Like each one of those tasks is a follow-up point for a client. It’s a potential revenue opportunity as well. We can potentially associate payment with it, and so on and so forth. So, I do think that unlike a lot of businesses, that are – just essentially just trying to get AI in there – to ride the wave and for a trend.

Like we actually have real hard problems that we’ve been facing for a long time now, as a business that are now a lot easier, because of AI. So that will be a huge focus for us next year. And so, in my opinion, a big reason behind my confidence in terms of the potential revenue growth for FY ’24.

Neil Katz

The other thing, I want to point out is we cut $8.8 million out of the operating costs, $3 million of which was marketing and the revenue is down $1.27, or whatever the number is. So the big focus really was just getting profitability up, and sustaining profitability. And just making sure every month, we’ve got a nice healthy margin coming through, because the macro environment changed. So that was really a big focus. So, yes, there is a 2.8% revenue drop on the Freelancer side. There’s also a $3 million cut in the marketing and $8.8 million overall costs. And structurally, we’re in a much better place in terms of the growth base.

Unidentified Company Representative

Michael Chan asks, Upwork posted solid growth. Is Freelancer losing share or in the wrong market segment? How has the competitive environment for attractive jobs under the platform changed over the last 12 months? What do we need to do to be ahead of the competitors?

Matt Barrie

Yes, I think as Adam said, I mean, I think that we will have a phenomenal year. I’m absolutely certain of it. I mean, the things that we can do in our products, I think we’ve got the ability to take a lot faster than our peers. I’ve got a lot of feedback recently from users of both platforms saying that, wow, actually, Freelancers are a delight to use and, wow, some of these features are pretty cool. And I think we will double down on that.

Obviously, they’ve raised a ton of money. I don’t know how much money the total is now, but it’s many, many, many hundreds and hundreds and hundreds of millions of dollars. And we are the underdog. Now, we were the first to go public. We were the first to build $1 billion U.S. market cap. I actually tried acquiring oDesk, actually, back in 2023, oh sorry 2013, but they merged with Elance, to form Upwork. But we did have a go at trying, to buy them out when we were bigger than them.

But this game, is not anywhere near in the late stages. We’ve got 72 million users. I don’t know what their exact user number is, but they got to 20 million years ago. They kicked off about 18 million to kick off all the low-paid workers. Now, they’re back around 20 million. I think, I saw some ads on Reddit saying, they’re about 18 million. Whatever the number really is, let’s say it’s 20 million, 25 million, I guess, you add up our numbers, their numbers, and the number three, and you’re only adding up to about 100.

So, 100 or so million users, 120 million users out of 5 billion people on the internet. And of the 5 billion people on the internet, either you won’t need a better job, or and that’s the vast majority of people, or you need to get someone, to help you get something done. So, this whole space is just very, very, very early days still. And we’re going to have a big fighting shot this year, to try and grow our market share. But as I said, it’s a tiny market.

It’s a market that, I’m surprised hasn’t grown significantly faster, but it is a complex – it’s a very complex to deliver a service over the internet, compared to all products, right. So, we’re selling a book, and a book is a book, and it’s pretty straightforward sale. If you’re selling services like a website, it’s far more complex. So, but I think we’re in a phenomenal position. We’ve got the largest workforce in the world. We’ve got, the largest low-cost workforce in the world. I think, we’re going to innovate, out-innovate.

And we haven’t sucked in anywhere near, as much capital, to some of the businesses they have. We raised $1.5 million before going public. That was it, total. And then the only money we’ve really raised, since has been to acquire businesses. So, we raised some money in 2015 to acquire Escrow, and we raised a little bit, to acquire Loadshift, and that’s it, right. So, I think we do have a very tightly held register. I think the numbers will turn. They turned quite a bit last year, in terms of profitability.

