Freelancer Limited (FLN) Earnings Call Transcript & Summary

[Audio Gap] The Freelancer Limited Third Quarter of 2026 Financial Results. My name is Matt Barry, and I'm the Chief Executive and Chairman of the group. With me on the call today is Dylan Carter, the Chief Financial Officer, calling in from Florida; and Andrew Bateman, to my right, who is the VP of Products. And as usual, you may address questions at the end to myself or any of the other executives in the room or follow up with one-on-one later on if you wish by e-mailing at investor@freelancer.com, The group returned to profit -- operating profit in the quarter as the cost program is delivered. Operating expenses decreased about 11% to $8.9 million, $1.2 million lower than the prior corresponding period, with employee expenses down 17.5% and the hosting cost down 9.6%. Our GMV for the group increased [ 13% ] to $244.6 million. In U.S. dollars, it was up 22%. So there was a strong currency effect in the quarter. It was led by Escrow.com and load shift. The group revenue, however, declined to $11.1 million, which is down 10.8% in U.S. dollars, which is the main operating currency of the group results and gross profit declined 16% to $9.6 million. Lower cost offset, more than half the decline in gross profit. EBITDA was positive $0.7 million, and the group recorded an operating profit of slighter positive compared with a slight loss in the first half and a positive net profit before tax. Cash was $16.5 million as of the end of the quarter, and the group remains debt free. We achieved an all-time record quarter for load shift and leadship is also profitable at this point. and on a run rate, that's in the 7 digits. And Escrow.com grew GMV 18.6% or 28% in U.S. dollar terms with a rising new star category being wholesale electronics, which is now 12.8% of GMV, and that looks like it will continue and end up being our second biggest category. France revenue declined 26%. I'll talk about the -- in the segment performance. This continuation of the last quarter as issues, and we are working through those issues as we speak, and I'll address them in a second. And there are some positive signs on that section. Skipping down to the group, there's the segment performance. So as I mentioned, the GMV defined 27.6% which is about 21.7% in U.S. dollar terms and revenue declined to about $6.8 million, about 20.5%. And this is a continuation of kind of what happened in the first half, a slight slowing. Look, there's been -- it hasn't been a great quarter for Freelancer, or it hasn't been a great year for Freelancer. We've been knocked around by really 3 to 4 issues that have been related, but we are slowly getting groups on each of them. The first issue I kind of -- I wanted -- probably to highlight the second issue here, which is really on platform stability and organic search. For the course of 2024, 2025, 2026, we have seen ever increasing search traffic, primarily from AI scrapers that has increased about 1,300% over the period. That caused, particularly in going into 2026 quite a number of stability issues. And we know that the customer acquisition of the business is very, very, very sensitive to bugs and platform stability. I'm pleased to report that we have largely solved the platform stability issues in the last quarter, Aptima been has been very good. And at the same time, the de-indexing that we suffered as a result, but this as well as remediation has to stop the scraping has rebounded. [ Google ] is now indexing about $5 million of our pages up from $1.2 million. at the start of the quarter. The traffic quality is not as good as it was before, but this does continue to rise, and we do have -- we are one of the most heavily linked 2 sites on the Internet. So figures crossed if we continue the remediation work that we're doing. And we're also enhancing so our logged-out surface. This will continue to rise. We're also, as I'll explain a little bit later on, expanding it's quite a number of new highly targeted high-bay sophisticated and very interesting verticals, and that's also increasing our SCS surface. So that issue, I think, has been, I think, stabilized addressed and remediated -- the second big issue I should probably talk about is payments. Now as I flagged in the first quarter of this year, we had a fairly disastrous migration on one of our credit card gateways and which basically was a migration that one of the gateways asked us to do that resulted in a number of our merchant IDs being consolidated, where some of those merchant IDs had paying existing customers and didn't migrate across properly. We were actually unaware that this migration is actually going on. As I mentioned in the last quarter as some we got [ Windeatt ], we jumped on it, and we've been working very aggressively with the payments team to peel off various flows from those gateways. I will say that when you look at our main U.S. credit card gateway, the business of Freelancer looks very healthy. There's a certain amount of initial payments coming in, and there's a growing recurring payment volume coming from that gateway. It looks like a very healthy business, customers are returning and the customers are spending more. This particular gateway looks fairly kind of topic that I'm talking about here. We've since pulled off pretty much the vast majority of the volume from