Transcription of Finance News Network interview with Freelancer Limited (ASX:FLN) Deputy CFO, Christopher Koch
Carolyn Herbert: Freelancer.com is the world's largest freelancing, outsourcing and crowdsourcing marketplace. I’m Carolyn Herbert and joining me at the CEO Sessions in Sydney is the company’s Deputy CFO Christopher Koch. Chris, welcome to FNN.
Christopher Koch: Thanks Carolyn.
Carolyn Herbert: Chris, can you start by telling us a bit about the company? What can you do on Freelancer.com?
Christopher Koch: Sure, you can do literally anything. It’s any amount of work that you want to get outsourced or you want someone else to do. There are two ways to post work; one is you post a project where you write your brief, you tag some skills and set a budget and one of our 16 and a half million members on the site will actually bid you to do the work – and then you pick someone and we help you work with them and get that project done.
The other way to get work done is crowdsourcing; which works really well for creative categories like design a business card, or design a logo, or design a house – do something where you want to see completed work and that’s a contest model where you post a prize and write what you want and people bid you with completed work and you get to pick and award that contest. So, we have nearly 17 million users on the site, we’ve done 8 million projects that represent about US$2.5 billion of posted work. So, it’s a huge marketplace to get literally anything you want to get done, done rightly.
Carolyn Herbert: And now to financials, what was your financial performance like in 1H15?
Christopher Koch: Sure, 1H15 was an exceptionally good result for us. We posted growth in net revenue of 41 per cent on PCP and just really strong growth in all of the metrics that we really care about on the platform. Our gross margin has been stable and high at 88 per cent and we’ve been creeping up the take rate, which is the percentage of the dollars that flow through our platform that we keep as net revenue; that’s sitting at 26.2 per cent and that’s a combination of the commissions that we take from work that flows through and some other non-commission line items as well. So the financial performance has been great.
Most interestingly, some of the operating metrics that support that financial performance have been growing in a way that we’re really pleased with. Including the frequency with which people are actually using the platform and if you look at the growth in projects and contests that were posted first half this year on the first half of last year, it’s up about 43 per cent and that’s a metric that we’re excited about and it helps fuel the growth in the business.
Carolyn Herbert: And what’s fuelling that exceptional growth?
Christopher Koch: We’re seeing more people use the business and more people be aware of it and also when you follow individual cohorts of users, we’re seeing an increase in the number of projects that a user will post in a year particularly on their employer side. And that’s great because we have people in their small business who might get their website built or a logo done and then move through to the 20 other things you can do quickly on the platform like that, which might be around more design work, having someone work on accounting, or some search engine optimisation, or advertising – the list is sort of endless. So we’re finding with small businesses that start to use the platform, they start to use it for more and more things which is great.
Carolyn Herbert: And Chris, now to operations, what are you doing with NASA?
Christopher Koch: NASA’s really exciting. They approached us a few months ago; they’re actually running a bunch of contests on the site right now. It’s a great sort of use case, you know, for people who are still getting their heads around how they can get comfortable using outsourcing in the everyday sort of parts of their business or their own lives. Seeing someone as sophisticated and high profile as NASA use the platform has been great validation of that for people. They’re using it to crowdsource CAD modelling, so computerated design, a very sophisticated designing software of components of the international space station, for a really interesting reason. Turns out there’s a robotic astronaut on the space station, which was a bit of a surprise to me, but there are a lot of videos online. It’s very well documented. NASA as part of a whole bunch of strategies are using that robot to do things that astronauts ordinarily had to do including some high risk things like go outside the space station and manipulate objects, repair and do those sorts of things.
So the first contest they posted was to really model in detail a handrail that runs around the edge of the international space station so that this robotic astronaut can grip it and manipulate it. It’s been a great demonstration of a use case that’s really sophisticated, you know, to the absolute highest standards and it’s got a huge amount of traction and it’s been really exciting for the community of people using the platform, so it’s great.
Carolyn Herbert: And what are some of the new elements and features that have been recently implemented on Freelancer.com?
Christopher Koch: We’ve expanded into local jobs so now you can tag a job with a skill so it might be for something very local like for someone to pick up your dry cleaning or get a coffee or come and help you at a venue, something like that. We have started to use our recruiter upgrade; which is our fee based upgrade that you can select when you post your project and one of our team of people in recruiter group will call you up or message you and help you post your project well and then match it to a freelancer. They will literally take it, look at the pool of the preferred freelancers, and help you get matched up with someone who is going to do your job really well.
We’re shipping improvements to the platform all the time. The mobile applications for the platform are really exciting at the moment; they’ve come a long way in the past five or six months so for people who haven’t used those mobile apps recently that’s definitely worth an updated look.
Carolyn Herbert: And now to your acquisitions, tell us about Escrow.com and this acquisition?
Christopher Koch: So Escrow.com is a secure payments business. It’s very secure; it’s trust accounted, funds are held off balance sheet, and it solves a whole bunch of problems in payments where there’s a lot of friction. Say, for example, if I was going to buy a domain name from you and you were somewhere else in the world and we hadn’t met, it’s quite difficult to work out how we’re actually going to deal with the payments for that transaction because I’m not going to wire you, you probably can’t take a credit card. Escrow.com is a great solution where you put the money into Escrow.com, it’s held on trust for you, and when we complete our transaction it comes to you in a very secure way on the other side so we’re just waiting on one final regulatory approval for that to close and we’re really excited about that business. It’s a great business in the payments space, which complements the rest of our platform really well.
Carolyn Herbert: And finally Chris, what’s your priority for the next 12 months?
Christopher Koch: We want to continue to grow the business in an exceptionally strong way and to bring in business. Mobile’s been a real priority for (us)..probably would have seen some of the broader commentary about how mobile is really taking over in terms of how people are using a lot of the internet sort of day to day, so that’s been a strategic focus for us and just continuing to have a really, really high quality product grow our platform and make it a really beautiful experience for people to use.
Carolyn Herbert: Christopher Koch, thanks for the update on Freelancer.com.
Christopher Koch: Thanks Carolyn.