FREELANCER LIMITED ACN 141 959 042
2017
A N N U A L R E P O R T
This Drone Photography cost
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INDEX
2 FREELANCER LIMITED ANNUAL REPORT 2017
INDEX
FREELANCER LIMITED ANNUAL REPORT 2017 3
Index
PAGE
CONTENTS
04
36
40
52
53
54
55
56
57
87
88
93
95
Chairman’s Letter
Directors’ Report
Review of Operations
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional ASX Information
Corporate Directory
CHAIRMAN’S LETTER
Chairman’s
Letter
In 2017, Freelancer had a challenging year,
marketplace quality. After identifying the
with revenue of $50.3 million (-5%) and
root cause we reverted this change, and
Gross Payment Volume of $588 million
over the last 8 months health is returning
(-12%). As at 31 December 2017, the
to the marketplace, as can be evidenced
Company ended the year with cash and
by a rebound in Gross Marketplace
equivalents of $31.9 million and no net
Volume, from which revenue will follow.
debt. Operating cash flow was breakeven
at $(0.6) million for the year.
In FY17 we also made a number of
decisions to lift long term marketplace
A detailed analysis is provided in the
quality, customer satisfaction and
Review of Operations and we are
confident that the issues the group faced
retention, at the expense of short term
revenue. This included tightening up
in 2017 are for the most part resolved.
the subscription funnel for membership
On the Freelancer side of the business,
from April 2016 we suffered from a
slowdown in growth from issues in the
core desktop fixed-price project funnel,
primarily driven by the introduction of a
new “1-click” funnel for posting projects.
plans, to ensure that only customers that
would achieve tangible value subscribed.
Similarly, we cut back on the promotion of
upgrades to improve the user experience.
We also improved the refund policy to
increase the ease and scope of refunds.
While initially this change tested positive
Collectively these changes have seen our
statistically and lead to a large increase
Trustpilot score lift to 8.7 and NPS for
of new projects being posted as intent
tickets to 63, which qualitatively puts our
was better captured, this funnel resulted
support between “excellent” and “world
in lower entropy projects, which over
class”.
time led to second order effects on
4 FREELANCER LIMITED ANNUAL REPORT 2017
Chairman’s
Letter
CHAIRMAN’S LETTER
In FY17 we added 2.4 million new jobs (to
to 45 granted or in-application, moving
also has tremendous potential in the
13.0 million) and 4.3 million new users (to
the head office to San Francisco and
world of payments.
26.6 million) to the marketplace. These
rebuilding the team in five countries. This
are projects and contests that range from
culminated in late 4Q17 with the launch
something as simple as a $10 logo design
into beta of the Escrow.com Platform
to something as complex as designing
API, which allows the product to be
a robotic arm for a free-flying robotic
integrated as simply as Paypal. We are
astronaut on the International Space
now starting to see the API being used in
Station for NASA. This further affirmed
businesses as diverse as marketplaces
our leading global position as the world’s
largest freelancing and crowdsourcing
for online stores, automobiles, high end
audio equipment and airplanes. I am very
marketplace by total number of users and
excited by the opportunities in store for
projects posted.
Escrow.com.
The Board and myself personally wish to
thank and acknowledge the support of
all of our staff, shareholders and our 30+
million users across the group who come
from every country in the world. None of
this would have been possible without
you.
Regards,
On the Escrow.com side, the business is
Freelancer is changing the global
now well positioned for growth. We have
dynamics in the marketplace for people.
spent the last two years since acquisition
We operate in a huge market, the global
completely overhauling the business.
market for labour services, which is by
These improvements include but are
some estimates a trillion dollar market.
Matt Barrie
Chairman
not limited to a complete overhaul of
Five billion people live on $10 a day - five
5 April 2018
the technology stack, migration of the
billion people that could potentially find
platform to Amazon Web Services, a
large amount of payments automation,
a better job. Escrow.com is the second
leg of this business, similar to Alibaba/
extension of the regulatory footprint from
Alipay, Ebay/Paypal or Amazon/Amazon
8 money transmission/escrow licenses
Payments- a phenomenal asset which
FREELANCER LIMITED ANNUAL REPORT 2017 5
MARKETPLACE STATISTICS
27m
TOTAL REGISTERED USERS
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
6 FREELANCER LIMITED ANNUAL REPORT 2017
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
13m
TOTAL JOBS POSTED
MARKETPLACE STATISTICS
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FREELANCER LIMITED ANNUAL REPORT 2017 7
MARKETPLACE STATISTICS
Marketplace
Statistics
Freelancer is a game-changer for entrepreneurs, small
businesses, and large organisations. We provide easy
access to talented freelancers from all around the world,
who offer a wide range of services at competitive prices.
$193
AVERAGE COMPLETED
PROJECT SIZE IN USD
80%
OF JOBS RECEIVE A BID
WITHIN 60 SECONDS
504k
MESSAGES SENT
PER DAY
27m
13m
TOTAL REGISTERED
TOTAL JOBS POSTED
USERS
$3b
3,000,000,000+ USD IN
JOBS POSTED
8 FREELANCER LIMITED ANNUAL REPORT 2017
MARKETPLACE STATISTICS
FREELANCER LIMITED ANNUAL REPORT 2017 9
MARKETPLACE STATISTICS
FREELANCER MOBILE
The world’s largest freelancing
site in your pocket. It’s
Freelancer... anywhere you go.
In 2017, the project management funnel was redesigned with a mobile first approach;
features such as file attachments in chat and new payment sources, like Paypal, were
introduced. The Android application was also translated into Chinese and published to
the Huawei App store. There were great achievements in funnel optimisations and a
push for more feature parity between the mobile and desktop platforms. Notably, these
efforts have resulted in a 66% YoY growth in mobile projects being posted and 49% YoY
growth in mobile paid fees.
2m+
2,000,000+
DOWNLOADS OF
ANDROID APP
85%
OF PROJECTS
TOUCH MOBILE
DEVICES
10 FREELANCER LIMITED ANNUAL REPORT 2017
MARKETPLACE STATISTICS
#1 by Nihal H.
#2 by Olexandro N.
0
0
FREELANCER CONTESTS
Entries to contests have seen
explosive growth in 2017, up
58% from 2016.
Contest holders can now award prizes to multiple freelancers per contest.
For example, a contest holder can now create a cookbook by awarding a
prize to each freelancer who entered their contest with a great recipe and
photo.
Friends and colleagues can now be invited to help contest holders rate and
give feedback on entries with the share feature as we build out our collabo-
rative features across the platform.
More and more organisations are crowdsourcing their needs using our
platform, including organisations such as NASA and Harvard, where we
have seen contests range from video production, graphic design through to
engineering and application design.
90
AVERAGE ENTRIES
PER CONTEST
62%
OF CONTESTS
RECEIVE ENTRIES
WITHIN 1 HOUR
FREELANCER LIMITED ANNUAL REPORT 2017 11
MARKETPLACE STATISTICS
FREELANCER LOCAL JOBS
Get anything done, anywhere
in the world with local jobs.
No other freelance marketplace in the world has a userbase as large or
internationally diverse as Freelancer. Now you can hire someone with not
just any skill, but any location. Local jobs with a specific skill in a specific
location receive five bids per project on average, with an average time of 15
minutes for the first bid and 65% of projects receiving bids in under an hour.
And all these bids are from freelancers within a short distance from a given
project location, anywhere in the world.
12 FREELANCER LIMITED ANNUAL REPORT 2017
65%
OF JOBS RECEIVE A
QUOTE WITHIN ONE
HOUR
15
MINUTES AVERAGE
TIME TO FIRST BID
5
BIDS PER JOB
AVERAGE GLOBALLY
MARKETPLACE STATISTICS
RECRUITER
Leave the work of finding the
perfect freelancer to an expert.
Recruiter projects grew substantially in 2017 with 71% growth in 2H17
compared over 1H17, leading to an 83% increase in Gross Marketplace
Volume for the same period. The service is particularly popular for large or
complicated projects. The rise in popularity of Recruiter has increased the
attraction of the Preferred Freelancer Program, a pool made up of the top
1% of freelancers on the site.
71%
GROWTH IN
RECRUITER
PROJECT VOLUME
83%
INCREASE IN GROSS
MARKETPLACE
VOLUME
FREELANCER LIMITED ANNUAL REPORT 2017 13
MARKETPLACE STATISTICS
FREELANCER MEMBERSHIPS
Making it easier for freelancers
to earn more money.
We added support for Paytm - an Indian payment provider similar to
PayPal, tapping into a large pool of users who were previously unable to
purchase memberships. In addition to this, we also began offering annual
memberships on a discounted lock-in contract. This allows users the benefit
of an annual discount, whilst not having to invest a large amount of money
upfront.
A new Corporate Membership plan was also added, allowing many
freelancers who operate different businesses to now manage separate
profiles in a manner similar to Facebook Pages for businesses. This has
seen 180% growth since June 2017.
100%
EARNINGS GROWTH
FOR PROFESSIONAL
MEMBERSHIPS
180%
GROWTH IN
CORPORATE
MEMBERSHIP USERS
14 FREELANCER LIMITED ANNUAL REPORT 2017
MARKETPLACE STATISTICS
ESCROW.COM
Payments for your website,
mobile app or marketplace with
no chargebacks, ever.
Escrow.com released the Platform API, which enables websites and apps
to integrate the trust and safety of Escrow.com directly into their platform.
Additionally we launched a API based plugin for the popular Wordpress
platform WooCommerce, the dominant ecommerce solution globally.
Escrow.com revamped the payments backend by introducing a new trust
accounting system, moving away from a legacy technical stack. Payments
automation continued, along a revamp of our anti-money laundering
know your customer system, which now processes the vast majority of
submissions within one hour.
1.1m
1,100,000+
REGISTERED USERS
$3.5b
$3,500,000,000+
USD IN PAID
TRANSACTIONS
5
SPOKEN LANGUAGES
BY OUR SUPPORT
TEAM
FREELANCER LIMITED ANNUAL REPORT 2017 15
MARKETPLACE STATISTICS
Scott Farquhar
Atlassian
STARTCON
Australia’s largest startup &
growth conference. Sold out 8
years in a row.
StartCon (a Freelancer.com company) successfully hosted Australia’s
largest start-up and growth conference in Sydney, which is in its ninth
year. The conference held in Q4 of 2017, saw huge increases in numbers
from 2016 across all aspects of the event, including over 3500 (up 16%)
attendees, 122 (up 20%) exhibitors including 60 (up 20%) startups in Startup
Alley, 90 (up 5%) start-ups in the pitch competition, and 63 (up 8%) speakers
of which 19 (up 26%) were international.
16 FREELANCER LIMITED ANNUAL REPORT 2017
3.5k+
ATTENDEES
125+
EXHIBITORS
600+
STARTUPS
MARKETPLACE STATISTICS
WARRIORFORUM.COM
The world’s #1 Internet
marketing community &
marketplace since 1997.
Warrior Forum continues its expansion as the world’s top internet marketing
forum. As a fountain of up to date content, Warrior Forum is the number one
place that marketers and startups learn from experienced internet marketers.
Over the last 12 months, we’ve partnered with some of the biggest names
in Internet Marketing, whether it’s helping Sean Ellis & Morgan Brown launch
their best selling book, Hacking Growth or hosting Dennis Yu of BlitzMetrics
on our podcast to talk about the ever-changing world of Facebook Ads.
1.3m
REGISTERED USERS
10.3m
10,315,000+ POSTS
1.03m
1,033,000+ DISCUSSIONS
FREELANCER LIMITED ANNUAL REPORT 2017 17
MARKETPLACE STATISTICS
We are changing lives
in the developing world
by providing opportunity
and income.
“Freelancer has skyrocketed me into a position
where I can provide for my family. It has taught me
a multitude of skills and has privileged me with the
opportunity to work when, where and how I want to.”
Ian Clement Fosgate
Web Developer
Phillippines
5.0 / 5.0 rating, 144 reviews
18 FREELANCER LIMITED ANNUAL REPORT 2017
MARKETPLACE STATISTICS
FREELANCER LIMITED ANNUAL REPORT 2017 19
MARKETPLACE STATISTICS
We continue
defining the future
of online work.
“As Freelancer continues growing and more people
understand the power of outsourcing, it will only get
stronger. I see this as the future for work and I am
so excited to be in on it at the ground level.”
Jessie Weatherley
Marketing Expert
Victoria, Australia
4.8 / 5.0 rating, 53 reviews
20 FREELANCER LIMITED ANNUAL REPORT 2017
MARKETPLACE STATISTICS
FREELANCER LIMITED ANNUAL REPORT 2017 21
MARKETPLACE STATISTICS
We help small
businesses, startups
and entrepreneurs turn
that spark of an idea
into reality.
22 FREELANCER LIMITED ANNUAL REPORT 2017
MARKETPLACE STATISTICS
“My business offers touristic tours guided
by iPads. It’s critical for us to be able to
rapidly change the content and experience.
Working with a local agency turned out to
be impossible, I had to wait days for every
small update and paid thousands of euros
for every misstep along the way.
This all changed with Freelancer. I quickly
found a brilliant developer with whom I can
share thoughts, files and code. With his help
I am now able to rapidly adapt my business
to a changing environment. This creates a
much stronger product, saves time and last
but not least- saves a lot of money. ”
Laurens Van Lieshout
Entrepreneur
Belgium
FREELANCER LIMITED ANNUAL REPORT 2017 23
This CAD
design cost
$1,500
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
This website
design cost
$114
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
This package
design cost
€100
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
This logo
design cost
$60
Real project completed at
freelancer.com. Have an idea? Post your
project today and get free quotes!
2017 AWARDS
2017
Awards
This was a stellar year for Freelancer.com in terms of
awards and recognition. We won a total of 18 awards,
including 10 International Business Awards, the 2017 SPi
Global Technology Company of the Year, an award in the
2017 Premier’s NSW Export Awards and Escrow.com
won the BBB Torch Award for Ethics.
Premier’s NSW Export Awards 2017
ASIA CEO Awards
BBB Torch Award
The Premier’s NSW Export Awards
The award is open to corporate
Escrow.com won the BBB’s most
is an annual program which aims to
organizations, academe and startup
prestigious award, the BBB Torch Award
recognize excellence in the export of
companies in Asia Pacific that focuses
for Ethics for Silicon Valley and the
goods and services by NSW business.
on Information and Communications
Bay Area. It is presented to a business
Freelancer won the award for 2017
Technology, Bio Technology &
that goes above and beyond in their
NSW Innovation in Export category.
Material Science, Sciences and Math
business dealings with customers,
& Engineering. Freelancer won the
other businesses and the community.
award for 2017 SPi Global Technology
Company of the Year.
32 FREELANCER LIMITED ANNUAL REPORT 2017
2017 AWARDS
Stevie Awards
This year Freelancer.com won a total of
15 Stevie Awards, including 10 Stevie
International Business Awards (IBA)
and 5 Asia Pacific Stevies. Escrow
took out gold for Financial Services
Company of the Year.
Stevie Awards
Stevie International Business Awards (IBA): We won
gold for Financial Services Company of the Year (Escrow.
com), Communications Department of the Year and
Professional Services, silver Executive of the Year -
Internet/New Media (Matt Barrie), Financial Services
(Escrow.com), PR Executive of the Year (Sebastian
Siseles), Business Services, Most Innovative Tech
Company of the Year, and Best User Experience. We won
Bronze for Best Web Writing/Content (Warrior Forum).
Asia Pacific Stevies: Open to the 22 nations of
the Asia-Pacific region, we won gold for Innovative
Management in Technology Industries and Innovation
in Shopping or E-commerce Websites; as well as three
bronze for Excellence in Innovation in Technology
Industries, Innovation in Shopping or E-commerce
Apps, and Innovation in Technology Development.
FREELANCER LIMITED ANNUAL REPORT 2017 33
OUR ONLINE ECONOMY
Our Online
Economy
This map illustrates the Freelancer
online economy. The pink lines indicate
where projects are being posted by
employers, and the blue lines indicate
where the projects are being performed
by freelancers. Thicker lines indicate
a higher dollar volume of work. White
dots indicate the location of Freelancer’s
users. Edges are sampled data from
awarded projects in 2017.
34 FREELANCER LIMITED ANNUAL REPORT 2017
OUR ONLINE ECONOMY
FREELANCER LIMITED ANNUAL REPORT 2017 35
DIRECTORS’ REPORT
Directors’
Report
Your Directors submit the financial report of Freelancer Limited
(the Company) for the year ended 31 December 2017. In order
to comply with the provisions of the Corporations Act 2001,
the Directors report as follows.
The names and particulars of the directors of the Company
during or since the end of the financial year (Directors) are:
36 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
Matt
Barrie
Executive Chairman
(appointed 10 April 2010)
BE (Hons I) BSc (Hons I)
GDipAppFin MAppFin MSEE
(Stanford) GAICD SEP FIEAust
Founder and Executive Chairman of the
from Macquarie University, Masters in
Company.
