Freelancer Limited Annual Report 2021

Plain-text annual report

Escrow.com is where the metaverse is bought and sold 2 0 2 1 A N N U A L R E P O R T A C N 1 4 1 9 5 9 0 4 2 INDEX FREELANCER LIMITED ANNUAL REPORT INDEX Index PAGE CONTENTS 002 Chairman’s Letter 052 Directors’ Report 056 Review of Results and Operations 096 Consolidated Statement of Profit or Loss and Other Comprehensive Income 001 097 Consolidated Statement of Financial Position 098 Consolidated Statement of Changes in Equity 099 Consolidated Statement of Cash Flows 100 Notes to the Financial Statement 142 Directors' Declaration 144 Independent Auditor's Report 150 Additional ASX Information 152 Corporate Directory FREELANCER LIMITED ANNUAL REPORT2021CHAIRMAN'S LETTER Chairman’s Letter 002 Dear Shareholders In 2021 Freelancer Limited delivered an all-time record Operating cash flow for the year was $2.6 million. Gross Payment Volume of $1,259.7 million (up 41.3% on pcp) or US$943.9 million (up 52.6% on pcp). By segment, The group ended the year with cash & cash equivalents on Freelancer GMV was $134.5m, down 5.2% on pcp. Escrow December 31 of $30.3 million, down $4m on 31 Dec 2020, had a great year achieving an all-time record GPV of of which this $4m was used for the acquisition of Loadshift, $1,079m, up 54.3% on pcp (US$808.3m, up 66.3%). Australia’s largest heavy haulage freight marketplace. Revenue for the full year was $57.4m (down 2.3% on pcp) or Escrow also ended the quarter with off balance US$43.1m (up 6.4%). Freelancer revenue was $46.1m down 8.8% sheet cash of US$47.0 million. on pcp (US$34.6m, down 0.5%), while Escrow achieved all-time record revenue of $11.3m up 37.3% on pcp (US$8.5m, up 48.6%). Group operating EBITDA was trending to break- even at ($2.7m) as was NPAT at ($2.3m). Escrow In Australian dollars, FX was a headwind of -8.9% in the was profitable in FY21 with EBITDA of $1.7m. year as the Australian dollar appreciated against the USD from an average of 0.6903 to an average of 0.7516. A detailed analysis of the activities of the group are provided Approximately 74% of group revenue is USD and 6% is AUD. in the Review of Operations in the Directors’ Report. FREELANCER LIMITED ANNUAL REPORTCHAIRMAN'S LETTER 003 2021CHAIRMAN'S LETTER Freelancer First of all I want to say that I have never been happier for the U.S. Centers for Disease Control and Prevention, than where we are now with the product. We have the National Institutes of Health, the U.S. Department of paid down a significant amount of technical debt over Commerce, the U.S. Department of Energy, and the U.S. Bureau the last number of years and the pace and quality of of Reclamation. Funding for this program expanded from new product features has improved significantly. US$25m to US$175m in 4Q21. The recent award of a $400,000 challenge for a data science challenge analysing maternal We started the year with the best GMV growth since IPO health data for the National Institute of Health to twelve teams in 1Q21 (US$25.9m, up 23.6% on pcp) however revenue that included Columbia University, Washington University and ended the year flat in US dollar terms which was a the IBM Data Science and AI Elite team submitting solutions disappointment. Macroeconomically the northern hemisphere such as Structural Equation Model Identifies Causal Pathways summer was pronounced as people took the opportunity Between Social Determinants of Maternal Health, Biomarkers to enjoy their first lockdown free summer in two years. of Allostatic Load, and Hypertensive Disorders of Pregnancy In 2020 we did not see the usual summer seasonality among U.S. Racial Groups demonstrates that Freelancer while in 2021 it was pronounced more than usual. scales from the smallest consumer job through to highly sophisticated work in challenging skill areas for high end clients. Operationally we updated our predictive LTV (long term value) model we use for the acquisition of new clients that Other customer wins of note include five MSAs with global we used to feed data back to the paid advertising platforms technology & professional services business process and it worked a little too well in terms of profitability targets, outsourcing firms. With a focus on activation, we expanded a cutting advertising spend 38% in the second half. Bringing global chemicals company’s usage over 400% from Singapore the spend back up under the new, higher profitability targets to India, China, Norway, and Germany. On the bidding front we took longer than expected- we could have done better. won a formal, rigorous RFP for a global leader with one of the world’s most valuable brands in the FMCG space for their US- In November we strengthened the team by hiring Hector based contingent worker program and are working through the 004 Perez-Nieto as Director of Marketing (formerly Head of paperwork. At the same time, we bid on another formal, rigorous Digital, Mobisuper). Hector is now in charge of all customer RFP for a trillion dollar market capitalisation technology company acquisition and has made significant progress through 1Q22. to create an agile, elastic business model using freelancers and Our focus for FY22 will be in three major areas. Firstly, creative & marketing software companies to engage specialist improvising the visual design, responsiveness & UI/UX freelancers to augment a key business unit and working which has now been enabled through the new unified front- through a draft Scope of Work as of the time of writing this. completed vendor onboarding with one of the world’s largest end architecture. Secondly enhancements in new product development in payments, enterprise features, matchmaking and Many in the company marvel at some of the things we are doing collaboration. The third is to continue to improve the trust and in this division. For a global computer & printer company through safety of the platform through enhancing the reputation of high Freelancer Global Fleet we’ve built a whole virtual field services quality freelancers on the platform and weeding out bad actors. division including at current count 66 field service technicians, I’m personally excited about these improvements as they will Mohammad (our Technical Operations Manager) recently gave be highly visible and deliver a lot of value to our customers. a company wide presentation on where we are today and where in-country management, quality assurance and training. Mas Freelancer Enterprise this engagement is going- it’s a pretty phenomenal testament to the scale and scope of what can be achieved with Freelancer. The Freelancer Enterprise division finished the year strongly Escrow.com with GMV growing at 164% on pcp. Enterprise GMV is now 3% of the total GMV of the platform and that share is growing. Escrow had a breakout year, achieving an all-time record GPV of $1.079 billion up 54.3% (US$808.3m up 65.3% on The division is working on strategic projects at scale, with pcp), revenue of $11.3m up 37.3% (US$8.5m, up 48.6%) and notable public examples being the Deloitte MyGigs engagement was profitable with EBITDA of $1.7 million (US$1.2m). and servicing the US Government through the NASA NOIS2 contract. Through NASA, Freelancer has provided services FREELANCER LIMITED ANNUAL REPORTCHAIRMAN'S LETTER Conclusion Escrow has a unique position as the world’s largest online Last year was transformative for all parts of the group. escrow company, facilitating high value payments in the growing For the first time the group GMV surpassed $1 billion segment of online marketplaces. Escrow is transforming the and did so with over 50% growing on pcp in USD. way that marketplaces & merchants complete transactions across a variety of high value asset classes by enabling them for There was one exception- the consumer division of the first time to take payments online. Most car marketplaces Freelancer could have done better. We had a great first today are simply advertising platforms, and many would be quarter but then had a challenging second half on the surprised to know that these platforms don’t know when a car customer acquisition front. We have new leadership in that is sold- they make an assumption that the car is sold when the regard under Hector and he is already hitting goals. listing isn’t renewed, but they have no idea whether the car sold through the marketplace or whether from the sign in the window. We have many company-making irons in the fire with the They also have very little information, in some circumstances enterprise division and volume is growing very rapidly and no information at all about the buyer and little opportunity to starting to become a meaningful percent of global volume. upsell products and services like snow tyres and financing. Escrow.com had a standout year with over $1 billion in Escrow now powers the payments for eBay Motors and GMV, almost 50% year on year revenue growth in the Watches in the United States and is achieving many wins in dominant operating currency and at the same time achieving the automotive space. We will shortly be announcing that profitability. Payments businesses are raising venture capital we have gone into production with a major North American achieving valuations at multiples of the current group market automotive marketplace with a world first value proposition. capitalisation with a fraction of these achievements. Loadshift & Freightlancer The freight group is just getting going and it is down to product & operations to take advantage of about $400m of The freight division experienced expansion this year notional load volume being posted this calendar year. We with Freightlancer’s May 2021 acquisition of Loadshift, expect that commencing 2H22 that the product will be in 005 Australia’s largest heavy haulage freight marketplace. At a position where we will start to see the movement from the same time the division received a $3.7m investment a classified membership model to a marketplace model. from Wes Maas, CEO and founder of Maas Group Holdings, Bryndis Hendrikson has been promoted to Vice President a diversified industrials group and Tom Cavanagh, CEO of Managed Services and is in the trenches building the & founder of EMS Group (now a division of ASX:MGH), a operations team to make it happen. She has been with the specialist in machinery hire, sales, repairs and rebuilds to company for a decade and done a phenomenal job with support underground mining and tunnelling, and others. Recruiter, which is almost the identical function for Freelancer. Collectively 83,290 requests for transport passed through Overall there are lots of moving parts in the business but the marketplace in the calendar year (up 18.6% on pcp) all divisions are market leading, broad, horizontal service representing 118,660,830 km of freight (up 19.7% pcp), with a offerings that consumers to large enterprises require as notional Gross Load Value of approximately $326 million. On part of their everyday business. We’re probably doing too an average weekday more freight is posted on the combined many things but working hard on having all the pistons entities than the distance from the earth to the moon. fire at once. When the engine gets going, however, I think it will take quite a few people by surprise Early in 1Q22 we successfully launched Freightlancer on the Freelancer Enterprise stack and are in the process of merging Loadshift and Freightlancer, moving from a classified membership model to a marketplace model. There is a lot of upside in this business, and we are heads down with product, engineering & operations to make it start to happen in the second half of the year. Regards, Matt Barrie Chairman 11 April 2022 FREELANCER LIMITED ANNUAL REPORT2021 MARKETPLACE STATISTICS 57M+ 006 TOTAL REGISTERED USERS FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 60 56 52 48 44 40 36 32 28 24 20 16 12 8 4 0 FREELANCER LIMITED ANNUAL REPORT21M+ TOTAL JOBS POSTED MARKETPLACE STATISTICS 007 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 FY21 FREELANCER LIMITED ANNUAL REPORT2021ABOUT FREELANCER Freelancer.com is the world’s largest freelancing marketplace 008 With over 57 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. 57m 5B $10/H+ REGISTERED USERS PEOPLE ON THE PLANET PEOPLE CAN EARN LIVE ON $10 A DAY OR LESS ON FREELANCER FREELANCER LIMITED ANNUAL REPORTABOUT FREELANCER 009 FREELANCER LIMITED ANNUAL REPORT2021FREELANCER CASE STUDIES FOUNDER/OPERATOR ASHEVILLE, NORTH CAROLINA, USA Jenna Washburn @JennaWashburn 5.0 ( 12 reviews ) WEBSITE: PROJECT NAME: HTTPS://PSYCHCLICKREPORT.COM/ VBA TO PHP CONVERSION PROJECT ID: 31920227 COMPANY: CLICKREPORT 010 TESTIMONIAL "My experience with Imara Software Solutions has been fantastic. The Recruiter from Freelancer who connected me with Imara’s team of tech professionals took the time to understand my business and hiring needs. By using Freelancer I also feel secure in knowing all the necessary precautions were taken care of with their built in NDA’s and privacy agreements. Thank you, Freelancer, for setting me up with a wonderful group of tech professionals, my business has seen great growth because of it." FREELANCER LIMITED ANNUAL REPORTFREELANCER CASE STUDIES 011 We're helping founders, entrepreneurs and startups around the world take their businesses to new heights. FREELANCER LIMITED ANNUAL REPORT2021 FREELANCER CASE STUDIES PRESIDENT/PRINCIPAL ANCHORAGE, ALASKA, USA Lisa-Marie Ikanomov @IkonicPR 5.0 ( 18 reviews ) WEBSITE: HTTPS://IKONICPR.COM/ PROJECTS: MULTIPLE COMPANY: IKONIC PUBLIC RELATIONS 012 TESTIMONIAL “As an independent public relations consultant, I often have the need for backend developers and technical support to help me with complex projects that are outside my skill set. When the developer I had been partnering with was no longer available, I had to find someone new to support my projects. After an unsuccessful search locally, a colleague recommended Freelancer.From that first project, I have not looked back.The Recruiter support has been invaluable in helping vet project applicants and find the right fit for each of my project needs.My favorite Recruiter (Stanley H.), has also been an amazing sounding board and has helped me navigate different challenges as they arise to find successful solutions.” FREELANCER LIMITED ANNUAL REPORTFREELANCER CASE STUDIES 013 We're helping founders, entrepreneurs and startups around the world take their businesses to new heights. FREELANCER LIMITED ANNUAL REPORT2021 FREELANCER CASE STUDIES CO-FOUNDER LOCATION SANTIAGO, CHILE Alejandro Osorio @OsorioAle 5.0 ( 8 reviews ) WEBSITE: HTTPS://NOPAIN.CL/ PROJECT NAME: INTEGRATION PROJECT ID: 22450806 OF TWO CLOUD SERVICES COMPANY: NO PAIN & BEYOND THOUGH ONE WEBHOOK 014 Four years ago, Dr. Romagnoli’s innovative medical approach to relieving chronic pain inspired Alejandro Osorio, an Industrial Engineer and entrepreneur. Their plan involved converting professionals trained to prescribe physical activity into a mobile, low complexity traumatology unit. Part of this process was establishing an online infrastructure, through cloud services and web protocols, which is where Freelancer. com came in. Through the Recruiter service they were able to find a freelancer with the skills they required. Osorio says, “The final result was such a success that we were delighted to pay not only the initially agreed amount but also an extra tip, given the excellent service we had also just experienced.” Development continues on the Osorio/Romagnoli platform as they reach out globally to reduce chronic pain for everyone. FREELANCER LIMITED ANNUAL REPORTFREELANCER CASE STUDIES 015 We're helping founders, entrepreneurs and startups around the world take their businesses to new heights. FREELANCER LIMITED ANNUAL REPORT2021MARKET STATIS AND CONTESTS Market Statistics and Contests Marketplace Statistics 016 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. 21m+ TOTAL JOBS POSTED 62% OF JOBS RECEIVE A BID WITHIN 60 SECS 26 AVERAGE BIDS PER PROJECT $5B TOTAL JOBS AWARDED IN USD $224 88% AVERAGE COMPLETED OF CONTESTS RECEIVE ENTRIES PROJECT (IN USD) WITHIN 1 HOUR FREELANCER LIMITED ANNUAL REPORTMARKET STATIS AND CONTESTS Freelancer Contests Get the perfect solution by crowdsourcing your ideas to millions of freelancers. Post a Contest on Freelancer.com. 247 AVERAGE ENTRIES PER CONTEST 88% OF CONTESTS RECEIVE ENTRIES WITHIN 1 HOUR The Freelancer contest platform gives you access to millions of talented individuals with the skills to provide you with the solutions that you need. Whether that be a logo, a design, an article, or anything in between. There are no limitations to what the crowd can do. Generating solutions for the likes of NASA, Airbus, IBM, Deloitte, The US Department of Energy, The US Bureau of Reclamation and the National Institute of Child Health, the contest platform is a powerful tool to tap into global talent. Imagine having access to thousands of designers at a moment's notice, turning your dream into reality, overnight. This is the power of the Freelancer contest platform, where new creations are submitted within hours of posting your contest, and contests receive on average around 220 entries. Quick, collaborative and creative The contest platform is the ultimate tool to engage with your community to get instant feedback on new ideas. Collaborate with your network through contest share, which invites others to interact with, rate, and award the participants of your contest. Publicise your contest through polls, which allows you to share your contest with the public to gather feedback on the best ideas. Engage with participants through the Public Clarification Board, which connects you with the talent of the world through comments to iterate on better designs. In 2021, the contest platform generated over 14 million ideas to help contest holders come up with solutions quickly and collaboratively. FREELANCER LIMITED ANNUAL REPORT2021FREELANCER® ENTERPRISE Power your competitive advantage with Freelancer® Enterprise 018 FREELANCER LIMITED ANNUAL REPORTFREELANCER® ENTERPRISE Freelancing is not new. Companies have been hiring independent contractors, or freelancers, for many years. Plus, outsourcing is not a new concept. Businesses have relied on other organizations to perform non-core functions to support their business for many decades. The distinct difference is that hiring freelancers is now more accessible than ever – thanks to globalization, remote work and freelance marketplaces like Freelancer.com. The work delegated to freelancers by Fortune 500 companies has increased rapidly over the past five years and this trend has accelerated year by year, reaching new heights in 2021. The primary motivators behind the enterprise adopting platforms Compared to conventional staffing agencies, enterprises like Freelancer.com to source freelance talent include: consider the speed of contracting a freelancer and delivery Easy access to scalable sources of labor, dimensions of value. Essentially, if you need something done expertise and skills and can’t do it in-house, a freelancer out there can do it for you. of work outcomes, as well as their quality, as other important Reduced transaction and start-up costs Elimination of conventional barriers to hiring 019 • • • There are numerous benefits of integrating freelancers into the enterprise to resolve modern industry challenges. Increased Agility and Ability to Respond to Shifting Demands Drastic Cost Savings Redirecting spend from high-markup vendors to freelancers. • • • • Close skill gaps quickly Increase workforce capacity Complete projects faster Local workforce, globally distributed Accelerated Innovation and Ideation Using crowdsourcing as a problem-solving mechanism. FREELANCER LIMITED ANNUAL REPORT2021 FREELANCER® ENTERPRISE Preparing for the Future of Work by Creating a Future-proof Workforce Remain competitive and relevant in the future. The Freelancer Enterprise division finished the year strongly with growth in GMV and revenue quarter on quarter. In 2H21 top line revenue grew by 188% vs 1H21 including 369% quarter on quarter growth in Q4 on Q3. Enterprise GMV grew 164% year on year with 2H21 up 96% compared to 1H21. We live in a new world. Innovation and change are the norms. Increased agility and the ability to respond to shifting demands is no longer just a desirable trait. Agile enterprises survive. Responsive organizations thrive. So, skill gaps must be closed quickly, workforce capacity must be flexible, and projects must be completed faster for companies to stay agile and responsive. Enterprises are now creating a future-proof workforce to remain competitive and relevant to prepare for the future of work. Using local workforces, globally distributed, offers drastic cost savings, especially when redirecting project funds from high-markup vendors to freelancers. By using crowdsourcing as a problem-solving mechanism, organizations can expect accelerated innovation and ideation to move forward. The benefits of outsourcing to freelancers, from the cost and time savings to flexibility and agility, could be just what a company needs. 020 Companies’ most strategic competitive advantage is access to global talent. Freelancer Enterprise takes it to the next level. Brands can access the best from the world’s largest cloud workforce instantly, at scale and on demand. We have built approved talent networks to provide access to highly skilled, curated, vetted talent with the skills, languages and locations that companies need. The division experienced growth across our key accounts in professional services, technology, business process outsourcing, chemicals, government, education and retail sectors, with a strong pipeline leading into FY22. Shaun McMeeken joined Freelancer in mid-2021 to take over leadership of the division. Formerly the VP Sales at Groupon ANZ, Shaun has played an integral role in establishing key sales processes that has positioned Enterprise for growth in FY22. The team also effectively and efficiently scaled output to handle the increased customer demand through the deployment of freelancers from the main marketplace platform. In November Adam Swertz joined the division to spearhead North American enterprise sales. Previously Adam was a technology strategist on the Accenture Bid Team where he maintained a >75% win rate and was co-lead on three of the largest service deals at Accenture in Canada (>C$150m). The Enterprise Talent Success teams and capabilities grew across our global markets, providing bespoke end- to-end program management capability for clients. The teams have enhanced capabilities to serve the enterprise with background checks, talent curation for the unique needs of each client and comprehensive talent vetting with customised interviews, testing and verification. FREELANCER LIMITED ANNUAL REPORTDeloitte MyGigs FREELANCER® ENTERPRISE 021 Deloitte US and Freelancer Enterprise commenced its Fieldglass integration), Deloitte consultants will be final phase of deployment for the MyGigs platform in able to hire freelancers, manage projects, and process 2H21, which will connect the internal platform to the payments at scale. Over 30,000 Deloitte consultants external Freelancer marketplace. Upon completion have been onboarded to the platform already. (targeted May ‘22 due to expanded scope with the SAP FREELANCER LIMITED ANNUAL REPORT2021FREELANCER® ENTERPRISE InSource™ This cloud workforce platform can dramatically reduce costs whilst providing unparalleled speed of delivery and fast time to market. 