Freelancer Limited
Building an Amazon ofServices
Freelancer Ltd (ASX: FLN) is a combination of three platforms:
First, Freelancer.com which is the world's largest freelancing
and crowdsourcing marketplace, measured by the total
number of users and jobs posted. The marketplace, which hasover 67m global users, serves as a game-changer for therequirements of entrepreneurs, small businesses, and largeorganisations. Secondly, Freelancer owns Escrow.com, aglobal online escrow service and much-needed payment
solution for high-value transactions, catering to the evolving
needs of businesses and guaranteeing secure and efficienttransactions. Given the increasing reliance on online
platforms for purchasing high value assets, and the inabilityof existing online platforms to cater for them, Escrow.com
has a substantial market opportunity. And third, there is theonline freight and heavy haulage marketplace Loadshift
which is the largest of its kind in Australia. In 2022, Freelancer
merged its Freightlancer platforms with the Loadshiftplatform. The combination of the platforms is likely toprovide additional opportunities to carriers for finding loads
while offering shippers access to more carriers acrossAustralia.

Share Price: A$0.275
ASX: FLN
Sector: Technology
25 July 2023

Market Cap. (A$ m)

124.0# Shares outstanding (m)450.9# Share fully diluted (m)451.7Market Cap Full. Dil. (A$m)

124.2Free Float

16.8%

12-months high/low (A$)

0.40/0.185

Avg. daily volume ('1000)

62.7
Freelancer.com, Escrow.com,
and Loadshift.com,

Websites

Source: Company, Refinitiv, Pitt Street Research

Share price (A$) and avg. daily volume (k, r.h.s.)

A remarkable and substantial opportunity awaits
The company is committed to catering to the expanding gig
worker economy. With the global gig economy market
projected to grow at a 6-year CAGR of 14.2% and reach
US$918.9bn in 2028, not to mention unique advantages of all
three platforms, Freelancer is presented with a remarkableand substantial market opportunity to capitalise on. As
technology continues to advance, an increasing number ofworkers are entering the global gig economy ecosystemthrough Freelancer's platform.

Source: Refinitiv, Pitt Street Research

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Valuation range of A$0.71–0.93 per share
Using the blended valuation approach (using RV and DCF
methodologies and weighting both equally in our final
valuation), we have valued Freelancer at A$0.71 per share ina base-case scenario and A$0.93 per share in a bull-casescenario. The potential significant upside is primarily
attributed to the increasing traction observed across all themarketplace platforms. Key risks, as outlined on page 33,
include: currency risk, competition risk, delayed risk, contract
risk and geographical concentration.

Analysts: Stuart Roberts, Nick Sundich
Tel: +61 (0)4 4724 7909
Stuart.roberts@pittstreetresearch.com
Nick.sundich@pittstreetresearch.com

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research coverage. Please refer to the final page of this report for the General Advice Warning, disclaimer, and full disclosures.

1

Freelancer Limited
Table of Contents
Introducing Freelancer, ASX: FLN

3

Ten reasons to look at Freelancer

5

Additional features are enhancing the user experience on Freelancer.com ..................................................... 10
The gig economy is an old concept undergoing a paradigm shift ..................................................................... 17

Freelancer's online payment services platform – Escrow.com

19

The market opportunity for escrow transactions ................................................................................................. 22

Loadshift – Steady expansion of loads shifted

23

The Loadshift/Freightlancer deal was transformational ...................................................................................... 24
The market environment for freight marketplace ................................................................................................. 25

How does Freelancer generate revenue?

26

Why Freelancer can turn around28

Freelancer's progress – as evidenced in 1HY23 .................................................................................................. 28
Freelancer's competition ........................................................................................................................................ 28

Valuation of Freelancer

29

Peer group valuation suggests $0.35-$0.64 per share......................................................................................... 29
DCF yields $0.96-$1.21 per share........................................................................................................................... 30

Key risks

33

Appendix I – Strong leadership

33

Appendix II – Analyst certification

35

General Advice Warning, Disclaimer & Disclosures

36

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2Freelancer Limited
Introducing Freelancer, ASX: FLN
Founded in 2009, Freelancer (ASX: FLN) operates the world's largest
freelancing and crowdsourcing marketplace by number of users and projects.
The company pursued an aggressive acquisition strategy to increase its global
footprint before it was listed on the ASX in late 2013 at a market capitalisationof A$218m. By this time, it had over 9m users and 4.9m projects. The ASX
listing came only weeks after Freelancer knocked back a takeover offer fromthe Japanese recruitment site Recruit. Freelancer acquired Escrow.com in2015 and freight marketplace Channel 40 in 2018. Freelancer went on toacquire Loadshift in 2021.
Freelancer operates through three segments - labour, payments and freight,
all services which are mission-critical for every business:- Labour – a segment that includes Freelancer.com and the Enterprisedivision- Payments – Escrow.com, the secure online payments platform- Freight – Loadshift.com, the number one online freight marketplace inAustralia

Freelancer.com
Freelancer provides anintegrated suite of tools tomanage an on-demand cloud
workforce across desktop,
tablet and mobile devices

Freelancer.com is an online services marketplace and is the largest ondemand and lowest cost elastic cloud workforce in the world with over 67m
users. Freelancer.com provides an integrated suite of tools designed toorganise and manage an on-demand cloud workforce across desktop, tablet,and mobile devices. It helps to connect businesses of any size in thedeveloped world with a skilled workforce building service organisations in thedeveloping world. Freelancer.com generates revenue through its websites
from users posting outsourcing projects and crowdsourcing contests. 67% ofprojects receive bids for the project in under 60 seconds and there are an
average 41 bids per project. The average completed project size was US$252
in FY22.

The Enterprise division of Freelancer.com provides access to highpaying larger organisations
Freelancer's Enterprise division facilitates a seamless augmentation andintegration of a virtual workforce by enabling access to the labour cloud
economy, which is its most strategic sustainable competitive advantage.
Using the platform, an internal workforce can be utilised more effectively, andapproved talent clouds can be accessed seamlessly for strong quality andscale. The Enterprise division's utility to customers is evident in its securing ofa US$6.7m task order for NASA and the National Institutes of Health fordeveloping new ways of gene therapy in humans. At the time (September2022) this was the biggest task order to date under the NASA Open Innovation
Services 2 (NOIS2) contract, and testimony to Freelancer's task record ofdelivery under the programme.

Escrow.com provides a much-needed secure payment solution
for high-value transactions
Escrow.com facilitates safe digital transactions of high-value goods andservices (such as private jets and luxury cars) by holding funds in custody andonly transferring them to the seller once the buyer has received the goods,
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3

Freelancer Limited
inspected them, and found them to be satisfactory. This is different fromother platforms such as PayPal where the proceeds must be shipped instantly.
In the event the delivery of goods or the goods themselves are unsatisfactory,
the only way to resolve the issue is via chargebacks or reversals.
Escrow.com supports payments up to 100m in USD, Euros, CAD, AUD, and
GBP. It has 55 financial services licenses granted or in-application, includingin Australia, the UK, and several US states. In the first half of 2023 (1HY23), it
generated US$147.3m in Gross Payment Volume (GPV) and it has securedtransactions worth ~US$6.6bn in its history.

Loadshift - the new entrant to Freelancer's service portfolio

Loadshift ensures that deals
are completed faster, operators
are vetted for reliability andquality, cargo is tracked atevery kilometre of the journeyand competitive quotes are
obtained at fast speed

Loadshift is Australia's largest freight marketplace, connecting freight owners
with transport operators. Around 100 million km a year in loads currently
move through Loadshift. In FY22, the platform enabled 74,096 loads with
A$350m of notional Gross Load Value (GLV). The average distance was
1,337km per load, the average load was $5,184 and the average freightcharge was A$3.49/km.
There are many freight categories but the largest is mobile machinery with a
21.2% market share, followed by cars with 11.8%. Loadshift has some key
advantages. It enables freight deals to be done faster, operators vetted toensure reliability and quality, payments to be kept in trust until the job has
been done, cargo to be tracked every kilometre of the journey, andcompetitive quotes issued very quickly. During 1HY23, it recorded thestrongest growth of any of Freelancer's platforms with a 52.7% increase in thenumber of quotes.

Freelancer is better placed than its peers
We believe that, although Freelancer's competitors (Crowdworks, Upwork,
Airtasker, Fiverr, Remitly, and ACI Worldwide) may have better PR andinvestor relations, what sets Freelancer apart is1) The consistency of the core Freelancer offering in terms of pricing
2) The Enterprise division
3) Escrow.com and Loadshift, which provide unique niches and abilities notpossessed by competing companies (whether that competition ismarketplaces, or companies like Paypal which facilitate low-volumetransactions).
Directly comparing Freelancer.com to Airtasker, the latter is essentially alabour-hire platform for manual household jobs of varying values, where
taskers tend to be in the same neighbourhood. We also note Airtasker is still
Australia-centric – it generated less than 2% of its 1HY23 revenues fromoutside Australia. By contrast Freelancer.com is a truly global marketplacewith its 60m+ users being resident in over 200 countries, speaking 34
languages and transacting in 39 currencies. We understand that revenue
outside Australia constitutes well more than 90%. And there are over 2,700
job categories ranging from graphic design and coding jobs to aerospace andengineering.
Freelancer.com's true competition is conventional service firms in therelevant sector, rather than other platforms like Airtasker that may appear tobe similar at first glance but actually aren't.