Serial entrepreneur with extensive
experience and knowledge in the
technology sector. Previously co-founded
and was CEO of Sensory Networks Inc.,
a vendor of high performance network
security processors, which was acquired
by Intel Corporation Inc. in 2013.
BE (Hons I) BSc (Hons I) GDipAppFin
MAppFin MSEE (Stanford) GAICD SEP
FIEAust
Formerly Adjunct Associate Professor
at the Department of Electrical and
Information Engineering at the University
of Sydney. Co-author of over 20 US patent
applications.
Qualifications include first class honours
degrees in Electrical Engineering and
Computer Science from the University
of Sydney, Masters in Applied Finance
Electrical Engineering from Stanford,
California, Graduate of the Stanford
Executive Program at the Graduate
School of Business, Fellow of the Institute
of Engineers Australia and Councillor of
the Electrical and Information Engineering
Foundation at the University of Sydney.
Relevant interest in 200,312,653 fully
paid ordinary shares, including a relevant
interest in 7,516,467 fully paid ordinary
shares by virtue of having a voting power
of over 20% in the Company, which has
a relevant interest as a result of trading
restrictions over shares issued under the
Employee Share Plan.
Beneficial interest in 192,796,186 fully
paid ordinary shares (representing 42.2%
of issued capital).
Member of the Nomination and
Remuneration Committee and Audit
Committee.
FREELANCER LIMITED ANNUAL REPORT 2017 37
DIRECTORS’ REPORT
Darren
Williams Non-Executive Director of Company.
Was the Chief Technology Officer and
Executive Director of the Company until
31 October 2015.
relating to security technology, software
and networking.
Qualifications include first class honours
degree in Computer Science and a Ph.D.
Non-Executive Director from 1
November 2015.
Executive Director until 31
October 2015 (appointed 10
April 2010)
BSc (Hons I) PhD (Computer
Science)
Extensive experience in computer
in Computer Science specialising in
security, protocols, networking and
computer networking from the University
software. Previously co-founded and
was CTO (and subsequently CEO) of
Sensory Networks Inc., a vendor of high
performance network security processors,
which was acquired by Intel Corporation
Inc. in 2013.
of Sydney.
Beneficial and relevant interest in
10,627,165 fully paid ordinary shares
(representing 2.3% of issued capital).
Member of the Nomination and
Remuneration Committee and Audit
BSc (Hons I) PhD (Computer Science)
Committee.
Previously lectured Computer Science
at the University of Sydney. Author of
numerous articles, patents and papers
38 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
paid ordinary shares, including a relevant
interest in 7,516,467 fully paid ordinary
shares by virtue of having a voting power
of over 20% in the Company, which has
a relevant interest as a result of trading
restrictions over shares issued under the
Employee Share Plan.
Beneficial interest in 159,717,351 fully
paid ordinary shares (representing 35% of
Simon
Clausen Founding investor and Non-Executive
Extensive experience in operating and
Director of the Company.
Non-Executive Director
(appointed 10 April 2010)
investing in high growth technology
businesses in both Australia and the
United States. Previously founded and
was CEO of WinGuides, which later
became PC Tools and was acquired by
Symantec Corporation in October 2008.
Currently the sole director of Startive
issued capital).
Ventures, a specialised technology
Member of the Nomination and
venture fund that actively maintains
Remuneration Committee and Audit
investments in a number of companies
Committee.
globally. Other directorships include
LatAm Autos Limited since 2014.
Relevant interest in 167,233,818 fully
FREELANCER LIMITED ANNUAL REPORT 2017 39
DIRECTORS’ REPORT
Company Secretary
Mr Neil Katz held the position of Company Secretary during and at the end of the financial year (appointed 9 March 2012). He has
been with the Group since 2009 and is also the Chief Financial Officer.
Principal activities
The principal activity of the consolidated entity (the Group) during the financial year was the provision of an online outsourcing mar-
ketplace and escrow payment services.
There were no other significant changes in the nature of the principal activities during the financial year.
Review of operations
The Group’s loss attributable to equity holders of the Company, after providing for income tax, was $4,773,000 (2016 loss:
$1,173,000).
Key Performance Highlights
Year ended 31 December
Financial metrics:
Gross Payment Volume1
Net Revenue2
Gross Profit
Gross margin (%)
Operating EBITDA3
Operating EBIT3
Operating NPAT3
Operating Cash Flow
Operational metrics:
New Jobs4 (millions)
Total Jobs Posted (millions)
New Registered Users (excluding Escrow, millions)
Total Registered Users5 (millions)
FY17
$m
588
50.3
44.1
87.5%
(3.7)
(4.4)
(3.8)
-0.6
2.4
13.0
4.4
27.7
FY16
$m
666
52.7
45.6
86.4%
0.5
(0.3)
0.1
4.5
2.6
10.6
4.6
23.3
% Change
-12%
-5%
-3%
nm
nm
nm
nm
nm
-8%
23%
-4%
19%
1. Gross Payment Volume (GPV) is calculated as the total payments to Freelancer and Escrow users for products and services transacted through the Freelancer and Escrow
websites plus total Freelancer and Escrow revenue. GPV is an unaudited metric. Marketplace segment FY17 GPV A$159.4 million (flat on prior corresponding period), Payments
segment GPV A$428.2 million (down 15% on prior corresponding period).
2. Net Revenue excluding Escrow.com for FY17 was $43.9m (down 3% on prior corresponding period).
3. Excludes non-cash share based payments expense of $986k in FY17 and $1,252k in FY16.
4. Total Projects and Contests Posted was redefined in January 2016 to Total Jobs Posted (filtered). Jobs Posted (Filtered) is defined as the sum of Total Posted Projects and
Total Posted Contests, filtered for spam, advertising, test projects, unawardable or otherwise projects that are deemed bad and unable to be fulfilled.
5. User and project/contest data includes all users and projects/contests from acquired marketplaces. Prior to May 2009, all data is from acquired marketplaces. Includes Escrow.
com unique users.
6. Gross margin % calculation excludes $0.3m of proceeds from working capital adjustment on acquisition of Escrow.com, which is included in Net Revenue.
Freelancer.com
The Company’s revenue is primarily generated from new and existing users posting and fulfilling projects and contests in the Free-
lancer marketplace.
From April 2016, Freelancer.com suffered from a drop in growth due to issues in the core desktop funnel (Region 1 in Figure 1, below),
primarily driven by introduction of the “1-click” funnel for posting projects. The 1-click funnel was designed to be an easier way to post
projects, and initially showed to be positive for revenue (red asterisk in Figure 2), but soon led to deterioration in marketplace quality
due to freelancers shying away from these projects after a few months.
It is important to note that this only affected fixed-price projects on desktop web, and not mobile projects, hourly projects or contests,
which continued to grow strongly during this period. However fixed-price projects from desktop is the core funnel, being the major
product funnel, and this created significant drag on overall growth. This can be seen in Figure 3 with number of milestones released to
40 FREELANCER LIMITED ANNUAL REPORT 2017
freelancers showing little growth between FY16 & FY17 (“2 years
ago” and “1 year ago”).
We reported in 3Q17 that improvements in that quarter were
showing strong lifts in core funnel metrics, and we are pleased
to report that in 4Q17 the health of the Freelancer.com business
continued to recover, with Freelancer earnings hitting all-time
highs and growing 5.4% in the quarter despite the usual seasonal
holiday slowdown in Q4 (Region 2 in Figure 1). This is similarly
reflected in active paid project fees (USD equivalent) in Figure 2.
Likewise in Figure 3, it can be seen that from the end of 3Q17,
the dollar value of milestones released to freelancers (USD
equivalent) grew strongly through to the end of FY17, and has
DIRECTORS’ REPORT
1
2
Jul 2016 Oct 2016
Jan 2017 Apr 2017
Jul 2017 Oct 2017 Jan 2018
rebounded as expected in Jan 18, with the last seven or so
FIGURE 1: FREELANCER EARNINGS IN USD (ACTIVE TRANSACTIONS)
months showing good growth.
Overall, this has resulted in Gross Marketplace Volume for Freelanc-
er.com climbing again in the last seven months as can be seen in
$ ,000,000
Figure 4. The GMV growth in 1Q18 comparing the periods ‘2018-
01-01’ to ‘2018-02-23’ and 2017-01-01’ to ‘2017-02-23 is up 14%’,
and this time range includes 1H17 at flat growth, and so this rate is
expected to climb as the year progresses (i.e. if it is assumed that
$ ,000,000
the growth occurred in 2H17 and this growth continued, annualised
$ ,000,000
growth would be just under 30%).
Note that GMV is a measure of total payments out of the system
$ ,000,000
(to freelancers). GPV is equal to GMV + revenue which is a proxy for
payments in, but not equivalent (as it excludes net change in user
$0
1
2
*
balances).
2013-01-01
2014-01-01
2015-01-01
2016-01-01
2017-01-01
2018-01-01
Hourly projects continued to grow strongly with paid tracked
FIGURE 2: ACTIVE PROJECT FEES USD EQUIVALENT (PAID, NON-REFUNDED)
hours up 26% QoQ in 4Q17/3Q17 and 54% on pcp 4Q17/4Q16
(Figure 5) after we made changes to the system in the third quar-
ter to improve the hourly hiring experience. Year on year growth
4Q17/4Q16 was 54%. Employers only pay for hours worked as
they are billed, rather than requiring an upfront payment before
freelancers start work.
Recruiter projects (assisted projects) likewise showed strong
growth up 19% 4Q17/3Q17 and 30% on pcp 4Q17/4Q16 (Figure
6).
Mobile also showed good growth with paid fees up 10% QoQ in
4Q17, with 56% on pcp 4Q17/4Q16.
The reason why this growth is not yet reflected in revenue is that
as outlined in the 3Q17 report, we embarked on a number of
items to drive quality and improve customer feedback with the
primary goal of increasing retention. These impacts have had an
effect on net customers’ receipts and revenues. These initiatives
included:
• Membership fees were lowered as we deliberately tightened
up the subscription funnels to ensure that only custom-
ers that would achieve tangible value from memberships
subscribe. Additionally we cut back on the primary plan that
we promoted from Professional (~$44 per month) to Plus
(~$11 a month plan) to lift bid quality by cutting back on the
number of low quality bids from freelancers (particularly
through the trial period), and we focused on promoting
monthly plans over annual plans to reduce chargeback
ratios
FIGURE 3: MILESTONES RELEASED TO FREELANCERS (USD EQUIVALENT)
GMV
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
Jan 15
Jan 16
Jan 17
Jan 18
FIGURE 4: GROSS MARKETPLACE VALUE OF FREELANCER.COM
FREELANCER LIMITED ANNUAL REPORT 2017 41
DIRECTORS’ REPORT
•
•
Similarly we cut back on the promotion for upgrades in certain parts of the funnel to improve the user experience.
These two items were approximately a 5% drag in revenue in FY17.
• We improved the refund policy to increase the ease and scope for refunds to customers with the goal of lifting retention and user
experience.
•
These quality improvements have seen our Trustpilot score rise to 8.7 and ticket NPS to 63.
All up, these changes have dropped the monetisation rate from 28.3% in FY16 to 27.5% in FY17 (erroneously reported as 26.3% in the
4Q17 4C).
FX impact was a drag of approximately 3% on revenue for the year.
Track Paid Hours Value USD (y2)
Track Paid Hours
0000
0000
0000
0000
0000
0000
0000
0000
0
$m
0
Jan 16 Apr 16
Jul 16
Oct 16
Jan 17 Apr 17
Jul 17
Oct 17
June 2017
July 2017
Aug 2017
Sep 2017
Oct 2017
Nov 2017
FIGURE 5: PAID TRACKED HOURS FOR HOURLY PROJECTS
FIGURE 6: NUMBER OF RECRUITER PROJECTS
In FY17 we added 2.4 million new jobs (to 13.0 million, up 23% on FY16, Figure 7), a strong number but was impacted by the drag of
removing the 1-click funnel by approximately 16%. Total registered users ended the year at 27.7 million, an increase of 19% on FY16.
The quality of freelance work continued to be exceptional. Freelancer.com continues to be unbeatable for the quality and sophistica-
tion of work delivered on a small business budget.
The Company is now in a much healthier position to continue its focus on revenue growth in FY18.
15,000,000
10,000,000
5,000,000
0
30,000,000
20,000,000
10,000,000
0
FY00
FY01 FY02 FY03 FY04 FY05 FY06
FY07 FY08 FY09 FY10
FY11 FY12 FY13 FY14 FY15
FY16 FY17
FY00
FY01 FY02 FY03 FY04 FY05 FY06
FY07 FY08 FY09 FY10
FY11 FY12 FY13 FY14 FY15
FY16 FY17
FIGURE 7: TOTAL JOBS POSTED (FILTERED FOR SPAM)
FIGURE 8: TOTAL REGISTERED USERS
42 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
Escrow.com
For the full year, Escrow.com was a major drag on GPV for the group, dropping to $428 million in FY17 from $506 million in FY16
(-15%).
This was for two main reasons:
The first being the well reported drop in China volume for domain purchases, which has reverted to the long term values after an
explosion in unexpected volume in FY15 and FY16 (See Figure 9, below). This bubble caused a jump of Chinese volume of 179%
in FY15 over FY14, but a drop of 53% from FY16 to FY17 (US$91m to $43m) as the bubble popped. We believe that this abnormal
volume spike has now passed and we should revert to growth in Chinese volume.
ROW
CHINA
China Bubble
Enhanced
AML/KYC
$150,000,000
$100,000,000
$50,000,000
$0.00
2
Q
0
0
0
2
3
Q
0
0
0
2
4
Q
0
0
0
2
1
Q
1
0
0
2
2
Q
1
0
0
2
3
Q
1
0
0
2
4
Q
1
0
0
2
1
Q
2
0
0
2
2
Q
2
0
0
2
3
Q
2
0
0
2
4
Q
2
0
0
2
1
Q
3
0
0
2
2
Q
3
0
0
2
3
Q
3
0
0
2
4
Q
3
0
0
2
1
Q
4
0
0
2
2
Q
4
0
0
2
3
Q
4
0
0
2
4
Q
4
0
0
2
1
Q
5
0
0
2
2
Q
5
0
0
2
3
Q
5
0
0
2
4
Q
5
0
0
2
1
Q
6
0
0
2
2
Q
6
0
0
2
3
Q
6
0
0
2
4
Q
6
0
0
2
1
Q
7
0
0
2
2
Q
7
0
0
2
3
Q
7
0
0
2
4
Q
7
0
0
2
1
Q
8
0
0
2
2
Q
8
0
0
2
3
Q
8
0
0
2
4
Q
8
0
0
2
1
Q
9
0
0
2
2
Q
9
0
0
2
3
Q
9
0
0
2
4
Q
9
0
0
2
1
Q
0
1
0
2
2
Q
0
1
0
2
3
Q
0
1
0
2
4
Q
0
1
0
2
1
Q
1
1
0
2
2
Q
1
1
0
2
3
Q
1
1
0
2
4
Q
1
1
0
2
1
Q
2
1
0
2
2
Q
2
1
0
2
3
Q
2
1
0
2
4
Q
2
1
0
2
1
Q
3
1
0
2
2
Q
3
1
0
2
3
Q
3
1
0
2
4
Q
3
1
0
2
1
Q
4
1
0
2
2
Q
4
1
0
2
3
Q
4
1
0
2
4
Q
4
1
0
2
1
Q
5
1
0
2
2
Q
5
1
0
2
3
Q
5
1
0
2
4
Q
5
1
0
2
1
Q
6
1
0
2
2
Q
6
1
0
2
3
Q
6
1
0
2
4
Q
6
1
0
2
1
Q
7
1
0
2
2
Q
7
1
0
2
3
Q
7
1
0
2
4
Q
7
1
0
2
FIGURE 9: TOTAL GROSS PAYMENT VOLUME CONTRIBUTION (US$) FOR CHINA AND WORLD EX-CHINA
The second being volume churning after introducing a more rigorous Anti-money Laundering and Know Your Customer (KYC)
program after acquisition of the business. While we have endeavoured to make this progress as straightforward as possible, with over
60% for KYC proof of identity & address submissions being processed within 15 minutes and over 85% in one hour (Figure 10, below),
it has led to increased friction and a churn in volume (See Figure 9, above). We are continuing to make the process easier to reduce
friction.
