Freelancer Limited Annual Report 2020

Plain-text annual report

A N N U A L R E P O R T F R E E L A N C E R L I M I T E D A C N 1 4 1 9 5 9 0 4 2 2 0 2 0 2020 ANNUAL REPORT F R E E L A N C E R L I M I T E D A C N 1 4 1 9 5 9 0 4 2 INDEX Index PAGE CONTENTS 001 Chairman's Letter 043 Directors' Report 047 Review of Operations 058 Auditor’s Independence Declaration 059 Consolidated Statement of Profit or Loss and Other Comprehensive Income 060 Consolidated Statement of Financial Position 061 Consolidated Statement of Changes in Equity 062 Consolidated Statement of Cash Flows 063 Notes to the Financial Statement 098 Directors' Declaration 099 Independent Auditor's Report 105 Additional ASX Information 107 Corporate Directory FREELANCER LIMITED ANNUAL REPORT 2020CHAIRMAN’S LETTER Chairman’s Letter 001 Dear Shareholders, Freelancer In 2020 the Freelancer Limited Group achieved all-time record In FY20, revenue from Freelancer.com was $50.5m (flat on pcp), net revenue of $58.8 million (up 1.5% on pcp) and all-time Gross and we added 8.9 million registered users and 2.2 million jobs Payment Volume (GPV) of $891.8m (up 13.2% on pcp). Breaking posted. GPV was an all-time record of $192.1m (up 5.9% on pcp). down by segment, both Freelancer and Escrow both hit all-time After a slow 1Q20 when Covid hit China, growth accelerated records with a GPV of $192.1m (up 5.9% on pcp) and $700m (up throughout the year, ending with 4Q20 Gross Marketplace 15.4% on pcp) respectively. For the year, the company achieved positive operating cash flow of $7.9 million, also an all-time record. The group is poised for operating leverage with EBITDA and NPAT both at $(0.6)m. As of 31 December 2020, the Company had $34.3 million in cash and Volume (GMV) at US$25.9m (up 20.0% on pcp). As mentioned in the fourth quarter results earnings call, the GMV numbers in 2021 so far are growing faster than this year on year. Overall, web traffic to Freelancer.com is flying. Web traffic (users) was up 51% in FY20 to 81 million and page views were up 95% cash equivalents (up 7% on pcp). on pcp to 1.2 billion. As of the writing of this letter, Freelancer. A detailed analysis of the activities of the group are provided in This ranking does not include our 52 other regional websites that the Review of Operations in the Directors’ Report. all rank independently. com is ranked the 678th largest website in the world on by Alexa. FREELANCER LIMITED ANNUAL REPORT 2020CHAIRMAN’S LETTER 002 CHAIRMAN’S LETTER For Freelancer.com, the year was one of major technological Evidenced by the growth in GMV contribution, the Freelancer and product improvements. We neared completion of a major Enterprise team delivered fantastic customer value in 2020. A overhaul to the front end stack- effectively rebuilding the $17B global BPO company hired over 300 freelancers within entire website. We were able to leverage this into dramatic a matter of weeks, beating internal hiring timelines by 318%. improvements in the mobile user experience. In July, we A Fortune 50 Technology company created new marketing permanently shut down our legacy standalone mobile website, content roughly 40% faster and with over 70% cost savings replacing it with our new webapp frontend. Since this release, when compared to traditional agencies. IBM ran a contest that revenue from mobile browsers has lifted by 51% in the second attracted over 1000 freelancers and resulted in a 65% increase in half of 2020 on pcp, which we believe can be wholly attributed to traffic to their ICCT page. the superior UX and fully featured offering that our new webapp stack offers our clients on mobile devices. Under the $25M NOIS joint NASA tender, Freelancer Enterprise partnered with Arrow Electronics and Adiona to win a $365,000 Continuing these efforts, we focused on mobile towards the end USD power engineering and $475,000 USD data science task of the year. New versions of both our Android and iOS apps are order, respectively. We will be partnering with our industry now in mass beta, with iOS being released into full production leading organisations to win many more task orders under the before the end of March 2021 and Android following within a tender. month. In addition to superior UX and fully featured offerings, by The year was also defined by the COVID-19 crisis. Prior to Covid, C-suite from Fortune 500 universally told us that in the reducing the number of codebases we are required to maintain future, some percentage of their organisation will permanently and develop from four to one, we are seeing significant improvements to developer productivity, speeding up product be staffed from the cloud- they were not sure whether it was 5%, 10%, 15% or 25% - but that is the range. It is also not known development. if this is 1 year away, 3, 5 or 10 years. However, Covid has accelerated the scale and speed of these plans. It is our belief 003 Outside of mobile development, our product efforts were that this new paradigm of working online is here to stay, and will focused around improving our hourly payment offering (tracked define the economic landscape for years to come. hours up 27% on pcp), strengthening our customer acquisition through improving SEM profitability and SEO volume and finally continuing our focus on building out our enterprise offering. Escrow The year was a record year for Freelancer Enterprise headlined Payment Volume of $700m, up 15.4% on pcp. The business had by a 67% year on year increase in GMV. Capitalising on the global particularly strong growth inclusive of September onwards. GPV tailwind of remote work and the acceleration of large enterprises in the fourth quarter of 2020 was $213.6m (up 45.7% on a pcp In FY20 Escrow.com achieved an all-time record Gross to build flexible and elastic workforce solutions, Freelancer Enterprise saw a significant uplift in both deal volume and deal size. For the first time Freelancer Enterprise started signing SOWs and fielding requests for thousands of Freelance hires at once- while these agreements are not “take or pay”, we believe that we are not far away from a large step up in GMV. of $146.6m) or US$156.6m (up 56.2% on a pcp of $100.3m). December GPV was US$63.4m, up 109.9% on pcp. In 2020, Escrow.com continued to solidify its dominant market position in domain names, websites, IP address ranges & intellectual property, but also expanded into other markets with key partners in the automotive and fine art verticals. To keep up with the increase in demand the Enterprise go- to-market team grew threefold in 2020. Executing strongly against our value proposition to connect talent with opportunity In July we announced that eBay had integrated Escrow.com in both the eBay Motors USA website and mobile app to enable on demand, the team helped leading organisations improve the buying and selling of vehicles online. Escrow.com is the internal workforce utilization, better manage their contingent workforce and build private talent clouds around hot skills. Freelancer Enterprise is the only solution in the market that can help organisations seamlessly build a blended workforce across all their talent clouds: internal, existing continent and first digital payment option since the launch of the new app in December 2019. In October 2020, we deepened the relationship by going into beta with eBay Watches. In January 2021, Jamie Lannone, Chief Executive of eBay, discussed the Escrow.com relationship 9 minutes into an interview with Yahoo Finance new freelancers. (https://www.youtube.com/watch?v=hSgPm5o2Flk). FREELANCER LIMITED ANNUAL REPORT 2020CHAIRMAN’S LETTER The flexibility of Escrow.com’s API means that partners across At the higher end, Escrow.com competes with incredibly diverse verticals can transact without buyers and sellers ever inefficient systems of payment- law firms running to banks to having to meet in person. In the fine art world, Escrow.com is set up trust or escrow accounts and archaic letters of credit that integrated with Artsy and Artland while in mining, the same API is require relying on third party quality inspection firms, that have integrated into Energy Domain’s marketplace for oil and gas rights. no idea about your business, inspecting goods at the point of Merchants looking to use Escrow.com in their eCommerce stores loading on a boat on the other side of the world. Escrow.com are able to make use of the Escrow.com WordPress, compatible allows buyers to receive and inspect the goods before payment with WooCommerce. is made. Our most popular integration, Escrow Pay added support for Summary new localised payment methods such as ACH debit and saw significant investment in product development focused on faster With 50 million users across 2000 skill sets in 247 countries, and more secure onboarding. The result of these developments regions and territories- no other provider comes close to the has been a large improvement in conversion with our largest scale, scope and ability of Freelancer.com to deliver skilled talent marketplace partners, and we look forward to rolling out these over the Internet. Within weeks we will hit 20 million jobs posted improvements platform wide in 2021. on the platform, which is a tremendous achievement. Another feature made available platform wide in 2020 was the Likewise, Escrow.com is a superior method of payment for international commerce. It is also unique in terms of its offering as there is no payments system like it globally. Combined, we are not far away from over $1 billion dollars a year of volume through our group payments infrastructure, which is another great milestone for the business. We continue to be heads down and focused on execution. The Board and myself wish to thank our staff, shareholders and 50 million users across the group. We couldn’t have done it without you. 004 Regards, Matt Barrie Chairman 31 March 2021 real time digital ID verification (eKYC) added on top of our KYC. This increased our rate of approved accounts, and overall made it faster for buyers and sellers to set up an account and start a transaction. In 2020 we commenced building out the sales team globally. We added Chris Weir as the head of business in Europe, and Raffaela Maiorano as Director of Compliance & Legal and MLRO for our Authorised Payments Institution license in the region, which is in process. Escrow continues to be the most licensed escrow provider globally by a long margin. We have three states left as part of our US licensing program, and are at an advanced stage in the licensing application process for the remaining states. We are already licensed in Australia and Canada and hope to have our UK API license approved in 2021. After that, we will turn our attention to Europe, as well as joint control escrow licensing in jurisdictions where it is available so that we can secure transactions for real estate, business sales and equity (e.g. M&A transactions). Globally, payment systems break down with transaction sizes over a few thousand dollars. Escrow.com excels for transaction sizes from the thousands of dollars to tens of millions, or more. Fundamentally there are no effective payment systems for global commerce at scale operating in a world of risk. At the lower end, Escrow.com competes against buyer protection for credit cards and payment systems like Paypal. When something goes wrong however, these protections are more akin to insurance policies, and it can take months to rectify a transaction which provides a terrible customer service experience. FREELANCER LIMITED ANNUAL REPORT 2020 MARKETPLACE STATISTICS 50.8 M 005 TOTAL REGISTERED USERS 52 48 44 40 36 32 28 24 20 16 12 8 4 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FREELANCER LIMITED ANNUAL REPORT 202019.1M TOTAL JOBS POSTED MARKETPLACE STATISTICS 006 24 22 20 18 16 14 12 10 8 6 4 2 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER Freelancer.com is the world’s largest freelancing marketplace 007 With over 50.8 million registered users Freelancer is the world’s largest freelancing and crowdsourcing marketplace by total number of users and jobs posted. We’re changing lives in the developing world by providing opportunity and income. Five billion people on the planet live on $10 a day or less. On Freelancer they can earn $10 an hour or more, as they develop their skills, education and reputation. FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER 008 FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER We help our customers grow their revenue, their reach and their possibilities. 009 “My team and I have only recently started using Freelancer as a complement to our in-house expertise. Our startup company will soon be launching a new socially responsible marketplace powered exclusively by local retailers called Lowkler. The experience has been beyond our most optimistic expectations. The freelancers are qualified and professional while the recruiters go above and beyond to make sure we feel supported. This looks like the beginning of a great partnership!“ Danny Zako Executive Vice President, Sekurcorp Laval, Canada FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER 010 FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER 011 FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER We're helping founders, entrepreneurs and startups around the world take their businesses to new heights. “I had a tough time working with someone from within my network to boost sales for my new e-commerce site. I was suggested to find someone on Freelancer. 012 I was very skeptical about competence, security of information etc. to hand over the project to someone I don't know face to face. However, on the first day of posting the requirements, there was a good response from professionals across the globe. Within a few hours, I signed my contract with a professional and created a milestone for the project. To my surprise, the freelancer finished the project in time, within budget and offered a lot of flexibility while working. All the work was handled very systematically. As a consequence, I could go into the market at planned timelines and get a good boost in my sales. This would never have happened without Freelancer. Thank you so much.” Naveen Alle Adobe Premiere Pro Video Editor Sint Truiden, Belgium FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER We change lives by opening up global markets to small businesses. “Using Freelancer has been an incredibly rewarding experience for AuriGen Medical. Our brief was to create a two-minute 3D photorealistic animation – demonstrating 013 a complex medical procedure for our implantable heart device. The Freelancer.com platform allowed AuriGen to receive 30+ proposals from highly rated creatives across the globe in 24 hours. Communication with our Freelancer was simple, straightforward and we always received answers to our queries within a 3-4 hour time frame. The finished product was received ahead of schedule and surpassed all of our expectations. Our budget for the work was $3,000 and the animation we received looked like it cost $10,000+. We have already received several compliments on the animation and have been successful in a recent fundraising round where the animation played a pivotal role in illuminating our value proposition. I would recommend Freelancer.com to anyone looking for high quality, cost-effective designers, and AuriGen Medical we will certainly be using the platform for our future projects.” Dr. John Thompson Co-Founder, GMIT Innovation Hubs Ireland FREELANCER LIMITED ANNUAL REPORT 2020ABOUT FREELANCER 014 FREELANCER LIMITED ANNUAL REPORT 2020FREELANCER CONTESTS NASA crowdsources talent with Freelancer 015 In 2020, Freelancer jointly won the US$25 Million NASA Open Innovation Services 2 (NOIS2) tender. Under the contract, Freelancer.com will help NASA crowdsource talent to design innovative tools and technologies for its new era of space exploration. FREELANCER LIMITED ANNUAL REPORT 2020FREELANCER CONTESTS Under the NOIS2, we won our first task Order for We also won a second task order valued at the US Bureau of Reclamation valued at $365,000 $474,500 working with the Eunice Kennedy USD in partnership with Arrow Electronics. The Shriver National Institute of Child Health and project is attempting to improve the reliability of Human Development (NICHD) in partnership hydropower plant generation by automating safety with Adiona, an Australian based data analytics equipment testing and reducing plant downtime. company with expertise in data science and Over the course of two years and two contests, machine learning. The project seeks to spur new including an on-site testing demonstration, we will research in maternal mortality, morbidity, and source innovative solutions for Reclamation from severe maternal morbidity through innovative a global community. exploration of NICHD's large databases. 