that gateway and we're deploying new payment gateways, new merchants, new alternative payment methods. For example, in the quarter, we've launched Google Pay towards the end of the quarter. That's currently in the final stage of the AB test and looking recently positive. And we will -- really is our top priority from here, be focusing on flow by flow by flow, really getting these payments to look like our main U.S. credit card gateway, which I do say looks very healthy and actually would show a growing business in freelance. This is something that's -- we've really got to put our heads down and work pretty hard on. We have -- as we speak, we're in the process of commissioning Indian payments. We have a fresh merchant ID for our U.K. payments, which we're in the final stages of a migration of APIs across 2 before we'll go live with that. And we have other flows currently in the works. We are in the middle of this. We do think we've got a strong handle on kind of what wrong here. and we are in the midst of rectifying all this. And I think we've got some stability in the payments and certainly with the new payment methods that are being deployed, we see some growth. So this, I think, is kind of well underway, and we just have to put our head scale and continue working on that. The last major issue is in terms of platform integrity controls, we tightened up the authentication of the site with 2-factor authentication over the course of the latter of 2025. With increasing authentication, you obviously have friction issues. We've been progressively tweaking that frictional way. I think we've kind of optimized it to the best we can have done. And we have lifted quite significantly the security of the platform in the process of doing so. But this, combined with all the other things, did lead to some churn, which we're now trying to fight to bring back. So I'm not happy about this. It's not been a great really 12 months I do think we've got some stability. I think there's a light at the end of the tunnel. And I will, again, point out that when we look at our main credit card gateway for the U.S., it doesn't very healthy. Customers are returning it's in a position of growth and we just need to get that working across all flows and just continue to optimize the core infrastructure as we kind of launch new product, new features, et cetera, and continue to grow the business. So we -- well, I think we've provide stabilization to the platform. We've got to now work to bring into the revenue into positive growth. And I think we're kind of heads down kind of at it. The quality of the marketplace does continue to grow in the underlying features and the improvements that we make. We have quite a number of AB tests that we've been running over the last number of months, which do show some underlying improvements in things like award rate, funnel conversion and so forth. Our average project size increased about 25% to $498. Projects received about 63 bps on average. So liquidity is very strong. AI-related work has grown to 7.7% of GMV, up from 5.7% -- sorry, pro GMV and 7% in U.S. dollar terms. Employee-rated freelances are up. rattans quality is up to 4.83% from 4.78% and we do maintain the highest rating on all the major sites like Trustpilot and side Java and so forth compared to our peers. So the customers do lowest despite some of the core infrastructure problems we've had. In the enterprise division, we are doing more work with NASA. We're doing something in robotics this time, robotics specialists supporting digital twin simulations of multi-agent robotic systems, with applications for Lunar and Martian exploration. Some of you might remember, we put the fifth aspect on the Artemis mission, being the rise 0 grabbing indicator for children's education. We continue to work on the human genomic editing challenge, which is a multiyear. I think it's about USD 7.5 million now challenge with 4 or 5 reagent tests complete. The final testing scheduled for later this year. Our data as index innovation event was held in July with the full winners advanced and with prime trajectory unknown challenge for the distribution of particles and explosions, also was resolved in. We also worked with the United Nations development program to mark underwater explosive ordinance. So I think you can see by the quality of the work we do there that we do, we do very high and sophisticated work on freelancer that is very hard to do anywhere else on the Internet. In field services, things are starting to move a little bit. We've got a field sales pilot for a global -- a very large trade to a global payments provider, which began in July. The sales team have really boosted the cadence in terms of sales final activity. And in September, we're onboarding quite a number of merchants for this particular payments provider. In the U.S., we signed a service agreement with a medical device manufacturer for on-site work in medical care, and we're starting with there as we speak. And we've also built 2 products in the process of doing this for managing and dispatching field workers. Some of the would have taken us years to do in the past, we managed to do in the quarter and also another product to run the field sales team for the big payments company. So that's starting to kind of get some real progress happening. And the enterprise also did a number