< 15 min
< 30 min
< 1 hr
< 2 hr
< 6 hr
< 12 hr
< 24 hr
< 2d
< 4d
All
1.0
0.8
0.6
0.4
0.2
0.0
Jan 17
Apr 17
July 17
Oct 17
Jan 18
FIGURE 10: OVER 70% OF TIER-2 (PROOF OF ID & ADDRESS) KYC SUBMISSIONS
ARE PROCESSED WITHIN 15 MINUTES, AND 90% IN ONE HOUR
FREELANCER LIMITED ANNUAL REPORT 2017 43
DIRECTORS’ REPORT
Review of Financial Performance
60
40
20
0
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Revenue (A$m)
4.7
6.5
10.6
18.8
26.1
38.6
52.7
50.3
Growth pcp
37%
64%
77%
39%
48%
37%
-5%
90%
80%
GPV (Marketplace)
70%
60%
50%
GPV (Payments)
13%
13%
13%
13%
13%
13%
13%
13%
Marketplace Take Rate
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
GPV (A$m)
28
35.6
50.8
84.4
103.7
229.3
666.2
587.6
Growth pcp
27%
43%
66%
23%
120%
290%
-12%
Gross margin
82.6%
86.7%
87.4%
87.6% 87.1%
86.7%
86.4%
87.5%
Take rate2
13%
13%
13%
13%
13%
13%
13%
13%
NET REVENUE (A$M) AND GROSS MARGIN (%)
GROSS PAYMENT VOLUME1 (A$M) AND MARKETPLACE TAKE RATE2 (%)
1. Gross Payment Volume (GPV) is calculated as the total payments to Freelancer or Escrow users for products and services transacted through the Freelancer or Escrow websites
plus Net Revenue. Based on Freelancer’s unaudited management accounts which have not been subject to an auditor’s review.
2. Take rate for the Marketplace segment is 3% employer commission and 10% freelancer commission, which has not changed since 2010.
3. Core Freelancer GPV of A$159.4m. Escrow GPV of US$329m, average AUDUSD FX of 0.7674= A$428.2m
The Company achieved Net Revenue of $50.3 million in FY17 (down 5% on the previous corresponding period), and Gross Payment
Volume of $587.5 million (down 12% on the previous corresponding period). Revenue excluding Escrow.com amounts to $43.9 million
(down 3% on the previous corresponding period, GPV excluding Escrow.com amounts to $159.4 million (flat on the previous corre-
sponding period).
Net Revenue and Gross Payment Volume were adversely impacted in FY17 by a number of factors including a drop in the core desk-
top funnel, which was driven by the introduction of a “1-click” funnel initiatives in mid 2016, which was designed to be an easier way
to post projects and initially showed to be positive for revenue, but soon led to a deterioration in marketplace quality. This feature was
rolled back during Q317. In addition the Company embarked on a number of initiatives in FY17 to drive quality and improve customer
feedback with the primary goal of increasing retention within the freelancer marketplace. These impacts adversely impacted Net
Revenue and Gross Payment Volume.
The Payments segment (escrow) was adversely impacted by the continued drop in China volume for domain purchases and the
introduction of rigorous Anti Money Laundering and Know Your Customer programs which resulted in increased friction and churn in
volume.
The Company’s gross margin of 87.5% in FY17 improved by 1.4% compared to the previous corresponding period (FY16: 86.4%) and
has been within a consistent range since 2011. The Company’s cost of sales predominantly consists of transaction costs that are
incurred from the various gateways relied upon to process user payments, as well as various provisions taken for credit card charge-
backs and fraud risks. The cost of sales in the Escrow.com business is higher than in the core Freelancer marketplace business.
Operating Performance
International Offices and Staffing
In FY17 the Company was able to reduce its headcount by 6% as it continues to reach operating scale. Staff are located at offices in
Sydney, Manila, Vancouver, San Francisco, Buenos Aires and London.
Whilst the Company has reduced its headcount, it continues to hire exceptional talent focused on engineering, data science and
product management teams.
NPAT and EBITDA
The Company reported an operating net loss after tax of ($3.8) million (FY16 Operating NPAT: $0.1 million) and Operating EBITDA
of ($3.7) million (FY16 Operating EBITDA: $0.5 million). The Company’s operating results were adversely impacted by a significant
44 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
increase in regulatory, legal and compliance related costs
their identity verified. Over 70% of Tier 2 KYC submissions are
principally in its payments segment (escrow.com). At the time
approved within 15 minutes and 90% in 1 hour.
of the acquisition of the escrow business in November 2015, it
held eight money transmission and/or escrow licences in the US.
Escrow.com also improved payment processing times to the
fastest ever in the company’s history during 2017.
After the acquisition, the Company has pursued an aggressive
program of applying for money transmission and/or escrow
Contests
licenses in the remaining states in the US. At 31 December 2017,
Entries submitted on contests have seen explosive growth in
thirty licences were in place. As part of this process, in FY17 the
2017, up 58% from 2016.
division incurred one-off regulatory penalties of $0.2 million for
unlicensed activity (substantially pre- acquisition). In addition
the Company has further made provision of $0.9 million as an
estimate of probable penalties. The impact of these penalties
has been a one off expense of $1.1 million in FY17.
In addition, several enhancements to the experience of running
a contest were introduced. Inviting collaborators to help contest
holders rate and give feedback on hundreds of entries is now
possible with the share feature as running a contest can easily
be a team effort. A more convenient interface to award multiple
The Company’s hosting costs were also up by $0.9 million (up
entries was also released where buying all the best entries can
20% on prior corresponding period) as a result of a series of proj-
be done at once.
ects to improve the performance and stability of the platform.
Various core systems such as MySQL, ElasticSearch and Varnish
have been upgraded, and development and staging environ-
ments modernized. The outcome of these projects was a 20% to
33% improvement of various end user performance metrics. The
Company expects FY18 hosting costs to reduce by 10-15% on
FY17 due to a number of initiatives being rolled out.
Reported Net Loss After Tax of $4.8 million in FY17 included a
tax benefit of $0.7 million (FY16 NPAT: ($1.2) million).
Cash Flow and Balance Sheet Strength
More companies and organizations are crowdsourcing their
needs using our platform, including organisations such as NASA
and Harvard, where we have seen contests range from video
production, graphic design and engineering through to applica-
tion design.
Mobile
The project management funnel was redesigned with a mobile
first approach; features such as file attachment in chat and new
payment sources, like Paypal, were introduced. The Android
application was also translated into Chinese and published to the
The Company posted a neutral operating cash flow of ($0.6)
Huawei App store. There were great achievements in funnel opti-
million in FY17 (FY16: $4.5 million). Operating cash flow was ad-
misations and a push for more feature parity between the mobile
versely impacted by lower net revenues and significant increases
and desktop platforms. Notably, these efforts have resulted in a
in legal and compliance costs principally associated with money
66% YoY growth in mobile projects being posted and 49% YoY
transmission and escrow licence applications. (Approximately
growth in mobile paid fees.
$0.7m of the costs are considered to be one offs in FY17)
Collaboration
As at 31 December 2017, the Company held cash and equiv-
alents of $31.9 million, providing the Company with sufficient
flexibility to pursue further growth via both organic and inorganic
channels.
A new hourly billing system was built, which allows more em-
ployers to use hourly billing as it no longer requires large up-front
security deposits, and instead relies on payment verification to
protect freelancers and ensure they get paid. This has led to a
huge increase in paid tracked hours; YoY growth 4Q17/4Q16 was
Key Product & Operational Highlights
54%.
In 2017, the Company embarked on a number of key initiatives:
We also built a new collaboration experience for sharing projects,
Escrow.com
allowing employers to invite their colleagues or friends to help
them manage their project.
Escrow.com released a new mobile responsive and multilingual
front end, added new payment methods for international users,
Memberships
and added chat technical support with an average response time
Corporate Memberships were launched, allowing freelancers to
of 20 seconds for support queries.
We also added support teams in three more locations (Vancou-
ver, Sydney, Manila) and a processing support team in Sydney.
setup multiple profiles for different businesses that they have
on the site. This had a strong uptake from users, and has been
experiencing 10-15% MoM growth since it went live.
We extended support hours and launched multilingual support
We also began offering the Plus membership as a trial to new
across a number of languages. We also rolled quality assurance
freelancers signing up, this has drastically improved the overall
for support globally.
Infrastructure and engineering technical work included migration
of the technical stack away from legacy infrastructure to AWS
(Amazon Web Services), and deployment of a new public facing
website.
Escrow.com also deployed an enhanced AML (anti money-laun-
dering) program and a new KYC (know your customer) verifica-
tion product which allows users to upload documents and have
membership retention rate, along with freelancer activation
metrics. The lower price point, along with higher purchase count
also contributed significantly to reducing chargeback ratios and
reducing churn.
The membership upsells throughout the site have also been cut
down, and tailored so that we better target users who receive
value from them. While this has been a drag on revenue it has
improved user experience, chargebacks, and retention for the
cohorts affected.
FREELANCER LIMITED ANNUAL REPORT 2017 45
DIRECTORS’ REPORT
Freelancer Enterprise
ups in the pitch competition, and 63 (up 8%) speakers of which
Freelancer Enterprise was launched in response to demands
from Fortune 500 corporations needing to scale their global
workforce fast, for a fraction of the price. Freelancer is current-
ly running pilots with top tier multinational enterprises in the
technology, media, professional services, medical and telecoms
sector. A suite of new product offerings and managed services,
including the Private Freelancers Cloud, Employer teams, Project
Success Management, API integration and Compliance feature
can be customized.
Payments
WeChat Pay was added as a payment method for Chinese users.
Freelancer now supports all the major payment methods in
China including Alipay and UnionPay.
19 (up 26%) were international.
Dividends paid or recommended
There have been no dividends paid or provided for the financial
year ended 31 December 2017 (2016: nil).
The Company has established a Dividend Reinvestment Plan
(DRP). The full terms and conditions of the DRP are available on
the Company’s website, www.freelancer.com.
Significant changes in state of affairs
There have been no significant changes in the state of affairs for
the current financial year.
A new payment service provider was added for Latin America
region which allows the payments to be processed locally in the
Subsequent Events
region as well as giving the users the ability to use their local
As at the date of this report, the Directors are not aware of any
bank cards for payments on Freelancer.com. Moreover, Canada
circumstance that has arisen since 31 December 2017 that has
was added to the local acquiring locations which improves the
significantly affected, or may significantly affect the Group’s
authorisation rate and reduces the costs for Canadian Dollar
operations in future financial years, the results of those operations
payments.
We also introduced daily express withdrawals for outbound
payments to multiple countries including Pakistan, Bangladesh,
Romania, Argentina, China, Russia and several European coun-
tries. The express withdrawal method allows the users to receive
the payments directly into their bank account with local currency.
in future financial years, or the Group’s state of affairs in future
financial years.
Future developments
In future financial years, the Group expects to further its growth
through expansions to other territories organically and by acquisi-
Freelancer integrated with Escrow API to allow the users to
tion, and forming strategic alliances and partnerships.
receive payments from external employers.
Local jobs
Environmental regulations
Local jobs has seen good growth in key metrics on a global
The operations of the Group do not involve any activities that have
basis. Average number of bids has increased from 2 to 7 globally.
a marked influence on the environment. As such, the Directors
The median time to first bid is now 15 minutes globally. Over 60%
are not aware of any material issues affecting the Group or its
of local jobs receive a bid within one hour globally.
compliance with the relevant environment agencies or regulatory
Local jobs also now has a 24/7 customer support team based in
authorities.
our network of offices including Sydney and Manila.
More local skills are being added as we look to increase our
reach to skilled freelancers across the globe.
Insurance and indemnification
of Directors and Officers
International
Now across 34 languages on 53 international sites with 39
currencies supported, with a significant increase and focus on
non-English community content.
Messaging
During the financial year, the Group paid premiums based on
normal commercial terms and conditions to insure all directors,
officers and employees of the Group against the costs and
expenses in defending claims brought against the individual while
performing services for the Group. The premium paid has not
been disclosed as it is subject to the confidentiality provisions of
There was a 21% YoY increase in number of chat threads per
the insurance policy.
user, driven by higher user engagement. Strong liquidity, despite
timezone barriers resulted in 36% of freelancers responding to
employers within 5 minutes, and 65% within an hour.
The Company has in place Deeds of Indemnity, Insurance and
Access with each of its current Directors and such other officers
that the Directors determine are entitled to receive the benefit of
StartCon
an indemnity.
StartCon (a Freelancer.com company) successfully hosted Aus-
tralia’s largest start-up and growth conference in Sydney, which
is in its eighth year. The conference held in Q4 of 2017, saw huge
increases in numbers from 2016 across all aspects of the event,
including over 3500 (up 16%) attendees, 122 (up 20%) exhibitors
including 60 (up 20%) startups in Startup Alley, 90 (up 5%) start-
Rounding off of amounts
The Company is an entity to which ASIC Corporations Instrument
2016/191 applies. Accordingly amounts in the financial report
have been rounded off to the nearest thousand dollars, unless
otherwise stated.
46 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
Meetings of Directors
During the financial year five meetings of Directors were held. Other matters arising during the year were resolved by circular resolu-
tions.
The following persons acted as Directors of the Company during the financial year, with attendances to meetings of Directors as
follows:
Director meetings
Audit Committee meetings
Nomination and
Remuneration meetings
Eligible to attend
Attended
Eligible to attend
Attended
Eligible to attend
Attended
R.M. Barrie
S.A. Clausen
D.N.J. Williams
5
5
5
5
5
5
3
3
3
3
3
3
-
-
-
-
-
-
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor and its related parties
amounted to $21,000 (2016: $47,000).
The Directors are satisfied that the provision of non-audit services in the form of tax compliance services during the year by the audi-
tor (or another person or firm on the auditors’ behalf) is compatible with the general standard of independence for auditors imposed
by the Corporations Act.
The Directors are of the opinion that the services as disclosed in Note 18 to the financial statements do not compromise the external
auditor’s independence, based on advice received from the Audit Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including review-
ing or auditing the auditors own work, acting in a management or decision making capacity for the Company, acting as advocate
for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former audit partners of the auditor
There are no officers of the Company who are former audit partners of Hall Chadwick.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 52 and forms part of the Directors’ Report for the year ended 31 Decem-
ber 2017.
Shares issued under Employee Share Plan (ESP)
No ESP shares have been granted to Directors during the financial year. No ESP shares have been granted to Directors since the end
of the financial year.
Proceedings on behalf of Company
No proceedings have been brought or intervened in on behalf of the Company, nor have any applications for leave to do so been made
in respect of the Company, under section 237 of the Corporations Act 2001.
Corporate governance
The Company is committed to strong and effective governance frameworks. The Company’s Corporate Governance Statement, in
addition to its corporate governance policies are available on the Investors section of the Company’s website at
www.freelancer.com/investor#corporategovernance.
FREELANCER LIMITED ANNUAL REPORT 2017 47
DIRECTORS’ REPORT
Remuneration Report
This audited Remuneration Report for the Group which forms part of the Directors’ Report for the financial year ended 31 December
2017, details the nature and amount of remuneration for each Director and the Executives.
Key management personnel (KMP) comprise:
• R.M. Barrie – Executive Chairman
• S.A. Clausen – Non-Executive Director
• D.N.J. Williams – Non-Executive Director from 1 November 2015 (Executive director until 31 October 2015)
• N.L. Katz – Chief Financial Officer and Company Secretary
Remuneration policy
The performance of the Group depends upon the quality of its directors and executives. The Group recognises the need to attract,
motivate and retain highly skilled directors and executives.
The Board of Directors, through its Nomination and Remuneration Committee, accepts responsibility for determining and reviewing
remuneration arrangements for the Directors and Executives. The Nomination and Remuneration Committee assesses the appropri-
ateness of the nature and amount of remuneration of Directors and Executives on a periodic basis by reference to relevant employ-
ment market conditions, giving due consideration to the overall profitability and financial resources of the Group, with the objective of
ensuring maximum stakeholder benefit from the retention of a high-quality Board and executive team.
Non-Executive Director remuneration
Fees and payments to Non-Executive Directors reflect the demands which are made of the Directors in fulfilling their responsibilities.
Non-Executive Director fees are reviewed annually by the Board. The Constitution of the Company provides that the Non-Executive
Directors of the Company are entitled to such remuneration, as determined by the Board, which must not exceed in aggregate the
maximum amount determined by the Company in general meeting. The most recent determination was at a General Meeting held
on 9 October 2013 where the shareholders approved an aggregate remuneration of $300,000. Annual Non-Executive Directors’ fees
currently agreed to be paid by the Company are $25,000 to S.A. Clausen and D.N.J. Williams inclusive of superannuation.
Executive and Executive Director remuneration
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any fringe benefits tax
charges related to employee benefits, including motor vehicles), as well as employer contributions to superannuation funds.
Executive and Executive Director remuneration levels are reviewed annually by the Nomination and Remuneration Committee through
a process that considers the overall performance of the Group. The Executive Directors are not paid any director fees in addition to
their fixed remuneration as Executives.
Performance based remuneration
Performance based remuneration is at the discretion of the Nomination and Remuneration Committee. These can take the form of
cash bonuses or invitations to participate in the Company’s Employee Share Plan (ESP).
48 FREELANCER LIMITED ANNUAL REPORT 2017
Remuneration of Directors and Executives
Remuneration shown below relates to the period in which the Director or Executive was a member of key management personnel.
Amounts below have either been paid out or accrued in the period.