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4Freelancer Limited
Ten reasons to look at Freelancer

Freelancer.com allows users topost a project, receive bids
from users, review the user's
portfolio and view profiles

1) Freelancer is an Amazon of services – The company boasts a uniqueportfolio of marketplace platform services, including labour market
solutions, payment solutions, and freight movement services - all of which
individually offer advantages for customers not available with othermarketplace solutions. As we argue below, there is a considerable
amount of value that have built up in the labour, payments and freight
given the current market capitalisation.
2) Freelancer is the world's largest freelancing and crowdsourcing
marketplace – Freelancer is a game changer for entrepreneurs, small
businesses, and large organisations as it helps turn their ideas into reality
and create the products and services of the future. It provides easy accessto talented freelancers around the world who offer a wide range ofservices at competitive prices. Over 2,700 categories of work are available
in the company's Freelancer.com marketplace. The key offerings by
Freelancer include the high-end tasks of website design, information
technology (IT) solution designing, software development, mobile
applications, writing and content, media architecture, data entry andadministration, engineering solutions, product sourcing andmanufacturing design.
3) The website Freelancer.com generates consistent revenue throughprojects and contests – Freelancer.com is an online services marketplaceand is the largest on-demand and lowest cost elastic cloud workforce inthe world with over 67m users. It has branded itself as a partner in the
new world of work and this is solving a trillion-dollar problem. It has theunique ability to crowdsource ideas and concepts that are yet to mature.
On Freelancer.com, it is free to sign up, post a project, receive bids fromusers, review the user's portfolio, view their profile, provide feedback,and discuss the requirements. Another way to perform the work is
through contests to crowdsource ideas. The project poster accepts
multiple competing entries and then selects a winning freelancer who inturn receives the prize and the transfer of the work is done. Both themodels result in consistent commission income for Freelancer.
4) Freelancer's online labour business also receives a boost through its
Enterprise division - Freelancer's Enterprise division helps in the seamlessaugmentation and integration of a virtual workforce. It enables large
global organisations to access the labour market through the cloud
economy. Using the Enterprise platform results in an improvement inworkforce utilisation and seamless access to approved talent byorganisations. This supports them in retaining strong quality andachieving necessary scale.
5) Task orders from NASA to further bolster the prospects of the Enterprisedivision – In September 2022, Freelancer secured a task order worth
US$6.7m for NASA and National Institute of Health (NIH) for developing
new ways of gene therapy. The two three-phase contests sought by NIH
under the Phase II of the SGCE programme were expected to be launched
on Freelancer.com with a total prize of US$6m Gross Market Value(GMV). Freelancer in turn was likely to generate close to US$700k in net
revenue contribution for the task order. This was the biggest task ordertill date under NASA's NOIS2 and is a hefty endorsement of the company's
task record of delivery under the programme.
6) Escrow.com is the world's safest platform for high value transactions –Freelancer's second business platform (Escrow.com) is the provider of

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5Freelancer Limited

Freelancer earns a 3%
commission from clients and a
10% commission fromfreelancers once the project isawardedsecure online payments and online transaction management services for
consumers and businesses on the internet. The items sold on Escrow.com
range from gemstones, diamonds, businesses, real estate to shipping
containers, paintings, fine art, and watches. Escrow.com is the only online
payment method for the listing of eBay Motors business in the US. It has
facilitated US$6.6bn worth of transactions in its history. Escrow.com adds
a layer of security to make sure that the transfer of funds occurs, but thatit only happens once the recipient is satisfied with the goods they havereceived. Due to this layer of security, it is becoming a sought-after
platform for large value transactions.
7) Loadshift is a substantial largest online freight marketplace – Loadshift
is Freelancer's third business and is Australia's largest online heavy
haulage freight marketplace, connecting freight owners with transport
operators. It is the go-to marketplace for all truck transportation needs
ranging from palletised freight to oversized loads such as cars, dozers andmore. Today it handles over 100 million km in freight requests worth$300m annually. Freelancer first entered this space in 2018 when it
acquired Freightlancer, then an independent company known as Channel
40. Then in 2022, Freelancer acquired Loadshift for $7.7m, after which
the merged division started operating under the Loadshift brand. The
merger resulted in the transformation of a single membership-based
bulletin board into a full marketplace for freight.
8) Freelancer's revenue generation model is stable and scalable - The main
source of Freelancer's revenue generation is through users posting jobs
across all the marketplaces. The concept of milestone payments is also
followed to ensure that the work gets paid for. Once the project iscompleted and the client is fully satisfied with the outcome, the milestone
payment is released to the freelancer and the client is paid. The main fee
income is generated from project commissions generated when projects
are awarded by users along with being accepted by other users. It earns
3% from clients when a project is accepted and rewarded and 10% fromfreelancers when a project is awarded and accepted.
9) Freelancer's management – Freelancer has a strong management teamwhich has built it up into the company into the strong market position it
has today. We take confidence in founder Matt Barrie's significant 'skin in
the game' with a >43% ownership stake. This should provide confidence
to potential investors that their desired outcomes and that of thecompany's management are well aligned, and that management has
incentive to deliver strong results going forward.
10) Freelancer is undervalued - We believe the stock is undervalued at its
current market value. We value the company at A$0.71 per share in ourbase case and A$0.93 per share in our optimistic case based on separate
RV and DCF approaches, equally weighting both in our final valuation. We
acknowledge investors would be frustrated with the share priceunderperformance. We think it has suffered from the 2022 'Tech Wreck',the superior IR strategies of peers such as Airtasker (ASX: ART), and thefact that it was not profitable in FY23.
We think the key catalysts will be continued revenue growth across all of
its platforms as adoption increases and the company tracking towards
EBITDA and NPAT profitability, which we anticipate can happen in FY24
and FY25 respectively, and is possible without further shareholder
dilution. The company has made significant progress towards this in
1HY23.

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6

Freelancer Limited
Freelancer – An Amazon of Services

Freelancer aims to become aone-stop destination forbusinesses, providing themwith the necessary tools andsupport to streamline theiroperations efficiently.

Freelancer is positioning itself as the 'Amazon of Services', aiming to offer adiverse and interconnected range of solutions through its marketplaces. Witha strategic focus on leveraging the synergies between its services, Freelancer
provides a comprehensive bouquet of holistic solutions that cater to various
aspects of business operations.
The company operates through three primary business segments: labour,
payments, and logistics. These segments encompass broad and horizontal
service offerings that are in high demand by both consumers and enterprises
every day of the week. By integrating these services, Freelancer aims tobecome a one-stop destination for businesses, providing them with thenecessary tools and support to streamline their operations efficiently.
Freelancer operates the world's largest freelancing, outsourced services andcrowdsourcing marketplace by users and number of projects posted. This inturn creates a competitive advantage in terms of network effects. The
marketplace is also highly liquid. Freelancer has demonstrated a strong trackrecord of execution and growth since inception across key metrics including
revenue, turnover, users, projects, GPV, geographic coverage, jobs coverage,press coverage and international recognition. Due to the strong impact of thebenefits felt by Freelancer on network effects of online marketplaces, thecompany is pursuing the strategy of focusing aggressively on growth. This has
been made possible by the company's data-driven growth team and fastengineering methodology.

I.

Freelancer owns and operates
one of the world's largest
online marketplaces foroutsourcing, freelancing andcrowdsourcing services

Freelancer.com

Freelancer.com is an online services marketplace and is the largest ondemand and lowest cost elastic cloud workforce in the world. It operates theworld's largest freelancing and crowdsourcing marketplace in terms of total
users and job postings, boasting over 67m registered users. Freelancer.com isa global marketplace of jobs and is a top 2000 website globally.
This platform is a game-changer for entrepreneurs, small businesses, andlarge organisations alike, empowering them to transform their ideas into
reality by facilitating the creation of innovative products and services. With avast pool of talented freelancers from around the globe, Freelancer provides
convenient access to a wide range of competitively priced services. Theirmarketplace encompasses over 600 work categories, spanning website
design, information technology (IT), software development, mobile
applications, computing, writing, content creation, design, media,
architecture, data entry, administration, engineering, science, and evenproduct sourcing and manufacturing. Freelancer collaborates with clients
ranging from small businesses to prominent organisations such as Deloitte,
NASA, and Unilever.
The platform provides opportunity, income, and technical jobs to people all
around the world who are looking at changing their careers, supplementing
their incomes, or trying something new. Freelancer helps make the ideas andambitions of its users real, through facilitating the hiring of freelancers forwhatever product or service the client is trying to create.
One of the most notable Freelancer projects involved a visualisation of Apple
VR-AR headsets coming to life. Freelancer ran a competition among its users
to create a realistic rendering or visual of what that would look like. The top
entry received A$500 and the work was proactively sent to journalists

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7

Freelancer Limited
covering the rumoured launch (Figure 1). It was used more than 100 times
globally across articles in the lead up to the VR-AR headset being announced.
Figure 1: Freelancer helps organisations create products and services of the future

Source: Company

How does Freelancer.com work?