016 Steven N. Rader, Deputy “Crowdsourcing is a very good tool for public of NASA's Center of Excellence for engagement with NASA. Our approach with Collaborative Innovation (CoECI), said: NOIS2 is designed to encourage the crowd to work on some of NASA's most compelling matters, making them feel they are a part of the mission. We want to tap into the diverse talents available around the world, made possible through crowdsourcing.” FREELANCER LIMITED ANNUAL REPORT 2020 MARKETPLACE STATISTICS Marketplace Statistics 017 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. $182 68% 263M+ AVERAGE COMPLETED PROJECT SIZE IN USD OF JOBS RECEIVE A BID TOTAL WITHIN 60 SECONDS MESSAGES SENT 50.8M+ 19.1M+ TOTAL REGISTERED TOTAL JOBS POSTED USERS $6.1B TOTAL JOBS POSTED IN USD FREELANCER LIMITED ANNUAL REPORT 2020FREELANCER CONTESTS FREELANCER CONTESTS 018 Source solutions through the power of the crowd. Post a Contest on Freelancer.com. 220+ AVERAGE ENTRIES PER CONTEST 87% OF CONTESTS RECEIVE ENTRIES IN 1 HOUR The Freelancer contest platform gives you access to millions of talented individuals with the skills to provide you with the Quick, collaborative and creative solutions that you need. Whether that be a logo, a design, an article, or anything in between. There are no limitations to The contest platform is the ultimate tool to engage with your what the crowd can do. Generating solutions for the likes of community to get instant feedback on new ideas. Collaborate NASA, Airbus, IBM, Deloitte, The US Department of Energy, with your network through contest share, which invites others The US Bureau of Reclamation and the National Institute of to interact with, rate, and award the participants of your contest. Child Health, the contest platform is a powerful tool to tap into global talent. Publicise your contest through polls, which allows you to share your contest with the public to gather feedback on the best Imagine having access to thousands of designers at a ideas. Engage with participants through the Public Clarification moment's notice, turning your dream into reality, overnight. This is the power of the Freelancer contest platform, where Board, which connects you with the talent of the world through comments to iterate on better designs. In 2020, the contest new creations are submitted within hours of posting your platform generated over 13 million ideas to help contest holders contest, and contests receive on average around 220 entries. come up with solutions quickly and collaboratively. FREELANCER LIMITED ANNUAL REPORT 2020FREELANCE ENTERPRISE 019 FREELANCER ENTERPRISE Freelancer Enterprise connects talent with opportunity, at scale. $8.5T OF LOST REVENUE BY 2030 DUE TO A GLOBAL SKILLS SHORTAGE Source: Korn Ferry https://www.kornferry.com/insights/ articles/talent-crunch-future-of-work Freelancer Enterprise brings exceptional talent to the world’s largest companies on demand. Leveraging the power of our platform, organisations can improve internal workforce utilization and seamlessly access Approved Talent Clouds for unparalleled quality and scale trusted by the largest organizations in the world. By 2030, there will be a talent shortage of 85 million people. In this global war for talent companies need access to an elastic workforce to compete better and innovate faster. The labour cloud economy on Freelancer Enterprise is how. IBM, BCG and Amazon are part of the 80% of Fortune 500s who use the platform to power their growth. The platform frees up an organization’s time and budget by providing access to the world’s intellectual capital at the fingertips. Freelancer Enterprise provides transformational programs and API integration to connect your existing contingent workforce, new flexible talent and full-time staff into a blended workforce ready for the future. FREELANCER LIMITED ANNUAL REPORT 2020FREELANCE ENTERPRISE Freelancer powers the workforce of the future. 318% HIRING TARGET BEAT BY $15B MULTINATIONAL COMPANY This was a record year for Freelancer Enterprise. In 2020 we cloud faster. A $17B global BPO company beat their hiring doubled the pilots launched with Fortune 500 companies, targets by 318% within a matter of weeks. with many scaling up to multi-region and multi-workflows by year end. Adoption of the platform increased and GMV is up 2020 will also hold a record for the size and scale of innovation 67% year on year. Covid has taken a seat in the C-suite and on our platform. Under the $25M NOIS2 joint NASA tender, accelerated digital transformation like never before. Freelancer Enterprise partnered with Arrow Electronics and Adiona to secure a $365,000 USD power engineering and Our clients applied our technology and talent to their $475,000 USD data science contest. Thousands of freelancers businesses in innovative and unexpected ways. A $30B global around the world will now get their shot at winning one of the IT company dispatched engineers in multiple APAC markets, largest contests ever on Freelancer! reducing response time by 10% and improving labour costs by 10-15%. Professional services firms staffed up projects 3x As diverse and unique as our customer stories sound, faster at 7x the cost savings compared to traditional agencies. A $100B company is leveraging thousands of developers to Freelancer Enterprise is the platform that unites F500s on a mission to build a diverse workforce for the future: exceptional scale network effects, enabling their clients to migrate to the talent at scale, on demand. 020 FREELANCER LIMITED ANNUAL REPORT 2020FREELANCER MOBILE The full power of Freelancer.com on any browser and any device. 021 FREELANCER MOBILE Work is no longer restricted to a physical office, or a computer sitting at a desk. Freelancer understands the importance of mobile platforms in the world of remote work. In 2020, we focused our energies on a complete overhaul of the entire website to provide a streamlined experience across desktop and mobile. Our customers can now access a new fully featured responsive website from the convenience of their mobile devices. Since this release in July 2020, the Freelancer revenue from mobile browsers grew by 50.5% thanks to the dramatically improved user experience. FREELANCER LIMITED ANNUAL REPORT 2020 WORKING IN THE CLOUD WORKING IN THE CLOUD 022 We provide a platform that lets you work the way you’d like to work. $332 AVERAGE VALUE OF HOURLY PROJECTS IN USD 32 AVERAGE LENGTH OF ENGAGEMENT IN DAYS On Freelancer you can begin a project with a fixed scope and and transparent hourly rate. You can review the outcomes and price in mind - the best option for projects that have a well- billings for the project on a weekly basis, and a summary of all defined scope and deliverables. your project’s activity is automatically sent to you. Alternatively, you can work on an ongoing basis. Payments Hourly projects are a great choice for building long-term, open- are based on the freelancer’s time spent working, at a clear ended working relationships with freelancers. FREELANCER LIMITED ANNUAL REPORT 2020 FREELANCER API 023 FREELANCER API Add the power and depth of the world’s largest global cloud workforce to your website, app or software with a Freelancer API integration. The Freelancer API is the foundation of the Freelancer Beyond accessing the Freelancer marketplace to increase ecosystem. Web and mobile applications alike share the same internal productivity, the Freelancer API may be used to build backend code and infrastructure which third parties may use to both B2C and B2B applications. Freelancer took this to heart power their applications. in 2020, building a new photo ordering app called Photo Anywhere. Users simply enter a location and their payment Organisations looking to adapt to a changing world and details into the app, and photos of the location are delivered capitalise on the future of work can directly source talent and back to them in 24 to 48 hours. This is all enabled by the expertise through the Freelancer API. The Freelancer API allows Freelancer API. workforce automation at scale with unparalleled speed and savings through elastic cloud labour. FREELANCER LIMITED ANNUAL REPORT 2020LOCATION-BASED JOBS AND FIELD SERVICES The world’s largest marketplace for online jobs is now the best marketplace for local jobs. Not all work takes place at a desk and the Freelancer platform is built to support myriad location based use cases. From delivery to photography to field services at scale, Freelancer Local Jobs provides features such as mapping, routing and GPS tracking to allow work to get done wherever in the world it is required. As the Freelancer platform matures, new business models are emerging that showcase the possibilities of being able to hire a global workforce. Photo Anywhere is a new app that illustrates this. Users simply enter a location and their payment details into the app, and photos of the location are delivered back to them in 24 to 48 hours. This would not be possible without the 50.8 million users on the Freelancer marketplace and the Freelancer Local Jobs infrastructure that supports it. 50.8M+ GLOBAL USERS 100K CITIES AROUND THE WORLD HAVE FREELANCERS IN OUR NETWORK LOCATION-BASED JOBS AND FIELD SERVICES 024 FREELANCER LIMITED ANNUAL REPORT 2020FREELANCER API 025 FREELANCER LIMITED ANNUAL REPORT 2020FREIGHTLANCER 026 Freight anything, anywhere with Freightlancer.com 7500+ LICENSED TRANSPORT OPERATORS Freightlancer is a combination of a marketplace and management system with global reach. It’s simplifying the supply chain for freight owners and transport companies, with major customers in the mining, construction, tunnelling, rail, oil & gas industries. Powered by the Freelancer network, it also facilitates rapid metro delivery with the network of 50.8 million freelancers. Freightlancer facilitates the fast, reliable and cost efficient transport of freight while ensuring a high standard of compliance. Major freight owners such as Newcrest Mining and Boart Longyear use Freightlancer to reduce the cost while assuring the security of freight deliveries at scale. Transport operators, large and small, trust Freightlancer with their fleet capacities and use our app to manage freight end to end. 2020 FREELANCER LIMITED ANNUAL REPORT 2020ESCROW.COM 1.38M REGISTERED USERS $5B USD IN PAID TRANSACTIONS 22 YEARS LICENCED 027 ESCROW.COM Secure online payment processing for the world’s largest online escrow service since 1999. Escrow.com was excited to announce our partnership with eBay in 2020 listing in the United States and was also rolled out as part of the eBay’s Providing guidance through the escrow process our knowledgeable Account as well as a number of key partners Luxury Watches Authenticity Guarantee Management team has been able to across the domains, IPv4, arts and program. marketplace industries ensuring we support users through tricky domain purchase through our Concierge protect both parties of the transactions Escrow Offer continues to empower services and Domain Name Holding during these unprecedented times as buyers and sellers to negotiate a as well as supporting motors vehicle people make more payments online. price for domain names, cars, boats, transactions through Title Collection aircrafts, watches or any high value and Lien Title Payoff. Escrow Pay is the simplest way to items online. add escrow payments in any website, mobile app, online store, classified site Escrow.com also extended our or marketplace via a single Escrow API call. This became the only online regulatory footprint into Alabama which brings our license coverage to 47, payment method for eBay Motors across US states and across the globe. FREELANCER LIMITED ANNUAL REPORT 2020ESCROW.COM Escrow.com is used to secure a wide range of valuable or complex transactions. Personal Protective Equipment Intellectual Property Domain Names Electronics Cars Boats Antiques Airplanes Motorcycles Collectables IPv4 Import / Export Business Assets Network Equipment Gemstones & Jewellery Industrial Equipment 028 Space Station Deposits FREELANCER LIMITED ANNUAL REPORT 2020RECRUITER With 50.8 million options, why not let one of our experts find you the perfect freelancer? Recruiter is Freelancer's flagship managed service. extensive search and interview process from our curated With a global presence, our recruiters provide 24x7 talent pool of vetted preferred freelancers. coverage to ensure that we can assist our clients anytime, anywhere. Utilising custom tooling optimised on top of our Our Recruiters work closely with the top 1% of freelancers matchmaking algorithm, our team works with our clients on the platform, the Preferred Freelancer Program, to ensure to clarify budget and requirements before conducting an that you’ll always have the perfect talent for the job. 029 RECRUITER 18% GROWTH IN RECRUITER PROJECTS IN FY20 18% GROWTH IN PREFERRED FREELANCER PROGRAM FREELANCER LIMITED ANNUAL REPORT 2020 The world’s #1 Internet marketing community & marketplace since 1997. Warrior Forum is the world's top marketing community and marketplace where marketers can find the latest news, trends discussion and daily deals. Whether you're an agency owner, CMO or entrepreneur just starting out - we have content suitable for any level. We've partnered up with industry experts such as Larry Kim, Paul Ponna, Eric Siu, Sam Bakker and more to deliver high-quality content and products to the forum. 1.5M+ MEMBERS 9M+ POSTS 778,421+ THREADS WARRIORFORUM.COM 030 FREELANCER LIMITED ANNUAL REPORT 2020This shoe design cost $60 USD Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! FREELANCER.COM 032 FREELANCER LIMITED ANNUAL REPORT 2020This skateboard graphic cost $50 USD Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! FREELANCER.COM 034 FREELANCER LIMITED ANNUAL REPORT 2020This package design cost $300 USD Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! FREELANCER.COM 036 FREELANCER LIMITED ANNUAL REPORT 2020This T-shirt design cost $75 USD Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! FREELANCER.COM 038 FREELANCER LIMITED ANNUAL REPORT 20202020 AWARDS 2020 Awards In terms of awards and recognition, Freelancer.com won a total of 9 awards and 1 honoree in 2020 including 1 Webby Honoree, 5 Stevie International Business Awards, and 4 APAC Stevie Awards. Escrow.com also won a total of 2 awards - all in the 2020 Stevie International Business Awards. 039 The Webby Awards Stevie Awards Organizers hailed the 24th annual Webby Awards’ edition The Stevie Awards are the world’s premier business awards, WFH: Webbys From Home with a special focus on those which were created in 2002 to honor and generate public using the Internet to respond to the impact of COVID-19. recognition of the achievements and positive contributions of The Webby Awards received nearly 13,000 entries organizations and working professionals worldwide. There are from 50 states and 70 countries worldwide. From the seven Stevie Awards programs, each with its own focus, list of thousands of global entries submitted, fewer than 10% categories, and schedule; such as the International Business were selected as Nominees. Although not won an award Awards that are open to all organizations worldwide, and include this year, Freelancer.com was recognized by the Webby categories to honor accomplishments in all aspects of work Academy as an Official Webby Honoree for the category of Best Employment Website. life; and the Asia-Pacific Stevie Awards that are open to all organizations in the 29 nations of Asia-Pacific region. In 2020, freelancer.com won a total of 9 Stevie Awards, including 5 Stevie International Business Awards (IBA) and 4 Asia-Pacific Stevies. Escrow took out 2 Stevie International Business Awards in total : 1 Gold and 1 Bronze. FREELANCER LIMITED ANNUAL REPORT 20202020 AWARDS 040 Stevie Awards Stevie International Business Awards (IBA): For Escrow.com, we won Gold Award for Company of The Year: Financial Services - Small; and Bronze Award for Most Innovative Company of the Year - Up to 100 Employees. Meanwhile for Freelancer.com, we won 3 Gold Awards for Communications, Investor Relations or PR Executive of The Year: Sebastian Siseles; Best Website: Business or Professional Services; and for Communications Team of The Year. Freelancer.com also won 1 Silver Award for Matt Barrie as Executive of The Year - Business or Professional Services; and 1 Bronze Award for Company of The Year : Business or Professional Services - Large. Asia Pacific Stevies: We won 3 Silver Awards for Innovative Management in Technology Industry (more than 100 employees); for Excellence in Innovation in Technology Industry (more than 100 employees); and Innovation in Technology Management, Planning, and Implementation (more than 100 employees); as well as 1 Bronze Award for Most Innovative Communications Professional of The Year : Helma Kusuma. FREELANCER LIMITED ANNUAL REPORT 2020 OUR ONLINE ECONOMY 041 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 November 2020. FREELANCER LIMITED ANNUAL REPORT 2020OUR ONLINE ECONOMY 042 FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT Directors’ Report 043 Your Directors submit the financial report of Freelancer Limited (the Company) for the year ended 31 December 2020. 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: FREELANCER LIMITED ANNUAL REPORT 2020Matt 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 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. 044 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 from Macquarie University, Masters in 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 197,161,429 fully paid ordinary shares, including a relevant interest in 3,158,998 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 194,002,431 fully paid ordinary shares (representing 42.81% of issued capital). Member of the Nomination and Remuneration Committee and Audit Committee. FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT Darren Williams 045 Non-Executive Director from 1 November 2015. Executive Director until 31 October 2015 (appointed 10 April 2010) BSc (Hons I) PhD (Computer Science) Non-Executive Director of Company. Was the Chief Technology Officer and Executive Director of the Company until 31 October 2015. Extensive experience in computer security, protocols, networking and 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. Previously lectured Computer Science at the University of Sydney. Author of numerous articles, patents and papers relating to security technology, software and networking. Qualifications include first class honours degree in Computer Science and a Ph.D. in Computer Science specialising in computer networking from the University of Sydney. Beneficial and relevant interest in 10,627,165 fully paid ordinary shares (representing 2.35% of issued capital). Member of the Nomination and Remuneration Committee and Audit Committee. FREELANCER LIMITED ANNUAL REPORT 2020Simon Clausen Non-Executive Director (appointed 10 April 2010) Founding investor and Non-Executive Director of the Company. 