Freelancer Ltd (FLNCF) (Q4 2024) Earnings Call Highlights: A Turnaround in Cash Flow Amid ...

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Freelancer Ltd (FLNCF) reported a significant turnaround in operating cash flow, which increased by 205% to $5.8 million.
• The company achieved a positive operating profit of $0.8 million, marking a 19% increase from the previous year.
• Freelancer Ltd (FLNCF) has no net debt and a cash balance of $23.2 million, up 9.5% from the first half of the year.
• The company saw a substantial increase in customer acquisition, with cash deposits from new customers up 18.6% year-on-year in the fourth quarter.
• AI integration has enhanced the skills of freelancers, improving the quality and speed of services, and contributing to customer satisfaction.

Negative Points

• Freelancer Ltd (FLNCF) experienced a decline in gross marketplace value by 7.1% and revenue by 4.2% compared to the previous year.
• The company's revenue from the freelancer segment was down 8.2%, primarily due to the roll-off of non-core legacy consulting services.
• There was a 1.7 million unrealized FX loss due to currency fluctuations, impacting financial results.
• The escrow segment's GMV decreased slightly, although revenue increased by 14.5%.
• Freelancer Ltd (FLNCF) faces challenges in automating processes for large-scale AI model training, which currently involves manual operations.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with FLNCF.

Q: Freelancer revenue drops primarily due to non-core legacy engineering consumer services revenue. What specifically was this work and is there any other non-core items that are planned to be dropped or sold? A: It was engineering services work for Deloitte. We built a marketplace for them from 2018 to 2024, and then that rolled off. We were generating revenue from building that marketplace, which is now live and active. The total payment was a little less than $5 million AUD. There are no other non-core items planned to be dropped or sold.

Q: Is the remuneration policy being updated to include share price and profitability incentives? A: We have incorporated updates from the ASX guidelines. Historically, we haven't had a big stock grant program. In FY24, there was no stock issuance. This will be a topic for the REM committee to discuss, especially with new non-executive directors joining.

Q: How much revenue does Load Shift make? A: We don't break it out as a segment yet, but it has the potential to contribute significantly to the business's revenue. It started at a low base of $1 million and has grown substantially since then. We will eventually break it out, but currently, we do not.

Q: Are the performance graphs indexed for inflation? A: The graphs are not indexed for inflation. They are in US dollars, which is the primary currency we operate in, accounting for 71% of our revenue. Therefore, they are not affected by Australian currency fluctuations.

Q: What was the revenue contribution in full year 24 from working with large tech firms in language models and related areas? What do you expect the contribution will be in full year 25? A: The revenue has been variable due to manual processes. We have around 20 engagements with one major model, potentially offering $1-2 million of GMV per month. We need to automate processes to unlock this potential fully. We are working on proposals to scale up substantially.

Q: Are there any comments on the impact of the new American President's policies on Freelancer's business? A: We anticipate a favorable environment for building apps, companies, and startups, which is beneficial for Freelancer and Escrow. There have been no specific policy impacts communicated yet, but we expect a positive business climate.

Q: Any comments on competitors? A: We've received feedback about Upwork's increased fees and platform issues. Freelancer does not charge per bid, unlike Upwork. Fiverr has not been seen in the enterprise space. These are anecdotal observations.

Q: Can you give us some details on the business model and revenue models for the government partnerships? A: We have various models, including per-person payments for training and program management. We also work on job subsidization programs with governments. The goal is to scale programs nationally to transition people from unemployment benefits to generating their own income.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.