Freelancer Limited

Hello and welcome to the Freelancer Limited first quarter of 2024 business update. My name is Matt Barry. I'm the Chief Executive and Chairman of the company. Here today, I have got Neil Capp, Chief Financial Officer of the business. I've got Sean McMeekin, who's the VP of Sales. I've got Adam Burns, who's the VP of Growth and Growth. Andrew Bateman, who runs Enterprise. And Drew Davis, who runs LoadShift, as well as Cohen on the operational side. As always, you may address questions to anyone in the room, including myself or any of the other executives in the Q&A section, which will happen at the end of the call. Moving into the business update, so we do the GMV of $227.1 million, down 23.8% on PCP. Freelancers' GMV was $31.5 million, effectively flat, down 2.2% on PCP. Escrow's GMV was $199.5.7 million, down 26.5% on PCP, but I will note that this is lapping a spike, as you'll see in a graph coming up one year ago, where we had some large, lumpy transactions. And I do anticipate that in this quarter, coming up in the second quarter, we will have a spike up again as we are in the process of closing probably the biggest transaction history of escrow, a $50 million transaction, which is done in two parts. So we will see that spike back again as this business is a lumpy business when it has large-value transactions. Group net cash receipts were $13.2 million, down 3.6% on PCP. Cash receipts were financed at $10.8 million, down 2% on PCP, and cash receipts for ESCO were down 10% on PCP at $2.4 million. We had a positive net operating cash flow of $1 million, continuing our positive operating cash flow for the last quarter, and ended with cash-in-cash accruals of $21.7 million. Moving into the segment-by-segment, so we've really... I would say in the first quarter laid the groundwork for a fantastic rest of year across all three businesses. We have got some tremendous opportunities, and I think we'll start seeing that reflected in the numbers for all three businesses from the second quarter onwards the rest of the year, as we'll kind of go through in a bit of detail. In the first quarter for the marketplace, we added 1.49 million new users and 211,000 new projects to the marketplace. The average project size was $253, down 6.9% on PCP. But you can see that that number is actually trending up over time as more complex sophistication comes into the projects in the marketplace. This average project size measures across all projects we do. So you've got all the small projects at the field services end of the business end, all the large projects at the low shift end. So that kind of gives a true representation of all the projects in the marketplace. Liquidity remains strong with average fits for project 39, down 9.1% on PCP. And average entries per contest now, 322, up 10% on PCP 10.7. As the marketplace as a whole, we're in a phenomenal position as the largest and widest and deepest online crowdsourcing marketplace distributed globally, everywhere there's electricity and internet. We have people, I put a graph out in social media earlier this week to show really the depth and the breadth of that talent. and really evident in the Contest platform where you can post a $10 contest on basically anything, get hundreds of entries. Right through the high end where we have projects such as NASA, an example of our continuing $6 million unit in Contest, which saw some phenomenal entries from top universities around the world as well as research institutes, which I'll talk about in a second. over the years maintained a very, very high score in terms of quality. Trust pilot rating is 4.5 with 13,744 reviews. The highest of anyone in industry by far. Closest major competitor is 93.4. So we've done some great work over the years in sort of maintaining a leading position in trust and quality. In 2084, our focus ensured we heavily increased client activation rates, turning initial positive experiences into ongoing and lasting business relationships through sticky and retentive product offerings and effective cross-selling. This means moving the core experience from a transactional marketplace to a sticky essential and widely adopted business service, embedded in the workflows of all businesses, small and large. Our four major... products are focuses for this year. Firstly, they say that you want to be a painkiller, not a vitamin. If you go to, you're reading the startup books that are out there or the business books out there, they would all like to take vitamins every day, but we forget that if you have pain, people will pay anything for a painkiller because they need it now. But even better than that is you want it to be a narcotic. You want the product to be so loved that it's actually a For example, Uber. If you stop using Uber, it has to go into a traditional taxi and you have a bit of withdrawal trying to go the old way of doing things. Reinventing the world of work and the AI revolution. We have made some phenomenal progress here. I will say you won't see the numbers in the first quarter, but you'll start seeing it from the second quarter onwards. The productivity gains we're getting from applying AI through our marketplace to get things done on the order of magnitude of 50x to 500x in terms of the productivity. We're starting to deploy AI to do various functionalities that would normally be done by an operations team or a support team on the site. And we're really only limited by infrastructure at this point in time. So we're scaling up day by day by day and also in revenue generating roles. And we're pretty excited about this. By the end of the year, the marketplace is going to be completely different products thanks to AI, and it's going to be incredibly easy to get work