of work for other companies. It's a very large trillion-dollar e-commerce company. We do research and localization and video production for, et cetera, is the work we did there and other BPOs and so forth. So look, I'll talk about in the outlook in a second kind of the future, but Really, this has been just working, get stabilization, work on the core infrastructure of stability, which is done, search, which is lifting payments, which I think is somewhat stabilized and growing now as we deploy new payment gateways and the platform integrity controls, where we have churn, we've optimized as much as possible and we're now just focus on growth. For escrow, we had -- were up 28% in terms of GMV. This is over the summer quarter, so this did pretty well. Revenue was basically flat because we were working on larger value transactions rather than smaller value. We think that will uplift in the fourth quarter. It's just you do have a bit of a slowdown over the over the summer holiday period with activity in terms of count, but we think that will lift in the fourth quarter. And certainly, the GMV was quite obviously, power into a very strong and I think very large, new vertical wholesale electronics. That's about 12.8% of our GMV in the quarter, and it's our fastest-growing vertical. We've had quite a number of meetings in this vertical, which is new and very, very large. And we've got a whole dedicated workflow that we're planning on deploying. And there are also some other interesting verticals they're popping up, such as data brokering and so forth for the companies. On products, we migrated to a new platform, which was outstanding. We've activated JPMorgan Chase for domestic processing and Rola international. U.S. still are processing we have quite a number of innovations there to try and get the mantra of fast secure payments very fast. And I think with a number of initiatives in the real-time payment sector, which we now support on our accounts, and we're rolling out progressive over the fourth quarter. I think that will provide a phenomenal experience. And wholesale electronics and domain as will be our main drivers of growth in the fourth quarter, and we'll be attending a sponsor one of the largest conferences in that sector. Load ship delivered the best quarter on record. Revenue increased [ 18% ] to $1.1 million. GMV increased 16.9% to $8.9 million September was stronger month-to-date, doing about $380,000, up 13.7%, GMV at $3.1 million up 9%. Growth was driven by higher marketplace activity and conversion and loads awarded increased by 14.8%, and the award rate also lifted, and I think will continue to lift because we've finally deployed full PSTN and app in calling. So we now have across all the modalities calling going through our system. And we lifted the core connection rate as a result of that to 93% from 21% on estimates only, and we have some mitigation to go on that. And as you can see, the award rate, as I've always been saying, started to lift as a result of this. So I think we can continue to lift the award rate, which would lift the monetization of existing flows through the site in addition to growing more loads on the platform. We've also introduced a new way of loads being found and published by carriers which is basically a big map where truck drivers can basically put their return legs or put empty legs up on the side. We're in the process of making this automated, which allows a huge amount of liquidity to be surfaced in the early days of FedEx the innovation that happened was the planes were used to only fly when they were booked. And when FedEx came along, the planes flew empty or not and they optioned up the spare capacity, and that opened up a whole new sector in low-cost airfreight. We're basically doing that for trucking in addition to kind of how the platform works today. And I think that's pretty exciting and something we look forward to in the future. The monetization continues to improve. Paid memberships increased and we've got enterprise membership and so forth. And -- we've also awarding larger and life jobs, the 300,000 job, which hasn't been reflected in the third quarter results, but will be reflected in the fourth quarter results. And we've got a number of conferences are also attending et cetera. Now I want to talk a little bit about outlook before I kind of open up to questions, of course. Dean's in the call, you want to ask you more about financials and I've also of Ad here about products. The main thing we're going to do for freelancer is we really need to focus on payments. So we really got to -- as I said before, our U.S. credit card processing looks very healthy. When you look at it, it's a growing business, customers are returning, that's growing. We just need to get all the flows looking like that. Google Play literally as being condition as we speak. India is in progress. It's been in progress for a while because complex. We have implemented the e-mandate which is a way in which cards can be charged when someone is not present on things like memberships and so forth. We have an integration with 1 gateway, and we have an alternate payment provider, which to integrate now for things like IU Pay and UPI. There's quite a bit of bureaucracy in that particular space. But I think that, that will deliver quite a strong benefit because we have quite a large