Freelancer enables ideas to be
crowdsourced

Freelancer.com offers an integrated suite of tools that effectively manage an
on-demand cloud workforce, ensuring seamless accessibility across desktop,
tablet, and mobile devices. With the largest global network of online talent,
it provides unparalleled access to a diverse pool of skilled professionals. One
of its unique strengths lies in its ability to crowdsource ideas and visually
represent novel concepts that have yet to be realised. This fosters innovationand creativity by tapping into the collective intelligence of the community. A
key advantage of Freelancer.com is its security measures, enabling users towork online with peace of mind.
Jobs are mainly posted as a project which is classified under outsourcing or
posted as a contest as a part of crowdsourcing.
A. Projects
The primary method of conducting work on Freelancer is through project
posting. To post a project, users provide a title and description of the task,
select the necessary skills, and set a budget. Freelancer.com ensures thatpayment is made only upon completion of the work and the user is satisfied
with the quality.
When a user posts a job, payments are made for the answering of requests,
which are then allocated to specific deliverables. As the work progresses,
payments are released accordingly. Through Freelancer's platform, clients
can swiftly post a project and receive competitive bids from freelancers
worldwide, often within minutes. Optional paid upgrades are available for

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8Freelancer Limited
project postings, such as featuring the project or requiring freelancers to sign
non-disclosure agreements before bidding (Figure 2 and Figure 3).
Figure 2: Top Completed project categories

Figure 3: Top countries by completed projects

Websites, IT and softwarre

31%

Design, media and architecture

29%

Writing and content

2.5%

5.2%

11%

Data entry and admin

7%Engineering and Science

6%

sales and marketing

6%

Mobile phones and computing

3%

Translation and Languages

3%

Business, accounting and Human Resources

3%

Product sourcing and manufacturing

1%

Other

1%
0%

2.2%

7.2%
37.9%

8.4%
10.7%

25.9%

10%

20%

30%

40%

OthersUS

India

Australia

UK

CanadaGermany

Saudi Arabia

Source: Company, Pitt Street Research

Freelancer.com provides anintegrated suite of tools
designed to manage ondemand cloud workforce
across various devices

Signing up, posting a project, receiving bids, reviewing portfolios, viewing
profiles and feedback, and discussing requirements are all free. Freelancer
offers over 2,700 skill sets, enabling clients to choose from a wide range ofexpert freelancers who can work on their projects, providing flexibility interms of work style and preferences. In FY22, the average completed projectsize on Freelancer was approximately US$252 (Figure 4).
B. Contests
The other way of performing work is through crowdsourcing ideas on its
Freelancer contest platform. A contest is one where the user requires
something visual such as a logo and people compete for the prize. On average,
220 entries come in per contest. The larger the prize the better the entries
and freelancers can adapt their lifestyle to suit the clients' feedback. The
contest can start from as simple as ten dollars and work its way up to NASAposting contests for many hundreds or thousands of dollars for complex
designs. In a contest, one can get up to 40 times leverage in terms of theamount of work that gets done due to competition by several people. Thiscan converge to solutions where one can enter a contest for multiple
categories of work. Within hours of posting the content, new submissions canbe received from thousands of freelancers. The user who posts provides
written feedback and rates the submissions for the duration of the contest.
Once the contest is completed, the user who posts selects a winningfreelancer who in turn receives the prize and the transfer of the work is done.
We believe that crowdsourcing of ideas to freelancers on the Freelancer.com
contest platform provides enterprises with the perfect solution for any
project ranging from visual design work to idea generation. The platform
enables immediate feedback on new ideas through contest sharing and polls.

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9Freelancer Limited
In 2022 alone, the platform generated over 13m ideas to enable contest
holders to find solutions quickly and collaboratively.
Figure 4: Average completed project size

Average paid per reward (lagging Jan 2023

$300

$200

$100

$0

2001

2005

2009

2013

2017

2021

Project completion time (entire year)

Source: Company, Pitt Street Research

Additional features are enhancing the user experience on
Freelancer.coma) New Quote feature: In Q1 2022, Freelancer introduced a newquotation feature aimed at enhancing the user experience. Thisfeature allows new freelancers to proactively send itemised work
proposals that can be easily accepted and paid in just two clicks. The
implementation of this feature has significantly streamlined thecheckout and payment creation process, addressing one of the key
pain points in the user journey. Additionally, freelancers can now
issue quotations to clients who are not yet on the platform at a
discounted fee rate of 3%. This enables freelancers to onboard
existing clients at minimal cost, fostering their reputation on theplatform and creating a new channel for client acquisition. The newquotation feature is expected to play a significant role in driving
revenue over the next couple of years.
b) Project Clarification Board: Freelancer has experienced significant
engagement in its Groups product, thanks to several enhancements
made in various areas. These enhancements include improvements
in discovery features, product performance, page load times, infinite
scrolling, notifications, and enhanced imaging quality. Furthermore,
Freelancer has introduced a new feature called the Project
Clarification Board (PCB). Acting as an open forum, the PCB allows
verified freelancers to engage in discussions with clients to clarify
project details before placing their bids. This new feature not only
facilitates better communication and understanding between
freelancers and clients but also has the potential to improve SearchEngine Optimisation (SEO) (Figure 5).
c) Enhanced design of User Interface: Freelancer is actively involved in
facilitating the outsourcing of various tasks, including graphic design,
programming, and writing. The company has also made notableefforts in enhancing the design and user experience (UX) of its
platform. The UI engineering and product design teams have made
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10

Freelancer Limited
significant progress in giving the platform a fresh and modern look,focusing on creating an intuitive and seamless user experience. These
improvements aim to provide users with a visually appealing anduser-friendly interface that enhances their overall experience on theplatform (Figure 6).
Figure 5: Project Clarification Board

Source: Company, Pitt Street Research

Figure 6: UX Improvements

Source: Company, Pitt Street Researchd) Voice calling: Alongside the Groups product, Freelancer is actively
working on enhancing its voice calling functionality to foster
improved communication between clients and freelancers. This
upgrade aims to facilitate more effective engagement andcollaboration throughout the project lifecycle. The predictive model
deployed by the company is also starting to pay off. The search engine
marketing non-brand profitability has reached the highest level in five
years, while the volume has remained steady compared to theprevious quarters. This has been achieved as a culmination of a multiReaders should be aware that Pitt Street Research Pty Ltd has been engaged and paid by the company covered in this report for ongoing
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11

Freelancer Limited
year effort. The company aims to focus on organic channels in Q2
2023, including but not limited to SEOs.
e) New Funnel: In Q1 2023, Freelancer started to replace the HireMe
funnel with a new funnel based on chat requests, a messaging system
like many found on social media. Instead of a client initiating thewhole project, the client sends requests to the freelancer and when
the time is right the freelancer sends the client a personalised
quotation for the work. This results in two benefits:§ Better understanding by clients and freelancers of thescope or pricing of the work up-front.
§ An elimination of spam and a reduction of trust andsafety issues, which had been a feature of HireMe

Chat requests has been a big
step forward in terms of clientsgetting what they need fromfreelancers

Figure 7: Chat requests

Source: Company, Pitt Street Research

f)

II.

Chat requests are being progressively rolled out and is likely to becompleted by Q2 2023. This in turn is likely to result in improvements
in financial performance with the quotations product (Figure 7).

Enterprise Services

Access to the labour cloud economy is made possible through Freelancer'sEnterprise division, which offers a significant sustainable competitive
advantage to global organisations — unparalleled access to talent. It allows
for seamless augmentation and integration of a virtual workforce, i.e. support
service providers. By utilising the platform, internal workforce utilisation canbe optimised, and approved talent clouds can be accessed effortlessly,
ensuring both high quality and scalability. Through this platform, the globalorganisations can serve their end-clients in every corner of their service
domain area without worrying about recruiting full time employees.
The division specialises in providing transformational programs and APIs thatconnect existing contingent workforce, new flexible talent, and full-time staff.
The integration of freelancers within the Enterprise division brings several
benefits:
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12Freelancer Limited-

The Freelancer Enterprisedivision augments andintegrates virtual workforces ina seamless manner