046 Extensive experience in operating and 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 Ventures, a specialised technology venture fund that actively maintains investments in a number of companies globally. Relevant interest in 163,658,998 fully paid ordinary shares, including a relevant interest in 3,158,998 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 160,500,000 fully paid ordinary shares (representing 35.42% of issued capital). Member of the Nomination and Remuneration Committee and Audit Committee. FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT Company Secretary Principal activities Mr Neil Katz held the position of Company Secretary during and The principal activity of the consolidated entity (the Group) at the end of the financial year (appointed 9 March 2012). He has during the financial year was the provision of an online been with the Group since 2009 and is also the Chief Financial outsourcing marketplace and escrow payment services. Officer. There were no significant changes in the nature of the principal activities during the financial year. REVIEW OF RESULTS AND OPERATIONS The Group’s loss attributable to equity holders of the Company, after providing for income tax, was nearing breakeven at $646,000 (2019 loss: $1,591,000). Key Performance Highlights Year ended 31 December Financial metrics: Gross Payment Volume1 Net Revenue2 047 Gross Profit Gross margin (%) Operating EBITDA3,4 Operating EBIT3 Operating NPAT3 Operating Cash Flow5 Operational metrics: New Jobs6 (millions) Total Jobs Posted (millions) New Registered Users (excluding Escrow, millions) Total Registered Users5 (millions) Notes: FY20 $m 892 59 49.0 83.3% (0.4) (0.7) (0.5) 7.9 2.2 19.1 8.9 50.8 FY19 $m 788 58 48.5 83.7% (1.1) (1.4) (1.3) (2.1) 1.9 17 9.1 41.7 % Change +13% +1% +1% -0.4% nm nm nm +285% +17% +13% -2% +22% 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 5 From FY19 lease payments in respect of office leases have been accounted for in accordance with AASB 16 Leases. The impact is that lease payments are are now websites plus total Freelancer and Escrow revenue. GPV is an unaudited metric. recorded in the cash flow statement as interest payments, disclosed in operating Marketplace segment FY20 GPV A$192.1 million (up 5.9% on prior corresponding period), activities and capital payments, disclosed in financing activities. Payments segment GPV A$699.7 million (up 15.4% on prior corresponding period). 2 Net Revenue excluding Escrow.com for FY20 was $50.5m (up 0.2% on prior corresponding period). 3 Excludes non-cash share based payments expense of $192k in FY20 and $329k in FY19. 4 From FY19 lease expenses in respect of office leases have been accounted for in accordance with AASB 16 Leases. The impact is that lease expenses are no longer reflected in the P&L but are brought into account as depreciation on the right of use asset and interest paid on the corresponding lease liability. Depreciation of $4.5m (FY19:$2.9m) and finance costs of $1.8m(FY19:$0.2m) relating to office leases (accounted for in accordance with AASB 16 Leases) are included in the EBITDA calculation. 6 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. 7 User and project/contest data includes all users and projects/contests from acquired marketplaces. Prior to May 2009, all data was from acquired marketplaces. Includes Escrow.com unique users. FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT FREELANCER.COM The Company’s revenue is primarily generated from new and In the year, Freelancer Gross Payment Volume hit an all- existing users posting and fulfilling projects and contests in the time record of $192.1 m, which was up 5.9% on the previous Freelancer marketplace. corresponding period. The second half of the year ended stronger with 2H20 GMV hitting an all-time record of $51.8 In FY20, Freelancer ended the year with 50.8 million registered million (up 17.7%) or AU$71.9m (up 11.6%). users, adding 8.9 million (up 22%). The number of jobs posted (filtered) totalled 19.1 million at 31 December 2020, adding 2.2 Moving into FY21, GMV is currently growing at 27.5% in USD million for the year (up 17%). on pcp on a 28 day rolling basis (17 February 21). 048 FIG.1 TOTAL REGISTERED USERS AND JOBS (FILTERED) BY YEAR ON FREELANCER.COM FIG.2 MULTI-YEAR GROSS MARKETPLACE VOLUME (USD) FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT FREELANCER.COM Net revenue for Freelancer.com was $50.5 m, which was flat Also negatively affecting revenue in this segment was Startcon, on the previous corresponding period. In 1Q20, Freelancer a conference which was discontinued in FY20. This was a experienced a negative impact on revenue due to Chinese $675k drag on revenue, although a positive boost to EBITDA freelancers having troubles with work continuity during Covid. of about $600k, as the conference in recent years was not From 2Q through 4Q20 however, segment revenue was up 10% operating profitably. We do not see Startcon running again for on pcp in USD, our primary operating currency. the foreseeable future. For the full year, underlying project fee growth was at 9.4% on Throughout FY20, the product and engineering teams primarily pcp and core marketplace revenue growth was at 7.1% on pcp, focused on overhauling the mobile experience of the website. both beating the headline GPV growth. In July, we replaced our legacy, standalone mobile website with our new responsive frontend, and in December we entered Negatively affecting revenue growth in FY20 was enterprise beta testing with a new, fully-featured mobile app, built using services (consulting) revenue, which fell $2.4m to $2.8m, the same codebase as our responsive frontend and the wider primarily due to cycling the largest Arrow services work in FY19. website. We believe this will pay dividends across multiple The activity within the enterprise division, however, continues to areas, including a superior mobile experience for customers, grow strongly. Enterprise GMV (USD) grew 67% in FY20 on pcp. and faster development times due to heavily reduced In the year, we also signed a record number of Master Services redundancy and complexity. After removing the legacy mobile Agreements with major brands in the technology, aerospace, web experience, in 2H20 revenue from customers viewing the telecommunications, field services, professional services, site in a mobile browser increased by 51.5% on pcp. advertising, defense and healthcare industries. We also launched double the number of pilot projects with enterprises around the world compared to the previous year. Our default agreements do 049 not include a minimum volume commitment. Of note, we delivered a number of enhancements to Deloitte MyGigs, a custom talent marketplace. Over 20,000 consultants have been onboarded and over 100,000 consultant hours logged In terms of outlook, we have never been in a better position with regards to product. We are at the tail end of the front end overhaul work, with most of the product migrated. Mobile web is now running from the same codebase as desktop (2H20 mobile web fees up 51.5% on pcp since). We expect similarly for iOS and Android with new apps in beta and full production imminent. In terms of product development, in FY21 we will to date. In 2Q21 we will integrate the MyGigs to the Freelancer. initially be focusing on the core experience, UX, design, API & com cloud workforce. collaboration. Also of note in enterprise in FY20, we jointly won a US$25M NASA tender, of which the first two task orders successfully obtained are a US$365,000 power engineering challenge for the US Bureau of Reclamation hydroelectric power authority and a US$474,500 data science challenge in child morbidity prevention for the US National Institute of Child Health. ESCROW.COM For the full year 2020, Escrow.com achieved an all-time record 2H20 GPV was an all-time record $275m (up 34.1% on pcp) or Gross Payment Volume of $699.7m (up 15.4% on pcp), or AU$379m (up 26.7% on pcp). The last four months of trading US$486.1 million (up 15.2% on pcp). For the full year, Escrow. were particularly strong (inclusive of September), with 4Q20 com net revenue was $8.2 million (up 9% on pcp). Escrow.com GPV of US$156.6 million (up 56.2% on pcp), or AU$213.6 million (up 45.7% on pcp). Fourth quarter revenue was AU$2.4m (up 33.4%) or US$1.75m (up 43.3% on pcp). FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT 050 FIG.3 GROSS PAYMENT VOLUME BY QUARTER FOR ESCROW.COM (USD) In FY20 Escrow.com was chosen as the exclusive escrow In early FY21 we appointed Raffaela Maiorano as Director provider for eBay Motors and luxury watches valued at $10,000 of Legal & Compliance for the Group and Money Laundering and above, as part of eBay’s new Authenticity Guarantee service. Reporting Officer (MLRO) of Escrow for the United Kingdom We look forward to announcing further growth in this relationship Authorised Payments Institution license. Raffaela has 18 years across multiple verticals throughout FY21. experience in regulatory compliance, asset management, private Escrow.com’s FY20 integrations with vehicle marketplaces have and Australia. She has previously worked at the Royal Bank put us in a strong position going into FY21. In FY20 motor vehicle of Scotland, Bank of America Merrill Lynch, Deutsche Asset GPV (USD) was up 285% on pcp. Management (UK) and GLG Partners (formerly Societe Generale equity and capital markets in the UK, Europe, USA, Hong Kong AM (UK) Limited). Looking forward into FY21 we see increased demand for luxury and collectible items. Attention from our new integration In terms of licensing, we are in the final stages of obtaining with eBay has led to an increase in the number of jewellery licenses for the three remaining US states. We have been given transactions, and we are actively integrating with three additional verbal approval in Hawaii, conditional on a banner indicating we marketplaces signed in FY20. do not transact in real estate escrow. The API application for the United Kingdom is also in process. We expect that the remaining Escrow.com’s geographic expansion into Europe with new partner licenses will be granted in FY21. After that, we will pursue a marketplaces has driven a 22% increase in Gross Payment license for the EU and money transmission licenses in the states Volume in Euros with additional focus on this region in FY21. where we have escrow licenses. FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT REVIEW OF FINANCIAL PERFORMANCE The Company achieved Net Revenue of $58.8 million in FY20 (up 1.5% on the previous corresponding period), and an all-time record Gross Payment Volume of $891.8 million (up 13% on the previous corresponding period). Revenue excluding Escrow.com was $50.5 million (flat on the previous corresponding period). Escrow.com revenue was $8.3 million (up 9% on the previous corresponding period). GPV excluding Escrow.com was an all-time record at $192.1 million (up 5.9% on the previous corresponding period). 051 FIG.4 NET REVENUE FOR THE FREELANCER GROUP BY FINANCIAL YEAR FIG.5 GROSS PAYMENT VOLUME (GPV) FOR THE FREELANCER GROUP BY YEAR Notes: 1. 2. 3. 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. Take rate for the Marketplace segment is 3% employer commission and 10% freelancer commission, which has not changed since 2010. 3. Core Freelancer FY20 GPV of A$192.1m. Escrow FY20 GPV of US$486.1m, average AUD/USD FX of 0.694708= A$700m FREELANCER LIMITED ANNUAL REPORT 2020 DIRECTORS’ REPORT The Company’s gross margin of 83.3% in FY20 decreased $1.4m in rental income from subleasing expansion space in the marginally by 0.4% compared to the previous corresponding new premises (These leases were finalised pre Covid-19). period (FY19: 83.7%), but remains within a consistent range since 2011. The Company’s cost of sales predominantly Overall NPAT (loss) was $(0.6) million in FY20, which included a consists of transaction costs that are incurred from the various tax benefit of $0.2 million (FY19: $(1.6) million). gateways relied upon to process user payments, as well as various provisions taken for credit card chargebacks and fraud Cash Flow and Balance Sheet Strength risks. Cost of sales also includes direct labour costs incurred in generating enterprise services revenue. The Company posted a positive operating cash flow of $7.9 The Company reported an Operating NPAT (loss) excludes $2.7 million (FY19: $3.1 million) of lease payments of $(0.5) million in FY20 (FY19: $(1.3) million). associated with office premises, which have been reflected as million in FY20 up from (FY19 of $2.1 million). Operating cash Operating NPBT (loss) was $(0.7) million in FY20 (FY19: $(1.4) million)). finance costs in accordance with AASB 16 Leases. Trade and other receivables include receivables from various payment gateways in relation to partially completed transactions Operating expenses were 1.5% higher than the prior as well as amounts due from enterprise customers. corresponding period. Payroll costs, which represent 45% of operating costs were lower by 2%. As of 31 December 2020, As at 31 December 2020, the Company held cash and the company had 419 FTE staff. Occupancy costs rose due to equivalents of $34.3 million and no net debt, up 7% on FY19. relocation and expansion of the Sydney office and is offset by Dividends paid or recommended Environmental regulations 052 There have been no dividends paid or provided for the financial The operations of the Group do not involve any activities that year ended 31 December 2020 (2019: nil). have a marked influence on the environment. As such, the Directors are not aware of any material issues affecting the The Company has established a Dividend Reinvestment Plan Group or its compliance with the relevant environment agencies (DRP). The full terms and conditions of the DRP are available or regulatory authorities. 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. Subsequent Events Insurance and indemnification of Directors and Officers 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 As at the date of this report, the Directors are not aware of any circumstance that has arisen since 31 December 2019 has not been disclosed as it is subject to the confidentiality provisions of the insurance policy. that has significantly affected, or may significantly affect the Group’s operations in future financial years, the results of those The Company has in place Deeds of Indemnity, Insurance and operations in future financial years, or the Group’s state of affairs in future financial years. Access with each of its current Directors and such other officers that the Directors determine are entitled to receive the benefit of an indemnity. Future developments In future financial years, the Group expects to further its growth through expansions to other territories organically and by The Company is an entity to which ASIC Corporations Instrument acquisition, and forming strategic alliances and partnerships. 2016/191 applies. Accordingly amounts in the financial report Rounding off of amounts have been rounded off to the nearest thousand dollars, unless otherwise stated. FREELANCER LIMITED ANNUAL REPORT 2020 DIRECTORS’ REPORT Meetings of Directors During the financial year five meetings of Directors were held. The following persons acted as Directors of the Company Other matters arising during the year were resolved by circular during the financial year, with attendances to meetings of resolutions. 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 6 6 6 6 6 6 2 2 2 2 2 2 - - - - - - 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 $29,000 (2019: $29,000). 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. 053 The Directors are satisfied that the provision of non-audit services in the form of tax compliance services during the year by the auditor (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 21 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit Committee, for the following reasons: Auditor’s independence declaration The auditor’s independence declaration is included on page 58 and forms part of the Directors’ Report for the year ended 31 December 2020. Shares issued under Employee Share Plan (ESP) • all non-audit services have been reviewed and approved to No ESP shares have been granted to Directors during the ensure that they do not impact the integrity and objectivity financial year. No ESP shares have been granted to Directors of the auditor; and since the end of the financial year. • 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 reviewing 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. 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. FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT REMUNERATION REPORT This audited Remuneration Report for the Group which forms Non-Executive Director remuneration part of the Directors’ Report for the financial year ended 31 December 2020, details the nature and amount of remuneration for each Director and the Executives. Key management personnel (KMP) comprise: 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 • • • • R.M. Barrie – Executive Chairman such remuneration, as determined by the Board, which must not exceed in aggregate the maximum amount determined by the S.A. Clausen – Non-Executive Director Company in general meeting. The most recent determination was at a General Meeting held on 9 October 2013 where the D.N.J. Williams – Non-Executive Director shareholders approved an aggregate remuneration of $300,000. N.L. Katz – Chief Financial Officer and Company Secretary by the Company are $25,000 (2018:$25,000) to S.A. Clausen and Annual Non-Executive Directors’ fees currently agreed to be paid D.N.J. Williams inclusive of superannuation. Remuneration Policy Executive and Executive Director remuneration The performance of the Group depends upon the quality of Fixed remuneration consists of base remuneration (which is its directors and executives. The Group recognises the need calculated on a total cost basis and includes any fringe benefits to attract, motivate and retain highly skilled directors and tax charges related to employee benefits, including motor executives. vehicles), as well as employer contributions to superannuation The Board of Directors, through its Nomination and funds. 054 Remuneration Committee, accepts responsibility for determining Executive and Executive Director remuneration levels are and reviewing remuneration arrangements for the Directors reviewed annually by the Nomination and Remuneration and Executives. The Nomination and Remuneration Committee Committee through a process that considers the overall assesses the appropriateness of the nature and amount of performance of the Group. The Executive Directors are not remuneration of Directors and Executives on a periodic basis by paid any director fees in addition to their fixed remuneration as reference to relevant employment market conditions, giving due Executives. consideration to the overall profitability and financial resources of the Group, with the objective of ensuring maximum stakeholder Performance based remuneration benefit from the retention of a high-quality Board and executive team. 