Indian user base. We have the U.K. payments being filled off within our payments coming for Apple Pay to Google Play, et cetera. And really, we're just laser focused stream by stream by stream and getting those payments up and running because that's a big thing. Now there's probably some questions about AI because I know everyone is a hot topic. My thoughts on AI are well published. There's a number of assays on medium and a number of gas spots or macro voices, which is not on macroeconomics or cast on world, which if you go back Escrow.com, you can listen to see my thoughts on it. But I think we think we sit in a fairly unique place in the world. On Freelancer, while there are quite a number of pits of work that AI can do and AI is very good for getting things started and for imagining and so forth. What we increasingly find is I get is great for that getting things going, but you very often need humans to make it real and to get the work done. And we have the largest workforce of humans in the world, about $90 million. And the other benefit made better for Freelancer is where paper outcome, not paper token. When you get a job done on the freelancer, you're paying fixed price most of the time. So you know what you've got to get and you know what you're going to pay for it and you don't release the funds because they hold in milestone payments until the job is done. And so it provides quite an attractive way of getting work done. Of course, all the freelances are AI powered as well. they have access to all the tooling. And one of the big things we need to do is we need to surface which tooling the finances have available, better to the clients, which we're working on now. And -- there's the skills of all the freelances now obviously being enhanced by AI has really lifted the quality and the value of the marketplace. So now you've got a lot of highly entrepreneurial, highly skilled professionals that are already priced in the best model you could think of, which is fixed price, paper outcome but also with the benefit of being able to access not just human skills but also AI skills. Not that everyone wants AI. There's a lot of people that actually specifically don't want AI-related work and make a very big point of that. for various reasons. Either they don't want to work for, they don't want AI to be sucking their content into the training data of the models or they want cute to talk to, et cetera. Our contest model, I think, is also -- we've got a number of optimizations coming into the contest model, which I think is going to be great and very AI-proof because effectively, it's a competitive marketplace for getting work done, whether or not it's human, human augmented with or AI-related -- and so when that gets deployed towards the end of this year, I think the people will see some pretty exciting things and pretty interesting outcomes as a result of that. It's very key for us that we should build the bridge to AI. I think many times people get stuck in cloud or what have you going loops, trying to get things done and great for punching something and then saying, oh, I want to go to a website and you kind of get a nice-looking page and then you realize to actually turn that to a fully featured site that goes into production, et cetera, that actually works and has ongoing tweaks and ongoing maintenance, et cetera. either you're sitting down there trying to hammer away at the keyboard and paying you a $200 subscription or whatever it is, having trying to figure it out, not everyone is capable of doing that. or you might end up with a bit of a loop. So we've got to build that bridge to AI. So whether it's by API or MCP, we've got both eos underway already. We already have a beta server that we're testing at the moment. And we really think that we could be the operator police for AI. So when people get stuck in core or Figma or whatever it may be or ChatGPT or any of the software packages that are out there, whether it's a can package or whatever, and you want to get to a human operator, you get the button and operate it, please, you've got a human professional on-demand fixed price pay by the hour. And I think that is a great metric. And I think a bigger customer acquisition channel in the future for us that we're aggressively working towards. It's also key that we work on -- the great thing also about technology is that while there can be temporary dislocation over time, whether it's the mechanization of agriculture, the mechanization of the factory, the information economy and the transistor and so forth and software and the Internet, mobile apps and so on. Ultimately, what we have seen is that more jobs get created than get destroyed over time. But what happens is these new jobs is the productivity gains are so large that what you can get done. They're highly deflationary these advances, what you can get done in terms of [ Bank or Back ] gets leads by orders of magnitude. And so it's key for us that we enable more sophisticated, more complex offerings to be done in the cycle. There are also quite a number of jobs that can't be done by, obviously, a lot of the fiscal jobs, et cetera, a lot of -- there's just a lot of things that literally that I think AI struggles with. I think for all the things that people say design work may be at risk with AI and the flashy things popping up the social