The task order secured byFreelancer for NASA and the
National Institute of Health islikely to help in thedevelopment of gene therapy
in humans ranging from thesimplest to most complex
thingsIt significantly enhances agility and the ability to respond to shifting
demands.
- It leads to substantial cost savings and accelerates innovation andideation within the organisation.
- The platform extends to serving the world's most prominent national
agencies. Through advanced skills development it empowers national
agencies to overcome challenges and offers them a platform tocrowdsource innovative solutions from the world's top talent.
A key offering of the Enterprise services division is the Freelancer Recruiter,
Freelancer's flagship managed service. The division's team of recruiters
provides round-the-clock coverage, aiding clients anytime and anywhere.
These highly talented recruiters excel in finding the best freelancers for
specific jobs, and with the support of technical co-pilots, they can efficiently
manage projects. The recruiters work closely with clients to estimate budgets
and requirements before conducting an extensive search and interview
process. They draw from a curated talent pool of vetted and preferred
freelancers, ensuring that clients have access to top-notch professionals who
can meet their needs.
Freelancer Enterprise has received task orders from NASA and other US
government agencies
Freelancer has worked with NASA since 2015 for crowdsourcing solutions tothe complex problems faced by astronauts on the cutting-edge space
exploration technology. Through Freelancer Enterprise, NASA witnessed hugecosts savings of 80%-99% when compared with traditional cost methods. The
solutions were also implemented 30% faster than standard agencies andvendors. There was a 97% application of solutions witnessed across a wide
range of federal space programmes.
In Q1 2022, Freelancer won three task orders and completed its second taskorder under the NASA Open Innovation Services 2 contract. The NASA Open
Innovation Series 2 tender is a programme whereby NASA effectively acts asa centre of excellence for crowdsourcing for the US government. The
company's success with NASA has resulted in an increase in the funding forNASA Open Innovation Services 2 Contract by 600% to US$175m (Figure 8 on
page 14). This is likely to span over the next three years. These task orders
have in turn made NASA act as a gateway to the US government task orders.
The government's task orders leverage Freelancer's crowd with strongtranscription skills and design facilitation expertise.
The company also has task order engagements with the US Centers for
Disease Control and Prevention and the US Department of Commerce. The
work of the task order engagements is further spread across high technology
areas including computational fluid dynamics work for a hydroelectric power
authority in the US, through a million-dollar task order. This is done bybuilding a 'Minority Report Style' dashboard for communication and trackingof data for first responders. The areas also cover electrical engineering, data
science, machine learning, graphic design, UI/UX design, advanced
manufacturing, software development, transcription and information
security.
Freelancer Enterprise is making rapid penetration across organisation in the
Middle East and the Asia-Pacific region- In Q1 2023, Freelancer executed a master agreement with theEurope, Middle East and Africa (EMEA) entity of a top 4 professional
service firm (i.e. one of Deloitte, KPMG, PwC and EY) piloting an

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13

Freelancer Limited
enterprise service solution. The company is in discussion with theentity's Indian, Australian and Philippines arm as well.
- Freelancer was recently made a service partner by the Middle Eastbranch of a Switzerland-based global pharma giant.
- Freelancer has proposed and is in the process of finalising anenterprise engagement model with a state-wide governmentorganisation in the APAC region.
All these recent client wins, and ongoing pilot projects, highlight that
Freelancer has been expanding geographically with its enterprise solutions,
gaining acceptance across all levels, including private organisations andgovernment agencies in an otherwise anti-outsourcing Middle East and APAC
region.
Figure 8: Success with NASA led to NOIS2 funding increase 600% to US$175m

Source: Company, Pitt Street Research
MyGigs is a self-service shortterm staffing application for
Deloitte

The Enterprise Services segment is conducted through two platforms: MyGigs
and Global Fleet Services.

A. MyGigs platform
MyGigs is a Deloitte branded version of the Freelancer InSource platform
which is tailored to address the needs of Deloitte practitioners and tightly
integrated with SAP Fieldglass. It is a self-service short term staffing
application connecting the company's internal talent pool to open up project
opportunities with the objective of creating a number one remote talentexperience. The MyGigs platform forms a flagship deployment of Freelancer
Enterprise's InSource product solution. The platform connects the internal
platform to the external Freelancer cloud workforce. InSource boosts theefficiency of the workforce, connecting internal demand for skills for bothinternal talent and Freelancer's cloud workforce on-demand. In H2 2022,
Deloitte US and Freelancer Enterprise completed its final phase of
deployment for the MyGigs platform. We believe that the InSource product islikely to be a key competitive differentiator for the Fortune 500, providing theEnterprise division with both an internal gig platform and an elastic cloud
workforce (Figure 9).
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14

Freelancer Limited
Figure 9: Freelancer InSource

Source: Company, Pitt Street Research

Since March 2020, the number of gig workers has expanded considerably, toover 48,000 consultants. MyGigs is changing the way the company delivers
work on its projects to firms, clients, and the society.
Projects on the MyGigs platform are posted both internally and externally to
the greater Freelancer.com marketplace. However, most of the new users arelikely to initially focus on MyGigs to find internal resources or gigs, while there
exists a significant potential for MyGigs External. One advantage of external
projects over internal ones is that the former is more liquid than internal
projects. The liquidity is likely to witness growth as more freelancers areonboarded through a comprehensive enterprise-grade vetting process.
Deloitte is likely to rely more heavily on IT freelancers than it did before or
during the COVID-19 pandemic. It enlists freelancers with specific skills acrossa diverse range of capabilities including AI and analytics. Deloitte consultants
can hire freelancers, manage projects, and process payments at scale with the
SAP Fieldglass integration. Thousands of consultants from Deloitte havealready been onboarded to the platform. We believe that the deployment of
the custom version of Freelancer is a positive for the company as it helps
Freelancer to scale well with the largest computer and printer companies. It
is currently in the process of being rolled out to 13 countries with a total of
53 countries globally in terms of the service network. The systems of theconsultants are integrated with Freelancer's customers and there is a step up
in terms of the volumes going through.

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15

Freelancer Limited
Figure 10: Field Service engineers completing on-site work

Source: Company

B. Global field services
Freelancer aims to build adisruptive and elastic global
workforce powered byfreelancers

Freelancer expanded its major engagement with a global technology leader
in computer and printer technology across multiple countries for building ofa disruptive and elastic global workforce powered by freelancers (Figure 10).
The company also made fast strides in its long-standing collaboration
focussed product strategy. The integration is now fully operational acrossIndia, Australia, New Zealand, India, and Malaysia. This is likely to pave theway for higher volumes across all markets and provide a standardised andsingle global solution. Additionally, an expansion in order volumes has also
been witnessed due to technical integration directly into the work
management system. Going forward, Freelancer aims to expand services to
new countries for both consumer and commercial segments. The two main
goals for 2023 are expansion to installation works and penetration into the
US market. We believe that the creation of a Field Services marketplacethrough Freelancer Enterprise is likely to help Freelancer expand its existing
services coverage into hard-to-reach regions experiencing service gaps
(Figure 11).

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16

Freelancer Limited
Figure 11: Field Service engineers activating globally

Source: Company, Pitt Street Research

The gig economy is an old concept undergoing a paradigm shift
A gig economy is a free market wherein individuals can earn income from ondemand, short-term assignments, tasks, and jobs. Workers in a gig economy
are not employees but self-employed independent contract workers who
work for a variety of clients. Gig workers earn money from completing small
jobs for numerous clients. Some gig workers are paid per hour, while others
are compensated per project or task. Those who earn money per hour havethe flexibility to choose when and how long they work.
With the availability of cheaper work and more efficient and flexible services,a gig economy offers consumers a unique alternative to regular andstandardised business models. It encompasses a range of arrangements,
including freelancers being paid per task, independent contractors who workand get paid on a contract-to-contract basis, project-based workers who arepaid for each project they undertake, temporary hires employed for a fixed
period, and part-time workers who work fewer hours than full-time
employees.
According to Marketwatch, a US-based market research firm and a subsidiaryof Dow Jones & Company, the global gig economy market is projected to growfrom US$413.9bn in 2022 to US$918.9bn in 2028, at a CAGR of 14.2% (Figure
12).
Freelancing is not a new concept. Companies of all industries have long relied
external parties – freelancers, independent contractors, or entire
organisations – to handle non-core functions and support their operations. By
outsourcing specialised tasks to freelancers, companies can lighten theworkload of their full-time employees, allowing them to focus on corebusiness activities. The COVID-19 pandemic has further fuelled the demand
for freelancing work, with more individuals and organisations seeking flexible
employment/task enabler opportunities.
Individuals can work both offline and online and can be engaged in securing
temporary and contracted work to find a gig. In the past, freelancers often
relied on word-of-mouth referrals to find work. However, with the emergenceof technologies such as Freelancer.com, the approach has changed
significantly. With advancements in internet bandwidth, improved humancomputer interactions, and enhanced technology, the scope and complexityof collaborative work between individuals have significantly increased.
Moreover, innovation and change are the norm in today's world, i.e.
organisations are turning to crowdsourcing as a problem-solving mechanism.

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17Freelancer Limited
Figure 12: Global gig economy growth forecasts
1000

918.9

900

800

US$bn

700
600
500

413.9

400
300
200
100

0
2022

2028

Source: Marketwatch, Pitt Street Research

Organisations are resorting to
gig workers to foster
innovation and idea
generation. They are also
striving to build future-proof
workforces, ensuring
competitiveness and relevancein the evolving landscape ofworkWith globalisation, remote work, and the emergence of freelancemarketplaces, hiring freelancers (such as Freelancer.com) has become easierthan ever before. The rise of IT platforms has ushered in a new era, giving
birth to freelance platforms. These platforms serve as marketplaces thatconnect businesses with gig workers from all corners of the globe, creating aseamless and efficient way to engage in freelance work. By connecting
businesses in need of skilled professionals with individuals seeking freelancing
opportunities, these platforms facilitate efficient and convenientcollaborations.
Freelance platforms such as Freelancer.com provide a platform for companies
to post their workforce requirements, while freelancers can showcase theirskills and experience through their profiles. These platforms typicallygenerate revenue by taking a percentage from both the employer and thefreelancer. In exchange for the fees charged, these platforms offer a
streamlined and user-friendly business experience for both parties involved.
Leveraging freelance platforms also allows businesses to tap into a global poolof talent, resulting in cost savings compared to engaging high mark-up
vendors.
While well-known companies like Amazon, Alibaba, and eBay dominate theglobal product marketplaces, the services marketplace is even more
extensive. According to the McKinsey Global Institute, approximately 160m
jobs, accounting for around 11% of the projected 1.46bn services jobs
worldwide, could potentially be performed remotely (assuming no supply
constraints). We believe that the growth and potential of freelance work andthe services marketplace underscore the transformative impact of technology
and the evolving nature of work in the modern era.
According to Marketwatch, the global freelance platform market is projected
to witness substantial growth, with an estimated increase from US$4.5bn in
2022 to US$9.8bn in 2028, at a CAGR of 13.7% (Figure 13). To illustrate themarket opportunity another way, the McKinsey Global Institute has
estimated that 160m, or about 11% of the projected 1.46 billion services jobs
worldwide, could theoretically be carried out remotely, barring any
constraints in supply.