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). FREELANCER LIMITED ANNUAL REPORT 2020DIRECTORS’ REPORT 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. Short-term benefits Post employment benefits Share based payments Total Directors’ fees Cash salary and fees Other Superannuation Shares Non-Executive Directors $ S.A. Clausen 2020 2019 D.N.J. Williams 2020 2019 Executive Directors R.M. Barrie 2020 2019 Other KMP N.L. Katz 2020 2019 Total 2020 2019 055 $ - - - - $ - - - - 569,096 17,056 569,096 7,289 317,400 16,420 317,400 7,023 25,000 25,000 22,884 22,884 - - - - 47,884 47,884 886,496 886,496 33,476 14,312 $ - - 2,174 2,174 25,904 25,904 27,600 27,600 55,678 55,678 $ - - - - - - $ 25,000 25,000 25,058 25,058 612,056 602,289 46,844 93,422 408,264 445,445 46,844 1,070,378 93,422 1,097,792 The remuneration of key management personnel in the years ended 31 December 2020 and 2019 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: 2020 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total 2019 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total 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 - - - - - - - - - - - - - - 685,539 440,539 685,539 440,539 - - 885,539 885,539 - - - - - - - - (200,000) (200,000) (440,539) 685,539 (440,539) 685,539 501,790 501,790 183,749 183,749 - - - - - - - - - - 685,539 685,539 232,635 232,635 452,904 452,904 FREELANCER LIMITED ANNUAL REPORT 2020 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: 2020 Directors R.M. Barrie1 S.A. Clausen D.N.J. Williams2 Other KMP N.L. Katz3 Total 2019 Directors R.M. Barrie1 S.A. Clausen D.N.J. Williams2 Other KMP N.L. Katz3 Total 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 194,696,431 160,350,000 10,758,165 350,000 366,154,596 194,696,431 160,000,000 10,758,165 150,000 365,604,596 - - - - - - - - 585,500 150,000 - - 735,500 - 350,000 - 200,000 550,000 195,281,931 160,500,000 10,758,165 350,000 366,890,096 194,696,431 160,350,000 10,758,165 350,000 366,154,596 - - - - - - - - - Loans to directors and key management personnel 056 The following loan balances are outstanding at the reporting As the ESP is considered in substance a share option, the date in relation to remuneration arrangements with Executive ESP shares issued and corresponding loan receivable are Directors and KMP in respect of shares issued under the not recognised by the Group in its financial statements. The Employee Share Plan (ESP). Directors: R.M. Barrie S.A. Clausen D.N.J. Williams Other KMP: N.L. Katz Total loans to Directors and KMP 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 Note 24 of the financial statements. 2020 $000 - - - 334 334 2019 $000 - - - 828 828 ¹ 1,279,500 shares as at 31 December 2020 (2019: 1,279,500) are held directly or indirectly by related parties. ² 131,000 shares as at 31 December 2020 (2019: 131,000) are held directly or indirectly by related parties. ³ 40,000 shares as at 31 December 2020 (2019: 40,000) are held directly or indirectly by related parties. FREELANCER LIMITED ANNUAL REPORT 2020 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. 057 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 relating 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 25 of 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 pursuant to s298(2) of the Corporations Act 2001. On behalf of the Directors Matt Barrie Chairman 23 February 2021 FREELANCER LIMITED ANNUAL REPORT 2020 058 FREELANCER LIMITED ANNUAL REPORT 2020 CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Revenue Cost of sales Gross profit Other income 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 Exchange differences on translation of foreign operations 059 Total Comprehensive loss for the year Loss is attributable to: Owners of Freelancer Limited Non-controlling interests Total comprehensive income for the year is attributable to: Owners of Freelancer Limited Non-controlling interests Earnings per share Basic earnings per share Diluted earnings per share Note 5 5 6 6 6 6 6 19 6 7 19 32 32 2020 $000 58,771 (9,786) 48,985 1,561 (21,797) (11,557) (10,709) (316) (374) (4,712) (192) (1,751) (862) 216 (646) (320) (966) (646) - (646) (966) - (966) Cents (0.14) (0.14) 2019 $000 57,911 (9,455) 48,456 98 (22,295) (12,764) (10,080) (285) (1,086) (3,214) (329) (219) (1,718) 127 (1,591) 128 (1,463) (1,591) - (1,591) (1,463) - (1,463) Cents (0.35) (0.35) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. FREELANCER LIMITED ANNUAL REPORT 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 CONSOLIDATED STATEMENT Note 2020 $000 2019 $000 Assets Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Trade and other receivables Plant and equipment Intangible assets Right of use assets Other assets Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Lease liabilities Borrowings Current tax liabilities Provisions Contract liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Provisions Lease liabilities Contract liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Non-controlling interests Total equity 8 9 10 9 11 12 13 10 7 14 13 15 7 16 17 7 16 13 17 18 19 34,341 5,593 2,030 41,964 1,003 367 26,457 22,418 517 10,965 61,727 103,691 39,166 5,628 286 87 2,417 586 48,170 5,957 758 19,094 547 26,356 74,526 29,165 38,446 4,329 (13,630) 20 29,165 060 32,014 4,003 1,309 37,326 1,103 482 26,429 26,964 592 5,129 60,699 98,025 36,607 3,248 121 57 2,322 629 42,984 443 1,030 23,134 495 25,102 68,086 29,939 38,446 4,457 (12,984) 20 29,939 The above statement of financial position should be read in conjunction with the accompanying notes. FREELANCER LIMITED ANNUAL REPORT 2020 CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Attributable to owners of Freelancer Limited Contributed Equity Share Based Payments Balance at 1 January 2019 38,106 Note $000 $000 4,382 Foreign currency translation reserve $000 (Accumulated loses) Non- controlling interests Total Equity $000 $000 $000 (382) (11,051) 20 31,075 Cumulative adjustment upon change in accounting policies – AASB 16 Leases - - - (342) - (342) Balance at 1 January 2019 restated 38,106 4,382 (382) (11,393) 20 30,733 Loss for the year Exchange differences on translation of foreign operations 19 Total comprehensive loss for the year - - - Transactions with owners in their capacity as owners: Contributions of equity arising from repayment of ESP loans Share based payments Balance at 31 December 2019 18 24 340 - 38,446 - - - - 329 4,711 - (1,591) 128 128 - - - (1,591) - - - - - - - (1,591) 128 (1,463) 340 329 (254) (12,984) 20 29,939 061 Attributable to owners of Freelancer Limited Contributed Equity Share Based Payments Note $000 38,446 $000 4,711 Foreign currency translation reserve $000 (Accumulated losses) Non- controlling interests Balance at 1 January 2020 Loss for the year Exchange differences on translation of foreign operations Total comprehensive loss for the year Transactions with owners in their capacity as owners: Share based payments - 19 24 - - - - Balance at 31 December 2020 38,446 $000 (254) (12,984) - (646) (320) (320) - (646) - - - 192 4,903 - - (574) (13,630) Total Equity $000 29,939 (646) (320) (966) 192 29,165 $000 20 - - - - 20 The above statement of changes in equity should be read in conjunction with the accompanying notes. FREELANCER LIMITED ANNUAL REPORT 2020 CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income taxes paid Net cash inflow from operating activities 31 Cash flows from investing activities Payments for plant and equipment Payments for intangible assets Net cash (outflow) from investing activities Cash flows from financing activities Contributions of equity arising from repayment of ESP loans 18 Repayment of lease liabilities Proceeds from borrowings Net cash (outflow) / inflow from financing activities Net increase / (decrease) 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 2020 $000 58,301 (49,467) 49 (856) (114) 7,913 (221) (28) (249) - (2,721) 176 (2,545) 5,119 32,014 (2,792) 34,341 2019 $000 56,972 (54,668) 38 (195) (91) 2,056 (226) (1) (227) 340 (3,091) - (2,751) (922) 33,211 (275) 32,014 062 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT NOTES TO THE FINANCIAL STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 Contents of the notes to the consolidated financial statements NOTE CONTENTS PAGE NOTE CONTENTS 01. Reporting Entity 02. Basis of Preparation 03. Financial risk management 04. Operating segments 063 05. Revenue 06. Expenses 07. Income tax 08. Cash and cash equivalents 064 064 065 068 070 071 072 074 09. Trade and other receivables 074 10. Other assets 11. Plant and equipment 12. Intangible assets 13. Leases 14. Trade and other payables 15. Borrowings 16. Provisions 17. Contract liabilities 18. Contributed equity 076 076 077 079 081 081 082 083 083 19. Equity – reserves 20. Key management personnel disclosures 21. Remuneration of auditors 22. Contingent liabilities 23. Commitments for expenditure 24. Share based payments 25. Reated party transactions 26. Parent Entity Information 27. Business Combinations 28. Interests in controlled entities 29. Fair value measurements 30. 31. Events occurring after the reporting date Reconciliation of loss after tax to net cash flow from operating activities 32. Earnings per share (EPS) 33. Other significant accounting policies PAGE 084 085 085 086 086 087 090 090 091 092 093 093 093 094 095 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 01. Reporting Entity Freelancer Limited (the Company) is a company domiciled in marketplace for services and providing escrow payment Australia. The address of the Company’s registered office is services. The separate financial statements of the parent Level 37, Grosvenor Place, 225 George Street, Sydney, NSW, entity, Freelancer Limited, have not been presented within this 2000. The consolidated financial statements of the Company financial report as permitted by the Corporations Act 2001. as at and for the year ended 31 December 2020 comprise the Company and its subsidiaries (together referred to as The consolidated financial statements were authorised for the Group and individually as Group entities). The Group is a issue by the Board on 23 February 2021 for-profit entity and primarily is involved in operating an online 02. Basis of Preparation These general purpose financial statements have been prepared statements are disclosed in Note 33(g). in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards (e) Significant accounting policies 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 2021 based on increased revenue and a planned reduction in expenses. 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 (a) Compliance with International Financial Reporting Standards The Company has applied the relief available to it under ASIC Corporations Instrument 2016/191. Accordingly, amounts in the financial statements and Directors’ Report have been 064 The consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). rounded off to the nearest $1,000. (g) New Accounting Standards (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 The Group has not adopted any new or amended Accounting Standards and Interpretations this year that have had a material impact on the Group or the Company. (h) 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: These consolidated financial statements are presented in • Group’s current year results; 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 • impact of significant changes in the Group’s business; or • aspects of the Group’s operations that are important to future performance. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 03. Financial risk management Financial risk management policies The Group’s activities expose it to a variety of financial risks: Risk management is carried out by senior finance executives market risk (including currency risk), credit risk and liquidity (Finance) under policies approved by the Board of Directors risk. The Group’s overall risk management program focuses on (Board). These policies include identification and analysis of the unpredictability of financial markets and seeks to minimise the risk exposure of the Group and appropriate procedures, potential adverse effects on the financial performance of the controls and risk limits. Finance identifies, evaluates and Group. The Group uses different methods to measure different hedges financial risks within the Group’s operating units. 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. 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 Lease liabilities 065 Total financial liabilities Note 8 9 14 13 2020 $000 34,341 6,596 40,937 39,166 26,382 63,888 2019 $000 32,214 5,106 37,120 36,607 26,382 62,989 The carrying value of the assets and liabilities disclosed in the Amortised cost is calculated as the amount at which the table above closely approximates or equals their fair value. financial asset or financial liability is measured at initial The carrying amounts of trade receivables and trade and other recognition less principal repayments and any reduction for payables are assumed to approximate their fair values due to impairment, and adjusted for any cumulative amortisation of their short-term nature. Initial recognition and measurement the difference between that initial amount and the maturity amount calculated using the effective interest method. Financial assets and financial liabilities are recognised when The effective interest method is used to allocate interest the entity becomes a party to the contractual provisions of the income or interest expense over the relevant period and is instrument. For financial assets, this is equivalent to the date equivalent to the rate that exactly discounts estimated future that the Group commits itself to either purchase or sell the cash payments or receipts (including fees, transaction costs asset (i.e. trade date accounting is adopted). and other premiums or discounts) through the expected life (or 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. 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 Classification and subsequent measurement recognition of an income or expense item in profit or loss. Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or The Group does not designate any interests in subsidiaries, cost. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Loans and receivables Loans and receivables are non-derivative financial assets When the terms of financial assets that would otherwise have with fixed or determinable payments that are not quoted in an been past due or impaired have been renegotiated, the Company active market and are subsequently measured at amortised recognises the impairment for such financial assets by taking cost. Gains or losses are recognised in profit or loss through into account the original terms as if the terms have not been the amortisation process and when the financial asset is renegotiated so that the loss events that have occurred are duly derecognised. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets considered. (a) Market risk that have fixed maturities and fixed or determinable payments, Foreign currency risk and it is the Company’s intention to hold these investments The Group operates internationally and is exposed to foreign to maturity. They are subsequently measured at amortised exchange risk arising from various currencies. cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is Foreign exchange risk arises when future commercial derecognised. Financial liabilities transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and Non-derivative financial liabilities other than financial guarantees cash flow forecasting. are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process The Group has not entered into forward foreign exchange and when the financial liability is derecognised. contracts to protect against exchange rate movements. The Impairment Directors are of the view that the cost of hedging the Group’s short-term foreign exchange exposure outweighs the risk of At the end of each reporting period, the Group assesses whether adverse currency movements. 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). The Group’s exposure to foreign currency exchange risk at the reporting date, expressed in each currency, was as follows: 2020 Currency exposure: AUD USD NZD GBP HKD SGD PHP EUR CAD INR Other Denominated in: AUD 000’s USD 000’s NZD 000’s Cash 4,244 17,525 Trade receivables 1,735 2,232 Other financial assets 1,726 97 Payables (285) (2,625) 145 19 - - GBP 000’s 1,261 189 10 (25) HKD 000’s SGD 000’s PHP 000’s EUR 000’s CAD 000’s INR 000’s AUD 000’s 755 291 - - 457 23,008 23 - 13 1,414 13,984 (3,530) 948 387 - - 755 221 8 68,407 27,129 283 223 382 - (88) (722) (15) User obligations (2,406) (17,413) (183) (1,351) (926) (285) (2,626) (2,816) (1,076) (63,562) (386) Net exposure 5,014 (184) (19) 84 120 208 32,250 (1,484) (107) 31,535 204 2019 Currency exposure: AUD USD NZD GBP HKD SGD PHP EUR CAD INR Other Denominated in: AUD 000’s USD 000’s NZD 000’s GBP 000’s HKD 000’s SGD 000’s PHP 000’s EUR 000’s CAD 000’s INR 000’s AUD 000’s 066 Cash 2,403 15,565 Trade receivables 1,339 1,705 Other financial assets 1,037 109 Payables (854) (1,990) 108 26 - - 858 144 9 (24) 882 279 - - 359 18,850 1,393 1,021 298 27 - 14,284 (19) (3,390) - - 975 201 1 58,328 21,287 99 255 278 - (13) (1,552) (13) User obligations (2,222) (15,093) (173) (1,059) (984) (292) (2,676) (2,438) (840) (50,767) (473) Net exposure 1,703 296 (39) (72) 177 75 28,089 (747) 342 27,395 (47) FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT The Group had net liabilities of $3,961,000 denominated The analysis below reflects management’s view of possible in foreign currencies as at 31 December 2020 (comprising movements in relevant foreign currencies against the assets of $32,613,000 less liabilities of $36,574,000). The Australian dollar in the short term subsequent to 31 December Group had net assets of $705,000 denominated in foreign 2020. The table summarises the range of possible outcomes currencies as at 31 December 2019 (comprising assets of that would affect the Group’s net profit and equity as a $34,751,000 less liabilities of $34,046,000) result of foreign currency movements on year end foreign denominated assets and liabilities. The impact of potential movements in exchange rates on the profit or loss is as follows: (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%) 2020 $000 2019 $000 High 11 1 (7) (1) (9) (42) 112 5 (27) 43 Low (13) (1) 8 1 10 46 (124) (6) 30 (49) High 35 2 22 (2) (4) (52) 56 (7) (26) 24 Low (39) (2) (24) 2 4 58 (62) 7 29 (27) 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 067 The Group is not exposed to significant equities price risk. (c) Liquidity risk Interest rate risk Liquidity risk management requires the Group to maintain The Group is not exposed to any significant interest rate risk. sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and Cash balances payable. As at 31 December 2020 the Group had $34,341,000 (2019: $32,014,000) held in bank accounts and online wallets. The The Group manages liquidity risk by maintaining adequate Group’s cash balances are predominantly held in interest cash reserves by continuously monitoring actual and forecast bearing bank accounts. Funds that are excess to short term cash flows and matching the maturity profiles of financial liquidity requirements are generally invested in short term assets and liabilities. 