done on an enduring and ongoing basis thanks to what we're doing here. We'll talk about that a little bit later on. We also want to rethink client acquisition in a world without Google. I think Google's going through some challenging periods right now. There were some comments in the last couple of weeks on social media that when you type in keywords into Google and you add the keyword before colon 2023, the search results are dramatically different and higher quality. We've tried that ourselves across a variety of keywords and the results are quite evident that the Google search index is being filled with AI-generated content. And so we think that's going to cause a a problem for Google in the future. The second problem they have with their paid advertising is that when you type keywords into Google and you get back – you used to get back 10 blue links. Now you get back 10 blue links and 69 ads. We think increasingly more of that sort of work will go to a chat-based interface where there is no tolerance from the consumer for any bias in the chat results, let alone blatant ads. So we think Google is going to be increasingly challenged as a channel in terms of the ability to use it for customer acquisition. So we've been working on a variety of other channels in order to complement that. And I will say we've got some pretty good success with using AI to build new sales-focused channels as opposed to some of the channels through AI. So one of the big focuses is really to get away and really focus on things like organic acquisition, AI acquisition, and so forth, which we're doing quite well. And you'll see that actually in the acquisition results in a second. Well-beating UX design that wins awards. So we've talked about this many years, getting from a consistent design then to a delightful design, and now we want to start winning awards because I think we're getting at the point where we can start doing that. So turning freelancers from pain care into narcotics. So we created a lot of features around communication and collaboration in the first quarter. We had a number of observations that a significant number of projects experience challenges or abandonment due to insufficient or inconsistent communications from freelancers to clients, particularly when you've got a one-on-one scenario with one client and one freelancer, and we're trying to make it easier for that relationship to become more enduring, in addition to build teams off the basis of that. We feel that the feature we've just launched, I think beta is rolling out now, a little bit of scale, will lead to a big increase in engagement between the two parties, lead to reduction in project management and value rates, and ultimately will increase client engagement rates, retention, and GMV, because the average project size will increase as a result. So that's rolling out as we speak now. In terms of AI, we've built a phenomenal framework. Before I get into the rest of things here, we've got a phenomenal framework to kind of a managed service layer, an operational layer, and a sales layer on the platform. And we started scaling that up with initial agents over the first quarter. That particular agent was focused on freelancers. We saw effectively a many hundred-fold increase in terms of the productivity. This is a human sales team. We've now moved that on to a client-based service. We've only scaled it out to about 2,000 reach-outs a day, but as of today, it might go a couple thousand more. It's pretty phenomenal in terms of what we can do. We've basically taken all the knowledge that we've had on the site from 23 million jobs and 73 million freelancers, and we've basically codified that into a framework to provide effectively sales operations and managed services to the freelancers on the platform, and it's getting pretty phenomenal results. And when you compare that sort of side-by-side with what you'd get with a human, based agent. The quality and the empathy, hands down, just surpasses what any human would ever be able to do. So we're pretty excited about where this goes. And this framework is also managed as a management layer, which is both AI powered and also ultimately escalated to our human agents. So we're getting big productivity increases there. Also, I will say that Anyone who thinks AI will take humans' jobs and create less jobs in the future, I think is probably a bit misguided. We've clearly seen with this that the amount of productivity gains in the AI is such that it creates a lot more work actually for humans to do in terms of escalations, in addition to a whole team running prompts and a whole team running the framework for the AI. In addition, we've produced a number of AI powers features around personalization, so you'll see now, if you use the site every day, that as you go into the flows, such as project posting flows and other flows, you will see that there's a lot more that's being done in terms of helping you to get through those funnels in a very structured manner. Improving acquisition through organic channels. We talked a bit about where we think the challenges are with Google and so forth. We're doing quite a number of things here. What I will say is that our SEM program profitability continues to improve. The 30-day profitability is up 18% on PCP from SEM and volumes up 6.7% on PCP. And that's all with a cut of 13.1% on PCP on the spends on the paid side of things. So we're eking out more profitability and more volume even though we're cutting spend on the paid as we kind of win ourselves up Google and more into other channels. We also, the gross values in users in the first four weeks since registration also has caught up to year-on-year for quite some time now, which sets the acquisition