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18

Freelancer Limited
Figure 13: Global freelance platform growth forecasts
12
9.8

10

US$bn

8
6
4.5
4

2
0

2022

2028

Source: Marketwatch Pitt Street Research

Freelancer's online payment services platform –Escrow.com

Escrow.com is the world's
largest and only multijurisdictional licensed online
escrow company. It ensures
the safety and integrity of
online transactions for bothconsumers and businesses

Freelancer through Escrow.com offers a highly secure payment platform forhigh-value transactions, providing a safe environment for buyers and sellers.
Escrow.com is the world's largest and only multi-jurisdictional licensed online
escrow company. With over US$6.6 billion in secured transactions,
Escrow.com ensures the safety and integrity of online transactions for bothconsumers and businesses.
Unlike PayPal, Escrow.com specialises in handling complex and high-valuetransactions that involve items such as cars, houses, gemstones, diamonds,
businesses, real estate, shipping containers, paintings, fine arts, and watches.
The platform caters to a wide range of items that can be sold for various priceranges, i.e. US$1-100m. Notably, Escrow.com is the exclusive online payment
method for listing eBay Motors businesses in the United States. It also enables
secure and reliable transactions in the luxury watch market. It serves as thepayment method for the Shopify exchange, allowing seamless and securetransactions on the popular e-commerce platform. Global organisations suchas Facebook, Snapchat, WeChat, SpaceX, Chrome.com, Gmail.com, andcrypto.com have relied on Escrow.com for purchasing domain names, further
demonstrating its trusted reputation and widespread adoption by industry
leaders (Figure 14).

What is an escrow account?
Escrow.com ensures the safety
and security of transactions bysecurely holding the buyer's
payment in a trust accountuntil the entire transaction iscompleted.

The Escrow.com platform provides a unique feature that allows for theinspection of high-value goods and services, such as private jets and luxury
cars, before the transfer of funds. This added level of security andtransparency ensures that buyers can verify the condition and authenticity of
the items they are purchasing and not risking throwing money down the drainon goods that aren't what they are paying for. This feature is particularly
crucial for expensive and exclusive transactions where thorough inspection isessential.
Escrow.com ensures the safety and security of transactions by securely
holding the buyer's payment in a trust account until the entire transaction iscompleted. This provides buyers with confidence as it guarantees the proper
registry of the asset in their name, simultaneously providing reassurance to

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19Freelancer Limited
the sellers about their payment. From a counterparty risk perspective,
Escrow.com is the most secure payment method for transactions. Both thebuyer and seller are safeguarded with the funds kept in trust.
Escrow.com follows a meticulous process. The transaction flow is wellstructured, beginning with the agreement of terms by the involved
parties. Buyers then submit their payments, and sellers deliver the goods
or services. In the case of high-value items, inspections may be conductedto ensure their quality and condition. Finally, upon successful completionof the transaction, the payment is released to the seller, ensuring a fairand reliable exchange.
In Q1 2023, Freelancer achieved a GPV of US$183m. Since its inception,
Freelancer has successfully facilitated >US$6.6bn in transaction volume,
demonstrating the platform's significant impact and popularity within theindustry.
Figure 14: Major global domains were bought through Escrow.com

Source: Company

What is the significance of Escrow.com?
Unlike most payment providers or platforms such as Afterpay, PayPal, Apple
Pay, and Google Pay, which primarily focus on low-value transactions,Freelancer specialises in facilitating secure payments for high-valuetransactions. This distinction arises from the unique characteristics of highvalue transactions, which require bespoke, secure, and error-free payment
solutions. Additionally, the inclusion of inspections before shipping adds anextra cost element to these transactions.
In many cases, traditional online payment methods fail to address theconcerns associated with untrustworthy counterparties, making buyer
protection a less satisfactory experience for consumers. The risk involved insending money before goods have been inspected also poses challenges forboth buyers and sellers.
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20

Freelancer Limited

Escrow.com has been used for
M&A transactions

Escrow.com solves most of the issues engulfing large value payments in an
untrustworthy world by ensuring the following:- Increased trust – Since marketplaces are about trust, Escrow.com
enhances trust for platforms.
- Increased liquidity – Buyers can inspect goods or services before therelease of funds thereby driving cross-border transactions.
- Improved network effects – Higher liquidity implies more buyers andsellers, better choice, pricing and conversion rates.
- Increased insights – This helps to know who the customer is, enables
bidirectional feedback, and what happens after the match.
- Increased Revenue – Upselling is possible due to the platform handlingthe payments.
The uses to which Escrow.com can be put are manifold.
- It's worth noting that sales of non-operated mineral rights online weremade possible by Escrow.com, and this in turn aided the transformationof the business into an online marketplace.
- The platform has also been used for M&A transactions - once the letterof intent or asset purchase agreement is signed, Escrow.com can be used
to protect the deal from fraud and scams.
- Escrow.com is the key payment method used in buying and sellingdomain names and websites.
Figure 15: Escrow.com holds the funds while the transaction is completed

1

2

3

4

5

Buyer and seller
agree to thetransaction andagreed terms

Buyer pays
Escrow.com

Seller delivers
the good orservice

Buyer conducts
an inspection of
the received
good or service

Escrow.com pays
the seller

Source: Company, Pitt Street Research

Escrow.com is different from PayPal, where funds must be shipped instantly,
and the unsatisfactory delivery of the goods may need to be resolved bycomplex and time-consuming chargebacks or reversals. By contrast
Escrow.com supports payments up to 100m in USD, Euros, CAD, AUD, and
GBP. The usage of Escrow.com results in an increase in trust, liquidity,
compliance, revenue, insights, and network effects (Figure 15).

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21

Freelancer Limited
Escrow.com's new partnerships supports feature enhancement
and market expansiona) Acquire.com: To prevent deals from fraud and scams, Escrow.com
has entered a partnership with Acquire.com, a website that ensures
the safety of startup acquisitions. Acquire.com is the largest startup
acquisition marketplace focussed on profitable software companies.
It also enables players in the energy sector to complete sales of nonoperated mineral rights online. Increased volume through application
marketplaces such as Flippa are currently being witnessed, which
Escrow.com is in process to handle through Acquire.com. Some of themarketplaces are likely to branch into mergers and acquisitions ofbusinesses, which are likely to be supported by Escrow.com.
b) Blinker: Since mid-2022, Escrow.com has been working on a new
integration agreement with Blinker, a mobile app that helps
consumers buy or sell a car completely on the app. On Blinker, wouldbe buyers can select a vehicle, negotiate a price, choose which
financing to go for from a marketplace of finance providers, secure
approvals, make down payments for reducing financing costs andcomplete purchases, all from a mobile application. Having
Escrow.com in the app makes the use of Blinker much moretrustworthy as far as the user is concerned. Escrow.com is talking withother car marketplaces such as CarMax, Carsales and Carvana. The
private party used car sales market is significant, with an estimatedsize of US$230 billion. Research indicates that 55.5% of used carpurchases involve financing. Escrow.com's offering aligns perfectlywith this market, providing a trusted payment platform that supports
the expansion of its market reach.
c) MergerCorps and BitsForDigits: In May 2022 it was announced that
Escrow.com would be used by MergersCorp, an M&A firm, for escrowservices when companies buy and sell businesses. In June 2023
Escrow.com announced a similar partnership with BitsForDigits, an
online platform for the acquisition of startups.

The market opportunity for escrow transactions
The global digital payment
market was valued at around
US$90bn in 2021. The market isprojected to experience
substantial growth and is
expected to reach a value of
US$375bn by 2030.

Digital payment, also known as electronic payment, involves the transfer ofvalue from one payment account to another without the need for physicalcash. It relies on digital devices like mobile phones, computers, and Point ofSale (PoS) machines, as well as digital communication channels such as mobile
wireless data or the SWIFT1 network.
According to research conducted by Precedence Research, the global digital
payment market was valued at US$89.5 billion in 2021. The market isprojected to experience substantial growth and is expected to reach a valueof US$374.9 billion by 2030. This impressive growth represents a compound
annual growth rate (CAGR) of 17.25% during the forecast period (Figure 16
and Figure 17).
Digital wallet providers, including industry leaders like Google, Amazon, andAlibaba, are continuously enhancing their offerings by introducing valueadded features and providing excellent customer experiences. Theseadvancements have a positive impact on the adoption of digital wallets,
driving significant traction within the segment.