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. Financing arrangements The Group does not have any borrowing facilities in place at the reporting date. Maturities of financial assets 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 2020 2020 Note $000 $000 $000 $000 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Remaining contractual maturities $000 NOTES TO THE FINANCIAL STATEMENT Non-derivatives Non-interest bearing Trade Receivables 1,986 1,986 2,064 2,064 5,362 5,362 2,696 2,696 12,108 12,108 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. 2020 Non-derivatives Non-interest bearing Trade and other payables Lease liabilities Total 2019 Non-derivatives Non-interest bearing Trade and other payables Lease liabilities Total 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Note $000 $000 $000 $000 Remaining contractual maturities $000 14 13 14 13 39,166 5,628 44,794 36,607 3,248 39,855 - 5,519 5,519 - 13,376 13,376 - 199 199 39,166 24,722 63,888 068 - 5,652 5,652 - 14,308 14,308 - 3,174 3,174 36,607 26,382 62,989 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. 04. Operating segments Operating segments are reported in a manner consistent with The CODM assess the performance of the operating segments the internal reporting provided to the chief operating decision based on a measure of revenue and operating EBITDA (earnings maker. These include items directly attributable to a segment before share based payments, interest, tax, depreciation and as well as those that can be allocated on a reasonable basis. amortisation). The accounting policies adopted for internal Unallocated items comprise mainly corporate assets (primarily reporting to the CODM are consistent with those adopted in the the Company’s headquarters), head office expenses, and financial statements. income tax assets and liabilities. The Board of Directors are identified as the chief operating decision makers (CODM). The Group operates predominantly in Australia, where the Identification of reportable operating segments the Group has staff and operations in Philippines, United 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 Kingdom, Argentina, the United States and Canada in addition to Australia, these geographic operations are considered, based on internal management reporting and the allocation of resources and used by the CODM in assessing performance and in by the Group's CODM, as one geographic segment. majority of online revenues and expenses are incurred. Although determining the allocation of resources (AASB 8 para. 5(b)). The information reported to the CODM is at least on a monthly basis. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Year end 31 December 2020 Online Marketplace Online Payments Total Segment revenue Segment revenue Total segment revenue Segment result Segment profit / (loss) Share based payments Depreciation and amortisation expenses Interest paid Loss before income tax Income tax benefit Loss for year Segment Assets At 31 December 2020 Segment assets Intergroup eliminations Deferred tax assets Intangibles Total assets Segment liabilities At 31 December 2020 Segment liabilities Intergroup eliminations Deferred tax liabilities Total liabilities 069 50,526 50,526 5,868 (192) (4,483) (1,740) (496) - 63,874 (2,973) - - 60,901 8,244 8,244 (75) - (229) (11) (369) 58,770 58,770 5,793 (192) (4,712) (1,751) (862) - 216 (646) 6,768 - - - 70,642 (2,973) 10,965 25,057 6,768 103,691 (67,140) (4,402) (71,542) - - (67,140) 2,973 2,973 - (1,429) (5,957) (74,526) Year end 31 December 2019 Online Marketplace Online Payments Total 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 2019 Segment assets Intergroup eliminations Deferred tax assets Intangibles Total assets Segment liabilities At 31 December 2019 Segment liabilities Intergroup eliminations Deferred tax liabilities Total liabilities 50,446 50,446 1,921 (329) (2,984) (1,392) - 65,405 (2,898) - - 62,507 (66,183) - - 7,563 7,563 96 - (230) (326) - 5,577 - - - 5,577 (4,574) 2,898 - 58,009 58,009 1,825 (329) (3,214) (1,718) 127 (1,591) 70,982 (2,898) 5,128 25,028 98,240 (70,757) 2,898 (443) (66,183) (1,676) (68,302) NOTES TO THE FINANCIAL STATEMENT 05. Revenue The Company’s net revenues result from transaction and other appropriate measure of progress for the completion of the fees generated in its online marketplaces and in providing online performance obligation. The cost-to-cost method is based on escrow services. Revenues are recognised when evidence of the proportion of costs incurred for work performed to date an arrangement exists, the fee is fixed and determinable, no relative to the estimated total contract costs. 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. A customer is billed for the project services when a certain series of milestones have been achieved. A contract asset is recognised for revenue recognised but not yet billed due to the milestone billing arrangement. Once an invoice is issued, the corresponding contract asset is reclassified to trade receivables. A contract liability is recognised if the milestone payment exceeds the revenue recognised to date under the cost-to-cost method. No significant financing components have been identified in the contracts with customers, as the period between the payment and the recognition of revenue (cost-to- Revenue is recognised for the major business activities as cost method) is always less than 12 months. follows: Marketplace Services The Group enters into short-term contracts with customers for marketplace services. Such contracts are entered into before the delivery of the service which is paid in advance of receipt of the service. The performance obligation is the delivery of the service which is recognised by the system controls. The system does not draw fees from the customer until the delivery of the service. Therefore, revenue is recognised at a point in time upon delivery of the service when the system recognizes that the service has completed. No rebates or volume discounts are provided to customers. Enterprise Services The enterprise services revenue stream focuses on projects negotiated with customers to meet their needs on short to long-term contracts. Revenue is recognised when milestones as determined in the contact are completed. Under AASB 15: Revenue from Contracts with Customers, this happens over time. The Group has an enforceable right to payment for work completed to date and therefore, revenue is recognised over time. The Group considers the cost-to-cost method an 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 conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match 070 the grant to the costs it is compensating. Sublease rent Sublease rental income of office space is recognised on a straightline basis over the term of the sub-lease. The Company recognises the right-of-use asset resulting from the head lease. Refer to Note 13. All revenue is stated net of the amount of goods and services tax (GST) and Valued Added Tax (VAT). The timing of revenue recognition is when the products and services are transferred to customers. Sales revenue Marketplace and payment services Payment services Enterprise services Other revenue Interest income Government grants Other Total revenue 2020 $000 47,742 8,244 2,785 58,771 44 1,375 142 1,561 2019 $000 45,171 7,563 5,177 57,911 39 - 59 98 60,332 58,009 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 06. Expenses Loss before income tax benefit includes the following specific net losses and expenses: 2020 $000 20,305 2,030 22,335 6,411 1,237 1,240 931 710 1,028 11,557 9,019 830 860 10,709 223 4,489 - 4,712 161 161 374 1 1,750 2019 $000 21,035 2,331 23,366 5,822 1,171 1,181 675 834 3,081 12,76 8,491 1,198 391 10,080 282 2,909 23 3,214 285 285 1,353 24 195 2 From FY19 lease expenses in respect of office leases have been accounted for in accordance with AASB 16 Leases. The impact is that lease expenses are no longer reflected in the P&L and are brought into account as depreciation on the right of use asset and interest paid on the corresponding lease liability. Employee expenses Wages and salaries (including superannuation) Other employment costs Total employee expenses1 Administrative expenses Hosting Subscriptions Professional fees Insurances Office Expenses Other Total Administrative expenses Marketing related expenses Search marketing Advertising Other marketing costs Total marketing related expenses 071 Depreciation and amortization Plant and equipment Right of use assets 2 Leasehold improvements Total depreciation and amortisation expenses Rental expense relating to operating leases 2 Plant and equipment Total rental expense relating to operating leases Net foreign exchange losses Finance costs Interest expense Interest expense on lease liability2 1 Inclusive of employee expenses included in cost of sales 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. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Other long–term employee benefit obligations Short-term incentive plans Employee benefits payable later than 12 months have been The Group recognises a liability and an expense for bonuses measured at the present value of the estimated future cash payable under short term incentive plans. Short term outflows to be made for those benefits. In determining the incentive plans are based on the achievement of targeted liability, consideration is given to employee wages increases performance levels that may be set at the beginning of each and the probability that the employee may satisfy any vesting financial year. The Group recognises a liability to pay out short requirements. Those cash flows are discounted using market term incentives when contractually obliged based on the yields on national government bonds with terms to maturity achievement of the stated performance levels, or where there that match the expected timing of cash flows attributable to is a past practice that has created a constructive obligation. employee benefits. 07. Income tax The income tax expense or revenue for the period is the tax amount of its assets and liabilities. payable on the current period’s taxable income based on the applicable tax rate for each jurisdiction adjusted by changes Deferred tax is measured at the tax rates that are expected to be in deferred tax assets and liabilities attributable to temporary applied to temporary differences when they reverse, using tax differences and to unused tax losses. rates enacted or substantively enacted at the reporting date. The current income tax charge is calculated on the basis of Deferred tax assets and liabilities are offset if there is a legally the tax laws enacted or substantively enacted at the end of enforceable right to offset current tax liabilities and assets, the reporting period in the countries where the Company’s and they relate to taxes levied by the same tax authority on the subsidiaries operate and generate taxable income. Management same taxable entity, or on different tax entities, but they intend periodically evaluates positions taken in tax returns with respect to settle current tax liabilities and assets on a net basis or their 072 to situations in which applicable tax regulation is subject to tax assets and liabilities will be realised simultaneously. interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. A deferred tax asset is recognised for unused tax losses, tax Deferred tax is recognised in respect of temporary differences that it is probable that future taxable profits will be available 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: 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 credits and deductible temporary differences, to the extent • • • realised. 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 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 judgements about future events. New information may become available that causes the Group to the extent that the Group is able to control the timing of change its judgement regarding the adequacy of existing tax the reversal of the temporary differences and it is probable liabilities; such changes to tax liabilities will impact the tax that they will not reverse in the foreseeable future expense in the period that such a determination is made. 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 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. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT (a) Income tax Current tax Deferred tax Income tax (benefit) Deferred income tax expense included in income tax benefit comprises: Decrease / (Increase) in deferred tax assets (Decrease) / 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 Timing differences not recognized as deferred tax asset Other non-allowable items Income tax (benefit) (c) Deferred tax assets 073 The balance comprises temporary differences attributable to: Amounts recognised in profit or loss: Employee benefits Provision for user disputes & refunds Prepayments Foreign exchange losses Provision for impairment of receivables Audit fees Lease liabilities Future benefit of tax losses Future benefit of foreign tax losses Total amounts recognised in profit or loss Net deferred tax assets Movements: Opening balance at beginning of year Opening balance adjustment upon change in accounting policies – AASB 16 (Debited) / Credited to the profit or loss statement Exchange differences Closing balance at end of year (e) Deferred tax liabilities The balance comprises temporary differences attributable to: Foreign exchange gains Right of use assets 2020 $000 134 (350) (216) (5,885) 5,535 (350) (862) (258) (11) (136) 58 52 - 99 (20) (216) 288 162 (9) 34 1,055 43 6,746 2,370 276 10,965 10,965 5,129 - 5,885 (49) 10,965 - 5,957 2019 $000 107 (234) (127) 333 (567) (234) (1,718) (515) (26) 115 99 31 117 22 30 (127) 303 175 (9) 285 1,063 46 398 2,492 376 5,129 5,129 4,674 788 (333) - 5,129 135 308 FREELANCER LIMITED ANNUAL REPORT 2020Net deferred tax liabilities Movements: Opening balance at beginning of year Opening balance adjustment upon change in accounting policies – AASB 16 (Debited) / Credited to the profit or loss statement Exchange differences 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 FINANCIAL STATEMENT 2020 $000 5,957 443 - 5,535 (21) 5,957 - 87 66 2019 $000 443 246 764 (567) - 443 - 57 66 Freelancer Limited and its wholly-owned Australian entities elected to form an income tax consolidated group as of 12 April 2010. 08. Cash and cash equivalents For cash flow statement presentation purposes, cash and readily convertible to known amounts of cash and which are cash equivalents includes cash on hand, deposits held at subject to an insignificant risk of changes in value, and bank call with banks, other short term highly liquid investments overdrafts. with original maturities of three months or less that are 074 Current Cash at bank and on hand Term deposits Total cash and cash equivalents 2020 $000 31,638 2,703 34,341 2019 $000 31,210 804 32,014 09. Trade and other receivables Trade receivables are recognised initially at fair value and considered indicators that the trade receivable is impaired. subsequently measured at amortised cost using the effective In addition, the trade receivables balances are considered for interest method, less provision for impairment. This provision credit notes that are expected to be raised against individual and includes amounts that are not considered to be recoverable from collective balances. debtors and amounts that are expected to be credited to debtors. Trade receivables are generally due for settlement no more than The Group applies the simplified approach to providing for 30 days from the date of recognition. They are presented as expected credit losses prescribed by AASB 9, which permits the current assets unless collection is not expected for more than 12 use of the lifetime expected loss provision for all trade receivables. months after the reporting date. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the Collectability of trade receivables is reviewed on an ongoing basis. days past due. The loss allowance provision as at 31 December A provision for impairment of trade receivables is established 2020 is determined as follows; the expected credit losses also when there is objective evidence that the Group will not be able incorporate forward-looking information. 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 The "amounts written off" are all due to customers declaring bankruptcy, or term receivables that have now become unrecoverable. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Current Trade receivables Payment gateway receivables Less: provisions for impairment of 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 075 Total trade receivables net of provision for impairment (c) Expected losses 2020 Expected loss rate Gross carrying amount Loss allowing provision 2019 Expected loss rate Gross carrying amount Loss allowing provision 2020 $000 7,125 1,711 (3,518) 5,318 275 5,593 1,003 6,596 3,543 294 (319) 3,518 3,596 891 1,649 2,700 (3,518) 5,318 31 – 60 days $000 95.76% 2,586 2,586 1 – 30 days $000 0.09% 3 3 31 – 60 days $000 31 – 60 days $000 - - - - - - 1 – 30 days $000 31 – 60 days $000 31 – 60 days $000 31 – 60 days $000 1.02% 0.28% 0.45% 82.73% 27 27 2 2 4 4 2,575 2,575 2019 $000 5,725 1,704 (3,543) 3,886 117 4,003 1,103 5,106 2,814 737 (8) 3,543 2,685 769 862 3,113 (3,543) 3,886 31 – 60 days $000 95.86% 2,589 2,589 31 – 60 days $000 84.48% 2,608 2,608 FREELANCER LIMITED ANNUAL REPORT 202010. Other assets Current Prepayments Other Total current other assets Non-current Security deposits Total non-current other assets Total other assets NOTES TO THE FINANCIAL STATEMENT 2020 $000 1,959 71 2,030 517 517 2,547 2019 $000 1,292 17 1,309 592 592 1,901 11. Plant and equipment Plant and equipment is stated at historical cost less The carrying amount of plant and equipment is reviewed depreciation, amortisation and impairment losses. Historical annually by directors to ensure it is not in excess of the cost includes expenditure that is directly attributable to the recoverable amount from these assets. The recoverable acquisition of the items. 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. 076 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 4 - 5 years Office and computer equipment 4 - 5 years Software 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 Gains and losses on disposals are determined by comparing adjusted if appropriate, at the end of each reporting period. proceeds with the carrying amount. These gains or losses are An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater recognised 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 than its estimated recoverable amount. retained earnings. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 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 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 2020 $000 2,566 (2,216) 350 497 (481) 16 - - - 451 (450) 1 367 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: 077 Balance at 1 January 2019 Additions Disposals Depreciation and amortisation Balance at 31 December 2019 Additions Disposals Depreciation and amortisation Balance at 31 December 2020 Office and computer equipment $000 481 217 (245) 453 481 200 - (202) 351 Fixtures and fittings Software Leasehold improvements $000 $000 51 12 (35) 28 51 8 - (21) 15 1 - (1) - 1 - - - - $000 24 - (23) 1 24 - - - 1 2019 $000 2,619 (2,166) 453 527 (499) 28 19 (19) - 768 (767) 1 482 Total $000 557 229 (304) 482 557 208 - (223) 367 12. Intangible assets Goodwill Domain Names Goodwill is initially recorded at the amount by which the Domain names are valued at cost of acquisition. Domain purchase price for a business combination exceeds the fair names are tested for impairment annually or more frequently value attributed to the interest in the net fair value of identifiable if events or changes in circumstances indicate that it might assets, liabilities and contingent liabilities acquired at date of be impaired, either individually or at the cash generating unit acquisition. Goodwill is not amortised. Instead goodwill is tested level. Useful lives are also examined on an annual basis and for impairment annually or more frequently if events or changes adjustments, where applicable, are made on a prospective in circumstances indicate that it might be impaired and is basis. carried at cost less accumulated impairment losses. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Intellectual Property Trademarks Intellectual property is valued at cost of acquisition. Intellectual Trademarks are valued at cost of acquisition and are property is tested for impairment annually or more frequently amortised on a straight-line basis over the period in which the if events or changes in circumstances indicate that it might benefits are expected to be realised. Trademarks are tested be impaired, either individually or at the cash generating unit for impairment where an indicator of impairment exists, either level. Useful lives are also examined on an annual basis and individually or at the cash generating unit level. Useful lives are adjustments, where applicable, are made on a prospective also examined on an annual basis and adjustments, where basis. 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 intellectual property Goodwill Accumulated impairment Carrying value of goodwill Total carrying value of intangible assets 2020 $000 4,938 (28) 4,910 2,198 - 2,198 19,349 - 19,349 26,457 26,429 Reconciliations Reconciliations of the carrying amount of intangible assets at the beginning and end of the current and previous financial year are set out below: Balance at 1 January 2019 Additions Adjustment to goodwiil from aquisition Impairment Amortisation Domain names $000 4,882 - - - - Intellectual property $000 2,198 - - - - Goodwill $000 19,349 - - - - 2019 $000 4,910 (28) 4,882 2,198 - 2,198 19,349 - 19,349 26,429 26,429 Total $000 26,429 - - - - 078 Balance at 31 December 2019 4,882 2,198 19,349 26,429 Additions Impairment Amortisation 28 - - - - - - - - 28 - - Balance at 31 December 2020 4,910 2,198 19,349 26,457 The Directors have determined the useful life of domain names The recoverable amount of the Group’s intangible assets is indefinite and subject to an annual test for impairment of the has been determined by a value-in-use calculation using a fair value of the domain names. The Directors have assessed discounted cash flow model, based on a 12 month projection the recoverability of domain names, intellectual property and period for the Group approved by management and extrapolated goodwill based on value in use calculations. for a further 5 years with a discounted terminal value. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Goodwill and other intangibles are allocated to cash-generating units which are based on the Group’s reporting segments: Online marketplace Online payments Total 2020 $000 14,808 11,649 26,457 2019 $000 14,780 11,649 26,429 The recoverable amount of each cash-generating unit above is extrapolated using a 2% terminal growth rate. The cash flows determined based on value-in-use calculations. Value- in-use is are discounted based on management’s estimate of the time calculated based on the present value of cash flow projections value of money and the Group’s weighted average cost of over a 5 year period with the period extending beyond 5 years 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 15.8% 14.4% Discount Rate 15% 15% Management has based the value-in-use calculations on Discount rates are pre-tax and are adjusted to incorporate budgets for each reporting segment. These budgets use risks associated with a particular segment. historical weighted average growth rates to project revenue. 079 Costs are calculated taking into account historical gross Based on the above, management is satisfied that there are margins as well as estimated weighted average inflation no indicators of impairment to the current carrying value of rates over the period, which are consistent with inflation rates intangible assets. applicable to the locations in which the segments operate. 13. Leases The Group as lessee At inception of a contract, the Group assesses if the contract – fixed lease payments less any lease incentives; contains or is a lease. If there is a lease present, a right- of-use asset and a corresponding lease liability are recognised by the – variable lease payments that depend on an index or Group where the Group is a lessee. However, all contracts that rate, initially measured using the index or rate at the are classified as short-term leases (ie leases with a remaining term of 12 months or less) and leases of low value assets are commencement date; recognised as operating expenses on a straight-line basis over – the amount expected to be payable by the lessee under the term of the lease. residual value guarantees; Initially the lease liability is measured at the present value of – the exercise price of purchase options, if the lessee is the lease payments still to be paid at the commencement reasonably certain to exercise the options; and date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, – payments of penalties for terminating the lease, if the lease the Group uses the incremental borrowing rate. term reflects the exercise of an option to Lease payments included in the measurement of the lease The right-of-use assets comprise the initial measurement of liability is as follows: the corresponding lease liability, any lease payments FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT made at or before the commencement day and any initial Options to Extend or Terminate direct costs. The subsequent measurement of the right- of- use assets is at cost less accumulated depreciation and The options to extend or terminate are contained in several impairment losses. of the Group’s property leases. These clauses provide the Group opportunities to manage leases in order to align with its Right-of-use assets are depreciated over the lease term or strategies. All of the extension or termination options are only useful life of the underlying asset, whichever is the shortest. exercisable by the Group. The extension options or termination Where a lease transfers ownership of the underlying asset included in the calculation of the right-of-use asset. options which were probable to be exercised have been or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. The Group's lease portfolio comprises commercial leases for office property. As at 31 December 2020 these leases had remaining lives ranging from 1 month up to 78 months. (i) AASB 16 related amounts recognised in the balance sheet Right of use assets Leased office property: Opening balance Addition to right-of-use asset Depreciation expense for the year ended Exchange differences Net carrying amount Lease liabilities Current Non – current Total (ii) AASB 16 related amounts recognised in the statement of profit or loss Depreciation charge related to right-of-use assets Interest expense on lease liabilities (under finance costs) (iii) AASB 16 related amounts recognised as cash outflows in the statement of cash Interest expense on lease liabilities (under finance costs) Repayment of lease liabilities 2020 $000 26,964 (12) (4,489) (45) 22,418 5,628 19,094 24,722 2020 $000 4,489 1,751 2020 $000 856 1,751 080 2019 $000 - 29,845 (2,909) 28 26,964 3,248 23,134 26,382 2019 $000 2,909 195 2019 $000 195 3,091 FREELANCER LIMITED ANNUAL REPORT 2020NOTES TO THE FINANCIAL STATEMENT 14. Trade and other payables These amounts represent liabilities for goods and services when they are due. Trade and other payables are presented as provided to the Group and amounts outstanding to users of current liabilities unless payment is not due within 12 months the Company’s websites at the end of financial year which are from the reporting date. unpaid. The amounts are unsecured and are payable as and Current Trade payables Sundry payables and accrued expenses User obligations Total trade and other payables 15. Borrowings 081 Current Working capital loan Payroll protection loan Total borrowings 2020 $000 3,172 800 35,194 39,166 2020 $000 121 165 286 2019 $000 3,155 785 32,677 35,898 2019 $000 121 - 121 The working capital loan has been provided from non- The payroll protection loan has been provided from the US controlling shareholders of Freightlancer Holdings Pty Limited Small Business Administration to support US businesses to provide working capital funding. The loan is unsecured, during COVID-19. The loan is unsecured, interest free and has interest free and has no fixed date of repayment. no fixed date of repayment. If certain conditions are met, this loan will be eligible for forgiveness. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 16. Provisions Provisions are recognised when the Company has a legal A provision for onerous contracts is recognised when the or constructive obligation, as a result of past events, for expected benefits to be derived by the Group from a contract which it is probable that an outflow of economic benefits will are lower than the unavoidable cost of meeting the obligations result, and that outflow can be reliably measured. Provisions under the contract. The provision is stated at the present value recognised represent the best estimate of the amounts of the future net cash outflows expected to be incurred in required to settle the obligation at reporting date. respect of the contract. Current Provision for user disputes and refunds Employee benefits Provision for indirect taxes Provision for penalties* Total current provisions Non-current Make-good provisions Employee benefits Total non-current provisions Total provisions 2020 $000 539 1,390 216 272 2,417 431 327 758 3,175 2019 $000 538 1,265 103 370 2,322 720 310 1,030 3,352 * 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 2020, forty four licences were in place. As part of this process, regulatory penalties may be payable for unlicensed activity (substantially pre- acquisition). The provision represents an estimate of probable penalties. 082 Movements Balance at 1 January 2019 Additional provisions Amounts used Unused amounts reversed Foreign exchange differences Balance at 31 December 2019 Balance at 1 January 2020 Additional provisions Amounts used Unused amounts reversed Foreign exchange differences Balance at 31 December 2020 Provision for User Disputes/ Refunds $000 Provision for Indirect Taxes Employee Benefits Provision for Penalties Provision for Make-good Total Provisions $000 $000 $000 $000 $000 252 270 (353) - (66) 103 103 802 (654) - (35) 216 1,351 864 (409) (244) 13 1,575 1,577 683 (259) (29) (29) 1,716 256 482 (57) (86) (11) 584 584 7 - - (53) 538 398 - - (28) - 370 370 - (14) (52) (32) 272 300 994 - (579) 5 720 720 - - (278) (11) 431 2,557 2,610 (819) (937) (59) 3,352 3,352 1,492 (927) (584) (160) 3,173 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 17. Contract liabilities Refer to Note 5 for the accounting policy on marketplace and payment services revenue recognition policy. Revenue is recognised when these conditions are met. Amounts received in advance of delivery for services Total contract liabilities Current Non-current Total contract liabilities There were no significant changes in the contract liability balances during the 2020 year. 2020 $000 1,133 1,133 586 547 1,133 18. Contributed equity (a) Share capital 083 Ordinary shares Fully paid Total share capital (b) Movements in ordinary share capital Note 2020 Number 2019 Number 18(b) 453,123,619 452,756,722 2020 $000 38,446 38,446 Reconciliation to 31 December 2019 Number of shares Average price Balance at 1 January 2019 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 2019 456,835,488 520,560 (2,961,773) - 452,756,722 $0.71 $0.95 - Reconciliation to 31 December 2020 Number of shares Average price Balance at 1 January 2020 Issue / (cancellation) of ordinary shares: Issue of ESP shares1 Buy-back and cancellation of ESP shares Contributed equity arising from repayment of ESP loans 452,756,722 1,179,001 (812,104) - $0.48 $1.27 - 2019 $000 1,124 1,124 629 495 1,124 2019 $000 38,446 38,446 $000 38,049 - - 340 38,446 $000 38,446 - - - FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Balance at 31 December 2020 453,123,619 38,446 (c) Ordinary shares Ordinary shares have the right to receive dividends as In order to maintain or adjust the capital structure, the Group declared, and, in the event of winding up the Company, to may adjust the amount of dividends paid to shareholders, participate in the proceeds from the sale of all surplus assets return capital to shareholders, issue new shares or sell assets in proportion to the number of and amounts paid up on shares to reduce debt. The Group would look to raise capital when an held. Ordinary shares entitle their holder to one vote, either in opportunity to invest in a business or company was seen as person or by proxy, at a meeting of the Company. value adding relative to the current parent entity’s share price (D) Employee Share Plan (ESP) at the time of the investment. The Group actively pursues additional investments as part of its growth strategy. Information relating to the ESP, including details of shares The capital risk management policy remains unchanged from issued under the plan, is set out in Note 24. the 2019 Annual Report. (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 returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. 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. 084 19. 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 2020 $000 4,711 192 4,903 (254) (320) (574) Total reserves 4,329 (b) Nature and purpose of reserves Share-based payments reserve Foreign currency translation reserve This amount represents the value of the ESP share grants to The foreign currency translation reserve is used to record employees under the Freelancer Employee Share Plan and exchange differences arising from the translation of the other compensation granted in the form of equity. financial statements of its overseas subsidiaries. 2019 $000 4,382 329 4,711 (382) 128 (254) 4,457 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 20. Key management personnel disclosures (a) Directors (b) Other key management personnel The following persons were Directors of Freelancer Limited The following persons also had the authority and responsibility during the financial year: Mr Robert Matthew Barrie – Executive Chairman for planning, directing and controlling the major activities of the Group, directly or indirectly, during the financial year: Mr Darren Nicholas John Williams – Non-Executive Director Mr Neil Leonard Katz – Chief Financial Officer and Company Mr Simon Alvin Clausen – Non-Executive Director Secretary (c) Key management personnel compensation Short-term employee benefits Share based employee benefits Other long-term benefits Total benefits 2020 $000 968 47 56 1,071 2019 $000 949 93 56 1,098 Short-term employee benefits Share based payments These amounts include fees and benefits paid to the Non- These amounts represent the expense related to the Executive Directors as well as all salary, paid leave benefits, participation of KMP in equity-settled schemes as measured fringe benefits and cash bonuses awarded to Executive by the fair value of the options rights and shares granted on Directors and other KMP. grant date. 085 Other long-term benefits Further information in relation to KMP remuneration can be These amounts represent long service leave benefits accruing found in the Remuneration Report, which is included in the during the year, long-term disability benefits and deferred Director’s Report. bonus payments 21. 