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Freelancer share price plummets 8% lower on full-year earnings result

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The Freelancer Ltd (ASX: FLN) share price has been hammered on the ASX today as it fell over 8.50% following a weak full-year earnings release this morning.

What happened?

Despite increasing revenue by 3.1% year-on-year to $51.85 million, Freelancer reported a $1.48 million loss, albeit this was an improvement on last year’s $4.77 million loss. While gross profit rose 1% to $44.2 million, the company’s gross margin saw some significant compression, down 2.6% to 85.2% in FY18.

When excluding share-based payments expense, Freelancer’s earnings before interest, tax, depreciation and amortisation (EBITDA) came in at -$0.7 million which translated to a net loss after tax of $0.9 million.

To make matters worse, the company’s net tangible asset per security fell into the red, down from 0.32 cents per share (cps) in 1H18 to -$0.01 per share as at 31 December 2018.

The big worry for Freelancer was the alarming drop in New Jobs posting, down 13% to $2.1 million, despite a 16% increase in Total Jobs Posted throughout the year as it added 4.7 million New Registered Users.

Gross Payment Volume (GPV), a preferred performance metric of the company’s, increased by 26% on prior corresponding period to a record $740.7 million in FY18.

This was in large part due to a $570 million (+33.3% on pcp) result from the group’s Escrow section, while Freelancer also recorded a take rate at 13%.

The company’s cash position remained largely unchanged, with cash and cash equivalents up marginally to $33.2 million for the year.

Freelancer has had a difficult couple of years, as investors have seen its share price slide from $1.699 in August 2016 to just $0.64 per share at the time of writing.

Foolish takeaway

Things aren’t looking good for Freelancer for the year ahead based on the full-year results released this morning. The nature of the Freelancer business model does leave it exposed to the economic cycle and any downturn could hit listings numbers hard and see the share price plummet further.

While the Freelancer share price is up 40% since mid-September, I would rather steer clear of the employment platforms and head towards a non-cyclical company such as AGL Energy Ltd (ASX: AGL) in the meantime.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freelancer Limited. 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 Scott Phillips.

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