part of the funnel as getting slow progress in terms of profitability, despite the decreased counts of new depositing clients as a result of the reduced marketing spend. So basically, what we are doing with the paid marketing channels is we're increasing the profitability of the volume coming to spend as we move to other channels over time. And that's coming up quite well. And that will flow through the product. all the way through over the next coming borders. We're also working hard on the UX design to get it to the win award level. Some examples here of kind of where that is heading, but I won't spend much time on that. And overall, there is a tremendous amount of productivity in terms of the product features that are coming through on the collaborative side, allowing people to kind of work together, including things like time tracking. There's an AI-powered whiteboard which is actually deployed and so on. So we're pretty excited for the rest of the year. But I will say we are going to see some pretty phenomenal results out of freelancers for the rest of the year from the second quarter onwards. And we've really been laying the groundwork for some time in getting this done. And it's going to happen through the AI, it's going to happen through collaborative tools, and it's going to happen with some work that we're doing, which probably I'll let Sean talk about in a second, around enterprise. Do you want me to do this, or can I pass it up to you for questions afterwards, or how do you want to? Yeah, you can go through it. Okay. So we've got some pretty interesting work we're doing now on the enterprise side. Probably the biggest I should mention is that our crowd is now being used to train one of the world's leading foundational AI models. This is a large-scale, I wouldn't say it's pilot anymore, it's going into full integration and so forth. But effectively what we're doing is we're doing the RLHF and safety training for one of the largest tech companies in the world for their foundational model. We're doing it in partnership with a BPO, one of the work that didn't have access to the crowd to do so. The scale here is quite large. And our ability to source and marshal resources to the project is a perfect fit for our business. There's about 500,000 hours per month available of work to do. In scaling up, we delivered over 20,000 freelancers just in one day by sending out one notification that we have this work available because we have obviously a lot of freelancers waiting for work. And this work is relatively unskilled compared to traditional work on freelancers because It's more playing with generative AI and kind of rating outputs and generative AI versus each other. This is stepping up quite significantly. I think every time we talk to them, they want to add a zero to the numbers in terms of where they want to go with this. But I think we'll start to see these numbers reflected in the second quarter numbers coming through. But we're pretty pleased to be doing this work. Specifically, it requires freelancers in... with certain language capabilities in certain geographic locations around the world. And we excel at that. And, you know, we think that probably, you know, I mean, the number of freelancers we're going to have working in this is going to be probably, you know, in the many, many tens of thousands of freelancers real soon. And Andrew Bateman is here in the room with me and Sean have been really driving it. We think this is a very, very, very substantial amount of work for Freelancer and we're pretty excited to be working on it. And I think demonstrating what we can do and how quick and how easy it is for us to be able to deliver on this sort of work really lends itself to be able to go to the other foundational models and actually also apply Crowd to those models. And I think we can actually also enhance the capability of the underlying training because we can not just identify freelancers with a language skill and a geographic area, but we can actually have them in a very specific geographic area. So you can have nuances that are kind of creeping through in the OpenAR model where the people are saying, oh, this is Nigerian English, because obviously the RLHF training was done with Nigerians. We can work that out of the model by delivering language capabilities that are in more specific locations and more specific nuances of a particular language So I think we can actually provide a more enhanced capability. But we're pretty excited about this. There's a lot of work here. We have some feelings of where that work may have come from, like why it's available on the market, but we're very happy to be in there and working on that. It's going to scale up quite quickly, very quickly. In fact, we were up 4x this week over the last week. Okay. We also submitted proposals for three companies looking to white-label our marketplace to create private talent for their clouds. This objective is to provide access to certified and better freelancers who can help with ongoing projects, give out a valued service for their clients, help them gain greater exposure and market share for their products and certifications. We also onboarded clients across automotive, industrial equipment beverages. And we've got a new activation program that's kind of working through each of those. We also signed an agreement with a leading biotech research company that serves more than 150 countries. And this activation program I mentioned, which is new, is rolling out across oil and gas. In fact, one of the largest oil and gas companies in the world. FMCG, e-commerce, healthcare and technology. And also at government, overnight actually, we've got another one on the government side. Government side there. I