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-related 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 2020 $000 121 2 29 152 2019 $000 119 2 37 150 FREELANCER LIMITED ANNUAL REPORT 2020 (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 Accounting Services Total remuneration of audit firms other than Hall Chadwick Total auditors’ remuneration NOTES TO THE FINANCIAL STATEMENT 81 14 14 109 261 62 22 104 188 338 22. Contingent liabilities Except for the items listed below, there are no other contingent • included in cash is an amount of $2,608,000 on term liabilities as at 31 December 2020: • • • a collateral amount of USD450,000 (2019: USD450,000) is in place in one of the Group’s PayPal accounts in favour of PayPal Australia Pty Ltd; term deposits of $76,852 (2019: $76,852) are secured for corporate credit card facilities in place; deposits of $1,003,000 (2019: $1,177,000) are held by various credit card processing providers, as security for any contractual compensation arising under these agreements; deposits (31 December 2019: $724,000), which is secured against bank guarantees that have been provided to lessors in respect of premises occupied by the Company in Sydney. • Included in cash is an amount of USD134,000 (2019: USD94,000), which is held as a reserve to satisfy escrow regulatory requirements in respect of credit card transactions. 086 23. Commitments for expenditure Leases in which a significant portion of the risks and rewards (a) Non-cancellable operating services 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 The Group has entered into a commercial agreement for web hosting services with an annual fee commitment for 2 leases are accounted for in accordance with AASB 16 Leases years commencing on 1 January 2020. Fees paid under this and are brought into account as depreciation on the right of agreement are charged to the income statement on a usage use asset and interest paid on the corresponding lease liability. Where the Group acts as lessor in an operating lease arrangement, rental income from operating leases is 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 2020 and may be subject to variation due to accounted for on a straight-line basis over the period of the changes in exchange rates. The amounts are as follows: lease. Lease incentives provided are recognised over the lease term on a straight-line basis. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Less than one year Between one and five years More than five years Total operating lease commitments (b) Other capital commitments 2020 $000 3,900 - - 3,900 2019 $000 4,264 4,264 - 8,528 There were no other capital commitments as at 31 December 2020 24. Share based payments The Group operates an employee share plan. The fair value ESP share. of the effective option over the shares granted under the Company’s Employee Share Plan (ESP) is recognised as an The fair value of share grants issued outside of the ESP is employee benefit expense with a corresponding increase in independently determined based on the value of the shares at equity. The fair value is measured at grant date and recognised over the period during which the employees become grant date less the present value of dividends expected to be distributed between the grant date and the vesting dates. unconditionally entitled to the ESP shares. During the year ended 31 December 2013, the Company The fair value at grant date is independently determined using established a share based payment plan, the Employee Share a Black-Scholes option pricing model that takes into account Plan (ESP) to assist the Company in retaining and attracting the exercise price, the term of the ESP shares, the vesting and current and future employees by providing them with the 087 performance criteria, the impact of dilution, the non-tradeable opportunity to own shares in the Company. Resolutions to nature of the ESP share, the share price at grant date and amend and approve the ESP were passed at the AGM held on expected price volatility of the underlying share, the expected 17 May 2016. dividend yield and the risk-free interest rate for the term of the 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 conditionality 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; – 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 – 40% of ESP shares applied for vesting on the date that is the fourth anniversary of the issue date of the ESP shares. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT • Eligible Employees who accept an invitation (ESP • ESP Participants will continue to have the right to participate Participants) may be offered an interest free loan from the in dividends paid by the Company despite some or all of Company to finance the whole of the purchase of the ESP their ESP shares not having vested yet or being subject to shares they are invited to apply for (ESP Loan). ESP Loans an ESP Loan. If an ESP Loan has been made to the ESP will have a term of 4 years and become repayable in full on Participant, then any dividend due must first be applied to 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 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; Eligible Employee is a good leaver (as defined in • the Company may buy-back at the issue price any ESP the ESP); or shares which: › that date of cessation, if the Eligible Employee is a – have not vested, or are incapable of vesting at any time bad leaver (as defined in the ESP). (including as a result of the ESP Participant failing to • if the ESP Participant does not repay the outstanding ESP – meet any key performance indicators on which vesting Loan, or it notifies the Company that it cannot, then such of ESP shares is conditional); or 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- • • › the ESP Participant ceasing to be an Eligible Employee (unless the Board, in its sole and absolute discretion determines 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; 088 on the death or permanent disability of an ESP Participant, all ESP shares held by the ESP Participant or their estate will immediately 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 residents, that did not require a disclosure document under outstanding ESP Loan; 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 • • the rules of the ESP and any amendment to the rules of the ESP must be in accordance with the Listing Rules and the Corporations Act; if, while the Company’s shares are traded on the ASX or any other stock exchange, there is any inconsistency between or more of the maximum number of Shares that may the terms of the ESP and the Listing Rules, the Listing Rules be issued under the ESP (if applicable), the subscription will prevail; and 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 conferred 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; 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 2020NOTES TO THE FINANCIAL STATEMENT (a) ESP share grants Set out below are summaries of ESP shares granted, issued and that have balances or movement during the year under the plan: 089 Grant date 2020 24 November 2015 7 March 2016 26 April 2016 27 July 2016 4 November 2016 8 December 2017 2 March 2018 18 October 2018 12 November 2018 20 February 2019 6 May 2019 19 February 2020 2 March 2020 30 July 2020 11 December 2020 Total 2019 20 February 2015 10 April 2015 3 June 2015 12 August 2015 15 October 2015 24 November 2015 21 December 2015 7 March 2016 26 April 2016 22 June 2016 27 July 2016 4 November 2016 30 October 2017 8 December 2017 19 December 2017 2 March 2018 18 October 2018 12 November 2018 20 February 2019 6 May 2019 Total Issue price 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 $1.76 $1.53 $1.38 $1.59 $1.34 $0.52 $0.40 $0.53 $0.65 $0.53 $0.65 $0.47 $0.45 $0.53 $0.52 $0.66 $1.01 $1.08 $1.40 $1.45 $1.76 $1.76 $1.53 $1.38 $1.55 $1.59 $1.34 $0.48 $0.52 $0.52 $0.40 $0.53 $0.65 $0.53 $0.65 50,000 30,000 50,000 440,539 100,000 505,852 15,150 980,000 100,000 407,226 113,334 - - - - - - - - - - - - - - - 640,539 200,000 300,000 38,462 - - - - - - - - - - - - - - - (50,000) (30,000) (50,000) (440,539) - - - - - 100,000 - - - - - - - - - 100,000 (33,081) (15,150) 472,771 120,978 351,793 - - - (180,000) 800,000 560,000 240,000 - - 100,000 70,000 407,226 366,504 (13,334) 100,000 90,000 640,539 640,539 200,000 200,000 300,000 300,000 - - - - 38,462 - 38,462 30,000 40,722 10,000 - - - 2,792,101 1,179,001 - (812,104) 3,158,998 2,348,021 810,977 940,000 200,000 150,000 560,000 200,000 75,000 100,000 30,000 50,000 - 440,539 330,000 - 756,007 825,000 15,150 1,000,000 100,000 - - (25,000) 50,000 - - - - - - 30,000 50,000 - - - - - - - - 7,500 12,500 - - - - - - 50,000 - 22,500 37,500 - (425,000) (515,000) (200,000) (150,000) (560,000) (200,000) (100,000) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 440,539 110,135 330,404 (230,000) 100,000 40,000 60,000 - - - - (78,382) (171,773) 505,852 270,431 235,421 (15,000) (810,000) - - - - 407,226 113,334 (20,000) - - - - - - - - - 15,150 - - 980,000 902,000 100,000 90,000 407,226 407,226 113,334 113,334 - 15,150 78,000 10,000 - - 5,771,696 520,560 (538,382) (2,961,773) 2,792,101 1,953,126 838,975 FREELANCER LIMITED ANNUAL REPORT 2020NOTES TO THE FINANCIAL STATEMENT All Eligible Employees who accepted an offer of ESP shares granted the participants an option to the ESP shares due to the were given an interest free loan from the Company to finance ESP Loans being non-recourse. As such, this arrangement is the whole of the purchase of the ESP shares they were invited accounted for under AASB 2. to apply for (ESP Loan). The assessed weighted average fair value at grant date of The ESP Loans are provided to participants on a non-recourse the effective share options granted during the financial year basis and upon vesting must be repaid in order to remove is $0.19 per option (2019: $0.27). Options were priced using a trading restrictions on vested ESP shares. The term of the Black-Scholes option pricing model that takes into account the ESP Loan is four years; however, participants may forfeit their exercise price, the term of the option, the impact of dilution, ESP shares if they do not repay the ESP Loan or leave the the share price at grant date and expected price volatility of Company. As the ESP removes the risk to participants from the underlying share, the expected dividend yield and the risk decreases in the share price by limiting the maximum loan free interest rate for the term of the option. The expected amount repayable to the value of the ESP shares disposed price volatility of the Company’s shares is based on the and waiving the ESP Loan should the participant forfeit their historical volatility of ASX listed companies considered to be ESP shares, whilst still allowing participants the rewards comparable to Freelancer Limited. of any increase in share price, the Company has effectively 25. Reated party transactions (a) Parent entity (d) Transactions with related parties Freelancer Limited is the parent entity and ultimate Receivable from and payable to related parties controlling entity. There were no receivables from or payable to related parties at reporting date in relation to transactions with related parties (b) Interests in controlled entities detailed above. 090 Interests in subsidiaries are set out in Note 28. Loans to / from related parties There were no loans to or from related parties (c) Transactions with key management personnel at the reporting date. Disclosures relating to key management personnel are Terms and conditions set out in Note 20 and the Remuneration Report. All transactions were made on normal commercial terms and conditions and at market rates. 26. Parent Entity Information The financial information for the parent entity, Freelancer Freelancer Limited (as the head entity) and its wholly-owned Limited has been prepared on the same basis as the Australian entities (as members of the Freelancer income consolidated financial statements, except as set out below. tax consolidated group) account for their own current and Investments in subsidiaries deferred tax amounts. These tax amounts are measured as if each entity in the income tax consolidated group continues to Investments in subsidiaries are accounted for at cost in the be a standalone taxpayer in its own right. financial statements of Freelancer Limited. Investments in subsidiaries are tested for impairment whenever changes in In addition to its own current and deferred tax amounts, events or circumstances indicate that the carrying amount Freelancer Limited also recognises the current tax liabilities (or may not be recoverable. assets) assumed from its wholly-owned entities in the income tax consolidated group. Income tax consolidation legislation Freelancer Limited and its wholly-owned Australian entities have elected to form an income tax consolidated group. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 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 2020 $000 (861) (861) 9,244 32,713 41,957 5,895 5,895 36,062 38,446 4,904 (7,288) 36,062 2019 $000 (655) (655) 3,619 33,224 36,843 112 112 36,731 38,446 4,712 (6,427) 36,731 The parent entity had no contingent liabilities at 31 December Significant accounting policies 2020 and 31 December 2019. Capital commitments The accounting policies of the parent entity are consistent with those of the Group, except for investments in subsidiaries which are accounted for at cost, less any impairment. 091 The parent entity had no capital commitments as at 31 December 2020 and 31 December 2019. 27. Business Combinations Business combinations occur where an acquirer obtains initial recognition, contingent consideration classified as equity control over one or more businesses. is not remeasured and its subsequent settlement is accounted A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exceptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of profit or loss and comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 28. 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 33: 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 Freightlancer Holdings Pty Ltd ** Freightlancer Technology Pty Ltd ** Freightlancer Pty Ltd ** Freelancer Networks (Canada), Inc. Freelancer Outsourcing, Inc. Canadian Payments, 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. * Freightlancer, Inc. ** * Escrow.com group ** Freightlancer group Country of incorportation Percentage Owned (%) 2020 Percentage Owned (%) 2019 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Canada Canada Canada Singapore Switzerland Switzerland India Philippines United Kingdom United Kingdom China United States United States United States United States United States United States 100 100 100 100 100 100 100 100 100 100 50 50 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 50 50 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 092 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 29. Fair value measurements All assets and liabilities are recorded at their fair value. 30. Events occurring after the reporting date There are no other matters or circumstances that have arisen • the aggregated entity’s operations in the future financial since 31 December 2020 that have significantly affected, or years, or may significantly affect: • • the results of those operations in future financial years, or the aggregated entity’s state of affairs in the future financial affairs. 31. Reconciliation of loss after tax to net cash flow from operating activities 093 Loss for the year Non-cash items in operating loss: Depreciation and amortisation Share based payments expense Net exchange differences Changes in operating assets and liabilities: (Increase) / Decrease in trade and other receivables Decrease / (Increase) in deferred tax assets (Increase) in other assets Increase in trade and other creditors (Decrease) / Increase in provision for income tax Increase in deferred tax liabilities Increase in provisions for employee benefits (Decrease) / Increase in other provisions Net cash inflow / (outflow) from operating activities Non cash information During the period, the group recognised $895K of interest charge relating to rent free period under AASB 16: Leases. 