022 The MyGigs platform will form a flagship deployment incumbent talent engagement models. The InSource of Freelancer Enterprise’s InSource product solution, product will be a key competitive differentiator commercially available towards the end of 2Q22. for the Fortune 500, providing the enterprise with InSource empowers workforce efficiency connecting both an internal gig platform and an elastic cloud internal demand for skills with both internal talent workforce, enable rapid scale in human capital and and the Freelancer cloud workforce, on-demand. capability, enable staff retention and access to As an end-to-end solution, InSource enables staff global opportunities, accelerate time to market by to access freelancers at scale, manage projects, augmenting talent on-demand, maximise workforce process payments and ensure compliance at scale utilisation and provide an on-ramp towards a whilst removing the cost structures inherent in full cloud-based gig model transformation. FREELANCER LIMITED ANNUAL REPORT FREELANCER® ENTERPRISE Global Fleet Field Services The creation of a local workforce, globally distributed, allows the enterprise to deliver expertise anywhere in the world at scale and on demand. This enables the enterprise to take control, expand their footprint and disrupt the service supply chain through the power of our technology. Our major engagement with a global technology leader Change Manager, Telstra, joined the team responsible for in computer & printer technology to build a disruptive scaling the operational infrastructure required to expand and elastic global workforce powered by freelancers globally. Based on our operational strength, continued continued to expand across several countries. performance, growth and cost savings to our partner, we renewed the Asia-Pacific Statement of Work for an We’re now able to expand its existing service coverage into additional year to further expand across the region. hard-to-reach regions experiencing service gaps. Relying on existing contractors was not timely or cost-effective, so In FY21, we entered into three strategic additional cities in the partnership with Freelancer Enterprise has created India, completing the Phase I expansion for a total of 7 cities. a new specialist Field Services marketplace. With this Total volume for India alone is 660,000 projects per year and 023 customized solution, we have created a dedicated talent the aim of the activity in India is to win a majority of that pool of qualified service engineers to deploy on-demand. volume. Project volumes increased 178% in 4Q21 compared • Scalable Field Services Now we have a proven framework to expand service coverage to new regions on-demand. • Increased Customer Satisfaction to 3Q21. An instrumental component of the continued growth is the implementation and dynamic part delivery framework across all operational cities that enables wider geographical coverage, all leveraging freelancers. The continued success of this engagement supports the disruption of traditional supply chains and positions freelancers as a key agile business solution. With certified experts assisting customers more quickly, there of two regional cities in Victoria, Australia in 4Q21. The is a noticeable increase in customer satisfaction rates. engagement is ahead of forecasts based on project volumes Beyond India, global expansion continued with the launch • Cost Savings and quality scores, with expected growth in 1H22 into two additional cities. In FY22, the expansion of Phase II will continue into 14 additional cities within India with a significant Faster, higher quality service, and easier increase to the overall project volumes handled by our expansion, all at a lower cost. freelancers. Our disruptive engagement and business model is also running in Indonesia (Jakarta) with a current goal of This demonstrates the power of Freelancer Enterprise to continual expansion across key markets in Asia and Europe. build a freelancer workforce to serve the needs of a globally distributed enterprise, locally in regions across the globe. We are now in discussions with the partner for a deeper technology integration to be performed by our engineering In FY21, Mas Mohammad, formerly Performance Manager services team which will allow volumes to grow substantially. & Operations Implementation Lead at NBN, and Operations FREELANCER LIMITED ANNUAL REPORT2021 FREELANCER® ENTERPRISE NASA & U.S. Government Freelancer now helps national agencies solve critical national challenges by crowdsourcing innovative solutions from the world’s best talent. In doing so, we push the boundaries of human innovation. NASA and Freelancer have been working together since 2015 to crowdsource solutions to the most complex problems being faced by astronauts on the cutting edge of space exploration. 024 $19K+ 137 14,024 FREELANCERS PARTICIPATING COUNTRIES PARTICIPATING DESIGNS TO DATE The NASA Open Innovation Series 2 tender is a management and operational excellence capabilities over the program whereby NASA effectively acts as a centre of course of the year, with majority of the wins occurring in 2H21. excellence for crowdsourcing for the U.S. Government. Freelancer is one of 19 joint winners in the bidding for Freelancer now has task orders or engagements with NASA, the this contract. In 4Q21 the funding for the program was U.S. Centers for Disease Control and Prevention, the National increased 600%, from US$25 million to $175 million. Institutes of Health, the U.S. Department of Commerce the U.S. Department of Energy and the U.S. Bureau of Reclamation. Freelancer won six task order contracts in FY21 with U.S. government agencies and we expect the rate of wins to increase in FY22. This is a direct result of investment into the team’s bid FREELANCER LIMITED ANNUAL REPORT FREELANCER® ENTERPRISE 025 FREELANCER LIMITED ANNUAL REPORT2021FREELANCER® ENTERPRISE This work is across a number of high technology areas more than 10,000 pregnant women. The data was collected including computational fluid dynamics, electrical engineering, from interviews, questionnaires, clinical measurements, patient physics, data science, machine learning, physics, mechanical charts and biological specimens. NuMoM2b aims to identify engineering, graphic design, UI/UX design, software engineering, pregnancy risks for women who have not given birth previously. network science, advanced manufacturing, software development, transcription and information security. “Any maternal death is one too many,” said Diana W. Bianchi, M.D., director of NIH’s Eunice Kennedy Shriver National Two of the six contracts were won in partnership with Institute of Child Health and Human Development (NICHD), LMI, a government-focused consultancy with 60 years which administered the challenge. “A healthy pregnancy and of experience delivering digital and analytic solutions, childbirth should be a given, but sadly, it’s not. Understanding logistics and management advisory services. LMI’s well- and reducing pregnancy-related complications and deaths – or established relationship with government agencies and maternal morbidity and mortality – is a high priority for NIH.” years of expertise in navigating the industry makes them a key strategic channel partner for us in FY22 and beyond. Seven prizes of $50,000 were awarded for innovation and an additional five prizes of $10,000 Towards the end of FY21, the first winners for were awarded for health disparities. NOIS2 task orders started to be announced. NICHD Decoding Maternal Morbidity Data Challenge On December 7th, the winners of the National Institutes of Health’s Decoding Maternal Morbidity Data Challenge Freelancer.com is proud to have partnered with NICHD and Adiona to run this challenge on our platform. Automated Maintenance of Protection Systems (AMPS) Challenge powered by Freelancer.com were announced at the The AMPS Challenge seeks to automate protection systems White House’s Inaugural Maternal Health Day of Action testing, eliminate outages necessary to accomplish the testing with United States Vice President Kamala Harris. and improve hydropower plant reliability. The AMPS Challenge 026 has two phases - a white paper and a prototype phase. Twelve prizes totaling US$400,000 were awarded to seven teams who proposed innovative solutions to In the first phase, the field was narrowed to twenty six identify risk factors in first-time pregnancies. high quality white papers including detailed designs in some circumstances up to eighty pages long from The NICHD Decoding Maternal Morbidity Data Challenge was run electrical engineers around the world. In 4Q21, the winners for the NIH’s Eunice Kennedy Shriver National Institute of Child of the first phase were awarded US$10,000 each. Health and Human Development (NICHD). Using computational analysis, data mining, artificial intelligence and other methods, These finalists now have five months to create a prototype. winning entrants devised ways for analysing the vast store of Each winner will be asked to submit both written and participant data from the Nulliparous Pregnancy Outcomes video submission components. From there, up to five will Study: Monitoring Mothers-to-Be (nuMoM2b), a racially, ethnically be selected to ship their prototypes to Colorado, where and geographically diverse sample of people beginning in the U.S. Bureau of Reclamation will test and judge the the sixth week of pregnancy and continuing through delivery. prototypes, and pick the final winner for up to US$100,000. NuMoM2b was established in 2010 and has compiled data on FREELANCER LIMITED ANNUAL REPORTFREELANCER® ENTERPRISE 027 FREELANCER LIMITED ANNUAL REPORT2021FREELANCER® ENTERPRISE Government Freelancer now serves the world’s most preeminent national agencies. We help national governments prepare for the future and address demographic imbalances by providing citizens access to global opportunities and empowering them through advanced skills development. Freelancer Enterprise is engaged in strategic partnerships opportunities working with global corporations. Funding for with governments in the Middle East and Egypt. These these initiatives is being provided by both governments, which strategic initiatives include job creation through the cloud, is generating network effects of demand and uptake from the building of talent pools of skilled professionals, training, enterprise companies globally. The Enterprise division is also job placement programs, as well as professional training and working with the governments of Australia and Malaysia. Other Enterprise Activity In FY21, the Enterprise division has seen a number • Freelancer Enterprise was awarded the 'Best 028 of wins. Some highlights include: Comprehensive Solution' in the 2021 HR Tech Awards by Lighthouse Research & Advisory. • Signing five MSAs with global technology & professional services business process outsourcing firms. These Examples of the diversity of applications of our firms are major players in the traditional skilled platform in FY21 included, but were not limited to: outsourcing industry, where all are facing challenges in scaling the provision of talent on demand. • Sourcing experts in computational fluid dynamics • Expanding a global chemicals company’s usage over 400% from Singapore to India, China, Norway and Germany. Freelancer Technical Co-Pilot is also embedded with this client as part of this partnership. • Bidding on a formal, rigorous RFP for a global for the modeling of river sediment for the U.S. government hydroelectric power authority. • • Supplying freelancer hires in over 90 regions around the world performing location based mystery shopping tasks. Building a supply chain for parts used in technical leader with one of the world’s most valuable brands field services using freelancers disintermediating in the FMCG space for their US-based contingent traditional supply chain models. worker program. We have since won this in FY22 with formal paperwork completed by Feb 2022. • Leveraging our global talent success capabilities to source and fill for projects requiring data engineers, • At the same time, we bid on another formal, rigorous user researchers, automation engineers, project RFP for a trillion dollar market capitalisation technology managers and performance testers for a key company to create an agile, elastic business model using enterprise client in the global chemicals sector. freelancers. We have since completed the first step of the onboarding process and are moving to completing contractual requirements ahead of a formal expected award. • End-to-end project management for a global campaign of translation projects into multiple languages, product guide writing and blog writing projects for a global • We completed vendor onboarding with one ecommerce company through Technical Co-Pilot. of the world’s largest creative and marketing software companies to engage specialist freelancers to augment a key business unit. • Accessing a pool of freelance video creators to produce high quality video content that matches pre-supplied audio files and scripts, at faster speed and lower cost to increase volume of direct SMB commercial radio advertising in the media industry. FREELANCER LIMITED ANNUAL REPORTFREELANCER® ENTERPRISE 029 FREELANCER LIMITED ANNUAL REPORT2021FREELANCER® ENTERPRISE Freight anything, anywhere 030 With an extensive network of over 8,000 vetted transport companies across Australia and direct rates with some of the world’s largest shipping lines, Freightlancer provides access to the right operator no matter the industry. We facilitate the fast, reliable and cost efficient transport of freight while ensuring a high standard of compliance. While Freightlancer is a technology platform at heart, it’s the To bolster this existing network of Shippers and Carriers, hands-on approach of our management team and operations Freightlancer’s acquisition of Loadshift for $7.7million in May staff that makes the difference to the freight movements. With of 2021 was of no surprise. Since the acquisition the amount of a combined experience of over 100 years, we have the right active Carriers on the Loadshift platform grew by 17.4% pcp due knowledge and experience to safely manage every project. to initiatives such as the auto renewal of memberships, extensive Through the management of the freight cycle and the continued marketing campaigns and ux/ui redesigns. innovation of our technology platform, we are continually delivering industry best practice. Through the management of the freight cycle and the continued development of our technology platform to ensure your freight is delivered the way it should be. FREELANCER LIMITED ANNUAL REPORTFREELANCER® ENTERPRISE 031 $1.26m 118m+ 1,424Km REVENUE FROM LOADSHIFT COMBINED KM OF FREIGHT AVERAGE DISTANCE FOR EACH FOR THE YEAR WITH 5.8% PCP PROVIDED NETWORK LOAD AT APPROXIMATELY BY FREIGHT GROUP IN 2021 $2.87/KM (UP 19.75% ON PPC) $1.76m $326m+ COMBINED REVENUE NATIONAL GLV AS A RESULT FOR THE GROUP OF 83,290 LOADS IN 2021 (UP 18.5% ON PPC) 83,290 LOADS IN 2021 18.5% YEAR OVER YEAR (YOY) FREELANCER LIMITED ANNUAL REPORT2021 ESCROW.COM Escrow.com is where the metaverse is bought and sold 032 In 2021, Facebook CEO Mark Zuckerberg introduced Meta, a rebranding effort driven by the company shifting its focus to the metaverse. This rebrand propelled the concept of the metaverse into mainstream popularity, seeing many everyday consumers beginning to invest in virtual real estate by purchasing plots of land in the metaverse through non-fungible tokens (NFTs). However, there is no one metaverse, but many metaverses When organizations are investing in virtual real estate, which all vary in size and popularity. This causes an issue they look at buying a domain name, not a plot of land if a person purchases a digital asset in that particular in a virtual game. Domain names are virtual real estate game. If the game goes under in a years’ time, then the where companies build and launch their metaverse. They person is stuck with nothing. There’s no real investment purchase a premium name on the best street available value here. The real investment opportunity is purchasing – the .com domain name. As leading provider of secure the real land of the metaverse – domain names. online payments and online transaction management, Escrow.com is where the metaverse is bought and sold. FREELANCER LIMITED ANNUAL REPORTESCROW.COM 033 Land of the Metaverse 2021ESCROW.COM Escrow.com Powering global trade through uncertain times. Empowering market makers to connect buyers and sellers without fear of fraud. In FY21 the Escrow.com team was challenged to execute on Partnerships delivered strong growth in new marketplace a plan of maintaining dominance in existing markets while verticals such as trademarks, oil, gas and mineral rights, as expanding into new markets while remaining EBITDA positive. well as existing verticals; IPv4, domain names, automotive, Throughout the year the team consistently outperformed services and luxury goods. Marketplace partners contributed expectations, delivering an all-time record year with GPV of a record US$373.9m in FY21, up 58.5% on pcp. $1.079 billion up 54.3% (US$808.3m up 65.3% on pcp) and revenue of $11.3 million, up 37.3% on pcp (US$8.5 million, up 48.5% on pcp) and positive EBITDA of $1.7 million. 034 while two-factor authentication was introduced for all accounts to protect against account takeover. We have seen an improvement in transaction agreed rate through this improved funnel across all transaction types and anticipate removing this key friction point will benefit all of our marketplace integrations. In the fourth quarter Escrow.com established a new program for high value transactions, adding a dedicated relationship manager, Manuel Rabade, with expert knowledge in the assets being transacted. This proactive allocation of expert support staff contributed improvement in the funding rate of high value transactions and to hitting an all-time record monthly GPV of $156.9 million, up 150.8% “ESCROW.COM IS USED TO HOLD FUNDS FOR PRIVATE JET CHARTER” in November 2021 (US$114.9 million, up 152.6% on pcp). Existing customers saw the launch of several enhancements Finally, this year we continued to develop Escrow.com’s across fraud detection, security, user interface and account standing as the most licensed online escrow service in the management to improve the transaction experience: our world by securing our escrow license in the state of New York, Security and User Interface teams worked closely with partner giving us a total of 53 financial services licenses granted or in- marketplaces to minimize friction and develop a new single application (Hawaii and the territories are the only US licenses sign-on experience that allows buyers and sellers to seamlessly remaining to file). Four U.S. states do not require Escrow.com to transition between creating and managing their transactions, hold licenses (Indiana, Massachusetts, Tennessee, Wisconsin). FREELANCER LIMITED ANNUAL REPORT ESCROW.COM 035 Additionally Escrow.com holds an Australian with the Financial Crimes Authority. In the fourth Financial Services Licence #501215 and is quarter we passed an important milestone with licensed as a MSB in Quebec, Canada #904468. A the management of the company passing the UK Payments Institution license is in-application vetting by Her Majesty’s Royal Customs Service. FREELANCER LIMITED ANNUAL REPORT2021RECRUITERS Recruiters With 57 million options, why not let one of our experts find you the perfect freelancer? Recruiter is Freelancer's flagship managed service. With a global presence, our recruiters provide 24x7 coverage to ensure that we can assist our clients anytime, anywhere. Utilising custom tooling optimised on top of our matchmaking algorithm, our team works with our clients to clarify budget and requirements before conducting an extensive search and interview process from our curated talent pool of vetted Preferred Freelancers. 036 $3.37m IN REVENUE FOR 2021 1.3x HIGHER RECRUITER AWARD RATE THAN AVARAGE MARKETPLACE AWARD RATE 74% GROWTH IN NUMBER OF PREFERRED FREELANCERS FREELANCER LIMITED ANNUAL REPORT RECRUITERS Our Recruiters work closely with the top 1% of freelancers on the platform, the Preferred Freelancer Program, to ensure that you’ll always have the perfect talent for the job. 037 FREELANCER LIMITED ANNUAL REPORT2021This logo design cost It took 9 days to make. Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! $30 USD FREELANCER.COM 039 FREELANCER LIMITED ANNUAL REPORT2021This cover art design cost It took 1 day to make. Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! $75 USD FREELANCER.COM 041 FREELANCER LIMITED ANNUAL REPORT2021This home page design cost It took 8 days to make. Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! $200 USD FREELANCER.COM 043 FREELANCER LIMITED ANNUAL REPORT2021This 3D shoe cost It took 6 days to make. Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! $500 USD FREELANCER.COM 045 FREELANCER LIMITED ANNUAL REPORT2021This gin brand cost It took 1 day to make. Real project completed at freelancer.com Have an idea? Post your project today and get free quotes! $120 USD FREELANCER.COM 047 FREELANCER LIMITED ANNUAL REPORT2021FREELANCER.COM 2021 Awards 048 Stevie Awards The Stevie Awards are the world’s premier business awards, which were created in 2002 to honor and generate public recognition of the achievements and positive contributions of organizations and working professionals worldwide. There are seven Stevie Awards programs, each with its own focus, list of categories, and schedule; such as the International Business Awards that are open to all organizations worldwide, and include categories to honor accomplishments in all aspects of work life; and the Asia-Pacific Stevie Awards that are open to all organizations in the 29 nations of Asia-Pacific region. FREELANCER LIMITED ANNUAL REPORT FREELANCER.COM 049 Stevie International Business Awards (IBA): For Escrow.com, we won 1 Silver Award for Achievement in Sales or Revenue Generation; and 1 Bronze Award for Achievement in Growth. Meanwhile, for Freelancer.com, we won 1 Silver Award for Achievement in Growth; and 2 Bronze Awards for Achievement in Sales or Revenue Generation; and Most Innovative Tech Company of the Year – Up to 2,500 Employees. Asia Pacific Stevies: We won 2 Gold Awards for Excellence in Innovation in Technology Industries – More than 100 Employees; and for Innovation in Technology Management, Planning & Implementation – Other Service Industries; as well as 1 Bronze Award for Innovative Management in Technology Industries – More than 100 Employees. FREELANCER LIMITED ANNUAL REPORT2021 FREELANCER.COM 050 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 2021. FREELANCER LIMITED ANNUAL REPORT FREELANCER.COM 051 FREELANCER LIMITED ANNUAL REPORT2021 DIRECTORS' REPORT Directors’ Report 052 Your Directors submit the financial report of Freelancer Limited (the Company) for the year ended 31 December 2021. 