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Freelancer Ltd reports strong user growth: What you need to know

Credit: Jason Howie

Crowdsourcing marketplace business Freelancer Ltd (ASX: FLN) has reported its interim financial results to the market today, posting a steeper net loss despite a record revenue figure. Nevertheless, the shares lifted 7.7% to a new 52-week high of $1.422.

For those investors who aren’t familiar with the company, Freelancer is the world’s largest freelancing and crowdsourcing marketplace business, measured by total number of users and posted projects. Essentially, employers can go to the company to hire freelancers to complete various tasks such as software development or website design, sales and marketing and even engineering.

Perhaps the best way to demonstrate the company’s growth is with the following two charts which show the total number of registered users, and total projects and contests posted. These figures rose 28.2% and 31% year-over-year respectively, continuing a remarkable trend that extends back to the year 2000.

Freelancer

Source: Freelancer presentation

For the six-month period ended 30 June 2015, Freelancer reported a 40.8% increase in revenues to $16.8 million (up from $11.9 million in the prior corresponding period, or the pcp), with its gross margin remaining in line with prior periods – albeit slightly lower than in the pcp. The rise in revenues didn’t flow into the bottom line result however, with the group’s operating net loss widening out to $0.8 million – down from a loss of $0.6 million in the first half of 2014.

Before investors get too carried away with the loss however, it is important to understand that Freelancer is an internet company early in its growth phase, meaning that it must invest heavily in its business now to achieve greater long-term results.

This was exemplified by its recent acquisition of Escrow.com which provides a secure online payment service for businesses and consumers. Indeed, this was an acquisition of strategic importance for Freelancer and reduces the financial risk involved when Freelancer matches its customers with freelancers located around the world.

Freelancer’s Chief Executive Officer, Matt Barrie, said: “In 1H15 our focus was continued growth in project & contest volume, international growth in countries and languages, and growth in mobile usage… We improved the customer experience in multiple dimensions, including launch of our Showcase app and website – a cross-platform design gallery of millions of easily browsable portfolio items.”

A quick look at Freelancer’s historical share price performance shows that the company got off to a strong start following its initial public offering (IPO) in 2013, but then endured a horror run in 2014. Since bottoming out at 51.5 cents in December the shares have risen a remarkable 176%, heavily outpacing the broader ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) in that time.

Although it’s easy to feel as though you’ve missed the boat on this one, there is an enormous market that Freelancer could potentially tap. Indeed, it is a somewhat speculative bet, but its rampant growth is certainly encouraging, and investors should at very least consider adding it to their watch lists.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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