DIRECTORS’ REPORT
Non-Executive Directors
S.A. Clausen
2017
2016
D.N.J. Williams
2017
2016
Executive Directors
R.M. Barrie
2017
2016
Other KMP
N.L. Katz
2017
2016
Total
2017
2016
Short-term benefits
Post-employ-
ment benefits
Share based
payments
Directors’
fees
Cash salary
and fees
Other
Superannuation
Shares
$
-
-
-
-
$
-
-
-
-
$
-
1,991
2,174
2,174
$
-
-
16,706
20,047
Total
$
25,000
25,051
41,764
45,105
569,096
569,096
22,209
22,866
25,904
25,904
13,365
16,038
630,574
633,904
310,200
310,200
6,324
5,941
34,800
34,800
111,706
66,304
463,030
417,245
47,884
45,944
879,296
879,296
28,533
28,807
62,878
64,869
141,777
102,389
1,160,368
1,121,305
$
25,000
23,060
22,884
22,884
-
-
-
-
The remuneration of key management personnel in the years ended 31 December 2017 and 2016 were 100% fixed, and there is no link
between remuneration and the market price of the Company’s shares.
ESP shares
Details of ESP shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows:
Balance at the
start of the year
Granted /
issued
Released from
restrictions
Forfeited /
cancelled
Balance at
the end of
the year
Balance of
unvested ESP
shares
Balance of
vested ESP
shares
2017
Directors
R.M. Barrie
D.N.J. Williams
Other KMP
N.L. Katz
Total
2016
Directors
R.M. Barrie
D.N.J. Williams
Other KMP
N.L. Katz
Total
400,000
500,000
-
-
-
-
(400,000)
(500,000)
-
-
-
-
-
-
1,000,000
1,900,000
245,000
245,000
(114,461)
(245,000)
(144,461)
(1,145,000)
885,539
885,539
251,800
251,800
633,739
633,739
400,000
500,000
-
-
559,461
1,459,461
440,539
440,539
-
-
-
-
-
-
-
-
400,000
500,000
83,334
104,167
316,666
395,833
1,000,000
1,900,000
631,250
818,751
368,750
1,081,249
FREELANCER LIMITED ANNUAL REPORT 2017 49
DIRECTORS’ REPORT
Ordinary share capital
Details of ordinary shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows:
Balance at the start
of the year
Received as part
of remuneration Purchase of shares
Sale of shares
Balance at the end of
the year
2017
Directors
R.M. Barrie1
S.A. Clausen
D.N.J. Williams2
Other KMP
N.L. Katz3
Total
2016
Directors
R.M. Barrie1
S.A. Clausen
D.N.J. Williams2
Other KMP
N.L. Katz3
Total
192,842,959
156,666,463
10,758,165
290,000
360,557,587
192,842,959
156,071,429
10,758,165
420,000
360,092,553
-
-
-
-
-
-
-
-
-
1,232,727
3,050,888
-
114,461
4,398,076
-
595,034
-
-
595,034
-
-
-
194,075,686
159,717,351
10,758,165
(254,461)
(254,461)
150,000
364,701,202
-
-
-
192,842,959
156,666,463
10,758,165
(130,000)
(130,000)
290,000
360,557,587
1. 1,279,500 shares as at 31 December 2017 (2016: 1,279,500) are held directly or indirectly by related parties.
2. 131,000 shares as at 31 December 2017 (2016: 131,000) are held directly or indirectly by related parties.
3. 40,000 shares as at 31 December 2017 (2016: 140,000) are held directly or indirectly by related parties.
Loans to directors and key management personnel
The following loan balances are outstanding at the reporting date in relation to remuneration arrangements with Executive Directors
and KMP in respect of shares issued under the Employee Share Plan (ESP).
As the ESP is considered in substance a share option, the ESP shares issued and corresponding loan receivable are not recognised
by the Group in its financial statements. The ESP shares will not be considered issued to participants until the corresponding loan has
been repaid, at which time there will be an increase in the issued capital and increase in cash. Further information relating to the ESP
is set out in the Note 21 to the financial statements.
Directors:
R.M. Barrie
S.A. Clausen
D.N.J. Williams
Other KMP:
N.L. Katz
Total loans to Directors and KMP
2017
$000
-
-
-
960
960
2016
$000
200
-
250
1,012
1,462
50 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
Executive service agreements
The employment terms and conditions of Group Executives and KMP are formalised in service agreements.
Position
Key terms of service agreements
Chief Executive
Officer
• Term: unspecified.
• Base remuneration: Reviewed annually by the Nomination and Remuneration Committee.
• Bonus entitlements: Determined annually by the Nomination and Remuneration Committee (capped at
50% of the base remuneration).
• Termination notice period: 6 months’ notice or alternatively in Freelancer’s case, payment in lieu of
notice.
• Restraint of trade period: 12 months.
Other Executives
Other Executives are employed under individual executive services agreements. These establish, amongst
other things:
•
•
•
total compensation;
eligibility to participate in the ESP;
variable notice and termination provisions of up to 3 months, or by the Group without notice in the event
of serious misconduct; and
•
restraint and confidentiality provisions.
Other transactions with KMP or their related parties
There were no other transactions conducted between the Group and KMP or their related parties, other than those disclosed above re-
lating to equity, compensation and loans, that were conducted other than in accordance with normal employee, customer or supplier
relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons, apart
from related party transactions disclosed in Note 22 to the financial statements.
This concludes the Remuneration Report.
The Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the directors made pursu-
ant to s298(2) of the Corporations Act 2001.
On behalf of the Directors
Matt Barrie
Chairman
27 February 2018
FREELANCER LIMITED ANNUAL REPORT 2017 51
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE
DIRECTORS OF FREELANCER LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 31
December 2017 there have been no contraventions of:
(i)
the auditor independence requirements as set out in the Corporations Act 2001
in relation to the review; and
(ii)
any applicable code of professional conduct in relation to the review.
Hall Chadwick
Level 40, 2 Park Street
Sydney NSW 2000
SANDEEP KUMAR
Partner
Date: 27 February 2018
52 FREELANCER LIMITED ANNUAL REPORT 2017
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 31 December 2017
Revenue
Cost of sales
Gross profit
Employee expenses
Administrative expenses
Marketing related expenses
Occupancy expenses
Foreign exchange losses
Depreciation and amortisation expenses
Share based payments expense
Finance costs
Loss before income tax
Income tax benefit
Loss after tax
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Total comprehensive loss for the year
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
5
6
6
6
6
21
6
7
16
27
27
2017
$000
50,270
(6,220)
44,050
(22,028)
(12,387)
(9,767)
(2,776)
(816)
(701)
(986)
(15)
(5,426)
653
(4,773)
22
(4,751)
Cents
(1.06)
(1.04)
2016
$000
52,749
(7,198)
45,551
(21,772)
(9,983)
(9,432)
(2,922)
(918)
(769)
(1,253)
(5)
(1,503)
330
(1,173)
(38)
(1,211)
Cents
(0.26)
(0.25)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
FREELANCER LIMITED ANNUAL REPORT 2017 53
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
As at 31 December 2017
Note
2017
$000
2016
$000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Other assets
Total current assets
Non-current assets
Trade and other receivables
Plant and equipment
Intangible assets
Other assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Deferred revenue
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Deferred Revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
8
9
7
10
9
11
12
10
7
13
7
14
7
14
15
16
31,908
3,058
105
869
35,940
871
913
26,442
521
4,003
32,750
68,690
32,956
61
2,020
911
35,948
5
509
305
819
36,767
31,923
38,049
3,441
(9,567)
31,923
34,779
4,166
155
966
40,066
216
1,311
25,701
502
3,278
31,008
71,074
32,728
81
1,325
984
35,118
3
374
190
567
35,685
35,389
37,750
2,433
(4,794)
35,389
The above statement of financial position should be read in conjunction with the accompanying notes.
54 FREELANCER LIMITED ANNUAL REPORT 2017
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Balance at 1 January 2016
37,310
1,585
(367)
(3,621)
34,907
Contributed
Equity
$000
Share based
payments
$000
Note
Foreign currency
translation
reserve
$000
(Accumulated
losses)
$000
Total Equity
$000
Loss for the year
Exchange differences on transla-
tion of foreign operations
Total comprehensive loss for the year
16
-
-
-
Transactions with owners in their capacity as owners:
Contributions of equity arising from
repayment of ESP loans
15
Share based payments
21
Balance at 31 December 2016
440
-
37,750
-
-
-
-
1,253
2,838
-
(1,173)
(1,173)
(38)
(38)
-
(1,173)
(38)
(1,211)
-
-
-
-
(405)
(4,794)
440
1,253
35,389
Balance at 1 January 2017
37,750
2,838
(405)
(4,794)
Contributed
Equity
$000
Share based
payments
$000
Note
Foreign currency
translation
reserve
$000
(Accumulated
losses)
$000
Total Equity
$000
35,389
Loss for the year
Exchange differences on transla-
tion of foreign operations
Total comprehensive loss for the year
16
-
-
-
Transactions with owners in their capacity as owners:
Contributions of equity arising from
repayment of ESP loans
15
Share based payments
21
Balance at 31 December 2017
299
-
38,049
-
-
-
-
986
3,824
-
22
22
-
-
(4,773)
(4,773)
-
(4,773)
22
(4,751)
-
-
299
986
(383)
(9,567)
31,923
The above statement of changes in equity should be read in conjunction with the accompanying notes.
FREELANCER LIMITED ANNUAL REPORT 2017 55
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Income taxes (paid) / refunded
Net cash inflow from operating activities
Cash flows from investing activities
Payments for plant and equipment
Payments for intangible assets
Note
26
Proceeds from working capital adjustment on acquisition of Escrow.com
5
Net cash (outflow) from investing activities
Cash flows from financing activities
Contributions of equity arising from repayment of ESP loans
15
Increase in security to gateway providers
Net cash (outflow) / inflow from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
8
The above statement of cash flows should be read in conjunction with the accompanying notes.
Notes to the financial statements
2017
$000
50,658
(51,244)
46
(28)
(568)
(303)
(740)
326
(717)
299
(673)
(374)
(1,659)
34,779
(1,212)
31,908
2016
$000
51,968
(47,434)
140
(198)
4,476
(428)
(1,851)
-
(2,279)
440
-
440
2,637
32,246
(104)
34,779
56 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contents of the notes to the
consolidated financial statements
NOTE
CONTENTS
PAGE
1.
2.
3.
4.
5.
6.
7.
8.
9.
Reporting entity.................................................................................................................................................
58
Basis of preparation.........................................................................................................................................
58
Financial risk management.............................................................................................................................
58
Operating segments.........................................................................................................................................
62
Revenue..............................................................................................................................................................
64
Expenses............................................................................................................................................................
64
Income tax.........................................................................................................................................................
65
Cash and cash equivalents.............................................................................................................................
67
Trade and other receivables............................................................................................................................
68
10.
Other assets......................................................................................................................................................
68
11.
Plant and equipment........................................................................................................................................
69
12.
Intangible assets..............................................................................................................................................
70
13.
Trade and other payables................................................................................................................................
72
14.
Provisions...........................................................................................................................................................
72
15.
Contributed equity............................................................................................................................................
73
16.
Equity – reserves..............................................................................................................................................
74
17.
Key management personnel disclosures.....................................................................................................
74
18.
Remuneration of auditors................................................................................................................................
75
19.
Contingent liabilities.........................................................................................................................................
75
20.
Commitments for expenditure........................................................................................................................
75
21.
Share based payments....................................................................................................................................
76
22.
Related party transactions..............................................................................................................................
79
23.
Parent entity information................................................................................................................................
79
24.
Interests in controlled entities.........................................................................................................................
81
25.
Events occurring after the reporting date....................................................................................................
81
26.
Reconciliation of loss after tax to net cash flow from operating activities...........................................
82
27.
Earnings per share (EPS)................................................................................................................................
82
28.
Other significant accounting policies...........................................................................................................
83
FREELANCER LIMITED ANNUAL REPORT 2017 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting entity
Freelancer Limited (the Company) is a company domiciled in Australia. The address of the Company’s registered office is Level
20, 680 George Street, Sydney, NSW, 2000. The consolidated financial statements of the Company as at and for the year ended 31
December 2017 comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities). The
Group is a for-profit entity and primarily is involved in operating an online marketplace for services and providing escrow payment ser-
vices. The separate financial statements of the parent entity, Freelancer Limited, have not been presented within this financial report
as permitted by the Corporations Act 2001.
The consolidated financial statements were authorised for issue by the Board on 27 February 2018.
2. Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpreta-
tions issued by the Australian Accounting Standards Board and the Corporations Act 2001.
The Directors believe that there are reasonable grounds that the company is able to pay its debts as and when they fall due. The
Group has a significant cash balance at year end and has projected a profitable financial year for the period ending 31 December 2018
based on increased revenue and a planned reduction in expenses.
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
(b) Historical cost convention
The consolidated financial statements have been prepared on the historical cost basis unless otherwise stated in the notes. Except
for the cash flow information, the financial statements have been prepared on an accrual basis, modified, where applicable, by the
measurement at fair value of selected non-current assets, financial assets and financial liabilities.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.
(d) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 28(h).
(e) Significant accounting policies
The principal accounting policies adopted in the presentation of these consolidated financial statements are set out in the relevant
notes. The policies have been consistently applied to all the years presented, unless otherwise stated.
(f) Rounding of amounts
The Company has applied the relief available to it under ASIC Corporations Instrument 2016/191. Accordingly, amounts in the finan-
cial statements and Directors’ Report have been rounded off to the nearest $1,000.
(g) Materiality
These consolidated financial statements have included information that is deemed to be material and relevant to the understanding of
the financial statements. Disclosure may be considered material and relevant if the dollar amount is significant due to size or nature,
or the information is important to understand the:
• Group’s current year results;
•
impact of significant changes in the Group’s business; or
• aspects of the Group’s operations that are important to future performance.
3. Financial risk management
Financial risk management policies
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk), credit risk and liquidity risk. The Group’s
overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed.
These methods include sensitivity analysis in the case of interest rate and other price risks and ageing analysis for credit risk.
58 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Risk management is carried out by senior finance executives (Finance) under policies approved by the Board of Directors (Board). These
policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance
identifies, evaluates and hedges financial risks within the Group’s operating units.
The Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial Liabilities
Trade and other payables
Total financial liabilities
Note
8
9
13
2017
$000
31,908
3,929
35,837
32,956
32,956
2016
$000
34,779
4,382
39,161
32,728
32,728
The carrying value of the assets and liabilities disclosed in the table above closely approximates or equals their fair value. The carrying
amounts of trade receivables and trade and other payables are assumed to approximate their fair values due to their short-term
nature.
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the
instrument. For financial assets, this is equivalent to the date that the Group commits itself to either purchase or sell the asset (i.e.
trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value
through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Where
available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are
adopted.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less
principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that
initial amount and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to
the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums
or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument
to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an
adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss.
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair
value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of
Accounting Standards specifically applicable to financial instruments.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market
and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process
and when the financial asset is derecognised.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it
is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses
are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.
Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are
recognised in profit or loss through the amortisation process and when the financial liability is derecognised.
FREELANCER LIMITED ANNUAL REPORT 2017 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Impairment
At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired.
A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a
result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial
asset(s).
When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Company recog-
nises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so
that the loss events that have occurred are duly considered.
(a) Market risk
Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currencies.
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a curren-
cy that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Group has not entered into forward foreign exchange contracts to protect against exchange rate movements. The Directors are of
the view that the cost of hedging the Group’s short-term foreign exchange exposure outweighs the risk of adverse currency move-
ments.
The Group’s exposure to foreign currency exchange risk at the reporting date, expressed in each currency, was as follows:
AUD
USD
NZD
GBP
HKD
SGD
PHP
EUR
CAD
INR
Other
AUD
000’s
USD
000’s
NZD
000’s
GBP
000’s
HKD
000’s
SGD
000’s
PHP
000’s
CAD
000’s
INR
000’s
AUD
000’s
4,861
13,257
413
529
1,491
135
(910)
(2,151)
208
29
-
-
1,632
1,011
171
1
(20)
(919)
865
660
-
-
(832)
839
EUR
000’s
2,139
273
-
-
332
121
-
2
41,118
17,010
6,079
(10,057)
865
129
5
(7)
54,153
12,686
197
(250)
220
338
-
(34)
(638)
(114)
User obligations
(2,113)
(15,350)
(160)
Net exposure
2,780
(2,618)
77
(289)
(2,878)
(1,840)
(711)
(36,568)
166
51,272
572
281
30,218
AUD
USD
NZD
GBP
HKD
SGD
PHP
EUR
CAD
INR
Other
AUD
000’s
USD
000’s
NZD
000’s
4,357
15,762
470
25
1,697
32
(393)
(2,235)
178
16
GBP
000’s
1,043
215
8
(45)
(707)
514
HKD
000’s
SGD
000’s
PHP
000’s
EUR
000’s
CAD
000’s
INR
000’s
AUD
000’s
845
512
-
-
(521)
836
296
45,693
1,640
222
71
5
6,468
14,506
(6)
(13,477)
839
118
9
(8)
69,969
9,172
-
(297)
(252)
(2,006)
(1,632)
(674)
(26,051)
114
51,184
230
284
52,793
207
208
-
(13)
(445)
(43)
User obligations
(1,993)
(15,135)
(117)
Net exposure
2,466
121
77
The Group had net assets of $453,000 denominated in foreign currencies as at 31 December 2017 (comprising assets of $30,964,000
less liabilities of $30,511,000). The Group had net assets of $4,470,000 denominated in foreign currencies as at 31 December 2016
(comprising assets of $34,782,000 less liabilities of $30,312,000).