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 REPORTDIRECTORS' REPORT Matt Barrie Executive Chairman BE (Hons I) BSc (Hons I) (Stanford) GAICD SEP FIEAust (appointed 10 April 2010) GDipAppFin MAppFin MSEE 053 Founder and Executive Chairman of the Company. from Macquarie University, Masters in Member of the Nomination Electrical Engineering from Stanford, and Remuneration Committee California, Graduate of the Stanford and Audit Committee. Serial entrepreneur with extensive Executive Program at the Graduate School experience and knowledge in the of Business, Fellow of the Institute of technology sector. Previously co-founded Engineers Australia and Councillor of the and was CEO of Sensory Networks Inc., Electrical and Information Engineering a vendor of high performance network Foundation at the University of Sydney. security processors, which was acquired by Intel Corporation Inc. in 2013. Relevant interest in 195,919,185 fully paid ordinary shares, including a relevant Formerly Adjunct Associate Professor interest in 1,916,754 fully paid ordinary at the Department of Electrical shares by virtue of having a voting power and Information Engineering at the of over 20% in the Company, which University of Sydney. Co-author of has a relevant interest as a result of over 20 US patent applications. trading restrictions over shares issued under the Employee Share Plan. Qualifications include first class honours degrees in Electrical Engineering and Beneficial interest in 194,002,431 fully Computer Science from the University paid ordinary shares (representing of Sydney, Masters in Applied Finance 42.87% of issued capital). FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Darren Williams Non-Executive Director until 31 October 2015 BSc (Hons I) PhD from 1 November 2015. (appointed 10 April 2010) (Computer Science) Executive Director 054 Non-Executive Director of Company. Qualifications include first class Member of the Nomination Was the Chief Technology Officer honours degree in Computer Science and Remuneration Committee and Executive Director of the and a Ph.D. in Computer Science and Audit Committee. Company until 31 October 2015. specialising in computer networking from the University of Sydney. Extensive experience in computer security, protocols, networking and software. Beneficial and relevant interest in Previously co-founded and was CTO (and 10,627,165 fully paid ordinary shares subsequently CEO) of Sensory Networks (representing 2.35% of issued capital). 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. FREELANCER LIMITED ANNUAL REPORTSimon Clausen DIRECTORS' REPORT Non-Executive Director (appointed 10 April 2010) 055 Founding investor and Non-Executive Relevant interest in 162,416,754 fully Member of the Nomination Director of the Company. paid ordinary shares, including a relevant and Remuneration Committee interest in 1,916,754 fully paid ordinary and Audit Committee. Extensive experience in operating and shares by virtue of having a voting power investing in high growth technology of over 20% in the Company, which businesses in both Australia and the has a relevant interest as a result of United States. Previously founded and trading restrictions over shares issued was CEO of PC Tools which was acquired under the Employee Share Plan. by Symantec Corporation in October 2008. Beneficial interest in 160,500,000 fully Currently the sole director of paid ordinary shares (representing Startive Ventures, a specialised 35.47% of issued capital). technology venture fund that actively maintains investments in a number of companies globally. FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Company Secretary Principal activities Mr Neil Katz held the position of Company Secretary The principal activity of the consolidated entity (the Group) during and at the end of the financial year (appointed during the financial year was the provision of an online 9 March 2012). He has been with the Group since outsourcing marketplace and escrow payment services. 2009 and is also the Chief Financial 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 $2,257,000 (2020 loss: $646,000). Key Performance Highlights Year ended 31 December Financial metrics: Gross Payment Volume1 Net Revenue2 Gross Profit 056 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 Users7 (millions) Notes: 1 Gross Payment Volume (GPV) is calculated as the total payments to Freelancer and Escrow users for products and services transacted through the Freelancer and Escrow websites plus total Freelancer and Escrow revenue. GPV is an unaudited metric. Marketplace segment FY21 GPV A$180.4 million (down 6.1% on prior corresponding period), Payments segment GPV A$1,079 million (up 54.2% on prior corresponding period). 2 Net Revenue excluding Escrow.com for FY21 was $46.1m (down 8.8% on prior corresponding period). 3 Excludes non-cash share based payments expense of $156k in FY21 and $192k in FY20. FY21 $m 1,260 57.0 47.7 83.1% (2.7) (3.0) (2.1) 2.6 1.8 21.0 7.6 58.2 FY20 $m 892 59.0 49.0 83.3% (0.4) (0.7) (0.5) 7.9 2.2 19.1 8.9 50.8 % Change +41% -3.3% -2.7% -0.2% nm nm nm -67% -18% +10% -15% +15% asset and interest paid on the corresponding lease liability. Depreciation of $4.6m (FY20:$4.5m) and finance costs of $2.0m(FY20:$1.8m) relating to office leases (accounted for in accordance with AASB 16 Leases) are included in the EBITDA calculation. 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 now recorded in the cash flow statement as interest payments, disclosed in operating activities and capital payments, disclosed in financing activities. 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. 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 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 DIRECTORS' REPORT FREELANCER.COM Summary Seasonality & Covid Freelancer revenue was flat for the year at US$34.6 million Seasonality for Freelancer is shown in Figure 1 for the (down 0.5%). GMV was US$101.1m, up 3.4%. four years prior to Covid. In 2H21, seasonality was more pronounced than usual as the northern hemisphere took advantage of their first lockdown free summer in two years. In 2H21 we experienced a return to the seasonal trend. FIG.1 SEASONALITY IN GROSS MARKETPLACE VOLUME FOR THE 4 YEARS PRIOR TO COVID 057 In brief: • We started the year strong in 1Q21 with the best year on year growth in GMV since IPO (US$25.9m, up 23.6% on pcp). • FY21 saw significant improvements to the core product, with all of our efforts on merging codebases and overhauling our mobile experience paying off in the form of increased productivity and speed of shipping new product features. However: • Macroeconomically northern hemisphere seasonality was far more pronounced in 2H21 due to the abatement of lockdowns and other restrictions. This was benchmarked against 2H20 where there was no seasonal drop, due to lockdowns. Simply, people in the Northern hemisphere got out and enjoyed an extended summer holiday period for the first time in two years. • More importantly, in 2Q21 we made significant alterations to our predictive ad targeting models to improve customer acquisition. These improvements improved the profitability but cut advertising spend more than what was forecast. Bringing the spend back up under the new, higher profitability targets took longer than expected. Coupled with pronounced seasonality this turned FY21 from the best start since IPO in 1Q21 to a flat year. FIG.2 GMV IN 2020 (NOTE THE LACK OF SEASONALITY VERSUS PRE-COVID) Predictive Ad Targeting Advertising platforms typically give you 30 days to feed Our data science and customer acquisition teams built information back about the value of an acquired customer in a more sophisticated predictive model for forecasting order to direct their targeting. Unlike selling goods, where the profitability can typically be calculated and fed back instantly, customer revenue which took the better part of a year. It is a reasonably complex problem to tackle¹. services are typically performed over long time periods. To be accurate with directing the targeting of the advertising platforms one needs to forecast revenue streams from a customer. This is achieved by developing a predictive model of a customer’s future payments by observations over a short time window. 1 https://medium.com/@algolift/pitfalls-of-modeling-ltv- and-how-to-overcome-them-d2dd4666a78 FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT FIG.3 ACCURATE PREDICTIVE LONG TERM VALUE MODELLING IS THE HOLY GRAIL OF ONLINE ADVERTISING problem here. The mea culpa was that we didn’t tune the model and expand the program fast enough. Part of the issue here is that it typically takes an advertising platform at least 30 days to fully implement targeting changes, as in the background various machine learning algorithms retrain. So any changes take a while before the effect can be measured. The second problem is that modifying targeting is akin to moving the cyclic stick on a helicopter: nothing happens, nothing happens, something happens. The low-point of volume from the advertising program was in 3Q21 as seen in Figure 3. Through the second half of 2021, we heavily focused on tuning and lifting the volume while retaining the This model went into production mid 2Q21. As part of deploying, new profitability constraints. This took quite a number we expected that some less profitable spend would be cut, and of adjustments before we saw the desired effect. that we would then both tune and extend the dimensionality of the advertising program which would ultimately lift the We are pleased to report that as of the time of writing this report profitability, spend and volume of acquired customes. On we have fully recovered our advertising volume (as measured deployment, the model worked a little too well. It dramatically by deposits from new advertising sourced customers). The lifted profitability, but as a byproduct cut total advertising 30 day deposit volume from paid search engine advertising is spending 24% in 1H21 and 38% in 2H21 compared to pcp. now positive on a monthly rolling pcp basis (up 6.1% year on The cut in spend from the model directing the advertising throughout FY22 within the new improved profitability targets. year as of 17 Feb). We plan to continue expanding ad volume platforms to hunt increased profitability was not the 058 FIG.4 DEPOSITS FROM CLIENTS FROM PAID SEM We also strengthened management of this effort in November 2021 by hiring Hector Perez-Nieto as Director of Marketing (formerly Head of Digital, Mobisuper). Hector is now in charge of all customer acquisition. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT 059 FIG.5 IMPROVED VISUAL DESIGN FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Supply & Demand On the supply side, the marketplace continues to grow strongly. In FY21 we added another 7.5 million users to the marketplace. Liquidity also improved, with the percentage of projects receiving their first bid in 30 seconds increasing from 28% to 38% over the course of FY21. FIG.6 060 AVERAGE COMPLETED PROJECT SIZE Average project size continues to rise, reaching US $225 at the end of FY21. This was partially as a result of the improved acquisition targeting mentioned above and partially from the long term marketplace trend of increasing sophistication in skills and quality of work delivered by our talented freelance workforce. Engineering Focus FY21 was a transformative year for the product and • A significant improvement in mobile engineering teams. In the first half of the year, we leveraged responsiveness of the primary product, resulting our substantial investment into our webapp technology in increases in client deposits and revenue. to completely overhaul the mobile user experience, whilst in the second half of the year we focused primarily on • The introduction of a design system to improve new product development and UX improvements. the products visual design & UI/UX. The overhaul of our mobile experience represents With the paying down of significant technical debt, our product the culmination of years of investment, and teams have shifted focus to new product development. brings a number of significant benefits: This is primarily focused in three major areas for FY22: • The merging of four codebases into one, dramatically 1. Visual design, responsiveness & UI/UX improving development time of new features, maintainability, and automated testing. 2. Enhancements to payments, enterprise features, matchmaking and collaboration 3. Trust and safety All new product will be delivered mobile first and across all of our platforms simultaneously – a key benefit of our new stack. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT FIG.7 IMPROVEMENTS TO THE VISUAL DESIGN Product 061 A number of enhancements to the core product were shipped in FY21, including, but not limited to a new Showcase for freelancer’s work, a new client onboarding flow, a modernised messaging interface and the first step towards enterprise-grade invoicing. FIG.8 NEW SHOWCASE OF FREELANCERS’ WORK FREELANCER LIMITED ANNUAL REPORT2021 DIRECTORS' REPORT FIG.9 IMPROVEMENTS TO INVOICING 062 FIG.10 NEW CLIENT ONBOARDING FLOW FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT FIG.11 Mobile NEW MESSAGING INTERFACE At the start of 3Q21 we finalised the rollout of the new Android is now complete, and the vast majority of web pages and app, marking the completion of our mobile transformation flows are also migrated. Whilst there are sporadic pages left and merging the codebases of desktop, mobile web, iOS that are not migrated, these will be migrated in the course and Android. This release also marked the beginning of the of business as usual and will no longer require a significant end of our “webapp” transition – all the major technical work amount of effort from our product and engineering teams. 063 The full features of Freelancer are now available at the same time, on every platform. FIG.12 NEW FULLY-FEATURED ANDROID APP FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Visual Design, UI & UX A major focus of the business in 4Q21 and FY22 is around the design and UX of the platform. With the introduction of our design system and consolidation of our web and mobile app codebases, this transformation will be highly visible. FIG.13 FREELANCER’S BITS DESIGN SYSTEM 064 In 4Q21 we overhauled the UI of our messaging system, which we have been progressively rolling out since November. FIG.14 EXAMPLE OF UX IMPROVEMENTS WITH THE USER CARDS FREELANCER LIMITED ANNUAL REPORTIn 4Q21 we overhauled the UI of our messaging system, which we have been progressively rolling out since November. DIRECTORS' REPORT FIG.15 IMPROVED MESSAGING UI In FY22, we will undergo a more fundamental UX and UI evolution, including but not limited to key elements such 065 as site navigation and structure, alongside a broader effort to overhaul our visual styling and branding. New Product Enhancements Whilst many of the products under development are not yet ready to announce, some early releases in 2H21 include features in payments, enterprise, matchmaking & collaboration e.g. • My Lists, an engagement-focused feature aimed at significantly reducing the barriers to rehiring existing freelancers • • • Advanced search functionality for users and projects An overhaul of our invoicing functionality Showcase 2.0 FIG.16 IMPROVEMENTS IN VISUAL BRANDING, PREFERRED FREELANCER PROGRAM FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT 066 FIG.17 INTRODUCING MY LISTS Trust & Safety Memberships Trust and Safety is key to the long term success of any As discussed in previous quarterly updates, membership revenue marketplace product. Over the past six months, we have been has been through 2020 and 1H21 a substantial drag on revenue. seeing an increase in spam activity within the marketplace, and As previously reported, this revenue drop was a by-product, towards the end of FY21 and throughout FY22, the product among other things, of our effort to improve bid quality in the teams have embarked on a concerted effort to eliminate marketplace by aggressively cracking down on poor bidding. spammers and other bad actors from the marketplace. Whilst we cannot discuss much of our activity in this area for operational reasons, this effort occupied a considerable amount of our resources in mid to late FY21 and will continue throughout FY22. We believe that these efforts will pay considerable long term dividends, and underpin long term sustainable growth. Revenue lines As mentioned in previous quarter reports, two revenue lines that have been a drag on revenue have been memberships and contests. In FY21, the product teams put in a major effort to reverse these trends, and we were successful in returning both of these revenue lines to growth. FIG.18 MEMBERSHIP REVENUE FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT Contests In 4Q21, contest revenue grew 12.1% on pcp. Revenue per contest increased to US$24 at the end of 4Q21 (compared to $19.50 at the end of 3Q21). There is no other contest platform that is as liquid as Freelancer with over 14 million entries per year. We ended FY21 with an average of around 240 entries per completed contest. FIG.19 PAID CONTEST FEES AND REVENUE PER CONTEST IN FY21 067 FIG.20 AVERAGE NUMBER OF ENTRIES PER CONTEST (ROLLING 365 DAYS) In FY22 we will continue to iterate and improve upon the Contests product, starting with the introduction of new logged out contest pages, through which we aim to improve the SEO and overall visibility of contests. FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT ENTERPRISE The Freelancer Enterprise division finished the year strongly The division experienced growth across our key accounts with growth in GMV and revenue quarter on quarter. In 2H21 in professional services, technology, business process top line revenue grew by 188% vs 1H21 including 369% outsourcing, chemicals, government, education and retail quarter on quarter growth in Q4 on Q3. Enterprise GMV grew sectors, with a strong pipeline leading into FY22. 164% year on year with 2H21 up 96% compared to 1H21. 068 FIG.21 FREELANCER ENTERPRISE & IBM Shaun McMeeken joined Freelancer in mid-2021 to take over technology strategist on the Accenture Bid Team where he leadership of the division. Formerly the VP Sales at Groupon maintained a >75% win rate and was co-lead on three of the ANZ, Shaun has played an integral role in establishing key sales largest service deals at Accenture in Canada (>C$150m). processes that has positioned Enterprise for growth in FY22. The team also effectively and efficiently scaled output to handle The Enterprise Talent Success teams and capabilities grew the increased customer demand through the deployment across our global markets, providing bespoke end-to-end program of freelancers from the main marketplace platform. management capability for clients. The teams have enhanced capabilities to serve the enterprise with background checks, talent In November Adam Swertz joined the division to spearhead curation for the unique needs of each client and comprehensive North American enterprise sales. Previously Adam was a talent vetting with customised interviews, testing and verification. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT Deloitte MyGigs Deloitte US and Freelancer Enterprise commenced its final phase of deployment for the MyGigs platform in 2H21, which will connect the internal platform to the external Freelancer marketplace. Upon completion (targeted May ‘22 due to expanded scope with the SAP Fieldglass integration), Deloitte consultants will be able to hire freelancers, manage projects, and process payments at scale. Over 30,000 Deloitte consultants have been onboarded to the platform already. 