I mean, as we said before, it’s an immense turnaround from negative $7 million to a slight net profit before tax. And if we can double down on that, and have that continue to grow this year, I think there’s a very good solid chance, we’ll grow that fairly well this year. I think that there will be a realization that, we’ve basically built this entire business while being public with very, very little money. And we’re now in a position, to actually start cranking it. And I think you’re going to start seeing that in the numbers real soon.

Unidentified Company Representative

[Alan Wise] is asking, any comments on improving the liquidity of the ASX listing on Freelancer?

Matt Barrie

Yes, so that is a big thing we’re going to do. So, we’ve appointed [Marco Dicco] to run Investor Relations, and really start getting our activity together on that. I am doing Results Day in Hong Kong tomorrow with investors. And I will do an Australian week locally when I’m back. And we’ve got a number of things we are starting to improve on our IR program. I mean, liquidity, it is a tightly held stock. And I do think the liquidity eventually does sort itself off as the market cap goes up.

Liquidity, you know, it joins. I mean, I’ve heard the liquidity story ever since we listed, right? So, when we’re $1 billion market cap, people said we weren’t liquid enough. When we’re now at a $100 million market cap, they’re saying it’s not liquid enough. But eventually you get sorted once you kind of get, the steady long-term growth in the share price. And so that’s what we’re focused on doing now. So, yes, I hear you, but we’re doing a lot more on IR. So, hopefully that will pick up a bit.

Unidentified Company Representative

[Ray Johnson] asks, are there any developments with escrow in the U.K. and Europe?

Matt Barrie

There’s lots of stuff happening all the time with escrow. Shaun, if you’ve got, a few on top of your head, we’ve got the really big thing we’re focused on right now, is really getting this shopping cart up and running. And they’ve got customers globally. About $120 billion volume a year from their shopping cart, that is the major focus. We continue to do transactions in Europe. We’ve had a long slog trying to get a license in the U.K. That’s just taking forever and very, very, very painful. But you know, Shaun, can you mention anything else about Europe with escrow?

Shaun McMeeken

Not so much. The interest we’re getting now is out of APEC. The interest right now. Yes, and the kind of automotive.

Matt Barrie

Yes. The big one, the big focus is we’ve got three shopping carts lined up and they’re three of the biggest. And we’re going to knock them off one after the other. And it’s really automotive and M&A. That is really what kind of we’re focusing on at the moment. As well as getting the large domains, going and getting the checkouts solution, as slick as possible and automation in the back end process, as much as possible. Any other questions?

Unidentified Company Representative

Yes. We’ll keep it open for a few minutes for questions to come in.

Matt Barrie

Don’t be afraid. Or if you want to, you can also have a one-on-one with us. If you contact us at Matt, M-A-T-T@freelancer.com. Okay, another question?

Unidentified Company Representative

One question, yes. Any comment on what you think the shopping cart will do to escrow? When is it coming online?

Matt Barrie

Yes. So this shopping cart has got lots of different payment methods available to it. It’s a household name. You would know it. But we just don’t want to mention the name until we actually do the launch date. There’s lots of payment methods in that shopping cart. They’ve got default payment methods, and then they’ve got additional payment methods. Of the $120 billion of volume that goes through that platform, 55% of the volume goes through the default payment methods. This is credit cards and the like.

The additional methods that you can add in based upon your geography, or what you’re selling, what have you, not a single one of them has large value payments, or escrow payments. It’s a completely new paradigm. When we integrated, we had to spend a fair bit of time, actually figuring out the flow, with their product management team. Because obviously we hold money until the provision of a service, or a product has been provided. So there was a new flow that they had to kind of build into their shopping cart. We figured that all out.

We’re now just doing, the final stage of the merchant onboarding flow, to sign up. Look, I don’t know what the volume is going to be, because it’s hard to forecast it’s brand new. But we’ve got many hundreds of requests, to be in the shopping cart, over the years. And it ranges everything from agricultural products through the reef fragments, and automotive marketplaces. And there’s so many different weird and wonderful things that, we want to build stores for, over the shopping cart. I think it’s going to be game changing in a way, as well for this particular platform, MyGigs.

