Get up to 2 Years of free subscription by inviting your friends to KALKINE!

For every friend of yours who joins KALKINE, we'll give you 3 months of free subscription (up to a limit of 24 months free subscription). If you recommend 3 friends and they join within a month of you referring them, you get 1 year free subscription to KALKINE reports added to your account (up to a limit of 24 months free subscription). Simply reply to this email with their name, e-mail and phone number.
 

Stock Of The Day - FREELANCER (BUY)

In today’s daily we cover Freelancer limited (FLN), which is world’s largest freelancing and crowdsourcing marketplace by total number of users and total number of projects posted. On 27^thApril, the CEO of the company Matt Barrie made a presentation about acquisition of Escrow.com and completion of capital raising.  All major global marketplaces have captive payment system and now Freelancer.com has one too.  


Exceptional Growth (Source - Company Reports)

Escrow.com is the world’s number 1 company for secure online payment. The company has done secure transactions of more than US $2.2 billion. The company is headquartered in California and was founded in 1999 by Fidelity National Financial. The company had gross payment volume of US $265 million, net revenue of US $ 5 million, and EBITDA of $1.2 million in FY14.


Financial Highlights (Source -Company Reports)
 
Freelancer has executed a definitive agreement to acquire Escrow.com from a private vendor at a US $7.5 million cash acquisition price. The funds were raised by placement of 10 million new ordinary shares. These shares were prices at $1.00 representing a premium to last closed of $0.995. The shares were placed to both domestic and international institutional investors.
 
Escrow.com will continue to run as a stand-alone business and there are lots of operating synergies with Freelancer’s core offering. Escrow.com will provide escrow services that facilitate and accelerate e-commerce by assuring secure settlement. Approximately 41% of the revenue of Escrow.com is in the United States. The company’s revenue has grown over the last five years from 3.2 million to 5 million at a CAGR (Compounded Annual Growth Rate) of 9.1%. The acquisition enhances the ability to capture more of the value chain and provide value added services. 



Top Country Sources (Source - Company Reports)

The current acquisition follows a couple of acquisitions made by the company in 2014, acquisition of warrior forum, the world’s largest internet marketing forum and marketplace boasting of 900,000 users and acquisition of Zlecenia.przez.net , which was Poland’s largest marketplace dedicated to a range of online categories of work. The company also bought a virtual content marketplace fantero.com and a technology start up conference and community, SydStart. Fantero is populated with a collection of almost 1 million unique items of digital content from over 100,000 users while SydStart is a community of 5,000 technology start up professionals, investors and ecosystem participants.


Mobile Strategy (Source - Company Reports)
 
Freelancer falls into the category of a high growth Internet Company that is reflected in the consistent growth of net revenues each year (FY10 +129%, FY11 +37%, FY12 +64%, FY13 +77% and FY14 +39%). Growth prospects of the company are also reflected in the fact that 60% of the global population is yet to connect to the Internet. Software and the Internet will consume more and more industries; more and more jobs will be performed with the Internet and will head into the cloud. The world is becoming more and more flat and everything is becoming hyper-connected. There is also a structural imbalance between the aging western world workforces. Some other growth drivers for Freelancer are growth in mobile usage, better freelancer onboarding and profile quality and improvement in agile development methodologies.


FLN Daily Chart (Source - Thomson Reuters)

The company accelerated its investment in product, staffing and infrastructure globally after successful capital raising via IPO in November 2013.  The company’s current focus is on top line growth and as a result EBITDA was $(2.1) million and the company had a break even operating cash flow of $(0.1) million in FY14.  Contributing factors to growth in Net Revenue for FY14 included both overall growth, increased efficiency and quality of the marketplace and increased sales of value added services (non-commission based revenues). The company primarily generates revenue from new and existing users posting and fulfilling projects and crowdsourcing contests on Freelancer.com and its various regional websites. The company’s registered user base (both employers and freelancers) grew exceptionally well increasing by 47% (4.6 million new users) to 14.3 million in 2014 (including 0.9 million from acquisitions). This represents a large increase in 60% over the number of new users that register in the prior year (FY13 grew by 2.9 million new users to 9.7 million in total).
 
Users are acquired through a variety of sources including search engine optimization (SEO), search engine marketing (SEM), media and public relations work, events, user referrals, competition, traditional advertising, email marketing and business combinations. The company’s new user acquisition focus is on attracting new employers, bring those users who post projects and contests, and therefore create demand in the online marketplace. The company also seeks to ensure that there is a sufficient supply of freelancers across regional language and skill specific segments of the marketplace in order to maximise marketplace liquidity and network effects. Employers accomplish work by posting projects (outsourcing) however work can also be performed through contests (Crowdsourcing) and through direct hires from company’s freelancer directory. The total number of projects and contests posted on Freelancer; increased by 32% to 6.9 million in FY14 (1.6 million new projects and contests in the year).  This compares to FY13, which saw 1.2 million new projects and contests in the year growing to 5.3 million total, posted. A
 
In line with its strategy of topline growth the company expanded its international footprint and increased its investment in talent in FY14. The company grew the size of its offices and staff in Sydney and Manila and opened new offices in London and Vancouver. The Sydney headquarters relocated from two occupancies at John Bay Wharf totalling 750-meter square to new premises of 1800 meter square in World Square. The Manila regional office moved from Makati Sky plaza with 761 meter square to two floors in Bonifacio Global city totalling 2600 meter square. A London office opened in Angel to better service the European market and an office in downtown Vancouver opened to better service the North American Market. 


The company is currently trading at a stock price of $1.150, which is close to 52 week high of 1.220. Given the strong growth prospects of the company, we believe that the stock is worth buying at the current price of $1.150.