069 FIG.22 InSource POSTING A PROJECT ON MYGIGS The MyGigs platform will form a flagship deployment of Freelancer Enterprise’s InSource product solution, commercially available towards the end of 2Q22. InSource empowers workforce efficiency connecting internal demand for skills with both internal talent and the Freelancer cloud workforce, on- demand. As an end-to-end solution, InSource enables staff to access freelancers at scale, manage projects, process payments and ensure compliance at scale whilst removing the cost structures inherent in incumbent talent engagement models. The InSource product will be a key competitive differentiator for the Fortune 500, providing the enterprise with both an internal gig platform and an elastic cloud workforce, enable rapid scale in human capital and capability, enable staff retention and access to global opportunities, accelerate time to market by augmenting talent on-demand, maximise workforce utilisation and provide an on-ramp towards a full cloud-based gig model transformation. FIG.23 FREELANCER INSOURCE™ FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Global Fleet / Field Services Our major engagement with a global technology leader in implementation and dynamic part delivery framework across computer & printer technology to build a disruptive and elastic all operational cities that enables wider geographical coverage, global workforce powered by freelancers continued to expand all leveraging freelancers. The continued success of this across several countries. In FY21, Mas Mohammad, formerly engagement supports the disruption of traditional supply chains Performance Manager & Operations Implementation Lead and positions freelancers as a key agile business solution. at NBN, and Operations Change Manager, Telstra, joined the team responsible for scaling the operational infrastructure Beyond India, global expansion continued with the launch required to expand globally. Based on our operational strength, of two regional cities in Victoria, Australia in 4Q21. The continued performance, growth, and cost savings to our engagement is ahead of forecasts based on project volumes partner, we renewed the Asia-Pacific Statement of Work for and quality scores, with expected growth in 1H22 into two an additional year to further expand across the region. additional cities. In FY22, the expansion of Phase II will continue into 14 additional cities within India with a significant In FY21, we entered into three strategic additional cities in India, increase to the overall project volumes handled by our completing the Phase I expansion for a total of 7 cities. Total freelancers. Our disruptive engagement and business model volume for India alone is 660,000 projects per year, and the is also running in Indonesia (Jakarta) with a current goal of aim of the activity in India is to win a majority of that volume. continual expansion across key markets in Asia and Europe. Project volumes increased 178% in 4Q21 compared to 3Q21. An instrumental component of the continued growth is the 070 FIG.24 GLOBAL FLEET DASHBOARD FOR FIELD SERVICES ENGAGEMENT We are now in discussions with the partner for a deeper technology integration to be performed by our engineering services team which will allow volumes to grow substantially. NASA and U.S. Government The NASA Open Innovation Series 2 tender is a increase in FY22. This is a direct result of investment into program whereby NASA effectively acts as a centre of the team’s bid management and operational excellence excellence for crowdsourcing for the U.S. Government. capabilities over the course of the year, with majority of Freelancer is one of 19 joint winners in the bidding for the wins occurring in 2H21. A seventh order was won this contract. In 4Q21 the funding for the program was for a six digit value in FY21 but unfortunately a partner increased 600%, from US$25 million to $175 million. jointly working on the bid pulled out after the award. Freelancer won six task order contracts in FY21 with U.S. government agencies and we expect the rate of wins to FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT FIG.25 FREELANCER NASA PROGRAM Freelancer now has task orders or engagements with NASA, the This work is across a number of high technology areas U.S. Centers for Disease Control and Prevention, the National including computational fluid dynamics, electrical engineering, Institutes of Health, the U.S. Department of Commerce, the U.S. physics, data science, machine learning, physics, mechanical Department of Energy, and the U.S. Bureau of Reclamation. engineering, graphic design, UI/UX design, software engineering, 071 network science, advanced manufacturing, software development, transcription and information security. FIG.26 US GOVERNMENT AGENCIES POWERED BY FREELANCER ENTERPRISE FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Two of the six contracts were won in partnership with established relationship with government agencies and LMI, a government-focused consultancy with 60 years years of expertise in navigating the industry makes them a of experience delivering digital and analytic solutions, key strategic channel partner for us in FY22 and beyond. logistics, and management advisory services. LMI’s well- The full list of task orders won to date since the beginning of the contract term is summarised in the table below: ID Sponsor Skills Value (AUD) Task Order Purpose NOIS2-068 NOIS2-069 NASA Aeronautics Research Mission Directorate Graphic Design $48,100 Seek freelance graphic illustration and facilitation expertise. NASA Aeronautics Research Mission Directorate English Transcription Services $12,090 Transcribe interview recordings. NOIS2-031 NASA Langley Research Centre Physics, Mechanical Engineering $130,000 NOIS2-030 Centers for Disease Control & Prevention Network Science $273,000 072 NOIS2-038 NASA Game Changing Development Program Machine Learning, Artificial Intelligence $130,000 NOIS2-039 Department of Commerce – International Trade Administration UI/UX Design, Software Development $1,071,200 NOIS2-043 Bureau of Reclamation Computational Fluid Dynamics $663,000 NOIS2-017 National Institute of Child Health & Human Development Data Science $624,431.60 NOIS2-006 Bureau of Reclamation Electrical Engineering $474,500 Towards the end of FY21, the first winners for NOIS2 task orders started to be announced. Develop novel shock propagation prediction techniques, helping them advance shock propagation prediction past the current 50 year-old empirical methods. Explore how recent advances in network science can be used to more quickly and accurately identify emerging health threats, such as suicide and drug overdose. Use machine learning and artificial intelligence to identify potential risks on active projects by using historical data and information available. Promote cross-border data flows through the creation of a data privacy certification software program. Optimise and speed up the sparse matrix linear equations solver for computational fluid dynamics models. Identify factors and interventions that impact maternal morbidity and severe maternal morbidity. Improve the reliability of hydropower plant generation by automating safety equipment testing and reducing plant downtime. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT NICHD Decoding Maternal Morbidity Data Challenge which administered the challenge. “A healthy pregnancy and childbirth should be a given, but sadly, it’s not. Understanding On December 7th, the winners of the National Institutes and reducing pregnancy-related complications and deaths – or of Health’s Decoding Maternal Morbidity Data Challenge maternal morbidity and mortality – is a high priority for NIH.” powered by Freelancer.com were announced at the White House’s Inaugural Maternal Health Day of Action Seven prizes of $50,000 were awarded for innovation, and with United States Vice President Kamala Harris. an additional five prizes of $10,000 were awarded for health disparities. The following are winning teams/entities / Twelve prizes totaling US$400,000 were awarded to individuals; asterisks denote winners of both prize categories: seven teams who proposed innovative solutions to identify risk factors in first-time pregnancies. Columbia University and Hunter College, New York City On Predicting and Understanding Preeclampsia: a Machine Learning Approach Ansaf Salleb-Aouissi, Ph.D., Team Lead (Columbia) Delfina, San Francisco* Random Forests for Accurate Prediction of the Risk of Hypertensive Disorders of Pregnancy at Term Ali Ebrahim, Ph.D., Team Lead Emory University, Atlanta* Social Determinants of Health Phenotype Predicts Unplanned Cesarean Birth in the Path to Maternal Morbidity Among Healthy Participants of the NuMoM2be Study Nicole Carlson, Ph.D., Team Lead Feng Ya, LLC, Watkinsville, Georgia A Fair Diagnosis Proposal of Maternal Morbidity with a Demonstrative Example in Predicting Stillbirths Yaping Li, Team Lead 073 IBM Data Science and AI Elite, San Francisco* Outcomes Among Nulliparous Women Ainesh Pandey, Team Lead Johnston and Company, LLC, Salt Lake City* FIG.27 NICHD DECODING MATERIAL MORBIDITY DATA CHALLENGE The NICHD Decoding Maternal Morbidity Data Challenge was run The Relationship Between Marginalizing Behaviors and for the NIH’s Eunice Kennedy Shriver National Institute of Child Postpartum Complications for Nulliparous Women Receiving an Health and Human Development (NICHD). Using computational Undesired C-section analysis, data mining, artificial intelligence and other methods, Britnee Johnston winning entrants devised ways for analysing the vast store of participant data from the Nulliparous Pregnancy Outcomes University of Washington, Seattle* Study: Monitoring Mothers-to-Be (nuMoM2b), a racially, ethnically Structural Equation Model Identifies Causal Pathways Between and geographically diverse sample of people beginning in Social Determinants of Maternal Health, Biomarkers of Allostatic the sixth week of pregnancy and continuing through delivery. Load, and Hypertensive Disorders of Pregnancy among U.S. NuMoM2b was established in 2010 and has compiled data on Racial Groups more than 10,000 pregnant women. The data were collected Monica Keith, Ph.D., Team Lead from interviews, questionnaires, clinical measurements, patient charts and biological specimens. NuMoM2b aims to identify Freelancer.com is proud to have partnered with NICHD pregnancy risks for women who have not given birth previously. and Adiona to run this challenge on our platform. “Any maternal death is one too many,” said Diana W. Bianchi, M.D., director of NIH’s Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD), FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT FIG.28 DEMONSTRATION OF THE DELFINA MODEL AT HYPERTENSION.DELFINA.COM 074 Automated Maintenance of Protection Systems (AMPS) Challenge The AMPS Challenge seeks to automate protection systems testing, eliminate outages necessary to accomplish the testing, and improve hydropower plant reliability. The AMPS Challenge has two phases – a white paper and a prototype phase. FIG.29 AMPS CHALLENGE FOR THE U.S. BUREAU OF RECLAMATION FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT In the first phase the field was narrowed to twenty six Seyed Mohammadhadi Rahavi (Team Lead, Innofoods, Inc.), A. high quality white papers including detailed designs Forotan, A. Mozaffarinia (SAPCO), S. Saffar, A. Sarami, H. Ghodsi in some circumstances up to eighty pages long from (University of Buffalo) electrical engineers around the world. In 4Q21, the winners Intelligent Self-Testing System (ISTS) for Protective Relays of the first phase were awarded US$10,000 each: and Automatic Relay Testing Software Matthew Wolter (Booz Allen Hamilton) and Matthew Paul (Amazon). Edge-Processing Observability Platform for Continuous Hydroelectric Plant Protection (ARTS) for Protective Relays José Andrés Quintanilla (European Spallation Source, ESS AB) Controller for Automated Maintenance of Protection Systems (CAMPS) Brett Wilson (UTS) and Professor Jian Guo Zhu (University of Sydney) A Revolutionary Technique for Automating Hydroelectric MultiSequence Inc. AMPS Submission Relay Protection Using Artificial Intelligence Mike Gemmer A Reliable, Flexible System for Protective Relay Monitoring and Automation 075 FIG.30 AMPS CONCEPTUAL DESIGN These finalists now have five months to create a prototype. Each winner will be asked to submit both written and video submission components. From there, up to five will be selected to ship their prototypes to Colorado where the U.S. Bureau of Reclamation will test and judge the prototypes and pick the final winner for up to US$100,000. FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Government Freelancer Enterprise is engaged in strategic partnerships working with global corporations. Funding for these with the governments of Saudi Arabia and Egypt. These initiatives is being provided by both governments which is strategic initiatives include job creation through the cloud, generating network effects of demand and uptake from the building of talent pools of skilled professionals, training enterprise companies globally. The Enterprise division is also (including in partnership with Udacity), job placement working with the governments of Australia and Malaysia. programs, as well as professional training and opportunities 076 FIG.31 FREELANCER & BAHR (SAUDI ARABIA) Other Enterprise Activity In FY21, the Enterprise division has seen a number of wins. Some highlights include: and Germany. Freelancer Technical Co-Pilot is also embedded with this client as part of this partnership. • Signing five MSAs with global technology & professional • Bidding on a formal, rigorous RFP for a global services business process outsourcing firms. These leader with one of the world’s most valuable brands firms are major players in the traditional skilled in the FMCG space for their US-based contingent outsourcing industry, where all are facing challenges worker program. We have since won this in FY22 in scaling the provision of talent on demand. with formal paperwork completed by Feb 2022. • Expanding a global chemicals company’s usage • At the same time, we bid on another formal, rigorous over 400% from Singapore to India, China, Norway, RFP for a trillion dollar market capitalisation technology company to create an agile, elastic FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT business model using freelancers. We have • Building a supply chain for parts used in technical since completed the first step of the onboarding field services using freelancers disintermediating process and are moving to completing contractual traditional supply chain models. requirements ahead of a formal expected award. • We completed vendor onboarding with one of the world’s source and fill for projects requiring data engineers, largest creative & marketing software companies to engage user researchers, automation engineers, project specialist freelancers to augment a key business unit. managers and performance testers for a key • Leveraging our global talent success capabilities to enterprise client in the global chemicals sector. • Freelancer Enterprise was awarded the 'Best Comprehensive Solution' in the 2021 HR Tech • End-to-end project management for a global campaign Awards by Lighthouse Research & Advisory. of translation projects into multiple languages, product Examples of the diversity of applications of our platform in FY21 included, but were not limited to: guide writing and blog writing projects for a global ecommerce company through Technical Co-Pilot. • Accessing a pool of freelance video creators to • Sourcing experts in computational fluid dynamics produce high quality video content that matches for the modelling of river sediment for the U.S. pre-supplied audio files and scripts, at faster speed government hydroelectric power authority. and lower cost to increase volume of direct SMB commercial radio advertising in the media industry. • Supplying freelancer hires in over 90 regions around the world performing location based mystery shopping tasks. Photo Anywhere™ Photo Anywhere is an app for ordering photos from anywhere in processing payments. With over 50 million freelancers one the world on demand. Available in the Apple App Store and the can quickly source visual insight from around the world. Google Play Store, users may use the app to place an order by entering the location they wish to get photographed, instructions In addition to releasing an update in 1H22 expanding the for the photographer, and their payment details. Using the functionality to other service areas, the Photo Anywhere team Freelancer API, the app handles posting a project, selecting a is primarily focused working with the enterprise sales team on photographer, syncing photographs, proxying messaging and an engagement with a global technology company which is working towards producing an RFP for the team to respond to. 077 FIG.32 PHOTO ANYWHERE™ FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT ESCROW.COM Escrow.com has closed an all-time record year with an all- This closed the financial year with an all-time record GPV time record quarter. Gross Payment Volume (GPV) in 4Q21 of $1.079 billion up 54.3% (US$808.3m up 65.3% on pcp). was $365.2 million, up 70.9% on pcp (US$266.33m, up 70.0% on pcp), on par with the payment volume generated in the entire of the first half (1H21: US$366 million). 078 FIG.33 ESCROW GROSS PAYMENT VOLUME (USD) BY QUARTER SINCE INCEPTION Revenue for the full year 2021 was $11.3 million, up 37.3% Customer Growth in New Verticals on pcp (US$8.5 million, up 48.5% on pcp). Escrow.com was profitable in FY21 with EBITDA of $1.7 million. transactions for oil, gas and mineral rights in partnership In FY21 Escrow.com enabled for the first time fully online Account Management with Energy Domain. This transformed a century old business into the modern online age. Since the launch of this category, Escrow.com has rapidly grown its presence A focus of the fourth quarter was expanding account in the space with additional marketplace integrations management, improving the customer experience for high value completing a total of 627 net royalty acres of mineral rights transactions by adding a dedicated relationship manager with in 2021. We anticipate further growth in this sector as expert knowledge in the assets being transacted. This proactive integrations currently underway advance to production. allocation of expert support staff contributed improvement in the funding rate of high value transactions and to hitting We additionally signed our first private jet charter an all-time record monthly GPV of $156.9 million, up 150.8% marketplace. A number of developments are happening in November 2021 (US$114.9 million, up 152.6% on pcp). in the automotive space, and we also expanded into more watch sellers. We also continue to closely work with eBay to expand the categories that we power. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT UX improvements Escrow.com’s design team has streamlined the transaction creation on the Escrow.com website to allow our UX to facilitate faster expansion into more industry verticals. 079 FIG.34 IMPROVED TRANSACTION UX If a seller does not have a buyer at the time of transaction These changes build on our new technology stack which creation, we added a QR code and link that can now be shared, will enable us to continue optimising the user experience. providing quick access to the Escrow Pay checkout flow. So far, we have seen an improvement in transaction agreed rate through this funnel across all transaction types. In 4Q21, we also integrated live chat, which allows customers to instantly contact our customer experience team from their mobile device and continue the conversation while away from their desk. FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT My Transactions The most visited page, while logged in, got a refresh this quarter. This has improved the site performance and the platform experience. 080 FIG.35 MY TRANSACTIONS Two factor authentication In 4Q21, Escrow.com expanded account security with a choice of 2 factor authentication (2FA) for all new and existing users, allowing users to use an authenticator app or mobile device to prevent unauthorised access. FREELANCER LIMITED ANNUAL REPORT DIRECTORS' REPORT FIG.36 2FA CONFIGURATION PAGE 081 Licensing & Compliance This year we secured our escrow licence in the state of New Licence #501215 and is licensed as a MSB in Quebec, Canada York, giving us a total of 53 financial services licences granted or #904468. A UK Payments Institution licence is in-application with in-application (Hawaii and the territories are the only US licences the Financial Crimes Authority. In the fourth quarter we passed remaining to file). Four U.S. states do not require Escrow.com to an important milestone with the management of the company hold licences (Indiana, Massachusetts, Tennessee, Wisconsin). passing the vetting by Her Majesty’s Royal Customs Service. Additionally Escrow.com holds an Australian Financial Services FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT FREIGHTLANCER / LOADSHIFT The freight division experienced a large expansion this year The combined entity solidified its position as Australia’s largest with Freightlancer’s May 2021 acquisition of Loadshift, online freight marketplace, closing with all-time records quarter Australia’s largest heavy haulage freight marketplace. on quarter. Collectively, over 83,290 requests for transport Freightlancer received a $3.7 million investment from Wes passed through the marketplace in CY2021 (up 18.6% on pcp) Maas, CEO and founder of Maas Group Holdings (ASX: MGH, representing 118,660,830 km of freight (up 19.7% pcp), with market capitalisation $1.3 billion), a diversified industrials a notional Gross Load Value of approximately $326 million. group, Tom Cavanagh, CEO & founder of EMS Group (now a division of ASX:MGH), a specialist in machinery Several other milestones were achieved this year. An all- hire, sales, repairs and rebuilds to support underground time record of freight kilometres posted in a day at 590,024 mining and tunnelling, and others. Startive Ventures, a km was recorded on October 12, about 1.5x the distance venture fund focused on global technology and internet from the Earth to the Moon, beating the previous record startup opportunities, also participated in the round. by 32,295 km. On the 13th of September 438 loads were posted which is an all-time record for daily jobs. In the last quarter of 2021, Mark McGinley was appointed as CEO of the freight division. For the last six years Mark was the CEO of CouriersPlease, an award winning last-mile e-commerce logistics company. With over 18 years in CouriersPlease, Mark has brought with him a wealth of knowledge and expertise. 082 FIG.37 GROUP FREIGHT POSTED SINCE INCEPTION (LOADS) In terms of other key metrics for the year: • • Average load distance: 1,424km / load Average time to first bid: 18.14 minutes • • • Average number of bids per job: 4.4 Average freight charge: $2.87 per kilometre Average load size: $4,023.74 FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT FIG.38 GROUP FREIGHT POSTED SINCE INCEPTION (KM) Freight Categories The freight moved by the group is diversified but primarily heavy machinery (20.3% mobile, 6.9% stationary) for the mining, construction and industrial sectors. This is followed by vehicles (cars 18.2%, trucks 9.4%, caravans 5.2%, trailers 6.3%, boats on trailers 2.9%, and motorcycles 2.2%). 083 FIG.39 FREIGHT CATEGORIES BY TYPE (%) FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Loadshift Freightlancer The Loadshift acquisition was formalised in May 2021. We released a revamped Freightlancer Platform at the end The team spent 2Q21 taking over the operational, of the year. The updated site is built on top of the Freelancer product, and engineering aspects of the business. enterprise stack which allows the Freightlancer business to leverage the functionality and tools built over the last The focus in 3Q21 was squarely on payments. The entire decade on the Freelancer platform. We have cut down a payment infrastructure was upgraded to support recurring huge amount of technical debt by migrating the platform subscription payments, and a number of on-ramps for new out of the legacy infrastructure and modernised the site. subscribers – such as the free trial landing page – were added to the Loadshift website. An optimised update to the For the carriers, the site provides an easier and more homepage was also deployed. The new design provided intuitive way to search, quote and manage all of their loads clear call to actions for both sides of the marketplace, and allows them to access the new and improved reviews contributing to a 52% increase in new carrier trials in 3Q21. feature to build their reputation and secure loads for high quality clients. For shippers, the new site allows a similar In the fourth quarter, we made each load on the loadboard intuitive experience to manage their loads on the platform. available to logged out users, requiring the user to sign up or login to view the contact details (if they were not already logged in). Besides the value the migration provides to shippers and This was a great improvement on the previous funnel whereby a carriers, the migration also allows the Freightlancer stack to visitor would be taken to the login screen if they clicked on a job. share the same codebase with Freelancer stack which will facilitate continuous improvement of both platforms, speed up new feature development and increase efficiency of engineering resources. We are excited about this launch and we plan to build on this momentum by releasing features such as new mobile apps and better matchmaking tools to seamlessly connect shippers and operators over the upcoming cycles. 