don't know if there's anything else. Just want to add, Sean, to any of that that you want to highlight? Well, yeah, we're also actively working with another technology company that's looking to shift 90% of their freelancers from one of our competitors across. So that's going to be, yeah, that should be reflected in Q2. Good. On the global fleet, which is... field services operation. That's been growing strongly. We've had a major technology partner we've worked with for a couple of years, but we're moving into full scale of the prioritization of that now. We delivered a 235% year-on-year increase in repair volumes through the platform. We're now in 48 cities in five countries. We've done 57,000 repairs using a completely freelance workforce. And I'll say that this is pretty novel and first of its kind in that we do the sorting of candidates, the training of candidates. We do the repairs. We do the QA. We do the path distribution and we do the warehousing entirely with a finance model. And these 48 cities across five countries that we do the servicing in, we manage with one person here in the France business. So one person manages hundreds and hundreds of them. It required a fair bit of work and it required a fair bit of integration, but it demonstrates what we can do with the power of a freelance network. It's pretty special. Now, I'll bring up some of the NASA stuff we do, and I know I mentioned it from time to time, but the reason why I bring this up, this work up, is because really NASA now is the whole of US government, and the sophistication, the complexity of the work we do here really sets us apart from our competitors in terms of our ability to deliver on very, very, very sophisticated projects. an innovation challenge we completed in the first quarter, which is called Detect, Track, and Remediate. It challenges small space debris in competition. And so what basically that was is detecting in orbit debris between one and 10 millimeter particle size and figuring out how to detect, track, and remediate it. If you look through here of the winners of this particular competition, I'll just scan through some of this here. There was a solution here that required a constellation of optical imaging satellites in low Earth orbit. There was a solution here that used sensors to detect plasma signatures of debris. There was a solution here that employed a novel interferomic radar technique of a fleet of low-cost CubeSats. There was one that used MIMO FMCW radar, the laser beam break array you used here. There was another here with cameras on satellites, another with a passive detector system, et cetera, and so on. So, I mean, we are working on some of the most sophisticated, high-end, complex work you could think of. And we had people enter from Australia, from the United States, from Spain. and so on for that. Also with the Australian Space Agency, we also worked with them on their EL02 Big Dipper Lunar Regulatory Challenge. And apart from that, we just released a bunch of submissions across basically how Australia's first lunar excavator rover is going to be basically accomplished. So we're pleased to be working with the Australian Space Agency on that. With a who let the gas out tank venting challenge, which is how do you refuel in an orbit, microgravity with minimal loss of propellants. We have a winner thing announced in Q2. We've got submissions in the first quarter. And we've got a challenge in gene editing and central nervous system measurements, of which we paid a half a quarter of the prize money in the first quarter, and that will continue over the rest of the year. So that's pretty special. An example of another large enterprise working with Deloitte, MyGigs, we now have 146,000 hours going through on that platform. They've brought in an activation team now, and we are currently negotiating with Europe to basically roll out in the later of this year. So that will be expanding as well. It's a slow burn, but we're getting there slowly. Onto escrow. You can see here from the graph, the long-term trend is intact with the last data point. We are lacking a big spike in 2023 Q1, which means we've got a large down number for this quarter, but effectively the trend is intact. As I said in the preamble, we have a $50 million transaction we're closing right now in the second quarter. I believe that will come through in the second quarter, possibly early third quarter, but most likely there's two parts. There's a $6 million part and there's a So that will either all come through in Q2 or partly Q2, partly Q3. But we do get spikes here as we do these big transactions, my point. We're trying to avoid and make the growth a lot smoother by building a frictionless checkout system, which we're now integrating into the largest shopping cart in the world. We're doing the final touches on that. We've got some extra requirements that came across in terms of what we want to see there. In the second quarter, we should be going to the beta. We sent out a request for beta customers. We've got about 1,000 responses back. So we're kind of sifting through that now, determining who the ideal shops are that we are going to integrate. But what it does is it allows this shopping cart provider, which traditionally would sell retail products, to sell yachts, to sell cars, to sell real estate, to sell businesses. Any large value asset or complicated asset you can now sell. And this particular shopping cart provider does about 120 billion a year of volume. So it's a pretty major one. And while 55% of the volume goes through four default payment methods, which is the credit card and PayPal and so forth, and the rest go through the alternative methods, we are the first payment method being integrated in