Freelancer reviews expenditure to seek return to profitability

For Freelancer (ASX: FLN), a freelancing marketplace that only just reached cash flow breakeven, it sure knows how to push its luck. Despite recently getting back on track, the Company’s fortunes have taken a hit and it’s come as a bit of a surprise.

Freelancer’s cash receipts for the first quarter of 2023, ending in March, were $11.1 million, down 10.4% compared to the same period last year. Despite flat year-on-year growth in gross merchandise value (GMV) at $32.2 million, the Company’s focus has been on achieving improving user-facing products. To this end, Freelancer implemented several cost efficiencies in all expense categories in the second half of 2022, resulting in a 33.3% decrease in marketing costs and a 16.7% decrease in overall operating costs compared to the previous year. 

The Company’s operating costs for the first quarter of 2023 remained flat compared to the previous quarter.

In March, the Freelancer division achieved an operating profit, and the Escrow division was profitable for the first quarter of 2023. However, the Company’s net operating cash flow for the quarter was negative at -$0.1 million, down from $1.7 million in the first quarter of 2022. Freelancer’s cash and equivalents also decreased by 2.9% to $22.7 million compared to the previous quarter.

In 2022, Freelancer accumulated losses worth $5.4 million, up from $2.2 million in 2021, while operating cash flow declined by 258% from a positive $2.6 million to a negative $4.2 million. If that wasn’t enough, fewer people used its marketplace, as the Company saw a decline in new users and job postings.

Freelancer attributed the mixed performance in 2022 to the rolling off of Covid super-seasonality, which affected project fees but not secondary fee lines such as memberships. The Company also made substantial improvements to its product and customer acquisition profitability and rectified longstanding marketplace problems towards the end of the year.

The Freelancer Group primarily consists of Freelancer.com, the largest cloud workforce in the world, Escrow.com, the world’s largest online escrow company, and Loadshift, Australia’s largest online freight marketplace. During the first quarter, its Freelancer Enterprise division provided some relief. It achieved a 123% growth in GMV from a Fortune 500 technology client in Q1 2023 and received over $350,000 in forward bookings. Its collaboration with Deloitte through Deloitte MyGigs also boosted the division’s credibility, helping attract new clients.

In 2023, it will focus on improving user-facing products by taking UX and design to the next level, introducing collaborative features, and personalisation, and improving acquisition through organic channels. The group will continue to monitor operating expenditures to achieve sustained profitability in FY23. Plus, it plans on penetrating the US market further, building on its partnerships with NASA and the CDC. 

Despite the continued boom in the freelance economy, it seems that Freelancer.com is having a hard time getting freelancers and clients to stick around. Perhaps some freelancers are running off with their clients without leaving so much as a trace on the platform, or maybe people are just getting cold feet when it comes to the risk and instability of freelance work.