084 FY22 The focus for FY22 will be to start to convert the forecast notional Gross Load Value (GLV) of Loadshift to a marketplace commission model on Freightlancer consistent with the current Freelancer commissions. FIG.40 VIEW LOAD This technical adjustment means that high quality leads will be encouraged to sign up as they interact with our site. It also provides us an opportunity to market these jobs to potential customers through other means along with adding to our presence on various search engines. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT REVIEW OF FINANCIAL PERFORMANCE The Company achieved Net Revenue of $57.4 million in FY21 Escrow.com was $46.1 million (down 8.8% on the previous (down 2.3% on the previous corresponding period), and an corresponding period). Escrow.com revenue was an all time all-time record Gross Payment Volume of $1,259.7 million (up record of $11.3 million (up 37.3% on the previous 41.3% on the previous corresponding period). Revenue excluding corresponding period). 085 FIG.41 NET REVENUE FOR THE FREELANCER GROUP BY FINANCIAL YEAR Notes: 1. Gross Payment Volume (GPV) is calculated as the total payments to Freelancer or Escrow users for products and services transacted through the Freelancer or Escrow websites plus Net Revenue. Based on Freelancer’s unaudited management accounts which have not been subject to an auditor’s review. 2. 3. Take rate for the Marketplace segment is 3% employer commission and 10% freelancer commission, which has not changed since 2010. Core Freelancer FY21 GPV of A$180.4m. Escrow FY21 GPV of US$808.3m, average AUD/USD FX of 0.74890= A$1,079.3m FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT 086 FIG.42 GROSS PAYMENT VOLUME (GPV) FOR THE FREELANCER GROUP BY YEAR The Company’s gross margin of 83.1% in FY21 decreased Operating NPBT (loss) was $(3.0) million marginally by 0.2% compared to the previous corresponding in FY21 (FY20: $(0.7) million)). period (FY20: 83.3%), but remains within a consistent range since 2011. The Company’s cost of sales predominantly Operating expenses were 3.1% higher than the prior consists of transaction costs that are incurred from the corresponding period. Payroll costs, which represent 48% of various gateways relied upon to process user payments, as operating costs were up by 18% due to increased headcount well as various provisions taken for credit card chargebacks and strengthening of the management team. As of 31 and fraud risks. Cost of sales also includes direct labour December 2021, the company had 465 FTE staff. Marketing costs incurred in generating enterprise services revenue. costs decreased by 34% due to a shift of the targeting strategy for higher ROI. Marketing cost will grow in FY22. The Company reported an Operating NPAT (loss) of $(2.3) million in FY21 (FY20: $(0.6) million). Overall NPAT (loss) was $(2.3) million in FY21, which included a tax benefit of $0.9 million (FY20: $(0.6) million). The 2H21 NPAT was $(0.6m) as the group trends to profitability. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT Cash Flow and Balance Sheet Strength Future developments The Company posted a positive operating cash flow of $2.6 million in FY21 down from (FY20: $7.9 million). Operating cash excludes $3.5 million (FY20: $2.7 million) of lease payments associated with office premises, which have been reflected as finance costs in accordance with AASB 16 Leases. In future financial years, the Group expects to further its growth through expansions to other territories organically and by acquisition, and forming strategic alliances and partnerships. Trade and other receivables include receivables from various payment gateways in relation to partially completed transactions as well as amounts due from enterprise customers. As at 31 December 2021, the Company held cash and equivalents of $30.3 million and no net debt, down 11.7% on FY20. During the period $4m of cash was used for the Loadshift acquisition. Environmental regulations The operations of the Group do not involve any activities that have a marked influence on the environment. As such, the Directors are not aware of any material issues affecting the Group or its compliance with the relevant environment agencies or regulatory authorities. Escrow ended the year with off balance sheet cash of $64.7 million. (FY20:$36.2 million) Dividends paid or recommended 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 There have been no dividends paid or provided for the directors, officers and employees of the Group against the financial year ended 31 December 2021 (2020: nil). costs and expenses in defending claims brought against the individual while performing services for the Group. The The Company has established a Dividend Reinvestment premium paid has not been disclosed as it is subject to Plan (DRP). The full terms and conditions of the DRP are the confidentiality provisions of the insurance policy. available on the Company’s website, www.freelancer.com. 087 Significant changes in state of affairs There have been no significant changes in the state of affairs for the current financial year. Subsequent Events The Company has in place Deeds of Indemnity, Insurance and Access with each of its current Directors and such other officers that the Directors determine are entitled to receive the benefit of an indemnity. Rounding off of amounts The Company is an entity to which ASIC Corporations Instrument 2016/191 applies. Accordingly amounts As at the date of this report, the Directors are not aware in the financial report have been rounded off to the of any circumstance that has arisen since 31 December nearest thousand dollars, unless otherwise stated. 2021 that has significantly affected, or may significantly affect the Group’s operations in future financial years, the results of those operations in future financial years, or the Group’s state of affairs in future financial years. FREELANCER LIMITED ANNUAL REPORT2021 DIRECTORS' REPORT Meetings of Directors During the financial year six meetings of Directors The following persons acted as Directors of the were held. Other matters arising during the year Company during the financial year, with attendances were resolved by circular resolutions. to meetings of Directors as follows: Director meetings Audit Committee meetings Nomination and Remuneration meetings Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended R.M. Barrie S.A. Clausen D.N.J. Williams 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 $40,000 (2020: $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. The Directors are satisfied that the provision of non-audit 088 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: • all non-audit services have been reviewed and approved to ensure that they do not impact the Auditor’s independence declaration The auditor’s independence declaration is included on page 95 and forms part of the Directors’ Report for the year ended 31 December 2021. Shares issued under Employee Share Plan (ESP) or Long Term Incentive Plan (LTIP) integrity and objectivity of the auditor; and No ESP shares or LTIP share options have been granted to Directors during the financial year. No ESP • none of the services undermine the general principles shares or LTIP share options have been granted to relating to auditor independence as set out in Code Directors since the end of the financial year. 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 Proceedings on behalf of Company making capacity for the Company, acting as advocate for No proceedings have been brought or intervened in on the Company or jointly sharing economic risks and rewards. 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 REPORTDIRECTORS' REPORT REMUNERATION REPORT This audited Remuneration Report for the Group which Non-Executive Director remuneration forms part of the Directors’ Report for the financial year ended 31 December 2021, details the nature and amount Fees and payments to Non-Executive Directors reflect the of remuneration for each Director and the Executives. demands which are made of the Directors in fulfilling their responsibilities. Non-Executive Director fees are reviewed Key management personnel (KMP) comprise: annually by the Board. The Constitution of the Company provides • • • • R.M. Barrie – Executive Chairman such remuneration, as determined by the Board, which must not that the Non-Executive Directors of the Company are entitled to 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. exceed in aggregate the maximum amount determined by the Annual Non-Executive Directors’ fees currently agreed to be N.L. Katz – Chief Financial Officer and Company Secretary paid by the Company are $25,000 (2020:$25,000) to S.A. Clausen and D.N.J. Williams inclusive of superannuation. Remuneration policy Executive and Executive Director remuneration The performance of the Group depends upon the Fixed remuneration consists of base remuneration quality of its directors and executives. The Group (which is calculated on a total cost basis and includes recognises the need to attract, motivate and retain any fringe benefits tax charges related to employee highly skilled directors and executives. The Board of Directors, through its Nomination and benefits, including motor vehicles), as well as employer contributions to superannuation funds. 089 Remuneration Committee, accepts responsibility for Executive and Executive Director remuneration determining and reviewing remuneration arrangements for the levels are reviewed annually by the Nomination and Directors and Executives. The Nomination and Remuneration Remuneration Committee through a process that Committee assesses the appropriateness of the nature considers the overall performance of the Group. The and amount of remuneration of Directors and Executives Executive Directors are not paid any director fees in on a periodic basis by reference to relevant employment addition to their fixed remuneration as Executives. market conditions, giving due consideration to the overall profitability and financial resources of the Group, with the Performance based remuneration objective of ensuring maximum stakeholder 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, invitations to participate in the Company’s Employee Share Plan (ESP) or invitations to participate in the Company’s Long Term Incentive Plan (LTIP). FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' 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 $ Executive Directors S.A. Clausen 2021 2020 D.N.J. Williams 2021 2020 Executive Directors R.M. Barrie 2021 2020 Other KMP N.L. Katz 2021 2020 Total 2021 2020 090 $ - - - - $ - - - - 569,096 20,148 569,096 17,056 357,314 18,242 317,400 16,420 25,000 25,000 22,884 22,884 - - - - 47,884 47,884 926,410 886,496 38,390 33,476 $ - - 2,232 2,174 25,904 25,904 27,600 27,600 55,736 55,678 $ - - - - - - $ 25,000 25,000 25,116 25,058 615,148 612,056 39,815 46,844 442,971 408,264 39,815 1,108,235 46,844 1,070,378 The remuneration of key management personnel in the years ended 31 December 2021 and 2020 were 100% fixed, and there is no link between remuneration and the market price of the Company’s shares. FREELANCER LIMITED ANNUAL REPORTDIRECTORS' REPORT ESP shares Details of ESP shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows: Balance at the start of the year Granted / issued Released from restrictions Forfeited / cancelled Balance at the end of the year Balance of unvested ESP shares Balance of vested ESP shares 2021 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total 2020 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total - - 685,539 685,539 - - - - - - - - 685,539 440,539 - - (245,000) (245,000) - - - - - - - - - - - - - - - 440,539 440,539 396,486 396,486 44,053 44,053 - - - - - - 685,539 440,539 - (440,539) 685,539 (440,539) 685,539 501,790 501,790 183,749 183,749 Ordinary share options in subsidiary (Payments Pty Ltd) 091 Details of ordinary shares options in Payments Pty Ltd held directly, indirectly or beneficially, by KMP, including their related parties, is as follows: 2021 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total 2020 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 - - - - - - - - - 10,000,000 10,000,000 - - - - - - - - - - - - - - - - - - - - - - - 10,000,000 10,000,000 10,000,000 10,000,000 - - - - - - - - - - - - - - - - FREELANCER LIMITED ANNUAL REPORT2021 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: 2021 Directors R.M. Barrie1 S.A. Clausen D.N.J. Williams2 Other KMP N.L. Katz3 Total 2020 Directors R.M. Barrie1 S.A. Clausen D.N.J. Williams2 Other KMP N.L. Katz3 Total 092 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 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 - - - - - - - - - - - - - 245,000 245,000 585,500 150,000 - - 735,500 - - - - - - - - - - 195,281,931 160,500,000 10,758,165 595,000 367,135,096 195,281,931 160,500,000 10,758,165 350,000 366,890,096 1 1,279,500 shares as at 31 December 2021 (2020: 1,279,500)are held directly or indirectly by related parties. 2 131,000 shares as at 31 December 2021 (2020: 131,000) are held directly or indirectly by related parties. 3 40,000 shares as at 31 December 2021 (2020: 40,000) are held directly or indirectly by related parties. FREELANCER LIMITED ANNUAL REPORT DIRECTORS' REPORT Loans to directors and key management personnel The following loan balances are outstanding at the reporting not recognised by the Group in its financial statements. The date in relation to remuneration arrangements with Executive ESP shares will not be considered issued to participants until Directors and KMP in respect of fully paid shares and the corresponding loan has been repaid, at which time there shares issued under the Employee Share Plan (ESP). will be an increase in the issued capital and increase in cash. Further information relating to the ESP is set out in Note 24 As the ESP is considered in substance a share option, the of the financial statements. Loans provided in respect of fully ESP shares issued and corresponding loan receivable are paid shares are recognized in the financial statements. Directors: R.M. Barrie S.A. Clausen D.N.J. Williams Other KMP: N.L. Katz* Total loans to Directors and KMP 2021 $000 2020 $000 - - - 334 334 - - - 334 334 *The loans comprise a non-recourse component of $207,053, which is secured by the corresponding ESP shares in issue to the employee and a full recourse loan of $127,400. The full recourse loan is unsecured, interest free, repayable within 14 days of termination of employment or 10 years, whichever is earlier, repayable in part or full by employee at any time, and an undertaking from the employee that should they dispose of any Freelancer Limited shares, they will in the first instance use the proceeds from such a sale to repay some or all of the loan obligation. 093 FREELANCER LIMITED ANNUAL REPORT2021DIRECTORS' REPORT Executive service agreements The employment terms and conditions of Group Executives and KMP are formalised in service agreements. Position Key terms of service agreements Chief Executive Officer • • • • • Term: unspecified. Base remuneration: Reviewed annually by the Nomination and Remuneration Committee. Bonus entitlements: Determined annually by the Nomination and Remuneration Committee (capped at 50% of the base remuneration). Termination notice period: 6 months notice or alternatively in Freelancer’s case, payment in lieu of notice. Restraint of trade period: 12 months. Other Executives Other Executives are employed under individual executive services agreements. These establish, amongst other things: • • • • Total compensation; Eligibility to participate in the ESP; Variable notice and termination provisions of up to 3 months, or by the Group without notice in the event of serious misconduct; and Restraint and confidentiality provisions. Other transactions with KMP or their related parties 094 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 22 February 2022 FREELANCER LIMITED ANNUAL REPORT DIRECTORS' DECLARATION 095 SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au FREELANCER LIMITED ABN 66 141 959 042 AND CONTROLLED ENTITIES AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF FREELANCER LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Freelancer Limited. As the lead audit partner for the audit of the financial report of Freelancer Limited for the year ended 31 December 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i)the auditor independence requirements of the Corporations Act 2001 in relationto the audit; and(ii)any applicable code of professional conduct in relation to the audit.Hall Chadwick (NSW) Level 40, 2 Park Street Sydney NSW 2000 SANDEEP KUMAR Partner Date: 22 February 2022 FREELANCER LIMITED ANNUAL REPORT2021CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 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 096 Income tax benefit Loss after tax Exchange differences on translation of foreign operations 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: per share 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 2021 $000 57,419 (9,689) 47,730 2,155 (25,793) (11,914) (7,063) (305) (838) (4,894) (156) (2,035) (3,113) 856 (2,257) 279 (1,978) 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) (2,257) (646) (2,257) (646) (1,978) (966) (1,978) Cents (0.50) (0.50) (966) Cents (0.14) (0.14) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. FREELANCER LIMITED ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 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 Note 8 9 10 9 11 12 13 10 7 14 13 15 7 16 17 7 16 13 17 18 19 The above statement of financial position should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT 2021 $000 30,316 6,448 2,191 38,955 732 639 34,119 18,753 496 11,633 66,372 2020 $000 34,341 5,593 2,030 41,964 1,003 367 26,457 22,418 517 10,965 61,727 105,327 103,691 41,259 5,709 121 43 2,871 846 50,849 5,605 822 16,082 639 23,148 73,997 31,330 38,779 4,764 (15,887) 3,674 31,330 097 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 FREELANCER LIMITED ANNUAL REPORT2021 CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Attributable to owners of Freelancer Limited Contributed Equity Share Based Payments Foreign currency translation reserve (Accumulated losses) 098 Attributable to owners of Freelancer Limited Contributed Equity Share Based Payments Foreign currency translation reserve (Accumulated losses) Balance at 1 January 2020 38,446 Note $000 Loss for the year Exchange differences on translation of foreign operations Total comprehensive loss for the year 19 - Transactions with owners in their capacity as owners: Share based payments 24 - - - - Balance at 31 December 2020 38,446 $000 4,711 - - - 192 4,903 Balance at 1 January 2021 38,446 Note $000 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 capital contributed by non-controlling interests Contributions of equity arising from repayment of ESP loans Share based payments 19 - 18 24 - - - - 333 - Balance at 31 December 2021 38,779 $000 4,903 - - - - - 156 5,059 Non- controlling interests $000 Total Equity $000 (12,984) 20 29,939 $000 (254) - (320) $000 (646) - (320) (646) - - - - - - (646) (320) (966) 192 (574) (13,630) 20 29,165 Non- controlling interests $000 Total Equity $000 $000 (13,630) 20 29,165 (2,257) - (2,257) - - - (2,257) 279 (1,978) - - - 3,654 3,654 - - 333 156 $000 (574) - 279 279 - - - (295) (15,887) 3,674 31,330 The above statement of changes in equity should be read in conjunction with the accompanying notes. FREELANCER LIMITED ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 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 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 Repayment of lease liabilities Issue of shares in subsidiaries Proceeds from borrowings Net cash inflow / (outflow) from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year CONSOLIDATED STATEMENT 2021 $000 60,990 (56,164) 56 (2,034) (205) 2,643 (429) (7,662) (8,091) 333 (3,479) 3,654 - 508 (4,940) 34,341 915 30,316 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) 34,341 099 Note 31 18 8 The above statement of cash flows should be read in conjunction with the accompanying notes. FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT NOTES TO THE FINANCIAL STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021 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 100 05. Revenue 06. Expenses 07. Income tax 08. Cash and cash equivalents 101 101 102 106 108 109 111 113 10. Other assets 11. Plant and equipment 12. Intangible assets 13. Leases 14. Trade and other payables 15. Borrowings 16. Provisions 17. Contract liabilities 115 116 117 119 121 122 122 123 18. Contributed equity 19. Equity – reserves 20. Key management personnel disclosures 125 21. Remuneration of auditors 22. Contingent liabilities 23. Commitments for expenditure 24. Share based payments 25. Related party transactions 27. Business Combinations 28. Interests in controlled entities 29. Fair value measurements PAGE 124 125 126 127 127 128 134 134 135 136 137 30. Events occurring after the reporting date 137 31. Reconciliation of loss after tax to net cash flow from operating activities 32. Earnings per share (EPS) 137 138 33. Other significant accounting policies 139 09. Trade and other receivables 114 26. Parent entity information FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 2021 comprise the Company and its subsidiaries (together referred to as The consolidated financial statements were authorised the Group and individually as Group entities). The Group is a for issue by the Board on 22 February 2022. for-profit entity and primarily is involved in operating an online 101 02. Basis of preparation These general purpose financial statements have been (d) Critical accounting estimates prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The Directors believe that there are reasonable grounds that the company is able to pay its debts as and when they fall due. The Group has a significant cash balance at year end and has projected a profitable financial year for the period ending 31 December 2022 based on increased revenue and a planned reduction in expenses. (a) Compliance with International Financial Reporting Standards The consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (b) Historical cost convention The consolidated financial statements have been prepared on the historical cost basis unless otherwise stated in the notes. Except for the cash flow information, the financial statements have been prepared on an accrual basis, modified, where applicable, by the measurement at fair value of selected non- current assets, financial assets and financial liabilities. (c) Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 33(g). (e) Significant accounting policies The principal accounting policies adopted in the presentation of these consolidated financial statements are set out in the relevant notes. The policies have been consistently applied to all the years presented, unless otherwise stated. (f) Rounding of amounts The Company has applied the relief available to it under ASIC Corporations Instrument 2016/191. Accordingly, amounts in the financial statements and Directors’ Report have been rounded off to the nearest $1,000. (g) New Accounting Standards 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. FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT (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: • • • Group’s current year results; impact of significant changes in the Group’s business; or aspects of the Group’s operations that are important to future performance. 