The analysis below reflects management’s view of possible movements in relevant foreign currencies against the Australian dollar
in the short term subsequent to 31 December 2017. The table summarises the range of possible outcomes that would affect the
Group’s net profit and equity as a result of foreign currency movements on year end foreign denominated assets and liabilities.
60 FREELANCER LIMITED ANNUAL REPORT 2017
2017
Currency exposure:
Denominated in:
Cash
Trade receivables
Other financial assets
Payables
2016
Currency exposure:
Denominated in:
Cash
Trade receivables
Other financial assets
Payables
The impact of potential movements in exchange rates on the profit or loss is as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2017 $000
2016 $000
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
(Range +5% to -5%)
High
160
(3)
(71)
(7)
(8)
(63)
(42)
(14)
(29)
(77)
Low
(177)
4
79
7
8
69
46
15
32
83
High
(8)
(4)
(42)
(7)
(5)
(68)
(16)
(14)
(51)
Low
9
4
46
8
6
75
18
15
57
(215)
238
AUD to USD
AUD to NZD
AUD to GBP
AUD to HKD
AUD to SGD
AUD to PHP
AUD to EUR
AUD to CAD
AUD to INR
Net movement
Price risk
The Group is not exposed to significant equities price risk.
Interest rate risk
The Group is not exposed to any significant interest rate risk.
Cash balances
As at 31 December 2017 the Group had $31,908,000 (2016: $34,779,000) held in bank accounts and online wallets. The Group’s cash
balances are predominantly held in interest bearing bank accounts. Funds that are excess to short term liquidity requirements are
generally invested in short term deposits.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The
maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for
impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does
not hold any collateral.
Credit risk is managed by a risk assessment process for all customers, which takes into account past experience.
(c) Liquidity risk
Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay
debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows
and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
The Group does not have any borrowing facilities in place at the reporting date.
Maturities of financial liabilities
The following table details the Group’s remaining contractual maturity for its financial instrument liabilities. The table has been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required
to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these
totals may differ from their carrying amount in the statement of financial position.
FREELANCER LIMITED ANNUAL REPORT 2017 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2017
Non-derivatives
Non-interest bearing
Trade and other payables
Total
2016
Non-derivatives
Non-interest bearing
Trade and other payables
Total
Note
1 year
or less
$000
Between 1 and
2 years
$000
Between 2 and
5 years
$000
Over 5
years
$000
Remaining
contractual
maturities
$000
13
13
32,956
32,956
32,728
32,728
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Trade and other payables are payable as and when they are due. The cash flows in the maturity analysis above are not expected to
occur significantly earlier than disclosed.
4. Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
These include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items
comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabili-
ties. The Board of Directors are identified as the chief operating decision makers (CODM).
Identification of reportable operating segments
The Group is organised into two operating segments: namely an online marketplace and online payment services. These segments
are based on the internal reports that are reviewed and used by the CODM in assessing performance and in determining the allocation
of resources (AASB 8 para. 5(b)).
The CODM assess the performance of the operating segments based on a measure of revenue and operating EBITDA (earnings be-
fore share based payments, interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the
CODM are consistent with those adopted in the financial statements.
The Group operates predominantly in Australia, where the majority of online revenues and expenses are incurred. Although the Group
has staff and operations in Philippines, United Kingdom, Argentina, the United States and Canada in addition to Australia, these geo-
graphic operations are considered, based on internal management reporting and the allocation of resources by the Group’s CODM, as
one geographic segment.
The information reported to the CODM is at least on a monthly basis.
62 FREELANCER LIMITED ANNUAL REPORT 2017
Year end 31 December 2017
Segment revenue
Segment revenue
Total segment revenue
Segment result
Segment profit
Share based payments
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
Loss for year
Segment Assets
At 31 December 2017
Segment assets
Intergroup eliminations
Deferred tax assets
Intangibles
Total assets
Segment liabilities
At 31 December 2017
Segment liabilities
Intergroup eliminations
Deferred tax liabilities
Total liabilities
Year end 31 December 2016
Segment revenue
Segment revenue
Total segment revenue
Segment result
Segment profit
Share based payments
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
Loss for year
Segment Assets
At 31 December 2016
Segment assets
Intergroup eliminations
Deferred tax assets
Intangibles
Total assets
Segment liabilities
At 31 December 2016
Segment liabilities
Intergroup eliminations
Deferred tax liabilities
Total liabilities
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Online Marketplace
$000
Online Payments
$000
Total
$000
43,850
43,850
6,420
6,420
(2,095)
(1,644)
38,806
(4,554)
5,393
34,252
5,393
50,270
50,270
(3,739)
(986)
(701)
(5,426)
653
(4,773)
44,199
(4,554)
4,003
25,042
68,690
(35,072)
(6,244)
4,554
(41,316)
4,554
(5)
(35,072)
(1,690)
(36,767)
Online Marketplace
$000
Online Payments
$000
Total
$000
45,168
45,168
7,581
7,581
56
462
41,641
(1,488)
3,342
40,153
3,342
52,749
52,749
518
(1,252)
(769)
(1,503)
330
(1,173)
44,983
(1,488)
3,278
24,301
71,074
(34,901)
(2,269)
1,488
(37,170)
1,488
(3)
(34,901)
(781)
(35,685)
FREELANCER LIMITED ANNUAL REPORT 2017 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Revenue
The Company’s net revenues result from transaction and other fees generated in its online marketplaces and in providing online
escrow services. Revenues are recognised when evidence of an arrangement exists, the fee is fixed and determinable, no significant
obligation remains and collection of the receivable is reasonably assured. Amounts disclosed as revenue are net of refunds and
amounts collected on behalf of third parties. Where services have not been provided but the Company is obligated to provide the
services in the future, revenue recognition is deferred. Provision for doubtful accounts and transaction losses are made at the time
of revenue recognition based on the Company’s historical experience. The provision for doubtful accounts and transaction losses are
recorded as charges to cost of sales.
Revenue is recognised for the major business activities as follows:
Marketplace and payment services
Marketplace and escrow fees are recognised once the services have been completed and no significant obligation remains.
Interest income
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in
the instrument.
Government grants
Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant condi-
tions will be met.
All revenue is stated net of the amount of goods and services tax (GST) and Valued Added Tax (VAT).
Sales revenue
Marketplace and payment services
Other revenue
Interest income
Government grants
Proceeds from working capital adjustment on acquisition of Escrow.com
Other
Total revenue
6. Expenses
Loss before income tax benefit includes the following specific net losses and expenses:
Employee expenses
Wages and salaries (including superannuation)
Other employment costs
Total employee expenses
Depreciation and amortisation
Plant and equipment
Leasehold improvements
Total depreciation and amortisation expenses
Rental expense relating to operating leases
Minimum lease payments
Net foreign exchange losses
Finance costs
Interest expense
64 FREELANCER LIMITED ANNUAL REPORT 2017
2017
$000
2016
$000
49,775
52,508
37
111
326
21
130
80
-
31
50,270
52,749
2017
$000
19,820
2,208
22,028
433
268
701
2,776
816
15
2016
$000
18,633
3,139
21,772
531
238
769
2,922
918
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Total employee benefits expenses are inclusive of:
Short-term obligations
Employee benefits that are expected to be settled within 12 months have been measured at the amounts expected to be paid when
the liabilities are settled, plus related on-costs. The liability for annual leave is recognised in the provision for employee benefits. All
other short-term employee benefit obligations are presented as payables.
Other long-term employee benefit obligations
Employee benefits payable later than 12 months have been measured at the present value of the estimated future cash outflows to be
made for those benefits. In determining the liability, consideration is given to employee wages increases and the probability that the
employee may satisfy any vesting requirements. Those cash flows are discounted using market yields on national government bonds
with terms to maturity that match the expected timing of cash flows attributable to employee benefits.
Short-term incentive plans
The Group recognises a liability and an expense for bonuses payable under short term incentive plans. Short term incentive plans are
based on the achievement of targeted performance levels that may be set at the beginning of each financial year. The Group recognis-
es a liability to pay out short term incentives when contractually obliged based on the achievement of the stated performance levels,
or where there is a past practice that has created a constructive obligation.
7. Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss
•
temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the
Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the
foreseeable future
•
taxable temporary differences arising on the initial recognition of goodwill.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end
of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is prob-
able that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether
additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judge-
ments about future events. New information may become available that causes the Group to change its judgement regarding the
adequacy of existing tax liabilities; such changes to tax liabilities will impact the tax expense in the period that such a determination is
made.
FREELANCER LIMITED ANNUAL REPORT 2017 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company and its wholly-owned Australian resident entities are part of a tax consolidated group. As a consequence, all members
of the tax-consolidated group are taxed as a single entity. The head entity within the tax-consolidated group is Freelancer Limited.
(a) Income tax
Current tax
Deferred tax
Income tax (benefit)
Deferred income tax expense included in income tax benefit comprises:
(Increase) in deferred tax assets
Increase in deferred tax liability
Total deferred income tax
(b) Numerical reconciliation of income tax benefit to prima facie
income tax payable
Loss from ordinary activities before income tax expense
Tax at the Australian rate of 30%
Tax effect amounts which are not deductible / (taxable) in calculating taxable income:
R&D tax incentive
Difference in tax rate
Share based payments
Over provision in prior years
Future benefit of foreign losses
Other non-allowable items
Income tax (benefit)
(c) Amounts recognised directly in equity
Deferred tax associated with capital raising
(d) Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Provision for user disputes & refunds
Legal fees
Capital raising costs
Foreign exchange losses
Intangible assets
Provision for impairment of receivables
Audit fees
Future benefit of tax losses
Future benefit of foreign tax losses
Total amounts recognised in profit or loss
Amounts recognised directly in equity:
Capital raising costs
Total amounts recognised in equity
Net deferred tax assets
Movements:
Opening balance at beginning of year
Credited to the profit or loss statement
Closing balance at end of year
66 FREELANCER LIMITED ANNUAL REPORT 2017
2017
$000
70
(723)
(653)
(725)
2
(723)
(5,426)
(1,628)
(81)
92
296
-
(20)
688
(653)
60
278
58
24
-
110
-
699
77
2,443
254
3,943
60
60
4,003
3,278
725
4,003
2016
$000
80
(410)
(330)
(410)
-
(410)
(1,503)
(451)
(213)
(196)
376
(56)
(8)
218
(330)
122
272
104
24
24
337
150
803
73
1,333
36
3,156
122
122
3,278
2,865
413
3,278
(e) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Fixed assets
Net deferred tax liabilities
Movements:
Opening balance at beginning of year
Credited to the profit or loss statement
Closing balance at end of year
(f) Current tax assets
Current tax assets
(g) Current tax liabilities
Current tax liabilities
(h) Franking credits
Franking credits available at the reporting date based on a tax rate of 30%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2017
$000
2016
$000
5
5
3
2
5
105
61
66
3
3
3
-
3
155
81
87
Freelancer Limited and its wholly-owned Australian entities elected to form an income tax consolidated group as of 12 April 2010.
8. Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with banks,
other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
Current
Cash at bank and on hand
Term deposits
Total cash and cash equivalents
2017
$000
31,111
797
31,908
2016
$000
31,323
3,456
34,779
FREELANCER LIMITED ANNUAL REPORT 2017 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. This provision includes amounts that are not considered to be recoverable from debtors and
amounts that are expected to be credited to debtors. Trade receivables are generally due for settlement no more than 30 days from
the date of recognition. They are presented as current assets unless collection is not expected for more than 12 months after the
reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. A provision for impairment of trade receivables is established when
there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or
delinquency in payments are considered indicators that the trade receivable is impaired. In addition, the trade receivables balances are
considered for credit notes that are expected to be raised against individual and collective balances.
Current
Trade receivables
Payment gateway receivables
Less: provisions for impairment of trade receivables
Current trade receivables net of provisions for impairment
Other receivables
Total current trade and other receivables
Non-Current
Payment gateway receivables
Total trade and other receivables
(a) Provision for impaired trade receivables
Opening balance
Increase / (Decrease) in provisions for impairment during the year
Exchange differences
Closing balance
(b) Ageing of current trade receivables
1 – 30 days
31 – 60 days
61 – 90 days
90+ days
Provision for impairment
Total trade receivables net of provision for impairment
10. Other assets
Current
Prepayments
Other
Total current other assets
Non-current
Security deposits
Total non-current other assets
Total other assets
68 FREELANCER LIMITED ANNUAL REPORT 2017
2017
$000
2,521
2,803
(2,331)
2,993
65
3,058
871
3,929
2,679
(115)
(233)
2,331
3,185
215
171
1,753
(2,331)
2,993
2017
$000
868
1
869
521
521
1,390
2016
$000
3,332
3,461
(2,679)
4,114
52
4,166
216
4,382
1,545
1,090
44
2,679
4,091
565
584
1,553
(2,679)
4,114
2016
$000
861
105
966
502
502
1,468
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Plant and equipment
Plant and equipment is stated at historical cost less depreciation, amortisation and impairment losses. Historical cost includes expen-
diture that is directly attributable to the acquisition of the items.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount
from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the
asset’s employment and subsequent disposal. The expected net cash flows have not been discounted in determining recoverable
amounts.
Depreciation of all fixed assets is calculated using the straight-line method to allocate their cost, net of their residual values, over their
estimated useful lives, as follows:
• Fixtures and fittings
• Motor vehicles
• Office and computer equipment
• Software
4 - 5 years
4 years
4 - 5 years
3 years
•
Leasehold improvements
shorter of either the unexpired period of the lease or the estimated useful lives
of the improvements
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are rec-
ognised in the profit and loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation
surplus relating to that asset are transferred to retained earnings.
Non-current
Office and computer equipment – at cost
Accumulated depreciation
Carrying value of office and computer equipment
Fixtures and fittings – at cost
Accumulated depreciation
Carrying value of fixtures and fittings
Motor vehicles – at cost
Accumulated depreciation
Carrying value of motor vehicles
Software – at cost
Accumulated depreciation
Carrying value of software
Leasehold improvements – at cost
Accumulated amortisation
Carrying value of leasehold improvements
Total carrying value of plant and equipment
2017
$000
2,315
(1,556)
759
494
(394)
100
42
(42)
-
19
(16)
3
730
(679)
51
913
2016
$000
1,992
(1,150)
842
497
(345)
152
42
(42)
-
19
(12)
7
864
(554)
310
1,311
FREELANCER LIMITED ANNUAL REPORT 2017 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliations
Reconciliations of the carrying amount of plant and equipment and leasehold improvements at the beginning and end of the current
financial year are set out below:
Office and
computer
equipment
$000
Fixtures and
fittings
$000
Motor Vehicles
$000
Software
$000
Leasehold
improvements
$000
896
385
(439)
842
365
-
(448)
759
206
34
(88)
152
29
-
(81)
100
-
-
-
-
-
-
-
12
-
(5)
7
-
-
(4)
3
538
9
(237)
310
11
(102)
(168)
51
Total
$000
1,652
428
(769)
1,311
405
(102)
(701)
913
Balance at 1 January 2016
Additions
Depreciation and amortisation
Balance at 31 December 2016
Additions
Disposals
Depreciation and amortisation
Balance at 31 December 2017
12. Intangible assets
Goodwill
Goodwill is initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed
to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired at date of acquisition. Goodwill is
not amortised. Instead goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated impairment losses.
Domain Names
Domain names are valued at cost of acquisition. Domain names are tested for impairment annually or more frequently if events or
changes in circumstances indicate that it might be impaired, either individually or at the cash generating unit level. Useful lives are
also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Intellectual Property
Intellectual property is valued at cost of acquisition. Intellectual property is tested for impairment annually or more frequently if events
or changes in circumstances indicate that it might be impaired, either individually or at the cash generating unit level. Useful lives are
also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Trademarks
Trademarks are valued at cost of acquisition and are amortised on a straight-line basis over the period in which the benefits are ex-
pected to be realised. Trademarks are tested for impairment where an indicator of impairment exists, either individually or at the cash
generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective
basis.