You can’t sell in their shops at the moment items above $20,000. Because above $20,000, credit cards start to fail. It’s quite expensive, to put on the credit card. So there’s no payment method, for large value. And we’re going, to take the ability for them to sit there. So they’ve got lots of different payment methods up to about 20 grand. From 20 grand to $100 million, they’ve got nothing. And that’s going to be us. So I think in a way, that platform, which is quite a well-known and global platform, it’s now going to mature, and allow the selling of products and services at the big end of town.

And so, who knows what the volumes will be? I think it’s – quite a good potential to get significant volumes. And as I’ve said, there’s a lot of irons in the fire, with a lot of the businesses that we have here. We’ve got a whole enterprise division on Freelancer. We’ve got all sorts of things happening. It comes to mind, actually, we didn’t mention one of the things we’re doing for one of the foundational AI platforms. We’ve got an engagement where working for a partner, we are potentially going to start helping with the RLHF training of that foundational model.

And so there’s, quite a lot of ongoing work, using Freelancers – with native language capabilities all around the world, which could happen fairly soon. We’ve got a lot of opportunity with AI in the main marketplace, and all the collaboration tools in the main marketplace. We’ve got all the enterprise customer work. We’ve got these shopping cart platforms, the automated platforms, the M&A platforms, a sub-segment on the escrow side. And then we’ve got quite, a lot of project work building up on the Loadshift side of the business, in addition to the kind of all that, is converting the main volume.

So, there’s a lot of irons in the fire. And I’ve always said, one of these irons in the fire is going, to do a multiple of the total GMV, of the existing business one day. And that one day may be getting close, with a couple of the irons in the fire that we’ll see. It’s – been a long work, to get the platform really in a scalable position. We’ve done that publicly with no money, effectively. It’s been a long slog, to get everything operationally under control. I think we’re in that spot now where everything really is. We’ve got a good group of everything. We’ve brought the whole group, to profitability in the last year.

We aim to build on that this year. We’ve done a big cost base, cost reduction, et cetera. So I think, we’re just now in a place, where it’s just time to scale, time to grow. And I think, we’re going to start, to see that this year. It’s been a while coming admittedly yes.

Unidentified Company Representative

Two more questions. Ray asks, will remuneration ever be tied to share price and profitability?

Matt Barrie

Well, there is no LTIP or long-term incentive plan or short-term incentive plan. I wish there was, but there isn’t one at the moment. So yes, hopefully one day. I’m probably speaking for everyone around me. We have the ESP program, which staff participate in. Some staff participate in. I don’t. But yes, something to bring up with the REM Committee I think.

Unidentified Company Representative

Alan Wise asks, NVIDIA’s surging share price is often talked about as an example we are in an AI-inspired bubble. Most investors on forums and et cetera are not convinced Freelancer is involved in AI much of all, and is not likely to be benefited from it. Do you have any comments on how Freelancer and its involvement in AI could be marketed better?

Matt Barrie

Yes, we could market better. But Jensen Hwang spoke before I spoke and basically laid out the whole thesis at the JPMorgan Global Chief Investment Officer Summit. Just before I came on, laid out the whole thesis why Freelancer will be the benefit of AI technology. I mean, AI is the great democratization of technology. It can allow, someone with ordinary skills, to become exceptional in a particular field. You can be average at copywriting, now you’re exceptional at copywriting.

You can be average at design, now you’re exceptional at design. You’ll be shortly average in programming, exceptional in programming. It’s going to go, through all the world of work. And he said, he was actually with Modi, and he actually said the week before and said that India, is going to be the big winner of this. You can Google it. Jensen Hwang with Modi, India is going to be the big winner, because of the democratization of technology and enabling a low-cost workforce to use AI tooling to compete at the global scale, at the elite level of talent.