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 controls and risk limits. Finance identifies, evaluates and the Group. The Group uses different methods to measure hedges financial risks within the Group’s operating units. different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks and ageing analysis for credit risk. The Group holds the following financial instruments: 102 Financial Assets Cash and cash equivalents Trade and other receivables Total financial assets Financial Liabilities Trade and other payables Lease liabilities Total financial liabilities Note 8 9 14 13 2021 $000 2020 $000 30,316 7,180 37,496 41,259 21,791 63,050 34,341 6,596 40,937 39,166 24,722 63,888 The carrying value of the assets and liabilities disclosed Initial recognition and measurement in the table above closely approximates or equals their Financial assets and financial liabilities are recognised when fair value. The carrying amounts of trade receivables and the entity becomes a party to the contractual provisions trade and other payables are assumed to approximate of the instrument. For financial assets, this is equivalent to their fair values due to their short-term nature. the date that the Group commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately. FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT Classification and subsequent measurement Impairment Financial instruments are subsequently measured at At the end of each reporting period, the Group assesses fair value, amortised cost using the effective interest whether there is objective evidence that a financial asset method, or cost. Where available, quoted prices in an has been impaired. A financial asset (or a group of financial active market are used to determine fair value. In other assets) is deemed to be impaired if, and only if, there is circumstances, valuation techniques are adopted. objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact Amortised cost is calculated as the amount at which the on the estimated future cash flows of the financial asset(s). financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for When the terms of financial assets that would otherwise impairment, and adjusted for any cumulative amortisation of have been past due or impaired have been renegotiated, the difference between that initial amount and the maturity the Company recognises the impairment for such amount calculated using the effective interest method. financial assets by taking into account the original terms The effective interest method is used to allocate interest loss events that have occurred are duly considered. as if the terms have not been renegotiated so that the income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated (a) Market risk Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currencies. Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group has not entered into forward foreign exchange contracts to protect against exchange rate movements. The Directors are of the view that the cost of hedging the Group’s short-term foreign exchange exposure outweighs the risk of adverse currency movements. 103 future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Financial liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT The Group’s exposure to foreign currency exchange risk at the reporting date, expressed in each currency, was as follows: 2021 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 Cash 4,073 14,192 Trade receivables 4,330 Other financial assets 1,711 318 239 Payables (1,258) (1,448) 161 40 - - 845 142 29 (14) 1,334 401 10,784 1,067 785 72,541 384 32 681 469 293 22,164 - - - 13,617 (5) (52,738) - - 50 (59) 258 (66) 150 525 - 28 User obligations (2,406) (17,577) (233) (1,224) (1,240) (289) (2,611) (2,702) (1,064) (66,310) (427) Net exposure 6,450 (4,276) (32) (222) 478 139 (30,267) (1,166) 5 28,587 276 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 GBP 000’s HKD 000’s SGD 000’s PHP 000’s EUR 000’s CAD 000’s INR 000’s AUD 000's Cash 4,244 17,525 145 1,261 Trade receivables 1,735 2,232 19 Other financial assets 1,726 97 Payables (285) (2,625) - - 189 10 (25) 755 291 - - 457 23,008 23 1,414 - 13,984 13 (3,530) 945 387 - - 755 68,407 221 27,129 81 283 223 382 - (88) (722) (15) 104 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) (180) 31,535 204 The Group had net liabilities of $9,007,000 denominated The analysis below reflects management’s view of in foreign currencies as at 31 December 2021 (comprising possible movements in relevant foreign currencies against assets of $28,772,000 less liabilities of $37,779,000). The the Australian dollar in the short term subsequent to Group had net liabilities of $3,961,000 denominated in 31 December 2021. The table summarises the range of foreign currencies as at 31 December 2020 (comprising possible outcomes that would affect the Group’s net profit assets of $32,613,000 less liabilities of $36,574,000). and equity as a 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: AUD to USD AUD to NZD AUD to GBP AUD to HKD AUD to SGD AUD to PHP (Range +5% to -5%) (Range +5% to -5%) (Range +5% to -5%) (Range +5% to -5%) (Range +5% to -5%) (Range +5% to -5%) 2021 $000 2020 $000 High 280 1 20 (4) (7) 39 Low (310) (2) (22) 4 7 High 11 1 (7) (1) (9) (43) (42) Low (13) (1) 8 1 10 46 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT AUD to EUR AUD to CAD AUD to INR Net movement (Range +5% to -5%) (Range +5% to -5%) (Range +5% to -5%) 87 1 (25) 392 (96) (1) 28 (435) 112 5 (27) 43 (124) (6) 30 (49) Interest rate risk (c) Liquidity risk The Group is not exposed to any significant interest rate risk. Price risk The Group is not exposed to significant equities price risk. Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. Cash balances As at 31 December 2021 the Group had $30,316,000 (2020: $34,341,000) held in bank accounts and online wallets. The Group’s cash balances are predominantly held in interest bearing bank accounts. Funds that are excess to short term liquidity requirements are generally invested in short term deposits. (b) Credit risk The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements The Group does not have any borrowing facilities in place at the reporting date. Credit risk refers to the risk that a counterparty will default Maturities of financial assets on its contractual obligations resulting in financial loss to the The following table details the Group’s remaining contractual Group. The maximum exposure to credit risk at the reporting maturity for its financial instrument liabilities. The table has date to recognised financial assets is the carrying amount, been drawn up based on the undiscounted cash flows of net of any provisions for impairment of those assets, as financial liabilities based on the earliest date on which the disclosed in the statement of financial position and notes to the financial liabilities are required to be paid. The tables include financial statements. The Group does not hold any collateral. both interest and principal cash flows disclosed as remaining 105 Credit risk is managed by a risk assessment process for all their carrying amount in the statement of financial position. customers, which takes into account past experience. contractual maturities and therefore these totals may differ from 2021 Non-derivatives Non-interest bearing Trade Receivables 2020 Non-derivatives Non-interest bearing Trade Receivables 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 2,064 2,064 2,001 2,001 5,139 5,139 918 918 10,122 10,122 1,986 1,986 2,064 2,064 5,362 5,362 2,696 2,696 12,108 12,108 FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT Maturities of financial liabilities The following table details the Group’s remaining contractual financial liabilities are required to be paid. The tables include maturity for its financial instrument liabilities. The table has both interest and principal cash flows disclosed as remaining been drawn up based on the undiscounted cash flows of contractual maturities and therefore these totals may differ from financial liabilities based on the earliest date on which the their carrying amount in the statement of financial position. 2021 Non-derivatives Non-interest bearing Trade Receivables Lease liabilities 2020 Non-derivatives Non-interest bearing Trade Receivables Lease liabilities 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Note $000 $000 $000 $000 14 13 14 13 41,259 5,709 46,968 39,166 5,628 44,794 - 4,485 4,485 - 5,519 5,519 - 11,597 11,597 - 13,376 13,376 - - - - 199 199 Remaining contractual maturities $000 41,259 21,791 63,050 39,166 24,722 63,888 106 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 the internal reporting provided to the chief operating decision segments based on a measure of revenue and operating maker. These include items directly attributable to a segment EBITDA (earnings before share based payments, interest, as well as those that can be allocated on a reasonable basis. tax, depreciation and amortisation). The accounting policies Unallocated items comprise mainly corporate assets (primarily adopted for internal reporting to the CODM are consistent the Company’s headquarters), head office expenses, and with those adopted in the 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 majority of online revenues and expenses are incurred. Although Identification of reportable operating segments the Group has staff and operations in Philippines, United The Group is organised into two operating segments: namely Kingdom, Argentina, the United States and Canada in addition an online marketplace and online payment services. These to Australia, these geographic operations are considered, segments are based on the internal reports that are reviewed based on internal management reporting and the allocation of and used by the CODM in assessing performance and in resources by the Group's CODM, as one geographic segment. 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 NOTES TO THE FINANCIAL STATEMENT Year end 31 December 2021 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 46,099 46,099 2,059 (156) (4,702) (1,981) (4,780) - 11,320 11,320 1,913 - (191) (55) 1,667 - Segment Assets At 31 December 2021 Online Marketplace Online Payments Segment assets Intergroup eliminations Deferred tax assets Intangibles Total assets Segment liabilities At 31 December 2021 Segment liabilities Intergroup eliminations Deferred tax liabilities Total liabilities 54,006 (2,673) - - 9,641 - - - 51,333 9,641 105,327 (65,042) - - (65,042) (6,022) 2,672 - (3,350) (71,064) 107 2,672 (5,605) (73,997) 57,419 57,419 3,972 (156) (4,893) (2,036) (3,113) 856 (2,257) Total 63,647 (2,673) 11,633 32,720 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 50,526 50,526 5,868 (192) (4,483) (1,740) (547) - 8,244 8,244 (75) - (229) (11) (315) - Segment Assets At 31 December 2021 Online Marketplace Online Payments Segment assets Intergroup eliminations 63,874 (2,973) 6,768 - 58,770 58,770 5,793 (192) (4,712) (1,751) (862) 216 (646) Total 70,642 (2,973) FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT Deferred tax assets Intangibles Total assets - - - - 60,901 6,768 Segment Assets At 31 December 2021 Online Marketplace Online Payments Segment liabilities Intergroup eliminations Deferred tax liabilities Total liabilities 05. Revenue (67,140) - - (67,140) (4,402) 2,973 - (1,429) 10,965 25,057 103,691 Total (71,542) 2,973 (5,957) (74,526) The Company’s net revenues result from transaction and other services as this is consistent to the pattern of performance fees generated in its online marketplaces and in providing online obligation i.e. availability of the open transaction to be executed escrow services. Revenues are recognised when evidence of progressively in the future and on the Escrow.com platform an arrangement exists, the fee is fixed and determinable, no significant obligation remains and collection of the receivable is Enterprise Services reasonably assured. Amounts disclosed as revenue are net of The enterprise services revenue stream focuses on projects refunds and amounts collected on behalf of third parties. Where negotiated with customers to meet their needs on short to services have not been provided but the Company is obligated to long-term contracts. Revenue is recognised when milestones 108 provide the services in the future, revenue recognition is deferred. as determined in the contact are completed. Under AASB Provision for doubtful accounts and transaction losses are made 15: Revenue from Contracts with Customers, this happens at the time of revenue recognition based on the Company’s over time. The Group has an enforceable right to payment for historical experience. The provision for doubtful accounts and work completed to date and therefore, revenue is recognised transaction losses are recorded as charges to cost of sales. over time. The Group considers the cost-to-cost method an Revenue is recognised for the major business activities as follows: Marketplace services appropriate measure of progress for the completion of the performance obligation. The cost-to-cost method is based on the proportion of costs incurred for work performed to date relative to the estimated total contract costs. The Group enters into short-term contracts with customers A customer is billed for the project services when a certain for marketplace services. Such contracts are entered into series of milestones have been achieved. A contract asset is before the delivery of the service which is paid in advance recognised for revenue recognised but not yet billed due to of receipt of the service. The performance obligation is the the milestone billing arrangement. Once an invoice is issued, delivery of the service which is recognised by the system the corresponding contract asset is reclassified to trade controls. The system does not draw fees from the customer receivables. A contract liability is recognised if the milestone until the delivery of the service. Therefore, revenue is payment exceeds the revenue recognised to date under the recognised at a point in time upon delivery of the service when cost-to-cost method. No significant financing components the system recognizes that the service has completed. No have been identified in the contracts with customers, as the rebates or volume discounts are provided to customers. period between the payment and the recognition of revenue (cost-to-cost method) is always less than 12 months. Payment services. The Group enters into both long-term and short-term Interest income contracts with customers for payment services. In respect Interest revenue is recognised using the effective of long-term contracts, revenue is recognised over the period interest rate method, which, for floating rate financial of the contract. In respect of short-term contracts, revenue assets, is the rate inherent in the instrument. is recognised by reference to stage of completion of the FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT Government grants Sublease rent Government grants are recognised at fair value where there Sublease rental income of office space is recognised is reasonable assurance that the grant will be received and on a straightline basis over the term of the sub-lease. all grant conditions will be met. Grants relating to expense The Company recognises the right-of-use asset items are recognised as income over the periods necessary resulting from the head lease. Refer to Note 13. to match the grant to the costs it is compensating. 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 Sublease rent Other Total revenue 06. Expenses Loss before income tax benefit includes the following specific net losses and expenses: Employee expenses Wages and salaries (including superannuation) Other employment costs Total employee expenses1 Administrative expenses Hosting Subscriptions Professional fees 2021 $000 43,374 11,320 2,725 57,419 56 1,834 265 2,155 2020 $000 47,742 8,244 2,785 58,771 44 1,375 142 1,561 109 59,574 60,332 2021 $000 23,325 2,648 25,973 6,009 1,324 1,763 2020 $000 20,305 2,030 22,335 6,411 1,237 1,240 FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT Insurances Office Expenses Other Total Administrative expenses Marketing related expenses Search marketing Advertising Other marketing costs Total marketing related expenses Depreciation and amortization Plant and equipment Right of use assets Total depreciation and amortisation expenses Rental expense relating to operating leases Utilities and other related costs Total rental expense relating to operating leases Net foreign exchange losses Finance costs Interest expense 110 Interest expense on lease liability 1 Inclusive of employee expenses included in cost of sales Total employee benefits expenses are inclusive of: 1,013 771 1,034 11,914 5,457 744 862 7,063 267 4,627 4,894 307 307 838 1 2,034 931 710 1,028 11,557 9,019 830 860 10,709 223 4,489 4,712 161 161 374 1 1,750 Short-term obligations are discounted using market yields on national government Employee benefits that are expected to be settled within bonds with terms to maturity that match the expected 12 months have been measured at the amounts expected timing of cash flows attributable to employee benefits. to be paid when the liabilities are settled, plus related on-costs. The liability for annual leave is recognised in Short-term incentive plans the provision for employee benefits. All other short-term The Group recognises a liability and an expense for bonuses employee benefit obligations are presented as payables. payable under short term incentive plans. Short term incentive plans are based on the achievement of targeted Other long–term employee benefit obligations performance levels that may be set at the beginning of each Employee benefits payable later than 12 months have financial year. The Group recognises a liability to pay out short been measured at the present value of the estimated term incentives when contractually obliged based on the future cash outflows to be made for those benefits. In achievement of the stated performance levels, or where there determining the liability, consideration is given to employee is a past practice that has created a constructive obligation. wages increases and the probability that the employee may satisfy any vesting requirements. Those cash flows FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT 07. Income tax The income tax expense or revenue for the period is the A deferred tax asset is recognised for unused tax losses, tax tax payable on the current period’s taxable income based credits and deductible temporary differences, to the extent that on the applicable tax rate for each jurisdiction adjusted by it is probable that future taxable profits will be available against changes in deferred tax assets and liabilities attributable which they can be utilised. Deferred tax assets are reviewed at to temporary differences and to unused tax losses. each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of In determining the amount of current and deferred tax the the reporting period in the countries where the Company’s Group takes into account the impact of uncertain tax positions subsidiaries operate and generate taxable income. Management and whether additional taxes and interest may be due. This periodically evaluates positions taken in tax returns with respect assessment relies on estimates and assumptions and may to situations in which applicable tax regulation is subject to involve a series of judgements about future events. New interpretation. It establishes provisions where appropriate on information may become available that causes the Group to the basis of amounts expected to be paid to the tax authorities. change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the tax Deferred tax is recognised in respect of temporary differences expense in the period that such a determination is made. between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for The Company and its wholly-owned Australian resident taxation purposes. Deferred tax is not recognised for: entities are part of a tax consolidated group. As a • temporary differences on the initial recognition of assets or group are taxed as a single entity. The head entity within liabilities in a transaction that is not a business combination the tax-consolidated group is Freelancer Limited. consequence, all members of the tax-consolidated and that affects neither accounting nor taxable profit or loss. • temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. • taxable temporary differences arising on the initial recognition of goodwill. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. 