Non Current
Domain names – at cost
Accumulated impairment
Carrying value of domain names
Intellectual property – at cost
Accumulated impairment
Carrying value of domain names
Goodwill
Accumulated impairment
Carrying value of goodwill
Total carrying value of intangible assets
70 FREELANCER LIMITED ANNUAL REPORT 2017
2017
$000
4,877
(28)
4,849
2,198
-
2,198
19,395
-
19,395
26,442
2016
$000
4,136
(28)
4,108
2,198
-
2,198
19,395
-
19,395
25,701
Reconciliations
Reconciliations of the carrying amount of intangible assets at the beginning and end of the current and previous financial year are set
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
out below:
Balance at 1 January 2016
Additions
Impairment
Amortisation
Balance at 31 December 2016
Additions
Impairment
Amortisation
Balance at 31 December 2017
Domain names
$000
Intellectual property
$000
3,055
1,053
-
-
4,108
741
-
-
4,849
1,400
798
-
-
2,198
-
-
-
Goodwill
$000
19,395
-
-
-
Total
$000
23,850
1,851
-
-
19,395
25,701
-
-
-
741
-
-
2,198
19,395
26,442
The Directors have determined the useful life of domain names is indefinite and subject to an annual test for impairment of the fair value
of the domain names. The Directors have assessed the recoverability of domain names, intellectual property and goodwill based on value
in use calculations.
The recoverable amount of the Group’s intangible assets has been determined by a value-in-use calculation using a discounted cash
flow model, based on a 12 month projection period for the Group approved by management and extrapolated for a further 5 years with a
discounted terminal value.
Goodwill is allocated to cash-generating units which are based on the Group’s reporting segments:
Online marketplace
Online payments
Total
2017
$000
15,553
10,889
26,442
2016
$000
15,553
10,889
26,442
The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations. Value- in-use is calculated
based on the present value of cash flow projections over a 5 year period with the period extending beyond 5 years extrapolated using a
2% terminal growth rate. The cash flows are discounted based on management’s estimate of the time value of money and the Group’s
weighted average cost of capital adjusted for the risk free rate and the volatility of the share price relative to market movements.
The following key assumptions were used in the value-in-use calculations:
Online marketplace
Online payments
CAGR
Rate
21%
14%
Discount
Rate
30%
30%
Management has based the value-in-use calculations on budgets for each reporting segment. These budgets use historical weighted
average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated weighted
average inflation rates over the period, which are consistent with inflation rates applicable to the locations in which the segments operate.
Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment.
Based on the above, management is satisfied that there are no indicators of impairment to the current carrying value of intangible assets.
FREELANCER LIMITED ANNUAL REPORT 2017 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Trade and other payables
These amounts represent liabilities for goods and services provided to the Group and amounts outstanding to users of the Company’s
websites at the end of financial year which are unpaid. The amounts are unsecured and are payable as and when they are due. Trade
and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.
Current
Trade payables
Sundry payables and accrued expenses
User obligations
Total trade and other payables
14. Provisions
2017
$000
3,184
840
28,932
32,956
2016
$000
3,067
939
28,722
32,728
Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable
that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions recognised represent the best
estimate of the amounts required to settle the obligation at reporting date.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than
the unavoidable cost of meeting the obligations under the contract. The provision is stated at the present value of the future net cash
outflows expected to be incurred in respect of the contract.
Current
Provision for user disputes and refunds
Employee benefits
Provision for penalties*
Total current provisions
Non-current
Make-good provisions
Employee benefits
Total non-current provisions
Total provisions
2017
$000
192
931
897
2,020
266
243
509
2,529
2016
$000
346
979
-
1,325
237
137
374
1,699
*At the time of the acquisition of the escrow.com business in November 2015, it held eight money transmission and/or escrow
licences in the US. After the acquisition, the Company has pursued an aggressive program of applying for money transmission and/or
escrow licenses in the remaining states in the US. At 31 December 2017, thirty licences were in place. As part of this process, in FY17
the division incurred one-off regulatory penalties of $0.2 million for unlicensed activity (substantially pre- acquisition). In addition the
Company has further made provision of $0.9 million as an estimate of probable penalties.
72 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Total share capital
Note
2017
Number
2016
Number
15(b)
456,835,488
458,728,081
2017
$000
38,049
38,049
(b) Movements in ordinary share capital
Reconciliation to 31 December 2016
Balance at 1 January 2016
Issue / (cancellation) of ordinary shares:
Issue of ordinary shares under incentive plan
Issue of ESP shares1
Buy-back and cancellation of ESP shares
Contributed equity arising from repayment of ESP loans
Balance at 31 December 2016
Reconciliation to 31 December 2017
Balance at 1 January 2017
Issue / (cancellation) of ordinary shares:
Issue of ESP shares1
Buy-back and cancellation of ESP shares
Contributed equity arising from repayment of ESP loans
Balance at 31 December 2017
Number of shares
Average price
457,294,618
333,333
3,665,539
(2,565,409)
-
458,728,081
$0.00
$1.49
$1.15
-
Number of shares
Average price
458,728,081
1,885,928
(3,778,521)
-
456,835,488
$0.52
$0.84
-
2016
$000
37,750
37,750
$000
37,310
-
-
-
440
37,750
$000
37,750
-
-
299
38,049
1. As the ESP is considered in substance a share option, the ESP shares issued and corresponding loan receivables are not recognised by the Group in its financial statements.
The loan receivable does not satisfy the “probable future benefits following to the entity” criteria on the basis that the loan is non-recourse. The ESP shares will not be considered
issued to participants until the corresponding loan has been repaid, at which time there will be an increase in the issued capital and increase in cash.
(c) Ordinary shares
Ordinary shares have the right to receive dividends as declared, and, in the event of winding up the Company, to participate in the pro-
ceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle
their holder to one vote, either in person or by proxy, at a meeting of the Company.
(d) Employee Share Plan (ESP)
Information relating to the ESP, including details of shares issued under the plan, is set out in Note 21.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide re-
turns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in
a business or company was seen as value adding relative to the current parent entity’s share price at the time of the investment. The
Group actively pursues additional investments as part of its growth strategy.
The capital risk management policy remains unchanged from the 2016 Annual Report.
FREELANCER LIMITED ANNUAL REPORT 2017 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Equity – reserves
(a) Movements
Share based payment reserve movements
Balance at the beginning of the period
Share based payment expense
Balance at the end of the period
Foreign currency translation reserve movements
Balance at the beginning of the period
Currency translation differences arising during the period
Balance at the end of the period
Total reserves
(b) Nature and purpose of reserves
Share-based payments reserve
2017
$000
2,838
986
3,824
(405)
22
(383)
3,441
2016
$000
1,585
1,253
2,838
(367)
(38)
(405)
2,433
This amount represents the value of the ESP share grants to employees under the Freelancer Employee Share Plan and other
compensation granted in the form of equity.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of its overseas subsidiaries.
17. Key management personnel disclosures
(a) Directors
The following persons were Directors of Freelancer Limited during the financial year:
Mr Robert Matthew Barrie – Executive Chairman
Mr Darren Nicholas John Williams – Non-Executive Director
Mr Simon Alvin Clausen – Non-Executive Director
(b) Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Group,
directly or indirectly, during the financial year:
Mr Neil Leonard Katz – Chief Financial Officer and Company Secretary
(c) Key management personnel compensation
Short-term employee benefits
Share based employee benefits
Other long term benefits
Total benefits
Short-term employee benefits
2017
$000
956
142
62
1,160
2016
$000
954
102
65
1,121
These amounts include fees and benefits paid to the Non-Executive Directors as well as all salary, paid leave benefits, fringe benefits
and cash bonuses awarded to Executive Directors and other KMP.
Other long-term benefits
These amounts represent long service leave benefits accruing during the year, long-term disability benefits and deferred bonus payments.
Share based payments
These amounts represent the expense related to the participation of KMP in equity-settled schemes as measured by the fair value of
the options rights and shares granted on grant date.
Further information in relation to KMP remuneration can be found in the Remuneration Report, which is included in the Director’s
Report.
74 FREELANCER LIMITED ANNUAL REPORT 2017
18. Remuneration of auditors
During the year the following fees were paid for services provided by the auditor of the parent entity, its related practices and non-relat-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ed audit firms:
(a) Hall Chadwick
Audit and other assurance services
Audit and review of financial reports
Taxation services
Tax compliance services, including review of Company income tax returns
Total remuneration of Hall Chadwick
(b) Audit firms other than Hall Chadwick
Audit and other assurance services
Audit and review of financial reports
Taxation services
Tax compliance services, including review of subsidiary income tax returns
Total remuneration of audit firms other than Hall Chadwick
2017
$000
2016
$000
109
21
130
60
13
73
104
47
151
75
18
93
Total auditors’ remuneration
203
244
19. Contingent liabilities
Except for the items listed below, there are no other contingent liabilities as at 31 December 2017:
• a collateral amount of USD100,000 (2016: USD100,000) is in place in one of the Group’s PayPal accounts in favour of PayPal
Australia Pty Ltd;
•
term deposits of $71,257 (2016: $77,482) are secured for corporate credit card facilities in place;
• deposits of $1,200,000 (2016: $730,000) are held by various credit card processing providers, as security for any contractual
compensation arising under these agreements;
•
included in cash is an amount of $724,000 on term deposit, which is secured against a bank guarantee that has been provided to
the lessor in respect of premises occupied by the Company at Level 20, 680 George Street Sydney.
•
included in cash is an amount of USD455,000, which is secured in connection with surety bonds in place with certain regulators
in the US.
•
included in cash is an amount of USD82,000 (2016: USD180,000), which is held as a reserve to satisfy escrow regulatory require-
ments in respect of credit card transactions.
20. Commitments for expenditure
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases. Leases are made up of operating leases of property. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the consolidated profit or loss statement on a straight-line basis over the period of the lease.
Benefits that are provided to the Group as an incentive to enter into a lease arrangement are recognised as a liability and amortised on
a straight-line basis over the life of the lease.
Where the Group acts as lessor in an operating lease arrangement, rental income from operating leases is accounted for on a straight-
line basis over the period of the lease. Lease incentives provided are recognised over the lease term on a straight-line basis.
FREELANCER LIMITED ANNUAL REPORT 2017 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) Non-cancellable operating leases
The Group has entered into commercial leases for office property. As at 31 December 2017 these leases had remaining lives ranging
from 1 month up to 28 months. Rentals paid under operating leases are charged to the income statement on a straight line basis over
the period of the lease. Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:
Less than one year
Between one and five years
More than five years
Total operating lease commitments
(b) Non-cancellable operating services
2017
$000
4,284
2,138
-
6,422
2016
$000
2,306
3,784
-
6,090
The Group has entered into a commercial agreement for web hosting services with an annual fee commitment for 2 years commenc-
ing on 1 January 2018. Fees paid under this agreement are charged to the income statement on a usage basis over the period of the
agreement. This commitment is fixed in USD. The future minimum fee commitment under this agreement has been calculated using
the spot exchange rate at 31 December 2017 and may be subject to variation due to changes in exchange rates. The amounts are as
follows:
Less than one year
Between one and five years
More than five years
Total operating lease commitments
(c) Other capital commitments
There were no capital commitments as at 31 December 2017
21. Share based payments
2017
$000
4,639
5,103
-
9,742
2016
$000
-
-
-
-
The Group operates an employee share plan. The fair value of the effective option over the shares granted under the Company’s Em-
ployee Share Plan (ESP) is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is mea-
sured at grant date and recognised over the period during which the employees become unconditionally entitled to the ESP shares.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exer-
cise price, the term of the ESP shares, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the ESP
share, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the ESP share.
The fair value of share grants issued outside of the ESP is independently determined based on the value of the shares at grant date
less the present value of dividends expected to be distributed between the grant date and the vesting dates.
During the year ended 31 December 2013, the Company established a share based payment plan, the Employee Share Plan (ESP) to
assist the Company in retaining and attracting current and future employees by providing them with the opportunity to own shares in
the Company. Resolutions to amend and approve the ESP were passed at the AGM held on 17 May 2016.
The key terms of the ESP are as follows:
•
the Board may invite a person who is employed or engaged by or holds an office with the Group (whether on a full or part-time
basis) and who is declared by the Board to be eligible to participate in the ESP from time to time (Eligible Employee) to apply for
fully paid ordinary shares under the plan from time to time (ESP shares);
•
invitations to apply for ESP shares offered to Eligible Employees subsequent to the Company’s initial public offering are to be
made on the basis of the market price per share defined as the volume weighted average price at which the Company’s shares
have traded during the 30 days immediately preceding the date of the invitation;
•
invitations to apply for ESP shares under the ESP will be made on a basis determined by the Board (including as to the condi-
tionality on the achievement of any key performance indicators) and notified to Eligible Employees in the invitation, or if no such
determination is made by the Board, on the basis that ESP shares will be subject to a 4 year vesting period, with:
»
»
»
10% of ESP shares applied for vesting on the date that is the first anniversary of the issue date of the ESP shares;
20% of ESP shares applied for vesting on the date that is the second anniversary of the issue date of the ESP shares;
30% of ESP shares applied for vesting on the date that is the third anniversary of the issue date of the ESP shares; and
76 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
»
40% of ESP shares applied for vesting on the date that is the fourth anniversary of the issue date of the ESP shares.
• Eligible Employees who accept an invitation (ESP Participants) may be offered an interest free loan from the Company to finance
the whole of the purchase of the ESP shares they are invited to apply for (ESP Loan). ESP Loans will have a term of 4 years and
become repayable in full on the earlier of:
»
»
the fourth anniversary of the issue date of the Employee Offer Shares; and
if the ESP Participant ceases to be an Eligible Employee, either:
»
»
the date 30 days after the date of cessation, if the Eligible Employee is a good leaver (as defined in the ESP); or
that date of cessation, if the Eligible Employee is a bad leaver (as defined in the ESP).
•
if the ESP Participant does not repay the outstanding ESP Loan, or it notifies the Company that it cannot, then such number of
ESP shares that equal by value (using the price at which the ESP shares were issued) the outstanding amount of the ESP Loan
will become the subject of a buy-back notice from the Company which the ESP Participant must accept. The buy-back of such
number of ESP shares will be considered full and final satisfaction of the ESP Loan and the Company will not have any further
recourse against the ESP Participant;
• any dividends received by the ESP Participant whilst the whole or part of the ESP Loan remains outstanding must be applied to
the repayment of the ESP Loan. In addition, an ESP Participant may make pre-payments at any time;
•
the maximum number of ESP shares for which invitations may be issued under the ESP together with the number of ESP shares
still to be issued in respect of already accepted invitations and that have already been issued in response to invitations in the
previous 5 years (but disregarding ESP shares that are or were issued following invitations to non-residents, that did not require
a disclosure document under the Corporations Act, or that were issued under a disclosure document under the Corporations
Act) must not exceed 5% of the total number of ordinary shares on issue in the Company at the time the invitations are made;
•
in the event of a corporate reconstruction, the Board will adjust, subject to the Listing Rules (if applicable), any one or more of the
maximum number of Shares that may be issued under the ESP (if applicable), the subscription price, the buy-back price and the
number of ESP shares to be vested at any future vesting date (if applicable), as it deems appropriate so that the benefits con-
ferred on ESP Participants after a corporate reconstruction are the same as the benefits enjoyed by the ESP Participants before
the corporate reconstruction. On conferring the benefit of any corporate reconstruction, any fractional entitlements to shares will
be rounded down to the nearest whole share;
• ESP Participants will continue to have the right to participate in dividends paid by the Company despite some or all of their ESP
shares not having vested yet or being subject to an ESP Loan. If an ESP Loan has been made to the ESP Participant, then any
dividend due must first be applied to reducing any outstanding ESP Loan amount applicable to the ESP shares on which the
dividend is paid;
• ESP shares which have not vested and/or are subject to repayment of the ESP Loan will be restricted (escrowed) from trading;
•
the Company may buy-back at the issue price any ESP shares which:
»
»
have not vested, or are incapable of vesting at any time (including as a result of the ESP Participant failing to meet any key
performance indicators on which vesting of ESP shares is conditional); or
remain in escrow and/or are the subject of an ESP Loan, on the occurrence of:
»
the ESP Participant ceasing to be an Eligible Employee (unless the Board, in its sole and absolute discretion deter-
mines otherwise, subject to any conditions that it may apply, including the repayment of any outstanding ESP Loan);
or
»
the expiration of the term of the ESP Loan.
• any bonus securities issued in relation to ESP shares which remain unvested or are subject to an ESP Loan which becomes
repayable in full will be the subject of a buy-back by the Company at the issue price for no consideration;
• on the death or permanent disability of an ESP Participant, all ESP shares held by the ESP Participant or their estate will imme-
diately vest subject to the repayment of any outstanding ESP Loan by the curator, executor or nominated beneficiary(ies) (as the
case may be) within 30 days of their appointment (or such longer period as the Company in its discretion may allow). Failing
such repayment, the Company will buy-back all ESP shares in respect of which there is an outstanding ESP Loan;
•
the rules of the ESP and any amendment to the rules of the ESP must be in accordance with the Listing Rules and the Corpora-
tions Act;
•
if, while the Company’s shares are traded on the ASX or any other stock exchange, there is any inconsistency between the terms
of the ESP and the Listing Rules, the Listing Rules will prevail; and
•
the ESP is governed by the laws of the State of New South Wales, Australia.
The full terms of the ESP are available on the Company’s website, www.freelancer.com.