At the end of the day, the proof is going to be in the pudding, and just wait and see. But if you get anything done with Freelancer, you can just say that the Freelancers, are all adopting the tools. They’re probably the biggest adopters of the tools that are out there. And if you think about it, do you believe the thesis, yes or no, that every business in the world is, going to want to use AI technology to revolutionize themselves? If you believe that thesis, and I think that’s a fairly obvious thesis, who’s going to provide it?

Where are they going to go? Who’s going to be providing those services, transforming small businesses, medium-sized businesses, large businesses? Now, there will be a whole bunch of service providers doing so, but they’re going to aggregate on our platform 59.04, right just like they did for web design, just like they did for app development.

Unidentified Company Representative

Michael Chan is asking, how much is Deloitte contributing to GMV? Will this be a material contributor to profits? Please discuss other relationships you have, and if any, will be material contributors?

Matt Barrie

Yes. So Deloitte is de minimis, currently for GMV. When they get around to the point where they will pull the trigger, I think they will be material very rapidly. So where we are is we’ve built the platform, it’s live, it’s operating, it works, projects are flying through. Projects can go via the internal marketplace or the external marketplace to Freelancers. The internal marketplace, it goes to Deloitte consultants. And that’s where basically, the vast majority of projects, are going right now, is from Deloitte consultants to Deloitte consultants.

60% of projects that go to the internal marketplace are eligible to go external. And in fact, we will show them, to external and the bids will come in from external with a very highly-accurated talent pool. And in fact, the number of bids coming in from external is much higher, than the number from internal. Just the issue is that with so many cooks in the kitchen and just being so cautious, and slowly getting this operational, they’re not letting projects go into the external marketplace other than the testing you’re all there.

At the point in time in, which they do decide to pull the trigger, for example, I mean, the average project size on Deloitte is about US$1,500 to US$2,000 right? There’s 50,000 consultants there, right? I mean, it’s pulling the trigger, and allowing those 50,000 consultants to post external, I think there’ll be a few things happening. One, I think there’ll be a big Eureka moment, because a lot of the consulting heads who realized now before that it would cost them $40,000, to do something and cost them $4,000 to do something or $400 to do something.

I think there’ll be a big Eureka moment on the profitability side. And the other thing is that I just think that the numbers, I mean, the 50,000 people have already been on board at moment. It doesn’t take very much. If they gave everyone, credit to post one project and everyone posted one project, it’s $50,000 times by $2,000, right? So, it’s $100 million in the GMV if everyone posts a project. Now, probably you won’t get everyone posting a project, but you might get 10% posting a project.

So, we’ve seen some forecasts, from them in terms of what they wanted, to do in terms of cost savings and in terms of GMV, but it’s just taken a lot longer and a lot slower than we anticipated. But all the noise is a positive. It’s now moving out of a think tank, which was managing us, to the talent team. The good thing about being managed in talent means that, when people join Deloitte, they go through their handbook of university that, we trained from day one, that they can use this marketplace, to get jobs, and to post jobs. It also means that we can scale across the entire organization globally.

And the other positive thing is the discussions we’re having going into Europe, and going into the U.K., and going into Australia. So, it’s just the stuff sometimes takes very slow. It’s very slow to get going, but we’re ready to scale when they’re ready. So, at some point, it will, I think, be very meaningful. It’ll be one of those irons in the fire, where the volume will come in, and you go, wow, that just came out of nowhere. But it has been a very, very, very long slog to get here. Any other questions? Okay, we’ll wait for a few more seconds to see if anyone has a question. Okay, last call. Questions. Three, two, one.

Matt Barrie

Okay. Well, thank you everyone for joining the FY ’23 results. You may arrange a one-on-one by emailing investor@freelancer.com or myself, Matt, M-A-T-T@freelancer.com. I will be in Hong Kong for a full day tomorrow. If you are in Hong Kong and you want to meet up, we have one or two guests on the calendar, I think. Still, I’ll have to check with Marco. Otherwise, just reach out directly and we’ll arrange something. Thank you.