1 Society for Worldwide Interbank Financial Telecommunications

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22Freelancer Limited
The COVID-19 pandemic has indeed brought about significant changes in
shopping behaviour, prompting a widespread adoption of online shopping
systems. As people turned to online platforms for their purchasing needs, theonline payments market experienced substantial growth. This surge in online
sales has created a greater demand for secure and reliable online payment
solutions. Companies like Escrow.com that provide secure online payment
methods, particularly for high-value items, are well-positioned to benefit
from this trend. Escrow.com is targeting growth opportunities across several
industries including domain names, luxury watches, jewellery, used vehicles,
M&A, and real estate.
Figure 16: Global digital payment by value

Figure 17: Global online payment market share – By
Payment type, 2019

25.6%
36.0%

38.4%

Mobile Payment

Online Banking

Digital Wallet

Source: Precedence Research and Fortune Business Insights

Loadshift – Steady expansion of loads shifted

Loadshift is Australia's largest
online heavy haulage freightmarketplace, connecting
freight owners with transport
operators

Freelancer's third business, Loadshift, is Australia's largest online heavy
haulage freight marketplace within the online freight marketplaces sector.
Loadshift is a pioneer in the digital freight industry, revolutionizing
connections between freight owners and transport operators. The platform
serves as a go-to marketplace, facilitating reliable transportation solutions fora wide range of needs, from palletised freight to oversized loads like cars anddozers. Loadshift today handles freight volume requests of around A$300m
annually, worth 100 million km.
Loadshift follows the same principles as Freelancer's other platforms,
streamlining the deal process by carefully vetting operators, providing
competitive quotes, ensuring reliability and quality, tracking cargo at every
kilometre of the journey, and securely holding payments in trust until the job
is completed. For carriers, it charges fees for loads of either 10% to nonmembers or 5% on a $69.95/month membership. Shippers pay 3% before
GST.
Loadshift caters to several major industries especially mining, infrastructure,
construction, and international shipping industries (Figure 18).

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23

Freelancer Limited--

Mining - Through Loadshift, anything can be shipped to anywhere in theworld. The items to be shipped can range from CAT loaders to be sent to
Tanzania, a drill to South Korea or a transmission to Papua New Guinea.
Infrastructure/construction – Strict deadlines and difficult locations aresome areas that Loadshift specialises in. Due to fast changing projectrequirements, a key aim of Loadshift is to ensure a job is not held up by
transport.
International shipping – Loadshift can be used for handling the clients'
import and export or shipping needs. It provides an extensive networkof freight forwarders and custom brokers all over the world withpayments secured by Escrow.com.

Figure 18: Major global freight customers of Loadshift platform

Source: Company

In 2022, the Loadshift and theFreelancer platforms weremerged which resulted in thetransformation of a single
membership-based bulletinboard into a full freightmarketplace

The Loadshift/Freightlancer deal was transformational
Freelancer has successfully developed specialised versions of its freightmarketplace, known as Freightlancer, to cater to specific verticals incollaboration with partners. It first entered this space in 2018 when it
acquired Freightlancer, then an independent company known as Channel 40.
In 2021, Freelancer acquired Loadshift for $7.7m, after which the merged
division started operating under the Loadshift brand.
With the integration of Freightlancer into Loadshift, which occurred in 2022,
the platform now offers a broader range of services and features. Notably, acommission-based model has been introduced, inspired by the operating
model of Freelancer.com. Shippers are charged a commission of 3%, while
carriers face a commission of 10% on transactions conducted through themarketplace. This approach aligns with Freelancer.com's successfulcommission-based structure and allows for a sustainable business model
within the freight industry.

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24

Freelancer Limited
We believe the merger of Freelancer's freight division with the Loadshiftplatform represents a significant milestone for the company. The integrationof these platforms is expected to generate additional opportunities for
carriers to connect with a wider range of available loads. Simultaneously,
shippers will gain access to an expanded network of carriers throughout
Australia. The platform's increased scale and reach are likely to drive greater
connectivity and facilitate smoother transactions between carriers andshippers.
In 2022, Loadshift enabled 74,096 loads with A$350m of notional GLV.
The average distance was 1,337km per load, the average completed load
size was A$5,184 and the average freight charge was A$3.49/km.

Figure 19: Freight marketplace mechanism
Aggregator that analyses shipments' data and automaticallymatches them to a carrier for optimal delivery

Shippers create orders with allnecesary data about delivery
and cargo

Digital touchpoint (web or
mobile app) for shippers andcarriers to seamlessly accessthe marketplace

Carriers (logistics service
providers or independent
drivers and fleets) receive thelist of optimal orders fortransportation

Source: Company, Pitt Street Research

The market environment for freight marketplace
How does a freight marketplace work?
In an online freight marketplace, shippers create orders with the necessary
data about delivery and cargo and carriers receive the list of optimal orders
for transportation. The freight marketplace enables companies to choose
from a list of independent truck drivers and logistics companies. To streamline
things, shippers can set desired delivery times or schedule cargotransportation in advance. In addition, the driver onboarding process is
accelerated, and drivers can apply for work faster, due to the digital nature of
online shipping platforms. Furthermore, a digital point for shippers andcarriers exists for access to the marketplace in a seamless manner. An
aggregator like Loadshift also analyses the data for shipments andautomatically matches it to a carrier for optimal delivery (Figure 19).
Benefits of using a freight marketplace
Besides real-time communication, secure payments, and the maximisation of
productivity and asset utilisation, digital freight marketplaces help with manyother things:

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25

Freelancer Limited
–
–
–
–
–

Marketplaces are enabled with cloud-based systems containing end-toend encryption, which helps in improving data security and fraud
protection.
Marketplaces ensure fairness and transparency at all stages between
shippers and carriers, through tracking systems.
Marketplaces accelerate batching through artificial intelligence (AI), as
packages can be allocated automatically and sent out for shipping roundthe clock at no additional cost.
The digital freight solutions of marketplaces help in optimising data andrecords management. Companies can also perform advanced forecasting
to improve last-mile delivery.
The increased competition that a digital freight marketplace brings canhelp to lower prices and improve service levels to a great extent.

Freight marketplace industry is expected to grow at an accelerate rate
The global digital freight forwarding market is likely to grow at a 10-year CAGR
of 23.1% from US$2.9bn in 2020 to US$22.9bn in 2030 (Figure ). The growthin the market is likely to be attributed to expansion in the e-commerce market
owing to digitalisation. Digital freight forwarding is likely to result in a host of
benefits such as instant quotes, transparent pricing, comparison of rates andcarriers, better tracking, and ease of documentation. Loadshift is expected toreap all the benefits of this rapidly expanding sector.

We expect the global digitalfreight forwarding market willgrow at more than 20% p.a. forthe coming decade or so

Figure 20: Digital freight forwarding growth forecasts
25

22.9

US$bn

20

15

10

5

2.9

0
2020

2030

Source: Marketwatch, Pitt Street Research

How does Freelancer generate revenue?
Freelancer generates commission income through its various marketplaceplatforms:- Freelancer.com - Freelancer's primary source of revenue generation
comes from users posting jobs on the platform. To ensure fair payment
for work, the concept of milestone payments is employed. Milestone
payments involve payments being held by Freelancer.com until the
project is completed. Payment is made for each hour of milestone work
completed. Once the project is finished and the client is fully satisfied
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26

Freelancer Limited

Freelancer's main fee income
is generated from projectcommissions when projects
are awarded by users andsubsequently accepted byother users-

with the outcome, the milestone payment is released to the freelancer,
and the client's payment is processed.
The main income from fees is generated through project commissions,which occur when users award projects to freelancers, and thoseprojects are accepted by the freelancers. The fees vary based on the
project's value and are paid as an introduction fee at the time ofacceptance. The project commissions range between 0-3% of the
project's value from employers and 3-10% of the value from freelancers.
The exact commission rate depends on whether a user is on a free orpaid membership plan. The paid membership plans offer various
additional features and benefits, such as lower commissions, more bids,
free project upgrades, and larger portfolios.
Freelancer also generates revenue from other services it offers. These
services include project upgrades, crowdsourcing contest upgrades, bid
upgrades, transaction fees, advertising, and certification fees.
Escrow.com - Freelancer charges fees on every transaction (Figure 21).
Transactions with buyers outside the US may incur a US$25 charge tocover intermediary bank fees. This fee will be added to the escrow fee,regardless of whether the buyer or seller selects to pay via international
wire transfer. Once the agreed-upon fee is determined, it will be
included in the purchase price of the merchandise, vehicle, or domainname. Following the completion and verification of the transaction's
terms, Escrow.com will promptly make the payment to the seller using
the preferred disbursement method on the same or the next day.
If there is an agreement for the seller or broker to pay all or part of theescrow fee, it will be automatically deducted from the purchase price or
the broker commission accordingly.

Figure 21: Transaction fees in USD

Transaction Amount(Merchandise + Shipping)$0-$5000$5000.01-$25000$25000.01 +Standard
3.25% ($10 minimum)$162.50 +0.26% of amount over
$5000
0.89%

Conceirge
6.5% ($100minimum)$325 +0.52% ofamount over $5000
1.78%

Payment Processing
feeStandard or concierge
fee + 3.05%
Not available
Not available

Source: Company, Pitt Street Research-

Loadshift – On the freight marketplace platform, signing up, postingloads, submitting quotes, and discussing project requirements are all
free of charge. However, if a load is awarded to a carrier, a small
introduction fee relative to the value of the selected quote is applied. To
ensure a trusted marketplace for both carriers and shippers, all loads arepaid through the Loadshift Milestone Payment system.
For shippers, a fee of 3.3% of the load's value or A$5.50 (whicheveramount is greater) is levied during the award of the load to the carrier.
These fees include GST to comply with taxation regulations. On the other
hand, member carriers benefit from discounted fees on their quotes.
Non-member carriers are charged a fee equivalent to 11% of the load's
value or A$5.50 per tonne (whichever is greater) when awarded the load.