media all the time about Amigo motions there or designers get or what have you. I don't think AI has really cracked that yet. But I think one thing that humans have is tasting judgment about trends and so forth that I think is actually quite hard to plant. Internally, when we look at automating a lot of the work that we do internally to make the benefit where is most applicable is things like Q processing, whether it's answering support tickets or processing requests that come from customers in various form factors for manipulation of processing, reporting or have is very, very good for that. But we have seen it really struggle in trying to be at the bleeding edge of, for example, design quality work and so on. But the key thing is we've got to work on enabling more sophisticated and more complex offerings. We're going to be launching something literally in the next couple of weeks as the first step towards doing that where you'll be able to get something built that you would never be able to get done before online through quite a neat product offering that will continue to get enhanced. I won't kind of take the fund away from it, but that literally is like it's very, very final stages of testing and in with customers now in beta and about to go live. We're also rolling out quite a number of vertical offerings to really build focused value-add interesting contemporary, sophisticated, high-end vertical niches, whether it's a bit like eBay did with cameras, cars, collectibles, computers and so forth. They had category managers and really focused on those categories. We're doing the same thing, and we're watching a range -- a range of categories, whether it's humanoid, robotics or electric vehicles or anime or and so forth. So there's quite a number of things that are progressively coming out there and we really have a factory setup to do that and rolling out. We have quite a lot of things we're doing around collaboration and sharing. We've been incrementingly releasing some of that over time, which has been a little bit masked by some of the greater issues we've been dealing with. But I do think that's going to lead to some big improvements on the customer acquisition front as well as retention from of the team's work and so forth, we're doing. And as I mentioned before, with the contest offering, I think we have something that's very future-proof and very exciting and works well with or without AI on the content front. We've also been automating a lot of the back end. And we have been doing obviously a lot of work on the cost control. We're actually a fair way to go still on the cost control. We've got quite a number of areas which we're chipping away at and costs will control will continue to flow through. And then really, probably the last -- probably the thing I want to talk about is on the acquisition front is really just on the channels. And which I mean by customer acquisition channels. And I do think is going to be a great new customer acquisition channel for us, as I mentioned before, as the bridge to humans from AI, I think we offer a fairly unique proposition with all the life workforce in the world of humans that we have ratings and reputation and so forth to and bridging to help really make it real once our gets things going. On the channel front, we did get knocked around. I think we're seeing some stabilization. On the SEO front, I did -- I mentioned before, we kind of had a bit of a de-indexing event when we kind of rate limited the crawling of our site by some of the AI scrapers, which were also using the same IP addresses to do search indexation. As I mentioned here, that's bounced back quite significantly. The quality of traffic isn't as good as nearly as it was before, but it does continue to lift, and that will continue. On the [ centengine ] marketing front, we've made quite a number of authorizations in a little bit of cost control while improving the return on investment there. And I think we have quite a lot of new avenues to explore there over the next quarter or 2, which I think will deliver some value to the site. And overall, it's really -- 2 out of 3 businesses are going okay. One business just we just need to work at I think we've identified the issues and we're just aggressively in there. This quarter, we're giving you a bit of an update. But hopefully, in the next quarter, we'll kind of show you that some real progress being made there. I will now open it up to Q&A with the audience. As I mentioned before, Dylan Carter, the Chief actual Officer, is on the call, calling in from the U.S. East Coast. So I think still to make yourself available. And I have Andrew Bateman here from products. I'll open it up, and I think, Dylan, you're going to be doing the hosting for this.

Yes. If there's any questions, please feel free to put it in the chat.

So I think there's a orders -- maybe Kurt you hosting that. Any questions in the audience? None currently. I'd be afraid to ask a question if you want as well, you can always e-mail myself at matt, M-A-T-T @freelancer.com. Dylan@ D-Y-L-A-N.com -- dylan@freelancer.com or investor@freelancer.com or you host your questions in the chat. Any questions? Keeping us 60 seconds for these question. Okay, then, well, thank you very much for calling into the third quarter results, and I'll see you in the full year results. Thank you very much.