FREELANCER LIMITED ANNUAL REPORT 2017 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) ESP share grants
Set out below are summaries of ESP shares granted and issued under the plan:
Grant date
2017
14 October 2013
13 November 2013
28 February 2014
22 May 2014
3 November 2014
20 February 2015
10 March 2015
10 April 2015
3 June 2015
12 August 2015
15 October 2015
24 November 2015
21 December 2015
7 March 2016
24 March 2016
26 April 2016
22 June 2016
27 July 2016
4 November 2016
30 October 2017
8 December 2017
19 December 2017
Total
2016
14 October 2013
13 November 2013
28 February 2014
22 May 2014
3 November 2014
20 February 2015
10 March 2015
10 April 2015
3 June 2015
12 August 2015
15 October 2015
24 November 2015
21 December 2015
7 March 2016
24 March 2016
26 April 2016
22 June 2016
27 July 2016
4 November 2016
Total
Issue
price
Balance at
the start of
the year
Granted /
issued
Released
from re-
strictions
Forfeited /
cancelled
Balance at
the end of the
year
Balance of
unvested
ESP shares
Balance of
vested ESP
shares
$0.50
$0.50
$1.54
$1.14
$0.70
$0.66
$0.77
$1.01
$1.08
$1.40
$1.45
$1.76
$1.76
$1.53
$1.32
$1.38
$1.55
$1.59
$1.34
$0.48
$0.52
$0.52
$0.50
$0.50
$1.54
$1.14
$0.70
$0.66
$0.77
$1.01
$1.08
$1.40
$1.45
$1.76
$1.76
$1.53
$1.32
$1.38
$1.55
$1.59
$1.34
900,000
1,501,287
-
-
-
1,000,000
1,500,000
600,000
300,000
825,000
375,000
125,000
100,000
30,000
400,000
320,000
300,000
1,065,539
530,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
835,928
1,000,000
-
(900,000)
(212,766)
(1,288,521)
-
-
-
-
(250,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(350,000)
(150,000)
(90,000)
-
(50,000)
-
-
(400,000)
(250,000)
-
(300,000)
-
-
-
-
-
-
-
-
-
1,000,000
1,250,000
250,000
150,000
735,000
375,000
75,000
100,000
30,000
-
70,000
300,000
765,539
530,000
50,000
835,928
-
-
-
-
-
-
-
-
-
-
291,671
708,329
468,750
781,250
83,335
166,665
105,000
45,000
514,500
220,500
262,500
112,500
52,500
70,000
22,500
-
52,500
247,500
22,500
30,000
7,500
-
17,500
52,500
622,905
142,634
450,000
80,000
50,000
835,928
-
-
-
1,000,000
1,000,000
9,871,826
1,885,928
(462,766)
(3,778,521)
7,516,467
5,129,589
2,386,878
900,000
2,807,238
-
-
-
1,200,000
1,500,000
950,000
400,000
1,065,000
375,000
125,000
240,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
400,000
320,000
350,000
1,065,539
530,000
-
-
900,000
187,501
712,499
(660,336)
(645,615)
1,501,287
351,794
1,149,493
-
-
-
-
-
-
(62,499)
(137,501)
-
(67,707)
-
-
-
-
-
-
(282,293)
(100,000)
(240,000)
-
-
(140,000)
(970,000)
-
-
(50,000)
-
-
-
1,000,000
1,500,000
600,000
300,000
825,000
375,000
125,000
100,000
30,000
400,000
320,000
300,000
-
-
-
541,671
843,750
370,837
270,000
746,500
337,500
112,500
90,000
30,000
400,000
320,000
300,000
-
-
1,065,539
1,065,539
530,000
530,000
-
-
-
458,329
656,250
229.163
30,000
78,500
37,500
12,500
10,000
-
-
-
-
-
-
9,562,238
3,665,539
(790,542)
(2,565,409)
9,871,826
6,497,592
3,374,234
All Eligible Employees who accepted an offer of ESP shares were given an interest free loan from the Company to finance the whole of
the purchase of the ESP shares they were invited to apply for (ESP Loan).
The ESP Loans are provided to participants on a non-recourse basis and upon vesting must be repaid in order to remove trading
restrictions on vested ESP shares. The term of the ESP Loan is four years; however, participants may forfeit their ESP shares if they
do not repay the ESP Loan or leave the Company. As the ESP removes the risk to participants from decreases in the share price
78 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
by limiting the maximum loan amount repayable to the value of the ESP shares disposed and waiving the ESP Loan should the
participant forfeit their ESP shares, whilst still allowing participants the rewards of any increase in share price, the Company has
effectively granted the participants an option to the ESP shares due to the ESP Loans being non-recourse. As such, this arrangement
is accounted for under AASB 2.
The assessed weighted average fair value at grant date of the effective share options granted during the financial year is $0.22 per
option (2016: $0.62). Options were priced using a Black-Scholes option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option. The expected price volatility of the Company’s shares
is based on the historical volatility of ASX listed companies considered to be comparable to Freelancer Limited.
(b) Share grants
On 29 October 2014, the Company agreed to issue a maximum of 1,733,333 fully paid ordinary shares to certain employees. The
agreement to issue shares was made outside of the ESP. The issue of the incentive shares was to occur in several tranches, with
each tranche conditional only upon the respective personnel being in on-going employment on the respective issue dates. At 31 De-
cember 2016, the Company has issued 658,333 of these shares. The remaining 1,075,000 shares will not be issued as the respective
personnel are no longer employed with the Company.
The 658,333 incentive shares issued ranked equally with existing ordinary shares in the Company and the issue price of each tranche
was the 5 day volume weighted average price of the Company’s shares on the date of issue of the incentive shares.
The assessed weighted average fair value at grant date of the share grants issued is nil (2016: $0.705). The fair value of the share
grants is determined based on the value of the shares at grant date less the present value of dividends expected to be distributed
between the grant date and the issue dates.
22. Related party transactions
(a) Parent entity
Freelancer Limited is the parent entity and ultimate controlling entity.
(b)
Interests in controlled entities
Interests in subsidiaries are set out in Note 24.
(c) Transactions with key management personnel
Disclosures relating to key management personnel are set out in Note 17 and the Remuneration Report.
(d) Transactions with related parties
Receivable from and payable to related parties
There were no receivables from or payable to related parties at reporting date in relation to transactions with related parties detailed
above.
Loans to / from related parties
There were no loans to or from related parties at the reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
23. Parent entity information
The financial information for the parent entity, Freelancer Limited has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Freelancer Limited. Investments in subsidiaries
are tested for impairment whenever changes in events or circumstances indicate that the carrying amount may not be recoverable.
Income tax consolidation legislation
Freelancer Limited and its wholly-owned Australian entities have elected to form an income tax consolidated group.
Freelancer Limited (as the head entity) and its wholly-owned Australian entities (as members of the Freelancer income tax consol-
idated group) account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the
income tax consolidated group continues to be a standalone taxpayer in its own right.
FREELANCER LIMITED ANNUAL REPORT 2017 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition to its own current and deferred tax amounts, Freelancer Limited also recognises the current tax liabilities (or assets) as-
sumed from its wholly-owned entities in the income tax consolidated group.
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Loss after tax
Total comprehensive loss
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Accumulated losses
Total equity
Contingent liabilities
2017
$000
(1,460)
(1,460)
3,875
32,761
36,636
24
24
36,612
38,049
3,824
(5,261)
36,612
2016
$000
(1,606)
(1,606)
3,984
33,833
37,817
40
40
37,777
37,750
2,838
(2,811)
37,777
The parent entity had no contingent liabilities at 31 December 2017 and 31 December 2016.
Capital commitments – plant and equipment
The parent entity had no capital commitments as at 31 December 2017 and 31 December 2016.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, except for investments in subsidiaries which are ac-
counted for at cost, less any impairment.
80 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Interests in controlled entities
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in Note 28:
Name of entity
Subsidiaries of Freelancer Limited:
Freelancer International Pty Ltd
Freelancer Technology Pty Ltd
Freelancer India Pty Ltd
Warrior Forum Pty Ltd
Warrior Technology Pty Ltd
Payments Pty Ltd
Payments International Pty Ltd
Payments Australia Pty Ltd
Payments IP Pty Ltd
StartCon Pty Ltd
Freelancer Networks (Canada), Inc.
Freelancer Outsourcing, Inc.
Freelancer.com Pte Limited
Freelancer International GmbH
Freemarket (Switzerland) GmbH
Freelancer Online India Private Limited
Freelancer.com Philippines, Inc.
Freelancer Outsourcing UK Limited
Payments Europe Limited
Freelancer (Shanghai) Information Technology Co., Ltd.
Westmor Management, Inc. *
Escrow.com, Inc. *
EC Services Corporation*
IES International, Inc. *
Internet Escrow Services, Inc. *
* Escrow.com group
Country of
Incorporation
Percentage Owned (%)
2017
2016
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Singapore
Switzerland
Switzerland
India
Philippines
United Kingdom
United Kingdom
China
United States
United States
United States
United States
United States
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
25. Events occurring after the reporting date
There are no other matters or circumstances that have arisen since 31 December 2017 that have significantly affected, or may signifi-
cantly affect:
•
•
•
the aggregated entity’s operations in the future financial years, or
the results of those operations in future financial years, or
the aggregated entity’s state of affairs in the future financial affairs.
FREELANCER LIMITED ANNUAL REPORT 2017 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Reconciliation of loss after tax to net cash flow from operating activities
Loss for the year
Cash flows excluded from loss attributable to operating activities:
Proceeds from working capital adjustment on acquisition of Escrow.com
Non-cash items in operating loss:
Depreciation and amortisation
Share based payments expense
Net exchange differences
Changes in operating assets and liabilities:
Decrease / (Increase) in trade and other receivables
(Increase) in deferred tax assets
Decrease / (Increase) in other assets
Increase in trade and other creditors
Increase / (Decrease) in provision for income tax
Increase in deferred tax liabilities
Increase in provisions for employee benefits
Increase / (Decrease) in other provisions
Net cash (outflow) / inflow from operating activities
27. Earnings per share (EPS)
Basic earnings per share
Basic earnings per share is calculated by dividing:
2017
$000
(4,773)
2016
$000
(1,173)
(326)
-
701
986
319
658
(725)
78
1,652
30
2
58
772
(568)
769
1,252
(292)
(1,147)
(413)
(44)
5,369
(121)
-
342
(66)
4,476
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordi-
nary shares issued during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordi-
nary shares.
(a) Basic earnings per share
From operations attributable to the ordinary equity of the Company
Total basic earnings per share attributable to the ordinary equity holders of
the Company
(b) Diluted earnings per share
From operations attributable to the ordinary equity of the Company
Total basic earnings per share attributable to the ordinary equity holders of
the Company
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share:
Loss from continuing operations
Diluted earnings per share:
Loss attributable to the ordinary equity holders of the Company
82 FREELANCER LIMITED ANNUAL REPORT 2017
2017
Cents
(1.06)
(1.06)
(1.04)
(1.04)
$000
(4,773)
(4,773)
2016
Cents
(0.26)
(0.26)
(0.25)
(0.25)
$000
(1,173)
(1,173)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2017
Shares
2016
Shares
449,055,421
448,856,255
9,668,625
-
10,582,610
166,210
458,724,046
459,605,075
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used in calculating basic earn-
ings per share
Adjustments for calculation of ordinary shares usedin calculating diluted earnings
per share:
ESP shares
Share grants
Weighted average number of ordinary shares used in calculating diluted
earnings per share
(e) Information on the classification of securities
ESP shares and share grants
ESP shares granted to employees under the ESP and shares granted to employees outside of the ESP are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
The ESP shares and share grants have not been included in the determination of basic earnings per share. Details relating to the ESP
shares are set out in Note 21.
28. Other significant accounting policies
(a) Principles of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of Freelancer Limited and all subsidiaries.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the
entity. A list of the subsidiaries is provided in Note 24.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on
which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercom-
pany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation.
Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting
policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group
initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share
of the subsidiary’s net assets on liquidation at either fair value or at the non- controlling interests’ proportionate share of the subsidiary’s
net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component
of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial
position and statement of comprehensive income.
(b) Goods and Services Tax (GST) and Valued Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of associated GST and VAT, except where the amount of GST and
VAT incurred is not recoverable from the relevant taxation authority. In these circumstances, the GST and VAT is recognised as part of
the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated inclusive of the amount of
GST and VAT receivable or payable. The net amount of GST and VAT recoverable from, or payable to, the relevant taxation authority is
included with other receivables or payables in the statement of financial position.
Cash flows are presented in the cash flow statement on a gross basis. The GST and VAT components of cash flows arising from
investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows
included in receipts from customers or payments to suppliers.
Commitments and contingencies are disclosed net of the amount of GST and VAT recoverable from, or payable to, the relevant taxation
authority.
(c) Research & development
Costs relating to research and development of new software products are expensed as incurred until technological feasibility in the form
of a working model has been established. At such time costs may be capitalised, subject to recoverability. Software development costs
incurred subsequent to the establishment of technological feasibility have not been significant, and the Group has not capitalised any
software development costs to date.
FREELANCER LIMITED ANNUAL REPORT 2017 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(d) Foreign currency transactions and balances
individual asset, the Group estimates the recoverable amount of
Functional and presentation currency
the cash generating unit to which the asset belongs.
The functional currency of each of the Group entities is measured
(f) Business Combinations
using the currency of the primary economic environment in which
that entity operates. The consolidated financial statements are
presented in Australian dollars, which is the parent entity’s func-
tional and presentation currency.
Transactions and balances
Business combinations occur where an acquirer obtains control
over one or more businesses.
A business combination is accounted for by applying the ac-
quisition method, unless it is a combination involving entities or
businesses under common control. The business combination will
Foreign currency transactions are translated into functional
be accounted for from the date that control is attained, whereby
currency using the exchange rates prevailing at the date of the
the fair value of the identifiable assets acquired and liabilities
transaction. Foreign currency monetary items are translated at the
(including contingent liabilities) assumed is recognised (subject to
period-end exchange rate. Non-monetary items measured at his-
certain limited exceptions).
torical cost continue to be carried at the exchange rate at the date
of the transaction. Non-monetary items measured at fair value are
reported at the exchange rate at the date when fair values were
determined.
When measuring the consideration transferred in the business
combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial
recognition, contingent consideration classified as equity is not
Exchange differences arising on the translation of monetary items
remeasured and its subsequent settlement is accounted for within
are recognised in the profit or loss, except where deferred in equity
equity. Contingent consideration classified as an asset or liability
as a qualifying cash flow or net investment hedge.
is remeasured each reporting period to fair value, recognising any
Exchange differences arising on the translation of non-monetary
items are recognised directly in other comprehensive income to
change to fair value in profit or loss, unless the change in value
can be identified as existing at acquisition date.
the extent that the underlying gain or loss is recognised in other
All transaction costs incurred in relation to the business combina-
comprehensive income; otherwise the exchange difference is
tion are expensed to the statement of profit or loss and compre-
recognised in profit or loss.
Group companies
hensive income. The acquisition of a business may result in the
recognition of goodwill or a gain from a bargain purchase.
The financial results and position of foreign operations whose
(g) Comparative figures
functional currency is different from the Group’s presentation
currency is translated as follows:
When required by Accounting Standards, comparative figures
have been adjusted to conform to changes in presentation for the
• Assets and liabilities are translated at period end exchange
current financial year.
rates prevailing at that reporting date.
Where the Group has retrospectively applied an accounting policy,
•
Income and expenses are translated at average exchange
made a retrospective restatement or reclassified items in its finan-
rates for the period.
• Retained earnings are translated at the exchange rates
prevailing at the date of the transaction.
Exchange differences arising on translation of foreign opera-
tions with functional currencies other than Australian dollars are
recognised in other comprehensive income and included in the
foreign currency translation reserve in the statement of financial
position. The cumulative amount of these differences is reclas-
sified into profit or loss in the period in which the operation is
disposed of.
(e)
Impairment of assets
cial statements, an additional statement of financial position as at
the beginning of the earliest comparative period will be disclosed.
(h) Critical accounting estimates and judgments
The directors evaluate estimates and judgements incorporated
into the financial report based on historical knowledge and best
available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and
economic data, obtained both externally and within the Group. The
resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and judgements that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
At the end of each reporting date, the Group reviews the carrying
values of its tangible and intangible assets to determine whether
there is any indication that those assets have been impaired. If
discussed below.
Business Combinations
such an indication exists, the recoverable amount of the asset,
Following the guidance in AASB 3: Business Combinations, the
being the higher of the asset’s fair value less costs to sell and
Group has made assumptions and estimates to determine the
value in use, is compared to the asset’s carrying value. Any excess
purchase price of businesses acquired as well as its allocation to
of the asset’s carrying value over its recoverable amount is rec-
acquired assets and liabilities. To do so, the Group is required to
ognised immediately in the profit or loss.
determine at the acquisition date fair value of the identifiable net
Impairment testing is performed annually for goodwill and intangi-
ble assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an
assets acquired, including intangible assets such as brand, cus-
tomer relationships and liabilities assumed. Goodwill is measured
as the excess of the fair value of the consideration transferred in-
cluding the recognised amount of any non-controlling interest over
84 FREELANCER LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the net recognised amount of the identifiable assets and liabilities.