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27

Freelancer Limited
Why Freelancer can turn aroundWe acknowledge investors would be frustrated with the share priceunderperformance. We think Freelancer has suffered from the 'Tech Wreck',the superior IR strategies of peers such as Airtasker (ASX: ART) which have led
to investors finding these companies more attractive, and the fact that thecompany is not profitable, not to mention the fact that growth is slower thaninvestors had expected. However, we are confident the company is making
progress.
We think the key catalysts will be continued revenue growth across all of its
platforms as adoption increases and the company tracking towards EBITDA
and NPAT profitability, which we anticipate can happen in FY24 and FY25
respectively and is possible without further shareholder dilution. The
company has made significant progress towards this in 1HY23.

Freelancer's progress – as evidenced in 1HY23
On a group-wide basis, Freelancer improved its NPAT from $(3.1m) in 1HY22
to $(0.3m) in 1HY23. Its Escrow.com division was profitable during the period
and its core marketplace and Loadshift divisions are at an effective breakeven position. The company's EBITDA improved too from $(4.2m) to $(0.4m).
This was due to cost efficiencies extracted across the business. Employee
expenses are down 23% and marketing is down 40%. It closed the period with
$23.1m in cash and no debt, a flat position compared to FY22. The grossmargin remained steady at 84%.
In 1HY23, Freelancer.com's Gross Merchandise Volume (GMV) remained
relatively stable at A$65.2m. The Gross Payment Volume (GPV) was $576.9m
across the group, down 11.6%. Although, this figure represents a decline,
figures from the past couple of years were driven by COVID-related superseasonality, artificially inflating core metrics, particularly project fees.
It was a particularly successful period for Loadshift. During 2Q23, its GMV
increased 53.7% quarter-on-quarter. The average freight charge was$4.03/km, up 18.5% from the prior corresponding period.
We think investors will re-rate the company as it edges to profitability, which
we think can happen in FY25. We don't expect Freelancer to raise more
capital.

Freelancer's competition
The Freelancer.com platform enjoys a plethora of advantages over nearest
competitors that investors have not realised and therefore underrated
Freelancer.
Airtasker: Airtasker has one central platform instead of Freelancer's three.
Although it has over 160k 'taskers', the pool is more limited in practicebecause jobs tend to be localised jobs that must be done in person such as
helping individuals move house. Although it has an international presence, it
is still very Australia-centric with <2% of revenues coming from outside
Australia. Airtasker allows 'taskers' to set their own hourly rate or bid for a
project, taking a percentage between 10 and 20% dependent on the task andvalue. It is listed on the ASX like Freelancer is, joining the bourse in March
2021.
One thing it has done better than Freelancer is its IR strategy in the first few
months post-listing, occurring as it did during the pandemic-related tech
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28

Freelancer Limited
boom. Retail investors were excited about having a chance to invest in thiscompany after it raised capital so successfully while private. But it has
suffered amongst the most of any ASX tech stocks as the company continued
to bleed cash while investing for growth, particularly international growththat has not eventuated thus far (at least to the extent investors may haveexpected).
Fiverr: At first glance, investors might say that Fiverr is a comparable platform
to Freelancer. It is not a marketplace in the sense that Freelancer is, where
freelancers have to bid for tasks. Fiverr is essentially a platform enabling the
traditional professional services model.
It has less flexibility for buyers and sellers compared to Freelancer where
payment only is made once the job is completed. Fiverr sellers are free to sell
their services, but the commission fee is flat. The platform will charge 20% of
the paid gigs, irrespective of how long one has worked with the buyer. 5.5%
fee is charged on all transactions. Buyers pay Fiverr in advance. When anorder is successfully delivered and completed, sellers receive 80% of the totalorder value. It has 830k Freelancers, a fraction of what Freelancer has.
Upwork: Upwork is similar to Fiverr in terms of its operations and the clientsthat use it. However, it tends to be suited for larger and complex jobs asevidenced that the typical spend is US$5,000 per year. Upwork may haveabout 4m active freelancers2 given the average but promotes 18 million in
total freelancers3 (ie active and not-so-active). The number of available
services is only around 90, and the platform is US centric. It has some special
features that its peers do not such as verification of freelancer entities, avirtual talent bench of trusted freelancers, and dedicated mobile application
for hiring of freelancers and project management.
Upwork charges a 5% processing fee on all transactions, although someAmerican clients may be eligible for a 3% processing fee and its service fee isa flat 10% fee.

Valuation of Freelancer
To derive Freelancer's long-term value, we have employed a weighted
average valuation methodology – using Peer Group & DCF approaches, thenweighting both equally.

Peer group valuation suggests $0.35-$0.64 per share
We have considered businesses from diverse geographic locations as
Freelancer faces competition from both domestic and international players(Figure 22). Given Freelancer's portfolio of three distinct businesses(Freelancer.com, Escrow.com, Loadshift), we have included publicly traded
companies that offer hiring services, talent marketplaces, online remittanceservices, management consulting services, task outsourcing services, andreal-time payment solutions. Peer list includes: Crowdworks Inc. (TSE: 3900),
Upwork Inc. (NASDAQ: UPWK), Airtasker (ASX: ART), Fiverr (NYSE: FVRR),
Remitly (NASDAQ: RELY) and ACI Worldwide (NASDAQ: ACIW).

2 Estimated using an average job figure of US$250 and Gross Services Volume of US$1bn in the March 2023 quarter.
3 See 94 Upwork Statistics For 2023 (Users, Growth & Trends) by Daniel Ruby, Demand Sage, 6 March 2023.

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29

Freelancer Limited
Figure 22: Peer Multiples^
Company Name

TickerLast reported
fiscal

CrowdWorks Inc.
Upwork Inc.
Airtasker
FiverrRemitly
ACI Worldwide
Average
MedianTSE:3900
NASDAQ:UPWK
ASX:ART
NYSE:FVRR
NASDAQ:RELY
NASDAQ:ACIW

Sep-22
Dec-22Jun-22
Dec-22
Dec-22
Dec-22M-Cap(A$ m)
206.0
1,595.0
88.0
1,544.0
5,002.0
3,784.0
2,037
1,570

2021
1.2x
2.7x
2.5x
4.1x
7.1x
2.7x
3.4x
2.7x

EV / Sales
2022
2023F
1.4x
1.1x
2.1x
1.9x
2.1x
1.5x
3.4x
3.1x
4.6x
3.4x
2.5x
2.4x
2.7x
2.2x
2.3x
2.1x

2024F
0.9x
1.6x
1.3x
2.7x
2.7x
2.2x
1.9x
1.9x

Note: ^As of 25 July 2023
Source: Refinitiv and Pitt Street research

By applying the industry-average EV/Sales multiple of 2.2x to the projected
revenue for 2023, we have calculated a fair value of A$0.35 for the base caseand A$0.45 for the bull case (Figure 23). It is imperative to note that
Freelancer possesses a unique combination of three distinct and high-growthbusinesses, warranting the application of a premium to the industry multiple.
Therefore, in our base case, we have applied a 10% premium to the industry
multiple, and in our bull case, we have applied a 20% premium.
Figure 23: Relative Valuation calculation
Freelancer Valuation (A$munless specified)
Sector Average Multiple
Discount/ Premium
Sales 2023F
Implied EV
Net (debt) cash
Minority interest
Other Investments
Equity/Book value
Diluted Shares (m)Implied price (A$)
Current price (A$)
Upside (%)
Source: Pitt Street ResearchBase case

Bull case

2.2x
20.0%
72.3
193
18
(4)
207.3
451.7
0.34
0.275
67.2%

2.2x
40.0%
84
262
32
(4)
290.3
452.3
0.64
0.275
133.4%

DCF yields $0.96-$1.21 per share
Our DCF model (Figure 24) has the following key assumptions:- Revenue Model: Our DCF calculation is primarily driven by forward
revenues from Freelancer's key business verticals, based on thecommission income charged on total transaction volume for thatvertical. The company's revenue growth is modelled to travel in tandemwith the expansion of key addressable markets. The company's
commission income expansion is projected based on its innovative
product portfolio, newer features on platforms and consistently
expanding client reach.
- Forecast Horizon – We have considered a forecast horizon of 11 years(2023 included) as the company is still in the early phase of its growth
lifecycle and experiencing a consistent revenue growth momentum. The
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30