2020 $000 2019 $000 4,712 192 (1,439) (501) (5,794) (647) 6,355 28 5,540 142 (29) 7,913 3,214 329 (196) 152 333 (554) 573 (13) (564) 224 149 2,056 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 32. Earnings per share (EPS) Basic earnings per share Diluted earnings per share Basic earnings per share is calculated by dividing: Diluted earnings per share adjusts the figures used in the • the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, determination of basic earnings per share to take into account: • by the weighted average number of ordinary shares and outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and • the weighted average number of shares assumed to have excluding treasury shares. been issued for no consideration in relation to dilutive potential ordinary 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: 2020 Cents (0.14) (0.14) (0.14) (0.14) $000 2019 Cents (0.35) (0.35) (0.35) (0.35) $000 (646) (1,591) 094 Loss attributable to the ordinary equity holders of the Company (646) (1,591) 2020 Shares 2019 Shares (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used in calculating basic earnings per share 449,964,621 449,827,061 Adjustments for calculation of ordinary shares used in calculating diluted earnings per share: ESP shares Share grants 3,005,447 4,961,048 - - Weighted average number of ordinary shares used in calculating diluted earnings per share 452,970,068 454,788,109 (e) Information on the classification of securities ESP shares and share grants ESP shares granted to employees under the ESP and shares which they are dilutive. The ESP shares and share grants have granted to employees outside of the ESP are considered to not been included in the determination of basic earnings per be potential ordinary shares and have been included in the share. Details relating to the ESP shares are set out in Note 24. determination of diluted earnings per share to the extent to FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT 33. Other significant accounting policies (a) Principles of consolidation The consolidated financial statements incorporate all of the recoverable from, or payable to, the taxation authority are assets, liabilities and results of Freelancer Limited and all presented as operating cash flows included in receipts from subsidiaries. Subsidiaries are all entities over which the Group customers or payments to suppliers. has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with Commitments and contingencies are disclosed net of the the entity and has the ability to affect those returns through amount of GST and VAT recoverable from, or payable to, the its power to direct the activities of the entity. A list of the relevant taxation authority. subsidiaries is provided in Note 28. (c) Research & development The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from Costs relating to research and development of new software the date on which control is obtained by the Group. The products are expensed as incurred until technological consolidation of a subsidiary is discontinued from the date feasibility in the form of a working model has been that control ceases. Intercompany transactions, balances and established. At such time costs may be capitalised, subject unrealised gains or losses on transactions between group to recoverability. Software development costs incurred entities are fully eliminated on consolidation. Accounting subsequent to the establishment of technological feasibility policies of subsidiaries have been changed and adjustments have not been significant, and the Group has not capitalised made where necessary to ensure uniformity of the accounting any software development costs to date. policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or (d) Foreign currency transactions and balances indirectly, to the Group are presented as “non-controlling Functional and presentation currency 095 interests”. The Group initially recognises non-controlling The functional currency of each of the Group entities is interests that are present ownership interests in subsidiaries measured using the currency of the primary economic and are entitled to a proportionate share of the subsidiary’s environment in which that entity operates. The consolidated net assets on liquidation at either fair value or at the non- financial statements are presented in Australian dollars, which controlling interests’ proportionate share of the subsidiary’s is the parent entity’s functional and presentation currency. net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each Transactions and balances component of other comprehensive income. Non-controlling interests are shown separately within the equity section Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the of the statement of financial position and statement of transaction. Foreign currency monetary items are translated at comprehensive income. (b) Goods and Services Tax (GST) and Valued Added Tax (VAT) the period-end exchange rate. Non-monetary items measured at historical 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. Revenues, expenses and assets are recognised net of the amount of associated GST and VAT, except where the amount Exchange differences arising on the translation of monetary of GST and VAT incurred is not recoverable from the relevant items are recognised in the profit or loss, except where taxation authority. In these circumstances, the GST and VAT is recognised as part of the cost of acquisition of the asset or as deferred in equity as a qualifying cash flow or net investment hedge. 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 Exchange differences arising on the translation of non- monetary items are recognised directly in other comprehensive payable to, the relevant taxation authority is included with other income to the extent that the underlying gain or loss is receivables or payables in the statement of financial position. recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. 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 FREELANCER LIMITED ANNUAL REPORT 2020 NOTES TO THE FINANCIAL STATEMENT Group companies (g) Critical accounting estimates and judgments The financial results and position of foreign operations whose functional currency is different from the Group’s presentation The directors evaluate estimates and judgements incorporated currency is translated as follows: into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable • Assets and liabilities are translated at period end expectation of future events and are based on current trends exchange rates prevailing at that reporting date. and economic data, obtained both externally and within the Group. The resulting accounting estimates will, by definition, • Income and expenses are translated at average exchange seldom equal the related actual results. The estimates and rates for the period. judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities • Retained earnings are translated at the exchange rates within the next financial year are discussed below. prevailing at the date of the transaction. Exchange differences arising on translation of foreign Following the guidance in AASB 3: Business Combinations, operations with functional currencies other than Australian the Group has made assumptions and estimates to determine dollars are recognised in other comprehensive income and the purchase price of businesses acquired as well as its included in the foreign currency translation reserve in the allocation to acquired assets and liabilities. To do so, the Group Business Combinations statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. (e) Impairment of assets At the end of each reporting date, the Group reviews the carrying values of its tangible and intangible assets is required to determine at the acquisition date fair value of the identifiable net assets acquired, including intangible assets such as brand, customer relationships and liabilities assumed. Goodwill is measured as the excess of the fair value of the consideration transferred including the recognised amount of any non-controlling interest over the net recognised amount of the identifiable assets and liabilities. 096 to determine whether there is any indication that those The assumptions and estimates made by the Group have assets have been impaired. If such an indication exists, an impact on the asset and liability amounts recorded in the the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset's carrying value over its recoverable amount is recognised immediately in the profit or loss. 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 assets acquired will have an impact on the Group’s future profit or loss. Impairment testing is performed annually for goodwill and Impairment of intangible assets intangible assets with indefinite lives. The Group assesses impairment at each reporting date by Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. (f) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group has retrospectively applied an accounting policy, made a retrospective restatement or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed. evaluating 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 performed in assessing recoverable amounts incorporate a number of key estimates. During the year ended 31 December 2020, no impairment has been recognised in respect of intangible assets. The Group assessed recoverability of goodwill based on the present value of cash flow projections over a 6 year period. Should any of the intangible assets fail to perform, an impairment loss would be recognised up to the maximum carrying value of intangible assets at 31 December 2020 of $26,457,000 (2019: $26,429,000). Provisions for doubtful accounts and transaction losses Provision is made in respect of the Group’s best estimate of doubtful accounts and transaction losses based on historical experience. FREELANCER LIMITED ANNUAL REPORT 2020NOTES TO THE FINANCIAL STATEMENT Share based payments The Group measures the cost of equity settled transactions The Group has determined that trust cash is not a resource with employees by reference to the fair value of the equity controlled by the Group, nor does the Group derive any instruments at the date at which they are granted. The economic benefit from these user funds, and therefore the fair value is determined with the assistance of an external Group does not have the risks and rewards of ownership of valuation with the assumptions detailed in Note 24. The the funds. Consequently, trust assets are not recognised as accounting estimates and assumptions relating to equity an asset in the Group’s financial statements, and neither is settled share based payments would have no impact on the the corresponding trust liability recognised as a liability in the carrying amounts of assets and liabilities within the next Group’s financial statements. annual reporting period but may impact expenses and equity. (h) Changes in accounting policies Lease term of contracts with renewal options The Group determines the lease term as the non-cancellable The accounting policies applied by the Group in this term of the lease, together with any periods covered by an consolidated financial report are the same as those applied option to extend the lease if it is reasonably certain to be by the Group in its consolidated financial report for the year exercised, or any periods covered by an option to terminate the ended 31 December 2019. lease, if it is reasonably certain not to be exercised. After initial recognition, the Group reassesses the lease term if there is a (i) New Accounting Standards for application significant event or change in circumstances that is within its in future periods control and affects its ability to exercise (or not to exercise) the option to renew. Income taxes A number of new accounting standards (including amendments and interpretations) have been issued but were not effective in FY20. The Group has not elected to early adopt The Group is subject to income taxes in Australia and any of these new accounting standards in these financial jurisdictions where it has foreign operations. Judgment is required in determining the worldwide provision for income taxes. There are transactions and calculations undertaken statements. Certain amendments were made to the definition of materiality, which were applicable to AASB 101 Presentation of Financial Statements and AASB 108 Accounting 097 during the ordinary course of business for which the ultimate Policies, Changes in Accounting Estimates and Errors and tax determination is uncertain. The Group estimates its tax consequential amendments to other AASBs, which: i) use a liabilities based on the Group’s understanding of the tax law. consistent definition of materiality throughout AASBs and 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. the Conceptual Framework for Financial Reporting; ii) clarify when information is material; and iii) incorporate some of the guidance in AASB 101 about immaterial information. These amendments are in issue but are applicable to the Group in future financial periods. 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 deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits. Trust assets and liabilities The Group’s Online Payments segment, namely the business of Escrow.com, is a regulated entity that holds funds on behalf of its users in trust bank accounts. At 31 December 2020 the cash balance in trust amounted to A$36,181,757 (2019: A$40,222,000), which has a corresponding liability of the same amount owing to its users. FREELANCER LIMITED ANNUAL REPORT 2020 DIRECTORS' DECLARATION DIRECTORS' DECLARATION In the Directors’ opinion: (a) the Financial Statements and notes of the consolidated entity set out on pages 59 to 97 are 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 2020 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 International Financial Reporting Standards as issued by the International Accounting Standards Board; 098 (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 2020. This declaration is made in accordance with a resolution of the Directors. On behalf of the directors Matt Barrie Chairman 23 February 2021 FREELANCER LIMITED ANNUAL REPORT 2020 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 2020, 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 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 2020 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001 ii. 099 (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 confirm that the independence declaration required by the Corporations Act 2001 has been given to the directors of the group. 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au FREELANCER LIMITED ANNUAL REPORT 2020 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 the fulfilling projects and contests on therefore a Freelancer.com website and significant part of financial reporting processes are heavily reliant on IT systems with automated processes and controls over the capturing, valuing and recording of transactions. Similarly, other IT platforms of includes the business Escrow.Com and Warrior Forum are also heavily reliant on IT systems. This is a key audit matter because of the: • Complex IT environment supporting the 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 12 – Intangible Assets and Note 2 (g) - Critical Accounting Estimates and Judgements The Group has recognised intangible assets of $26.5 million at 31 December 2020 resulting from business combinations and asset acquisitions. The assessment of impairment of the Group’s intangible asset incorporated significant judgement in respect of factors such as general market conditions, discount rates, revenue growth and cost assumptions. balances 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. 100 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. 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. We involved our valuation specialists to 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. 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 2020INDEPENDENT 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 2020, 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. 101 Responsibilities of the Directors 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 Responsibilities for the Audit of the Financial Report 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 from error, as intentional omissions, involve collusion, fraud may misrepresentations, or the override of internal control forgery, 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. FREELANCER LIMITED ANNUAL REPORT 2020INDEPENDENT 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 – – – – 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. 102 FREELANCER LIMITED ANNUAL REPORT 2020INDEPENDENT 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 54 to 57 of the directors’ report for the year ended 31 December 2020. 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 2020 complies with s 300A of the Corporations Act 2001. 103 Hall Chadwick (NSW) Level 40, 2 Park Street Sydney NSW 2000 SANDEEP KUMAR Partner Dated: 23 February 2021 FREELANCER LIMITED ANNUAL REPORT 2020104 FREELANCER LIMITED ANNUAL REPORT 2020ADDITIONAL ASX INFORMATION ADDITIONAL ASX INFORMATION Shareholder information Substantial shareholders Additional information required by the Australian Securities The names of substantial shareholders who have notified the Exchange Limited Listing Rules and not disclosed elsewhere in Company in accordance with section 671B of the Corporations this report. This additional information was applicable as at 31 Act 2001 are: March 2021. Robert Matthew Barrie1 Simon Clausen and Startive Holdings Limited and its related bodies1 1 Includes a relevant interest in 3,158,998 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. Top 20 Shareholders as at 31 March 2021 Number of Shares 197,161,429 163,658,998 Rank Name Number of ordinary shares held % of ordinary shares held 105 1 2 3 4 5 8 7 8 9 10 11 12 13 14 15 16 17 18 19 20 MATT BARRIE HSBC CUSTODY NOMINEES CITICORP NOMINEES PTY LIMITED MR DARREN WILLIAMS BNP PARIBAS NOMS (NZ) LTD J P MORGAN NOMINEES AUSTRALIA BNP PARIBAS NOMINEES PTY LTD CS THIRD NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD 3RD WAVE INVESTORS PTY LTD UBS NOMINEES PTY LTD MRS RIKA WESTWOOD MR NICHOLAS PETER DE JONG CUSTODIAL SERVICES LIMITED MR RODNEY JOHN SELLICK MR NEIL LEONARD KATZ INFILSEC PTY LTD MR RAM SHANKER KANGATHARAN MR GREGORY SEGAL DUNRAY NOMINEES PTY LTD Total Top 20 Total Remaining Total of Securities 191,435,150 104,436,514 62,711,108 10,605,660 8,765,331 7,218,774 5,234,724 3,858,803 3,337,905 2,600,000 2,263,761 1,800,000 1,501,849 1,236,253 1,109,833 995,539 978,727 972,000 800,000 800,000 412,661,931 40,461,688 453,123,619 42.2% 23.0% 13.8% 2.3% 1.9% 1.6% 1.2% 0.9% 0.7% 0.6% 0.5% 0.4% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 91.1% 8.9% FREELANCER LIMITED ANNUAL REPORT 2020 Distribution of ordinary shareholders as at 31 March 2021 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-999,999,999 1,000,001-9,999,999,999 Totals ADDITIONAL ASX INFORMATION Number of shareholders Number of Shares 537 890 304 445 81 15 2,272 312,410 2,465,683 2,379,204 14,413,774 25,436,883 408,115,665 453,123,619 Restricted securities as at 31 March 2021 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 Number of Shares Quoted ESP shares Unquoted ESP shares Various dates ending no later than 5 May 2023 Various dates ending no later than 10 December 2024 Total shares subjected to trading restrictions 1,879,997 1,279,001 3,158,998 Voting Rights On-market Buy Back The voting rights attaching to ordinary shares, set out in the There is no current on-market buy back. Company’s Constitution are: 106 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. FREELANCER LIMITED ANNUAL REPORT 2020 CORPORATE DIRECTORY Corporate Directory 107 Company Directors Registered Office Mr Robert Matthew Barrie Level 37 Grosvenor Place — Chairman and Chief Executive Officer 225 George Street Sydney NSW 2000 Mr Darren Nicholas John Williams Telephone: +61 (02) 8599 2700 — Non-Executive Director Mr Simon Alvin Clausen — Share Registry Non-Executive Director Boardroom Limited Company Secretary Mr Neil Leonard Katz Level 12 225 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 2020

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