111 FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT (a) Income tax Current tax Deferred tax Income tax (benefit) Deferred income tax expense included in income tax benefit comprises: (Increase) in deferred tax assets (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) / Under provision in prior years Timing differences not recognized as deferred tax asset 112 Non Taxable income Other non-allowable items Income tax (benefit) (c) Deferred tax assets 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: 2021 $000 171 (1,027) (856) (661) (365) (1,026) (3,115) (934) (11) (114) 47 (33) - 5 184 (856) 357 151 (9) 430 1,101 39 6,216 3,000 348 11,633 11,633 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 Opening balance at beginning of year 10,965 5,129 FREELANCER LIMITED ANNUAL REPORTCredited to the profit or loss statement Exchange differences Closing balance at end of year (d) Deferred tax liabilities The balance comprises temporary differences attributable to: Accrued revenue Foreign exchange gains Right of use assets Net deferred tax liabilities Movements: Opening balance at beginning of year (Debited) / Credited to the profit or loss statement Exchange differences Closing balance at end of year (e) Current tax assets Current tax assets (f) Current tax liabilities Current tax liabilities (g) Franking credits Franking credits available at the reporting date based on a tax rate of 30% NOTES TO THE FINANCIAL STATEMENT 661 7 11,633 (181) (205) (5,219) (5,605) 5,957 (365) 13 5,605 - 43 66 5,885 (49) 10,965 - - 5,957 5,957 443 5,535 (21) 5,957 - 87 66 113 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 original maturities of three months or less that are readily cash equivalents includes cash on hand, deposits held at call convertible to known amounts of cash and which are subject to with banks, other short term highly liquid investments with an insignificant risk of changes in value, and bank overdrafts. Current Cash at bank and on hand Term deposits Total cash and cash equivalents 2021 $000 27,593 2,723 30,316 2020 $000 31,638 2,703 34,341 FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT 09. Trade and other receivables Trade receivables are recognised initially at fair value and delinquency in payments are considered indicators that the subsequently measured at amortised cost using the effective trade receivable is impaired. In addition, the trade receivables interest method, less provision for impairment. This provision balances are considered for credit notes that are expected includes amounts that are not considered to be recoverable to be raised against individual and collective balances. from debtors and amounts that are expected to be credited to debtors. Trade receivables are generally due for settlement The Group applies the simplified approach to providing for no more than 30 days from the date of recognition. They expected credit losses prescribed by AASB 9, which permits the are presented as current assets unless collection is not use of the lifetime expected loss provision for all trade receivables. expected for more than 12 months after the reporting date. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics Collectability of trade receivables is reviewed on an ongoing and the days past due. The loss allowance provision as at basis. A provision for impairment of trade receivables is 31 December 2021 is determined as follows; the expected established when there is objective evidence that the Group credit losses also incorporate forward-looking information. will not be able to collect all amounts due according to the original terms of the receivables. Significant financial The "amounts written off" are all due to customers difficulties of the debtor, probability that the debtor will declaring bankruptcy, or term receivables that enter bankruptcy or financial reorganisation, and default or have now become unrecoverable. Current Trade receivables Payment gateway receivables 114 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 (Decrease) / Increase in provisions for impairment during the year Exchange differences Closing balance (b) Ageing of current trade receivables 1 – 30 days 31 – 60 days 61 – 90 days 90+ days Provision for impairment Total trade receivables net of provision for impairment 2021 $000 7,672 2,241 (3,669) 6,244 204 6,448 732 7,180 3,518 (53) 204 3,669 4,929 915 491 3,578 (3,669) 6,244 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 FREELANCER LIMITED ANNUAL REPORT (c) Expected losses 2021 Expected loss rate (% of Aged Receivables) Gross carrying amount Loss allowing provision 2020 Expected loss rate Gross carrying amount Loss allowing provision 10. 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 1 – 30 days $000 31 – 60 days $000 31 – 60 days $000 90+ days $000 Total $000 - - - 14% 129 129 30.78% 94.74% 151 151 3,389 3,389 3,669 3,669 1 – 30 days $000 31 – 60 days $000 31 – 60 days $000 90+ days $000 Total $000 0.09% 3 3 - - - - - - 95.76% 95.86% 2,586 2,586 2,589 2,589 2021 $000 1,996 195 2,191 496 496 2,687 115 2020 $000 1,959 71 2,030 517 517 2,547 FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT 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. annually by directors to ensure it is not in excess of the Historical cost includes expenditure that is directly recoverable amount from these assets. The recoverable attributable to the 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. 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 adjusted if appropriate, at the end of each reporting period. comparing proceeds with the carrying amount. These gains or losses are recognised in the profit and loss in An asset’s carrying amount is written down immediately the period in which they arise. When revalued assets are to its recoverable amount if the asset’s carrying amount sold, amounts included in the revaluation surplus relating 116 is greater than its estimated recoverable amount. to that asset are transferred to retained earnings. Non-current Office and computer equipment – at cost Accumulated depreciation Carrying value of office and computer equipment Fixtures and fittings – at cost Accumulated depreciation Carrying value of fixtures and fittings Software – at cost Accumulated depreciation Carrying value of software Leasehold improvements – at cost Accumulated amortization Carrying value of leasehold improvements Total carrying value of plant and equipment 2021 $000 3,109 (2,480) 629 502 (495) 7 2 - 2 451 (450) 1 639 2020 $000 2,566 (2,216) 350 497 (481) 16 - - - 451 (450) 1 367 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT Reconciliations Reconciliations of the carrying amount of plant and equipment and leasehold improvements at the beginning and end of the current financial year are set out below: Office and computer equipment $000 453 100 - (202) 351 534 - (256) 629 Fixtures and fittings Software Leasehold improvements $000 28 8 - (21) 15 3 - (11) 7 $000 $000 - - - - - 2 - - 2 1 - - - 1 - - - 1 Total $000 482 108 - (223) 367 539 - (267) 639 Balance at 1 January 2020 Additions Disposals Depreciation and amortization Balance at 31 December 2020 Additions Disposals Depreciation and amortization Balance at 31 December 2021 12. Intangible assets Goodwill Intellectual Property Goodwill is initially recorded at the amount by which the Intellectual property is valued at cost of acquisition. Intellectual purchase price for a business combination exceeds the fair property is 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 be impaired, either individually or at the cash generating unit of acquisition. Goodwill is not amortised. Instead goodwill is level. Useful lives are also examined on an annual basis and tested for impairment annually or more frequently if events or adjustments, where applicable, are made on a prospective basis. 117 changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Trademarks Domain Names Trademarks are valued at cost of acquisition and are amortised on a straight-line basis over the period in which the benefits Domain names are valued at cost of acquisition. Domain are expected to be realised. Trademarks are tested for names are tested for impairment annually or more frequently impairment where an indicator of impairment exists, either if events or changes in circumstances indicate that it might individually or at the cash generating unit level. Useful lives be impaired, either individually or at the cash generating unit are also examined on an annual basis and adjustments, level. Useful lives are also examined on an annual basis and where applicable, are made on a prospective basis. adjustments, where applicable, are made on a prospective basis. FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT 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 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: 118 Balance at 1 January 2020 Additions Balance at 31 December 2020 Additions Balance at 31 December 2021 Domain names $000 4,910 - 4,910 Domain names $000 - 4,910 Intellectual property $000 2,198 - 2,198 Intellectual property $000 - 2,198 2021 $000 4,938 (28) 4,910 2,198 - 2,198 27,011 - 27,011 34,119 Goodwill $000 19,349 - 19,349 Goodwill $000 7,662 27,011 2020 $000 4,938 (28) 4,910 2,198 - 2,198 19,349 - 19,349 26,457 Total $000 26,457 - 26,457 Total $000 7,662 34,119 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 has been determined by a value-in-use calculation using a of the fair value of the domain names. The Directors have discounted cash flow model, based on a 12 month projection assessed the recoverability of domain names, intellectual period for the Group approved by management and extrapolated property and goodwill based on value in use calculations. for a further 5 years with a discounted terminal value. FREELANCER LIMITED ANNUAL REPORT 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 2021 $000 22,385 11,734 34,119 2020 $000 14,808 11,649 26,457 The recoverable amount of each cash-generating unit above rate. The cash flows are discounted based on management’s is determined based on value-in-use calculations. Value- in- estimate of the time value of money and the Group’s weighted use is calculated based on the present value of cash flow average cost of capital adjusted for the risk free rate and the projections over a 5 year period with the period extending volatility of the share price relative to market movements. beyond 5 years extrapolated using a 2% terminal growth The following key assumptions were used in the value-in-use calculations: Online marketplace Online payments CAGR Rate 11% 18% Discount Rate 15% 15% Management has based the value-in-use calculations on Based on the above, management is satisfied budgets for each reporting segment. These budgets use that there are no indicators of impairment to the historical weighted average growth rates to project revenue. current carrying value of intangible assets. 119 Costs are calculated taking into account historical gross margins as well as estimated weighted average inflation rates over the period, which are consistent with inflation rates applicable to the locations in which the segments operate. Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment. 13. Leases The Group as lessee At inception of a contract, the Group assesses if the contract Initially the lease liability is measured at the present value of contains or is a lease. If there is a lease present, a right-of- the lease payments still to be paid at the commencement use asset and a corresponding lease liability are recognised date. The lease payments are discounted at the interest by the Group where the Group is a lessee. However, all rate implicit in the lease. If this rate cannot be readily contracts that are classified as short-term leases (ie leases determined, the Group uses the incremental borrowing rate. with a remaining term of 12 months or less) and leases of low value assets are recognised as operating expenses on a straight-line basis over the term of the lease. FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT Lease payments included in the measurement Right-of-use assets are depreciated over the lease term or of the lease liability is as follows: useful life of the underlying asset, whichever is the shortest. – – fixed lease payments less any lease incentives; Where a lease transfers ownership of the underlying asset variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; 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 amount expected to be payable by the lessee under residual value guarantees; The Group's lease portfolio comprises commercial leases for office property. As at 31 December 2021 these leases had – the exercise price of purchase options, if the lessee remaining lives ranging from 1 month up to 78 months. is reasonably certain to exercise the options; and – payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement day and any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Options to Extend or Terminate The options to extend or terminate are contained in several of the Group’s property leases. These clauses provide the Group opportunities to manage leases in order to align with its strategies. All of the extension or termination options are only exercisable by the Group. The extension options or termination options which were probable to be exercised have been included in the calculation of the right-of-use asset. (i) AASB 16 related amounts recognised in the balance sheet 120 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 2021 $000 2020 $000 22,418 953 (4,627) 9 18,753 5,709 16,082 21,791 26,964 (12) (4,489) (45) 22,418 5,628 19,094 24,722 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT (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 flow Interest expense on lease liabilities (under finance costs) Repayment of lease liabilities 2021 $000 4,627 2,034 2021 $000 2,034 3,478 2020 $000 4,489 1,751 2020 $000 856 1,751 14. Trade and other payables These amounts represent liabilities for goods and services payable as and when they are due. Trade and other payables provided to the Group and amounts outstanding to users are presented as current liabilities unless payment is of the Company’s websites at the end of financial year not due within 12 months from the reporting date. which are unpaid. The amounts are unsecured and are 121 Current Trade payables Sundry payables and accrued expenses User obligations Total trade and other payables 2021 $000 2,930 1,612 36,717 41,259 2020 $000 3,172 800 35,194 39,166 FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT 15. Borrowings Current Working capital loan Payroll protection loan Total borrowings 2021 $000 121 - 121 2020 $000 121 165 286 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 interest free and has no fixed date of repayment. and has no fixed date of repayment. If certain conditions are met, this loan will be eligible for forgiveness. 16. Provisions Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result, and that outflow can be reliably measured. Provisions recognised represent the best estimate of the amounts required to settle the obligation at reporting date. 122 A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is stated at the present value of the future net cash outflows expected to be incurred in respect of the contract. Current Provision for user disputes and refunds Employee benefits Provision for indirect taxes Provision for penalties* Total current provisions Non-current Make-good provisions Employee benefits Total non-current provisions Total provisions 2021 $000 503 397 1,683 288 2,871 511 311 822 2020 $000 539 1,390 216 272 2,417 431 327 758 3,693 3,175 *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 2021, forty five licences were in place. As part of this process, regulatory penalties may be payable for unlicensed activity (substantially pre- acquisition). Theprovision represents an estimate of probable penalties. FREELANCER LIMITED ANNUAL REPORT Movements Balance at 1 January 2020 Additional provisions Amounts used Unused amounts reversed Foreign exchange differences Balance at 31 December 2020 Balance at 1 January 2021 Additional provisions Amounts used Unused amounts reversed Foreign exchange differences Balance at 31 December 2021 Provision for User Disputes/ Refunds $000 584 7 - - (53) 538 538 - - (65) 30 503 NOTES TO THE FINANCIAL STATEMENT Provision for Indirect Taxes Employee Benefits Provision for Penalties Provision for Make-good Total Provisions $000 103 802 (654) - (35) 216 216 1,744 (1,570) - 7 397 $000 1,575 683 (259) (254) (29) 1,716 1,716 1,223 (678) (273) 6 1,994 $000 370 - (14) (52) (32) 272 272 - - - 16 288 $000 720 - - (278) (11) 431 431 133 (58) - 5 511 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 There were no significant changes in the contract liability balances during the 2021 year. 2021 $000 1,485 1,485 846 639 1,485 $000 3,352 1,492 (927) (584) (160) 3,173 3,173 3,100 (2,306) (338) 64 3,693 2020 $000 1,133 1,133 586 547 1,133 123 FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT 18. Contributed equity (a) Share capital Ordinary shares Fully paid Total share capital (b) Movements in ordinary share capital Note 2021 Number 2020 Number 18(b) 452,516,636 453,123,619 2021 $000 38,779 38,779 Reconciliation to 31 December 2020 Number of shares Average price Balance at 1 January 2020 Issue / (cancellation) of ordinary shares: Issue of ESP shares 1 Buy-back and cancellation of ESP shares Contributed equity arising from repayment of ESP loans Balance at 31 December 2020 452,756,722 1,179,001 (812,104) - 453,123,619 $0.48 $1.27 - Reconciliation to 31 December 2021 Number of shares Average price Balance at 1 January 2021 124 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 2021 453,123,619 330,527 (937,510) - 452,516,636 $0.83 $0.65 - 2020 $000 38,446 38,446 $000 38,446 - - - 38,446 $000 38,446 - - 333 38,779 (c) Ordinary shares (e) Capital risk management Ordinary shares have the right to receive dividends as The Group’s objectives when managing capital are to declared, and, in the event of winding up the Company, to safeguard its ability to continue as a going concern, so participate in the proceeds from the sale of all surplus assets that it can provide returns to shareholders and benefits in proportion to the number of and amounts paid up on for other stakeholders and to maintain an optimum shares held. Ordinary shares entitle their holder to one vote, capital structure to reduce the cost of capital. either in person or by proxy, at a meeting of the Company. (d) Employee Share Plan (ESP) Information relating to the ESP, including details of shares issued under the plan, is set out in Note 24. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current parent entity’s share price at the time of the investment. The Group actively pursues additional investments as part of its growth strategy. The capital risk management policy remains unchanged from the 2020 Annual Report. FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 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. 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 Total reserves 2021 $000 4,903 156 5,059 (574) 279 (295) 4,764 2020 $000 4,711 192 4,903 (254) (320) (574) 4,329 125 (b) Nature and purpose of reserves Share-based payments reserve This amount represents the value of the ESP share grants to employees under the Freelancer Employee Share Plan and other compensation granted in the form of equity. Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of its overseas subsidiaries. 20. Key management personnel disclosures (a) Directors (b) Other key management personnel The following persons were Directors of Freelancer The following persons also had the authority and responsibility Limited during the financial year: for planning, directing and controlling the major activities of the Group, directly or indirectly, during the financial year: Mr Robert Matthew Barrie – Executive Chairman Mr Darren Nicholas John Williams – Non-Executive Director Mr Neil Leonard Katz – Chief Financial Mr Simon Alvin Clausen – Non-Executive Director Officer and Company Secretary FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT (c) Key management personnel compensation Short-term employee benefits Share based employee benefits Other long-term benefits Total benefits 2021 $000 1,012 40 56 1,108 2020 $000 968 47 56 1,071 Short-term employee benefits Share based payments These amounts include fees and benefits paid to the These amounts represent the expense related to the participation Non-Executive Directors as well as all salary, paid of KMP in equity-settled schemes as measured by the fair leave benefits, fringe benefits and cash bonuses value of the options rights and shares granted on grant date. awarded to Executive Directors and other KMP. Other long-term benefits Further information in relation to KMP remuneration can be found in the Remuneration Report, which These amounts represent long service leave benefits is included in the Director’s Report. accruing during the year, long-term disability benefits and deferred bonus payments. 21. Remuneration of auditors 126 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 Due diligence services Taxation services Tax compliance services, including review of Company income tax returns Total remuneration of Hall Chadwick (b) Audit firms other than Hall Chadwick Audit and other assurance services Audit and review of financial reports Taxation services Tax compliance services, including review of subsidiary income tax returns Other non-audit services Accounting services Total remuneration of audit firms other than Hall Chadwick 2021 $000 2020 $000 127 2 40 169 83 65 6 154 121 2 29 152 81 14 14 109 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 22. Contingent liabilities Except for the items listed below, there are no other contingent liabilities as at 31 December 2021: • a collateral amount of USD450,000 (2020: • included in cash is an amount of $2,643,759 on term • • USD450,000) is in place in one of the Group’s PayPal deposits (31 December 2020: $2,608,000), which is secured accounts in favour of PayPal Australia Pty Ltd; against bank guarantees that have been provided to lessors term deposits of $75,047 (2020: $76,852) are secured in respect of premises occupied by the Company in Sydney. for corporate credit card facilities in place; • Included in cash is an amount of USD240,000 deposits of $728,308 (2020: $1,003,000) are held by various credit card processing providers, as security for any contractual compensation arising under these agreements; (2020: USD134,000), which is held as a reserve to satisfy escrow regulatory requirements in respect of credit card transactions. 