Freelancer Limited---

company achieved operational profitability in Q1 2023. We have applied
terminal growth of 2% beyond the 11 years of the forecasted period.
Discount rate - Considering that Freelancer is a high beta and volatile
stock, we have assumed a WACC of 12.6% - derived from a 14% cost ofequity and 7.7% pre-tax cost of debt with an 83.6-16.4 equity-debt split.
The cost of equity is derived from an 8% equity premium, a 1.2 beta anda 4% risk free rate of return. Figure 25 depicts the impact of the WACC
on the valuation.
Corporate tax - We assume a corporate tax rate of 30%. As Freelancer isanticipated to achieve net-level breakeven only in 2025, the company
will start to pay-out taxes at that time.
Difference in valuation scenarios: There are primarily two differencesthat we have applied across our valuation scenarios:
Growth rate: We have assumed accelerated growth in the acquisition of
new clients and trading volume across platforms. The growth rate differs
across the valuation scenarios, with an average annual growth of 6% in
the base case, 9% in the bull case, and 4% in the bear case. As a result,the 5-year revenue CAGR (2022-27) varies across the three cases asfollows: 8.5% in the base case, 14.5% in the bull case, and 6.3% in thebear case. We see both cases as reasonable given the massive growth in
the gig economy globally, as well as the market opportunity for
Escrow.com.
Net profitability: The escalation of costs applied across scenarios varies.
In our base case, we assume net profitability will be achieved in 2025,
while in the bull case, the same is anticipated to be achieved as early as
2024.
Figure 24: Calculation of Freelancer's DCF valuation
Freelancer Valuation (A$munless specified)Enterprise Value (A$ m)
Net (debt) cash
Minority Interest
Other Investments
Equity value (m)Diluted Shares (m)Implied price (A$)
Current price (A$)
Upside (%)
Estimates: Pitt Street ResearchBase case

Bull case

419.7
18.2
(3.7)
434.2
451.7
0.96
0.275
249.1%

519.6
31.7
(3.7)
547.6
451.7
1.21
0.275
340.0%

Figure 25: DCF value in A$ cents using various WACCs
Sensitivity Analysis
WACC
Terminal Growth Rate
Implied Price (A$ cents)
Change in Terminal Growth
Rate

12.7%
2%
0.96
1.0%
1.5%
2.0%
2.5%
3.0%

10.7%
1.18
1.21
1.25
1.29
1.35

11.7%
1.03
1.06
1.09
1.12
1.16

12.7%
0.92
0.94
0.96
0.99
1.01

13.7%
0.82
0.83
0.85
0.87
0.89

14.7%
0.74
0.75
0.76
0.78
0.79

Estimates: Pitt Street Research
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31

Freelancer Limited
Fair value of A$0.71-0.93 per share
Our base case value of A$0.71 per share has been derived using a weighted
average valuation methodology, which assigns equal weight to our relative
valuation and our DCF calculation (Figure 26). Our bull case calculation results
in a valuation of A$0.93 per share. Both the cases imply substantial upsidefrom the current share price.
Figure 26: Blended Valuation of Freelancer
Freelancer Valuation (A$ m)
Enterprise Value (A$ m)
Net debt (cash)
Minority Interest
Other Investments
Equity value (A$ m)
Diluted Shares (m)Implied price (A$)
Current price (A$)
Upside (%)

Base Case
306.4
18.2
(3.7)
320.9
451.7
0.710
0.275
154.6%

Bull Case
391.0
31.7
(3.7)
419.0
451.7
0.927
0.275
237.1%

Estimates: Pitt Street Research

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32

Freelancer Limited
Key risks
The main risks that are facing Freelancer and its investment rationale are as
follows:–
Execution risk: The majority of the future growth for Freelancer is
expected to come from the addtion of new features and partnerships
across its three platforms. Any interruption in expansion of service
portfolio and difficulty in commercialising the newer features will
jeopardise investor sentiment.
–
Economic downturn in focused industries: Freelancer is expected togenerate a significant portion of revenue from high-value paymenttransactions and freight movement. Considering that volume in thesebusinesses is directly dependent on economic activity, any related
fundamental downturns here will hamper Freelancer's growthpotential.
–
Geographical concentration: Australia represents 100% of total
revenue for Loadshift.com. This may restrict the growth capacity forFreelancer as the global market becomes competitive.
–
Competition: As the global online freelance marketplace and highvalue online trasaction segment expands, the larger (regional andforeigner) players will also increase presence in the region. Freelancer
will have to counter their financial and technological power toattract/retain customers.
–
Forex risk: Freelancer's earnings is mostly in USD. Currency
fluctuations can impact the company's earnings in AUD. Fluctuationsin the exchge rate will impact our valuation.

Appendix I – Strong leadership
Freelancer has a strong board and management team (Figure 27) withexperience across technology, computer security, networking and software,finance, accounting, and general management domain. Additionally, some of
the leaders are key shareholders in the company and this should provide
confidence to potential investors.

Founder and CEO Matt Barrie
Matt Barrie founded Freelancer in 2009 and remains its CEO. The company
originated from Mr Barrie's realisation that freelancers were easy to hire andpay for once you found them. Mr Barrie first aggregated numerous freelancer
businesses to create Freelancer.com. He took the company public in 2013 andhas since guided the company through its entry into payments and freight.
Mr Barrie was educated at the University of Sydney, where he graduated in
1994 with a Bachelor of Science with First Class Honours in Computer Scienceand Physics and in 1996 with a Bachelor of Engineering with First Class
Honours in Electrical Engineering. He gained his Master of Science in ElectricalEngineering from Stanford University in 1998. Mr Barrie also has a Master ofApplied Finance degree from Macquarie University, gained in 2009.

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33

Freelancer Limited
Figure 27: Freelancer's other management and Board Members

Name and Designation

ProfileMr. Darren Williams
Non-Executive Director•••

Mr. Simon Clausen
Non-Executive Director•••

Mr. Neil Katz
CFO

•
•
•

Mr. Laurent Goudet
CTO

•
•
•

Mr. Williams has extensive experience in computer security, protocols,
networking and software domain.
He co-founded Sensory Networks Inc. and held the roles of CTO andsubsequently CEO.
Mr. Williams holds a first class honours degree in Computer Science and a Ph.D.
in Computer Science from the University of Sydney.
Mr. Clausen has more than 17 years of experience in high growth technology
businesses across Australia and the US.
He was founder and CEO of PC Tools which was acquired by Symantec
Corporation in October 2008.
He also founded Startive Ventures, a specialised technology venture fund in2009.
Mr. Katz has over 20 years of experience in finance, accounting and generalmanagement domain.
He has held CFO level roles at several technology companies, including IPscape,Threatmetrix, Sensory Networks and Aptrix.
Mr. Katz holds a Bachelor of Commerce (Hons.) degree in Financial Managementfrom the University of Cape Town and is a member of the Institute of Chartered
Accountants in Australia.
Mr. Goudet has extensive experience in transforming the web & native clients
into mobile-friendly and fast web applications, enhancing the user experienceand reducing the engineering costs.
He previously worked as a Linux embedded systems software engineer.
Mr. Goudet holds a first-class honours degree in Mathematics and Computer
Science from Université de Marne-la-Vallée, France and a Master's degree in
Embedded Systems Engineering from ESIEE Paris, France.

Source: Company

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34

Freelancer Limited
Appendix II – Analyst certification
Stuart Roberts, lead analyst on this report, has been an equities analyst since
2002.
Stuart obtained a Master of Applied Finance and Investment from the
Securities Institute of Australia in 2002. Previously, from the Securities
Institute of Australia, he obtained a Certificate of Financial Markets(1994) and a Graduate Diploma in Finance and Investment (1999).
Stuart joined Southern Cross Equities as an equities analyst in April 2001.
From February 2002 to July 2013, his research speciality at Southern
Cross Equities and its acquirer, Bell Potter Securities, was Healthcare andBiotechnology. During this time, he covered a variety of establishedhealthcare companies, such as CSL, Cochlear and Resmed, and numerous
other emerging companies. Stuart was a Healthcare and Biotechnology
analyst at Baillieu Holst from October 2013 to January 2015.
After 15 months over 2015–2016 doing Investor Relations for two ASXlisted cancer drug developers, Stuart founded NDF Research in May 2016
to provide issuer-sponsored equity research on ASX-listed Life Sciencescompanies.
In July 2016, with Marc Kennis, Stuart co-founded Pitt Street Research
Pty Ltd, which provides issuer-sponsored research on ASX-listedcompanies across the entire market, including Life Sciences companies.
Since 2018, Stuart has led Pitt Street Research's Resources Sector
franchise, spearheading research on both mining and energy
companies.
Nick Sundich, lead analyst on this report, is an equities research analyst at Pitt
Street Research.
– Nick obtained a Bachelor of Commerce/Bachelor of Arts from the
University of Sydney in 2018. He has also completed the CFA Investment
Foundations program.
– He joined Pitt Street Research in January 2022. Previously he worked forover three years as a financial journalist at Stockhead.
– While at university, he worked for a handful of corporate advisory firms.

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35

General Advice Warning, Disclaimer & Disclosures
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Pitt Street Research has been commissioned to prepare the Content. From time to time, Pitt Street Research
representatives or associates may hold interests, transact or hold directorships in, or perform paid services for,companies mentioned herein. Pitt Street Research and its associates, officers, directors and employees, may, fromtime to time hold securities in the companies referred to herein and may trade in those securities as principal, and ina manner which may be contrary to recommendations mentioned in this document.
The analyst has received assistance from the company in preparing this document. The company has provided theanalyst with communication with senior management and information on the company and industry. As part of due
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