this particular platform, which is large value. So all the other payment methods work really well up to $10,000. Above $10,000, they have nothing. They've got maybe a few credit cards that start maxing out around $20,000, $30,000, and then we're going to be the only large-value payment system in that particular platform. So I think that's particularly exciting. We need to get it right. We need to make sure it's frictionless. Obviously, escrow has higher friction because you need to upload your ID documents. Credit cards also require you to upload your ID documents, but you do it at the time you set the credit card up. So because credit cards are quite entrenched and everyone's already sent their ID in, etc., That is the one thing we have to make sure that that setup flow in terms of submitting your ID documents is as streamlined as possible. The very positive thing about that is we have the four top shopping carts basically all lined up in a row. So we're working with number one right now, and number two, three, and four are all in the pipeline basically right after that. So we will pretty much be reasonably well entrenched with the online shopping cart industry in the next couple of quarters. And we're pretty excited about that. The volume, I think, should go up quite dramatically. It also allows much easier integration of escrow because if you want to get going and start from scratch building a platform that uses escrow, you could go to one of these shopping cart providers instead and just boot that up and you'll have the payment method built in and off you go. So this is huge. This is where we're dedicated. Basically, 90% of our product resources is just making The other thing we've got, we've got another major eye on the fire right now, and I spoke to them this morning. It's a tender we submitted to a major Australian state authority related to the sale of secondhand automotive automobiles. We've made it to the first round and we are basically waiting for the second round to be, we've submitted everything to the second round. We're waiting for it to basically be awarded to someone. We've been told we have a strong entry. It is a competitive tender, so we'll see where that goes. But this alone will be game-changing for the business if we get it. It's a multi-billion dollar a year opportunity, actually. Tens of billions of dollars, low tens of billions of dollars a year GMP opportunity. Should we? But it's a competitive tender. We'll see where it goes. I think we stand a good chance. We also attended the big NADA convention in Q1. We've got a bunch of follow-up from that, including a key partnership with the largest trade organization for automotive options in the US. And we're also... in a competitive, I wouldn't say it's a tender, but a competitive pitch to win over one of the largest automated marketplaces in the U.S. for integration for a payment system. So we'll see where that goes in the decision she made in the second quarter. We also partnered with four new luxury watch marketplaces. The drain industry remains a bit flat. And that's kind of one of the reasons why the ASPRO numbers are not amazing for this particular quarter. Again, lacking that spike we've got in 2023 at Q1, but we do think it's going to pick up in Q2 for a variety of reasons. And we think venture funding will come back, particularly in AI, and we're starting to see that. I had a graph in here, but I took it out for AI domain names. But they're growing quite strongly, and we do think there'll be a bit of a rush in the next 12 months into buying those domains. We also brought to the team August Gow into escrow. He was a CommBank working across products to do with home buying and before that Toyota for products related to car buying. So it's a good set of assets to be added expertise to the escrow team for. Load Chef had a good quarter. It was up 69.7% on PCP as we increased the monetized freight posts on the platform. The loads posted was down a bit and the comments down a bit as we kind of kicked off people who are trying to freight broker on the site and not put the loads to the platform in terms of payments. But the monetization increased quite strongly as we were doing that. Quoting went up quite dramatically. It went up 145% in the quarters for 84,000 quotes. Quotes per job went from 2.6 to 7.5. So it basically is now a fully operating marketplace. So it's successfully completed the transition from a board to a marketplace. It's really just focusing on the operating metrics of that marketplace. And the awarded loads are up 125%. So you can see the quotes are quite healthy. And the machinery actually increased as that percentage of the loads. And that's where the valuable work is. That's moving back 21% to about 26.7%. That's where we want to be in the machinery. We've also started taking on fire end project work with LoadShift, and we think starting from next quarter, we're going to see some pretty strong contributions to the numbers for that project work along with everything else we're doing for LoadShift. So LoadShift's going very, very well. In terms of group profitability, we lost in the quarter 10% on PCP. And we might probably expect to make a small operating loss in the quarter, but it will turn around quite dramatically from the second quarter onwards. Positive operating cash flow of $1 million, and cash-in cash flows of $12.7 million. So with that completed, I'll open up to questions. You may address your questions in the group. Alex will proximate them to myself, and you can address them to anyone in the room. We've got the CFO, we've got the head of enterprise sales, we've got the VP of product and growth, the head of enterprise, and two of the managers of LoadShift. Any questions?

