Shares in Freelancer Ltd (ASX: FLN) have quietly gone under the radar recently and have gained over 77% since the start of this month alone.
Freelancer listed on the ASX back in 2013 with an offer price of 50 cents per share but commenced trading at roughly $1.60, presumably with a fair bit of hype surrounding its IPO.
Over the past few years, it seems as if Freelancer has fallen out of favour with the market, but sentiment has picked up again recently for various reasons.
The company has just provided an impressive trading update, but it’s also worth noting that Freelancer’s shares started gaining traction at roughly the same time that competitor Airtasker Ltd (ASX: ART) listed on the ASX last month.
Airtasker has performed fairly strongly since its IPO, so it seems as though the positive sentiment around the sector has brought up the Freelancer share price as well.
FLN share price
What does Freelancer do?
Founded in 2009, Freelancer is the world’s largest freelancing and crowdsourcing marketplace by the number of users and projects.
In comparison to Airtasker that mainly facilitates outdoor tasks, Freelancer is more tailored towards remote services that can help other businesses. Commonly listed tasks are for designing things such as logos, labels, websites, interiors and packaging.
Freelancers are charged 10% for a fixed price project, or $5.50 (whichever is greater), and 10% for hourly projects.
Revenue is also generated on the employer side of the transaction and collects 3% of the project value or hourly rate.
Strong Q1 update
One of the catalysts behind the recent jump in Freelancer’s share price was its Q1 FY21 results released last week.
For the three months ending 31 March, Freelancer reported an all-time record Gross Payment Volume (GPV) of US$192 million, up 39% on the prior corresponding period (PCP).
GPV isn’t quite the same as revenue though – It’s just the total amount of transactions (tasks) that are processed through its platform.
Cash receipts collected for the quarter also came in at a record high of $12 million, up 32.1% on the pcp.
Freelancer earns around 72% of its revenue in USD. As such, the company noted that foreign exchange was a headwind of 17.4% due to the appreciation of the Australian dollar against the USD.
The company finished the quarter with a cash balance of $37.8 million, up 8.2% on the pcp.
Web traffic surges
Another area of the business that experienced significant growth across the period was the demand from its users.
The number of users was up 105.7% to 16.4 million with total sessions up 105.6% to 26.6 million. Bounce rates were down 55.4%, the average session duration was up 70.6% and Freelancer had climbed from the 1190th largest website to 561st based on Alexa rankings.
Escrow eBay partnership
Freelancer’s shares gained even more momentum on Tuesday when it announced a partnership between its business divisions, Escrow.com and eBay Inc (NASDAQ: EBAY).
Escrow provides additional security for payment transactions where funds are held in escrow until the buyer accepts the item and the funds are released to the seller. It protects both the buyer and seller from any potential fraudulent activity.
Under the recent agreement, buyers of watches sold for more than $10,000 will now have the option to pay using escrow services.
At this stage, Freelancer is unable to forecast the impact this will have on revenue, but it aims to keep the market informed.
Time to buy Freelancer shares?
One of the biggest things playing to Freelancer’s advantage is the huge market it operates in and the potential for this to grow even larger.
COVID-19 forced many of us to work from home, and it’s likely remote working will be a sustainable tailwind to some extent moving forward, which companies like Freelancer are likely to benefit from.
Local jobs in the US market alone has an estimated Total Addressable Market (TAM) of up to $800 billion.
It looks like Freelancer’s revenue growth has stalled over the past few years, but management have indicated the company’s been going through a complete overhaul of its backend infrastructure, website, iOS app and many other aspects to improve profitability and operating leverage.
Freelancer is on my watchlist for now. The market opportunity is large, but it’s by no means the only player in the industry. Various other companies such as Airtasker, Fiverr International Ltd (NYSE: FVRR), Upwork Inc (NASDAQ: UPWK) and Hipages Group Holdings Ltd (ASX: HPG) are similar companies competing for market share.
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