The Group’s Online Payments segment, namely the business of
The assumptions and estimates made by the Group have an
impact on the asset and liability amounts recorded in the financial
statements. In addition, the estimated useful lives of the acquired
amortisable assets, the identification of intangible assets and the
determination of the indefinite or finite useful lives of intangible
Escrow.com, is a regulated entity that holds funds on behalf of
its users in trust bank accounts. At 31 December 2017 the cash
balance in trust amounted to A$32,355,000 (2016: A$26,104,000),
which has a corresponding liability of the same amount owing to
its users.
assets acquired will have an impact on the Group’s future profit or
The Group has determined that trust cash is not a resource
loss.
Impairment of intangible assets
The Group assesses impairment at each reporting date by evalu-
ating conditions specific to the group that may lead to impairment
of assets. Where an impairment trigger exists, the recoverable
amount of the asset is determined. Value-in- use calculations per-
controlled by the Group, nor does the Group derive any economic
benefit from these user funds, and therefore the Group does not
have the risks and rewards of ownership of the funds. Conse-
quently, trust assets are not recognised as an asset in the Group’s
financial statements, and neither is the corresponding trust liability
recognised as a liability in the Group’s financial statements.
formed in assessing recoverable amounts incorporate a number
(i) Changes in accounting policies
of key estimates. During the year ended 31 December 2017, no
impairment has been recognised in respect of intangible assets.
The Group assessed recoverability of goodwill based on the pres-
The accounting policies applied by the Group in this consolidated
financial report are the same as those applied by the Group in
its consolidated financial report for the year ended 31 December
ent value of cash flow projections over a 6 year period. Should any
of the intangible assets fail to perform, an impairment loss would
2017.
be recognised up to the maximum carrying value of intangible
(j)
New Accounting Standards for application in future
assets at 31 December 2017 of $26,442,000 (2016: $25,701,000).
periods
Provisions for doubtful accounts and transaction losses
Accounting Standards and Interpretations issued by the AASB that
Provision is made in respect of the Group’s best estimate of
doubtful accounts and transaction losses based on historical
experience.
Share based payments
are not yet mandatorily applicable to the Group, together with an
assessment of the potential impact of such pronouncements on
the Group when adopted in future periods, are discussed below:
• AASB 9: Financial Instruments and associated Amending
Standards (applicable for annual reporting periods com-
The Group measures the cost of equity settled transactions with
mencing on or after 1 January 2018).
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
The Standard will be applicable retrospectively (subject to
with the assistance of an external valuation with the assumptions
the comment on hedge accounting below) and includes re-
detailed in Note 21. The accounting estimates and assumptions
vised requirements for the classification and measurement
relating to equity settled share based payments would have no
of financial instruments, revised recognition and derecog-
impact on the carrying amounts of assets and liabilities within the
nition requirements for financial instruments and simplified
next annual reporting period but may impact expenses and equity.
requirements for hedge accounting.
Income taxes
The Group is subject to income taxes in Australia and jurisdic-
tions where it has foreign operations. Judgment is required in
determining the worldwide provision for income taxes. There are
transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is
uncertain. The Group estimates its tax liabilities based on the
Group’s understanding of the tax law. Where the final tax outcome
of these matters is different from the amounts that were initially
recorded, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses as management considers that
it is probable that future taxable profits will be available to utilise
those temporary differences and unused tax losses. Significant
management judgement is required to determine the amount of
The key changes made to the Standard that may affect the
Group on initial application include certain simplifications
to the classification of financial assets, simplifications to
the accounting of embedded derivatives, and the irrevoca-
ble election to recognise gains and losses on investments
in equity instruments that are not held for trading in other
comprehensive income. AASB 9 also introduces a new
model for hedge accounting that will allow greater flexibility
in the ability to hedge risk, particularly with respect to hedges
of non-financial items. Should the entity elect to change its
hedge policies in line with the new hedge accounting require-
ments of AASB 9, the application of such accounting would
be largely prospective.
The directors have assessed that the adoption of AASB 9
will not have any significant impact on the Group’s financial
instruments.
deferred tax assets that can be recognised, based upon the likely
• AASB 15: Revenue from Contracts with Customers (appli-
timing and the level of future taxable profits.
cable to annual reporting periods beginning on or after 1
Trust assets and liabilities
January 2018).
FREELANCER LIMITED ANNUAL REPORT 2017 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
When effective, this Standard will replace the current
liability using the index or rate at the commencement
accounting requirements applicable to revenue with a
date;
single, principles-based model. Except for a limited number
of exceptions, including leases, the new revenue model in
AASB 15 will apply to all contracts with customers as well
as non-monetary exchanges between entities in the same
line of business to facilitate sales to customers and potential
customers.
»
application of a practical expedient to permit a lessee
to elect not to separate non-lease components and
instead account for all components as a lease; and
»
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to
either retrospectively apply the Standard to comparatives
The core principle of the Standard is that an entity will rec-
in line with AASB 108 or recognise the cumulative effect of
ognise revenue to depict the transfer of promised goods or
retrospective application as an adjustment to opening equity
services to customers in an amount that reflects the consid-
on the date of initial application.
eration to which the entity expects to be entitled in exchange
for the goods or services. To achieve this objective, AASB 15
provides the following five- step process:
identify the contract(s) with a customer;
Impact on Freelancer Limited
The Company have assessed that its leases for which it has
commitments amounting to $6,224,000 will go on balance
sheet , impacting asset and liability balances for future
identify the performance obligations in the contract(s);
lease commitments based on the current leases where the
determine the transaction price;
allocate the transaction price to the performance obli-
gations in the contract(s); and
Company is a lessee.
»
»
»
»
»
recognise revenue when (or as) the performance obli-
gations are satisfied.
The transitional provisions of this Standard permit an entity
to either: restate the contracts that existed in each prior
period presented as per AASB 108: Accounting Policies,
Changes in Accounting Estimates and Errors (subject to
certain practical expedients in AASB 15); or recognise the
cumulative effect of retrospective application to incomplete
contracts on the date of initial application. There are also
enhanced disclosure requirements regarding revenue.
The directors have assessed that the adoption of AASB 15
will not have any significant impact on the Group’s financial
statements.
• AASB 16: Leases (applicable to annual reporting periods
beginning on or after 1 January 2019).
When effective, this Standard will replace the current
accounting requirements applicable to leases in AASB 117:
Leases and related Interpretations. AASB 16 introduces a
single lessee accounting model that eliminates the require-
ment for leases to be classified as operating or finance
leases.
The main changes introduced by the new Standard are as
follows:
»
recognition of a right-to-use asset and liability for all
leases (excluding short-term leases with less than
12 months of tenure and leases relating to low-value
assets);
»
depreciation of right-to-use assets in line with AASB
116: Property, Plant and Equipment in profit or loss
and unwinding of the liability in principal and interest
components;
»
inclusion of variable lease payments that depend on an
index or a rate in the initial measurement of the lease
86 FREELANCER LIMITED ANNUAL REPORT 2017
DIRECTORS’ DECLARATION
Directors’ Declaration
In the Directors’ opinion:
(a)
the Financial Statements and notes of the consolidated entity set out on pages
53 to 86 are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial posi-
tion as at 31 December 2017 and of its performance for the financial
year ended on that date; and
(ii)
complying with Australian Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting
requirements;
(b) Note 2(a) confirms that the Financial Statements also comply with Interna-
tional Financial Reporting Standards as issued by the International Accounting
Standards Board;
(c)
there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable; and
(d)
the Directors have been given the declarations by the Chief Executive Officer
and Chief Financial Officer required by section 295A of the Corporations Act
2001 for the financial year ending 31 December 2017.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the directors
Matt Barrie
Chairman
27 February 2018
FREELANCER LIMITED ANNUAL REPORT 2017 87
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITES
Opinion
We have audited the accompanying financial report of Freelancer Limited (the Group), which
comprises the consolidated statement of financial position as at 31 December 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity, the consolidated statement of cash flows for the year then
ended and notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration.
In our opinion:
(a) the accompanying financial report of the Consolidated Entity is in accordance with
the Corporations Act 2001, including:
i.
giving a true and fair view of the Consolidated Entity’s financial position as
at 31 December 2017 and of its performance for the year ended on that
date; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001
ii.
(b) the financial report also complies with International Financial Reporting Standards
as disclosed in Note 2(a).
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards
require that we comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance about whether the financial report
is free from material misstatement. Our responsibilities under those standards are further
described in the Auditor’s responsibility section of our report. We are independent of the
Consolidated Entity in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code
of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
88 FREELANCER LIMITED ANNUAL REPORT 2017
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
Key Audit Matter
Procedures
the Group’s
Reliance on automated process and
controls
Freelancer’s revenue is primarily generated
from new and existing users posting and
fulfilling projects and contests on
the
therefore a
Freelancer.com website and
financial
significant part of
reporting processes are heavily reliant on IT
systems with automated processes and
controls over
the capturing, valuing and
recording of transactions. Similarly other IT
includes
the business
platforms of
Warrior
Escrow.Com
Forum are also heavily reliant on IT systems.
This is a key audit matter because of the:
• Complex IT environment supporting the
and
that
Group’s business processes
• Mix of manual and automated controls
• Multiple internal and outsource support
arrangements
• Large volume of low value transactions
Impairment of Goodwill and Intangible
Assets
Refer to Note 13 – Intangible Assets and Note
29 (h) - Critical Accounting Estimates and
Judgements
The Group has recognised intangible assets
of $26.4 million at 31 December 2017
resulting from business combinations and
asset acquisitions.
The assessment of impairment of the Group’s
intangible asset balances
incorporated
significant judgement in respect of factors
such as discount rates, revenue growth and
cost assumptions.
to amounts
We have focussed on this area as a key audit
matter due
involved being
material; the inherent subjectivity associated
with critical judgements being made in relation
to forecast future revenue and costs; discount
rates; and terminal growth rates
Our procedures included, amongst others:
We understood and tested management’s controls over its
systems relevant to financial reporting.
We involved our IT specialist to conduct general IT controls tests
that related to applications that support the effective functioning of
application controls. This included a review of the policies and
procedures, change management and access security.
Our IT specialist performed application controls testing over the
three main applications. The testing included procedures used to
initiate, record, process and report transactions and other financial
data, with particular focus on recognition and measurement of fee
income, transactions including payment gateways and exception
report testing.
When testing controls was not considered an appropriate or
efficient testing approach, alternative audit procedures were
performed on the financial information.
Our procedures included, amongst others:
We evaluated management’s goodwill and intangible assets
impairment assessment. We obtained the Group’s value in use
model and agreed amounts to a combination of budgets and future
plans.
Key inputs in the value in use model included forecast revenue,
costs, discount rates and terminal growth rates. We corroborated
those assumptions by comparing forecasts to historical actuals.
valuation
involved our
We
recalculate
management’s discount rates based on external data where
available. The valuation specialist was also involved in assessing
the value in use model used for valuation methodology including
treatment of the net present value calculations.
specialists
to
We performed sensitivity analysis on the fee income; terminal
growth rate; and discount rate inputs.
We assessed the Group’s disclosures of the quantitative and
qualitative considerations in relation to the carrying value of
goodwill and intangible assets, by comparing these disclosures to
our understanding of this matter.
FREELANCER LIMITED ANNUAL REPORT 2017 89
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
Other Information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 31 December 2017, but does not
include the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact. We have nothing to
report in this regard.
Director’s Responsibility for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australia Accounting Standards and the Corporations Act
2001 and for such internal control as directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Consolidated
Entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Consolidated Entity or to cease operations, or have no realistic alternative but to do
so.
Auditor’s Responsibility
Our objectives are to obtain reasonable assurance about whether the financial report as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
–
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
intentional omissions,
involve collusion,
fraud may
from error, as
misrepresentations, or the override of internal control
forgery,
90 FREELANCER LIMITED ANNUAL REPORT 2017
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
–
–
–
–
–
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.
FREELANCER LIMITED ANNUAL REPORT 2017 91
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
FREELANCER LIMITED
ABN 66 141 959 042
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
FREELANCER LIMITED AND CONTROLLED ENTITITES
Report on the Remuneration Report
We have audited the remuneration report included in pages 48 to 51 of the directors’ report for
the year ended 31 December 2017.
The directors of the Group are responsible for the preparation and presentation of the
remuneration report in accordance with s 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance
with Australian Auditing Standards.
Opinion
In our opinion the remuneration report of Freelancer Limited for the year ended 31 December
2017 complies with s 300A of the Corporations Act 2001.
Hall Chadwick
Level 40, 2 Park Street
Sydney NSW 2000
SANDEEP KUMAR
Partner
Dated: 27 February 2018
92 FREELANCER LIMITED ANNUAL REPORT 2017
ADDITIONAL ASX INFORMATION
Additional ASX Information
Shareholder information
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report.
This additional information was applicable as at 22 March 2018.
Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Robert Matthew Barrie1
Simon Clausen and Startive Holdings Limited and its related bodies1
Top 20 Shareholders as at 22 March 2018
Rank Name
1 MATT BARRIE
2 CITICORP NOMINEES PTY LIMITED
3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
4 MR DARREN WILLIAMS
5 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
6 J P MORGAN NOMINEES AUSTRALIA LIMITED
7 NATIONAL NOMINEES LIMITED
8 BNP PARIBAS NOMS (NZ) LTD
9 BNP PARIBAS NOMINEES PTY LTD
10 MR NICHOLAS PETER DE JONG
11 MR RODNEY JOHN SELLICK
12 MRS RIKA WESTWOOD
13 INFILSEC PTY LTD
14 MR JONATHON SEALLY
15 MAROBAR HOLDINGS PTY LIMITED
16 MR MICHAEL JOHN RUHFUS
17 DUNRAY NOMINEES PTY LTD
18 CS FOURTH NOMINEES PTY LIMITED
19 HAMPTON PTY LTD
20 PLASMA EQUITIES RESEARCH PTY LTD
Number of Shares
198,479,148
165,356,504
Number of ordinary
shares held
% of ordinary
shares held
191,435,150
105,111,638
63,251,075
10,605,660
8,716,639
7,763,683
6,348,530
4,161,253
2,914,542
2,106,164
1,109,833
1,006,627
978,727
900,000
789,500
694,831
650,000
612,865
600,000
600,000
42.2%
23.2%
14.0%
2.3%
1.9%
1.7%
1.4%
0.9%
0.6%
0.5%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.1%
0.1%
0.1%
0.1%
Total Top 20
Total remaining
410,356,717
90.5%
42,923,382
9.5%
1. Includes a relevant interest in 5,611,617 fully paid ordinary shares by virtue of the Director having had a voting power of over 20% in the Company,
which had a relevant interest as a result of trading restrictions over shares issued under the ESP.
FREELANCER LIMITED ANNUAL REPORT 2017 93
ADDITIONAL ASX INFORMATION
Distribution of ordinary shareholders as at 22 March 2018
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
Number of shareholders
Number of Shares
658
1,259
471
639
96
3,123
407,598
3,574,163
3,741,125
19,433,204
426,124,009
453,280,099
Restricted securities as at 22 March 2018
There are no restricted securities on issue for the purpose of the ASX Listing Rules.
There are ordinary shares on issue that are subject to trading restrictions pursuant to the ESP. The table below sets out the number of
shares subject to trading restrictions.
Class of restricted securities
Nature of restriction
Quoted ESP shares
Unquoted ESP shares
Various dates ending no later than 1 March 2022
Various dates ending no later than 3 November 2020
Total shares subjected to trading restrictions
Number of Shares
3,961,078
1,650,539
5,611,617
Voting Rights
The voting rights attaching to ordinary shares, set out in the Company’s Constitution are:
a. at meetings of members, each member is entitled to vote in person or by proxy, attorney or representative; and
b. on a show of hands, every person present who is a member has one vote, and on a poll every member present has a vote for each
fully paid share owned.
There are no voting rights attached to unlisted options, voting rights will be attached to unlisted ordinary shares once issued and to
options upon exercise.
On-market Buy Back
There is no current on-market buy back.
94 FREELANCER LIMITED ANNUAL REPORT 2017
CORPORATE DIRECTORY
Corporate Directory
Company Directors
Mr Robert Matthew Barrie
Chairman and Chief Executive Officer
Mr Darren Nicholas John Williams
Non-Executive Director
Mr Simon Alvin Clausen
Non-Executive Director
Company Secretary
Mr Neil Leonard Katz
Registered Office
Level 20
680 George Street
Sydney NSW 2000
Telephone: +61 (02) 8599 2700
Share Registry
Boardroom Limited
Level 12
255 George Street
Sydney NSW 2000
External Auditors
Hall Chadwick
Level 40
2 Park Street
Sydney NSW 2000
Securities exchange listing
Freelancer Limited shares are listed on the Australian Securities Exchange (Listing code: FLN)
FREELANCER LIMITED ANNUAL REPORT 2017 95