I'll just take a couple of AI compared with the competitors.

Okay, Ray asks, how does take up of AI compare with competitors? I'm not sure, maybe Adam, have you seen what the competitors are doing with AI? I mean, as far as I've seen, they've been doing a personalization.

Yeah, so I should typically, this is probably two months old. I haven't looked specifically in the last two months, but about two months ago, I did an audit of both of our major competitors in the core marketplace. One of them had done, I guess, a fairly what I would consider a primitive version of the job posting flow that we have. I personally believe that our experience is substantially better. They didn't gather as much information from the client. They just basically took a cynical sentence from the client and created a job from it, which led to a lot of AI hallucination. The other thing that they've been doing, both of them together, is they do have AI-based landing pages and AI-based services. However, we are also doing very similar in that space. So I would say currently my assessment is that we seem to be ahead, but time will tell. Yes, and certainly what we're doing with the AI framework I think is quite groundbreaking and very different from what we see. Yes, I haven't seen them do anything around, or anything significant I should say, around using AI in the sales space and things like this.

Any other questions from anyone in the audience, just feel free to put them into the chat and Alex can proximate Ross.

Ray asks, were the recent shared buybacks event-driven or discretionary?

They were expired options that had been allocated to staff previously that had expired and exercised. Anything else? So I will say all three businesses, I think, will shine in the next couple of quarters. In summary, I hope some of the questions come through, but I'll kind of say in summary, we've laid a lot of groundwork in the first quarter. On the freelancer itself, I think the AI work we're doing is pretty phenomenal. And that's multifaceted in terms of the AI we've built into the marketplace. I think it's opening up new sales channels for us in addition to helping with the flow and the managed service layer. We've done a huge amount of work in collaborative tooling, which I think is going to be quite phenomenal for lifting retention and lifting GMV. And then we've got the work that we're doing with one of the largest conventional models in the world, if not the largest, doing the RLHF training for that. And the work there is substantial and growing very strongly. Then we've got the entire shopping cart industry lined up for which we're really focusing on now getting up in the second quarter. And really, I think this will be game-changing for the entire business in a big way. One of these shopping carts could do the entire volume of the entire business just by itself or multiples. The tender we're waiting to hear on is competitive with the state regulator, and then we've got a competitive thing with one of the major water marketplaces in the US. And then on the Loachers side of things, we've got substantial project work coming through, which we're working on now, and we've got some major product improvements we're doing on the Loachers side, really on the monetization, but it is functioning now as a full marketplace, so that was very successfully done in terms of transitions from the Portland board. So I think we're going to have a great rest of the year. It's going to be pretty well set up. And as I said, that lump we've got, we're cycling with escrow year on year. We're probably going to have a lump coming up, most likely in the second quarter, if not the third quarter, with a $50 million transaction going through. So that will continue to be lumpy. We're just trying to get those lumps out by building a great checkout solution.

Is that a question? Yes. Ray asks, can these recorded presentations be published on the investor section of the website? They invariably paint a good picture that needs a wider audience of share prices to improve.

Yeah, we are building out. So, Marcus, you've got the book charge of IR, and we are going to start doing a lot more on the IR side, including recording of the quarterlies, including putting stuff like that up online, doing more outreach, running investor days, and so forth. We're really going to start... We're well through that whole COVID period now. We're going to do a lot more outreach and a lot more IR work and some of the people in charge. Thanks.

Any other questions from anyone else? Okay.

Well, I'll call it for a close. Thank you for joining us. I look forward to seeing you next quarter. Thank you.