23. Commitments for expenditure Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Leases are made up of operating leases of property. Payments made under operating leases are accounted for in accordance with AASB 16 Leases and are brought into account as depreciation on the right of 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 accounted for on a straight-line basis over the period of the lease. Lease incentives provided are recognised over the lease term on a straight-line basis. Less than one year Between one and five years More than five years Total operating service commitments (b) Other capital commitments There were no other capital commitments as at 31 December 2021. (a) Non-cancellable operating services The Group has entered into a commercial agreement for web hosting services with an annual fee commitment for 2 years commencing on 1 February 2022. Fees paid under this agreement are charged to the income statement on a usage basis over the period of the agreement. This commitment is fixed in USD. The future minimum fee commitment under this agreement has been calculated using the spot exchange rate at 31 December 2021 and may be subject to variation due to changes in exchange rates. The amounts are as follows: 127 2021 $000 4,893 4,893 - 9,786 2020 $000 3,900 - - 3,900 FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT 24. Share based payments Employee Share Plan The Group operates an employee share plan. The fair value is made by the Board, on the basis that ESP shares of the effective option over the shares granted under the will be subject to a 4 year vesting period, with: Company’s Employee Share Plan (ESP) is recognised as an employee benefit expense with a corresponding increase – 10% of ESP shares applied for vesting on the date that is in equity. The fair value is measured at grant date and the first anniversary of the issue date of the ESP shares; recognised over the period during which the employees become unconditionally entitled to the ESP shares. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the ESP shares, the vesting and performance criteria, the impact of dilution, the non-tradeable – 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 nature of the ESP share, the share price at grant date and expected – 40% of ESP shares applied for vesting on price volatility of the underlying share, the expected dividend yield the date that is the fourth anniversary of and the risk-free interest rate for the term of the ESP share. the issue date of the ESP shares. The fair value of share grants issued outside of the ESP is independently determined based on the value of the shares at grant date less the present value of dividends expected to be distributed between the grant date and the vesting dates. During the year ended 31 December 2013, the Company established a share based payment plan, the Employee Share Plan 128 (ESP) to assist the Company in retaining and attracting current and future employees by providing them with the opportunity to own shares in the Company. Resolutions to amend and approve the ESP were passed at the AGM held on 17 May 2016. The key terms of the ESP are as follows: • the Board may invite a person who is employed or engaged by or holds an office with the Group (whether on a full or part-time basis) and who is declared by the Board to be eligible to participate in the ESP from time to time (Eligible Employee) to apply for fully paid ordinary shares under the plan from time to time (ESP shares); • invitations to apply for ESP shares offered to Eligible Employees subsequent to the Company’s initial public offering are to be made on the basis of the market price per share defined as the volume weighted average price at which the Company’s shares have traded during the 30 days immediately preceding the date of the invitation; • invitations to apply for ESP shares under the ESP will be made on a basis determined by the Board (including as to the conditionality on the achievement of any key performance indicators) and notified to Eligible Employees in the invitation, or if no such determination • Eligible Employees who accept an invitation (ESP Participants) may be offered an interest free loan from the Company to finance the whole of the purchase of the ESP shares they are invited to apply for (ESP Loan). ESP Loans will have a term of 4 years and become repayable in full on the earlier of: – the fourth anniversary of the issue date of the Employee Offer Shares; and – if the ESP Participant ceases to be an Eligible Employee, either: › the date 30 days after the date of cessation, if the Eligible Employee is a good leaver (as defined in the ESP); or › that date of cessation, if the Eligible Employee is a bad leaver (as defined in the ESP). • if the ESP Participant does not repay the outstanding ESP Loan, or it notifies the Company that it cannot, then such number of ESP shares that equal by value (using the price at which the ESP shares were issued) the outstanding amount of the ESP Loan will become the subject of a buy-back notice from the Company which the ESP Participant must accept. The buy-back of such number of ESP shares will be considered full and final satisfaction of the ESP Loan and the Company will not have any further recourse against the ESP Participant; • any dividends received by the ESP Participant whilst the whole or part of the ESP Loan remains outstanding must be applied to the repayment of the ESP Loan. In addition, an ESP Participant may make pre-payments at any time; • the maximum number of ESP shares for which invitations may be issued under the ESP together with the number of ESP shares still to be issued in respect of already accepted FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT invitations and that have already been issued in response estate will immediately vest subject to the repayment to invitations in the previous 5 years (but disregarding of any outstanding ESP Loan by the curator, executor or ESP shares that are or were issued following invitations to nominated beneficiary(ies) (as the case may be) within non-residents, that did not require a disclosure document 30 days of their appointment (or such longer period as under the Corporations Act, or that were issued under a the Company in its discretion may allow). Failing such disclosure document under the Corporations Act) must repayment, the Company will buy-back all ESP shares in not exceed 5% of the total number of ordinary shares on respect of which there is an outstanding ESP Loan; issue in the Company at the time the invitations are made; • the rules of the ESP and any amendment to the • in the event of a corporate reconstruction, the Board will rules of the ESP must be in accordance with the adjust, subject to the Listing Rules (if applicable), any one Listing Rules and the Corporations Act; or more of the maximum number of Shares that may be issued under the ESP (if applicable), the subscription price, the buy-back price and the number of ESP shares to be vested at any future vesting date (if applicable), as it deems appropriate so that the benefits 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; • if, while the Company’s shares are traded on the ASX or any other stock exchange, there is any inconsistency between the terms of the ESP and the Listing Rules, the Listing Rules will prevail; and • the ESP is governed by the laws of the State of New South Wales, Australia. The full terms of the ESP are available on the Company’s website, www.freelancer.com. • ESP Participants will continue to have the right to participate Long Term Incentive Plan in dividends paid by the Company despite some or all of their ESP shares not having vested yet or being subject to an ESP Loan. If an ESP Loan has been made to the ESP Participant, then any dividend due must first be applied to reducing any outstanding ESP Loan amount applicable to the ESP shares on which the dividend is paid; The Group operates a long term incentive plan through the grant of equity incentives in the form of Share Rights . The fair value of the effective option over the equity incentives in the form of Share Rights granted under the Company’s Long Term Incentive Plan (LTIP) are recognised as an employee benefit expense with 129 • ESP shares which have not vested and/or are a corresponding increase in equity. The fair value is measured subject to repayment of the ESP Loan will be at grant date and recognised over the period during which the restricted (escrowed) from trading; employees become unconditionally entitled to the Share Rights. • the Company may buy-back at the issue price any ESP shares which: – have not vested, or are incapable of vesting at any time (including as a result of the ESP Participant failing to meet any key performance indicators on which vesting of ESP shares is conditional); or – remain in escrow and/or are the subject of an ESP Loan, on the occurrence of: The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the Share Rights, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the Share Rights, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the Share Rights. › the ESP Participant ceasing to be an Eligible During the year ended 31 December 2021, the Company Employee (unless the Board, in its sole and established a long term incentive plan, the Long Term Incentive absolute discretion determines otherwise, subject Plan (LTIP) to assist the Company in retaining and attracting to any conditions that it may apply, including the current and future employees by providing them with the repayment of any outstanding ESP Loan); or opportunity to own shares in the Company. Resolutions to › the expiration of the term of the ESP Loan. implement the LTIP was passed at the AGM held on 28 July 2021. • any bonus securities issued in relation to ESP shares which remain unvested or are subject to an ESP Loan which becomes repayable in full will be the subject of a buy-back by the Company at the issue price for no consideration; • on the death or permanent disability of an ESP Participant, all ESP shares held by the ESP Participant or their FREELANCER LIMITED ANNUAL REPORT2021NOTES TO THE FINANCIAL STATEMENT The key terms of the LTIP are as follows: • Shares issued under the Plan • A Share Right includes (without limitation): – Shares that are registered or allocated (as applicable) – Performance Rights (i.e. Share Rights with no exercise price); in the participant’s name will carry the same voting and dividend rights as all other Shares from the date of registration or allocation (as applicable). – Options (i.e. Share Rights generally with an – Shares issued under the Plan will rank equally with exercise price equal to the market value of a Share on the date of grant or such other all other existing Shares as at the time of issue in all respects, including with respect to voting exercise price determined by the Board); and rights and rights to receive dividends and bonus – Premium Priced Options (i.e. Share Rights with shares and to participate in rights issues. an exercise price that is greater than the market – A participant may only participate in a new issue of value of a Share on the date of grant). • Eligibility and grant of securities – Employees who are in full-time or permanent part-time employment of a Group Company who the Board determines is to receive an offer under the Plan. • Offer and Conditions – The Board may, in its absolute discretion and subject to the Plan, offer eligible employees the opportunity to participate in the Plan. • Vesting – Share Rights may be subject to certain Performance Criteria or other vesting conditions as determined by the Board and set out in each participant’s plan offer letter. Following testing of any relevant Performance Criteria / vesting conditions, Share Rights 130 that do not vest will lapse (unless otherwise determined by the Board). Performance Criteria / vesting conditions can be waived by the Board in its absolute discretion. • Exercise and allocation of Share Rights – Upon vesting of the Share Rights, subject to the Plan, those Share Rights will become exercisable. Share Rights must be exercised within the exercise period as advised by the Board. Upon exercise of Share Rights for the exercise price (if any), the participant will receive one Share for each Share Right that is exercised (subject to adjustment in accordance with the Plan) either by way of the issue of new Shares or a transfer of Shares acquired on-market or an allocation of Shares. The corresponding number of Shares will be delivered and registered, or allocated, in the participant’s name (as applicable) as soon as practicable after a participant has exercised their Share Rights and paid the exercise price (if any) to the Company. Notwithstanding the above, upon exercise of Share Rights, the Board may determine, in accordance with the Plan, to instead pay a cash amount to the participant in respect of a vested Share Right in lieu of an issue of new Shares. The Board may, in its discretion, also determine to accept a cashless exercise of any Share Rights (in accordance with the Rules), which will involve the number of Shares allocated to the relevant participant being reduced by such number of Shares determined by the Board equal to the aggregate exercise price (if any) in respect of those Share Rights. Shares or other securities to holders of Shares if Shares have been allocated to the participant and registered or allocated (as applicable) in the name of the participant in accordance with the Plan rules before the record date for determining entitlements to the issue. – Shares allocated to a participant following exercise of their Share Rights will not be subject to any further restrictions on dealing, other than to the extent prohibited by the Freelancer Securities Trading Policy. • Cessation of employment – If a participant ceases their employment with the Group before the end of the Performance Period, their unvested Share Rights will ordinarily lapse (unless otherwise determined by the Board). However, if a participant ceases employment with the Group due to a ‘Good Leaver Event’ and at least six months of the Performance Period has elapsed at that time, a pro rata number of their unvested Share Rights (based on the portion of the Performance Period that has elapsed as at that time) will generally be retained and will be tested following the end of the Performance Period in accordance with the Plan. A ‘Good Leaver Event’ means death, permanent disablement, retirement, redundancy (as those terms are defined in the Plan) or such other circumstances that result in a participant leaving the employment of the Group and that the Board determines is a Good Leaver Event. The Board retains the discretion to determine a different treatment of any unvested Share Rights. If prior to cessation of employment, the participant held any exercisable Share Rights, then subject to the Plan rules, the relevant exercise period, in respect of those Share Rights will end on the earlier of (i) the date that is three months (or other such period as determined by the Board) following the date of the participant’s cessation of employment or the date on which those Share Rights become vested Share Rights; or (ii) the expiry date. • Lapsing of Share Rights – The Board may determine that some or all of a participant’s Share Rights (whether vested or unvested) lapse, if a participant: FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT – commits any act of fraud or defalcation the number of Share Rights, and/or the number of Shares or gross misconduct in relation to the subject to the Share Rights, and/or the exercise price (if affairs of any Group Company; – materially breaches their obligations to the Group Companies, including by failing to comply with a Group Company’s policies; – hedges the value of, or enter into a derivative arrangement in respect of, any unvested Share Rights; or any) of Share Rights, will be reconstructed to the extent necessary to comply with, and in accordance with, the ASX Listing Rules applying to a reorganisation of capital at the time of the reorganisation. If the Company makes a bonus issue of Shares to existing holders of Shares (other than an issue of Shares in lieu or in satisfaction of dividends or by way of dividend reinvestment) and no Share has been issued in respect of a Share Right – purports to dispose of or otherwise deal with (including before the record date for determining entitlements by granting any security interest over) their Share to the bonus issue, then the number of underlying Rights other than as permitted under the Plan. Shares over which the Share Right is convertible will be • The Plan rules contain other circumstances where such Share Rights may lapse. In addition, the Board may determine in the above and other circumstances that any Shares acquired by (or cash paid to) a increased by the number of Shares which the participant would have received if the participant had exercised the Share Right before the record date for the bonus issue. No adjustment will be made to the exercise price. participant following the vesting of Share Rights for • Plan Trustee – The Plan may be administered in the after tax value of the Share Rights at the time conjunction with an employee share trust, the trustee of they converted into Shares (or at such other time which may acquire Shares for the purposes of transfer determined by the Board) be paid to the Company. to Participants or to be held for Participants (whether • No transfer – Except in respect of the transmission of a Share Right to a participant's legal representative upon death or legal incapacity, and unless the Board determines otherwise, a participant may not dispose of or otherwise deal with (including by granting any security interest over) a Share Right. • Change of control – If a Change of Control Event occurs, or the Board determines that such may occur, the Board has the discretion to determine that any one or more of the following apply: – the Performance Criteria applicable to some or all unvested Share Rights will be assessed as at on an unallocated and/or allocated basis). The transfer of a Share by the trustee of such a trust to a Participant, or the allocation of a Share in the Participant’s name which continues to be held by the trustee for that Participant, will satisfy the obligation of the Company to allocate a Share to the Participant under the Plan. • Other – The Plan will be administered by the Board, which has broad powers in respect of the Plan including to exercise discretions, amend the Plan rules or any offer letter at any time in any manner the Board thinks fit (subject to prescribed limitations in the Plan rules) and/or to waive any terms or conditions (including any Performance Criteria / vesting conditions) in relation to any Share Rights. 131 a date determined by the Board or are waived; • Foreign participants – The Board may adopt amended rules of the Plan applicable in any jurisdiction under which Share Rights are offered under the Plan and the way in which the Plan is operated may be subject to additional or modified terms, having regard to any securities, exchange control or taxation laws or regulations or similar factors that may apply to a Participant or to any member of the Group in relation to the Share Rights or any of the provisions of the Plan. – the exercise period in respect of some or all Share Rights that are or become vested Share Rights (including as a result of the exercise of the Board’s discretion above) is abridged to end on a date determined by the Board (subject to earlier lapse in accordance with the Plan rules); – some or all Share Rights are to be replaced by rights to shares of the new controlling company on substantially the same terms and subject to substantially the same conditions as the Share Rights with any appropriate amendments, including to Performance Criteria; – some or all unvested Share Rights lapse as at a date determined by the Board • Reorganisation of Capital and Bonus Issues – In the event of any reorganisation of the share capital of the Company (including any sub-division, consolidation, reduction or return of the share capital of the Company), FREELANCER LIMITED ANNUAL REPORT2021NOTES 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: 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 Grant date 2021 3,158,998 330,527 (635,261) (937,510) 1,916,754 1,542,072 374,682 4 November 2016 $1.34 100,000 8 December 2017 $0.52 472,771 18 October 2018 $0.53 800,000 12 November 2018 $0.65 100,000 20 February 2019 $0.53 407,226 6 May 2019 $0.65 100,000 19 February 2020 $0.47 640,539 2 March 2020 $0.45 200,000 30 July 2020 $0.53 300,000 11 December 2020 14 April 2021 28 May 2021 Total 2020 132 24 November 2015 7 March 2016 26 April 2016 27 July 2016 $0.52 $0.62 $0.95 $1.76 $1.53 $1.38 38,462 - - 120,000 210,527 50,000 30,000 50,000 $1.59 440,539 4 November 2016 $1.34 100,000 8 December 2017 $0.52 505,852 2 March 2018 $0.40 15,150 18 October 2018 $0.53 980,000 12 November 2018 $0.65 100,000 20 February 2019 $0.53 407,226 6 May 2019 $0.65 113,334 19 February 2020 2 March 2020 30 July 2020 11 December 2020 $0.47 $0.45 $0.53 $0.52 - - - - 640,539 200,000 300,000 38,462 - - - - - - - - - - - - - - - - - - - - - - (100,000) (448,461) (24,310) - - - - - - (180,000) (420,000) 200,000 80,000 120,000 - - (100,000) - - - - 407,226 285,059 122,167 (6,800) (93,200) - - - - - - - - - - - 640,539 576,486 64,053 200,000 180,000 20,000 (200,000) 100,000 90,000 10,000 - - - 38,462 - 38,462 120,000 120,000 210,527 210,527 - - - - - - - - - - - - - - - - - (50,000) (30,000) (50,000) (440,539) - - - - - 100,000 - - - - - - - - - 100,000 (33,081) 472,771 120,978 351,793 (15,150) - - - (180,000) 800,000 560,000 240,000 - - 100,000 70,000 30,000 407,226 366,504 40,722 (13,334) 100,000 90,000 10,000 - - - - 640,539 640,539 200,000 200,000 300,000 300,000 - - - 38,462 - 38,462 Total 2,792,101 1,179,001 - (812,104) 3,158,998 2,348,021 810,977 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT All Eligible Employees who accepted an offer of ESP the Company has effectively granted the participants an option shares were given an interest free loan from the to the ESP shares due to the ESP Loans being non-recourse. Company to finance the whole of the purchase of the As such, this arrangement is accounted for under AASB 2. ESP shares they were invited to apply for (ESP Loan). The assessed weighted average fair value at grant date The ESP Loans are provided to participants on a non-recourse of the effective share options granted during the financial basis and upon vesting must be repaid in order to remove trading year is $0.42 per option (2020: $0.19). Options were priced restrictions on vested ESP shares. The term of the ESP Loan is using a Black-Scholes option pricing model that takes into four years; however, participants may forfeit their ESP shares account the exercise price, the term of the option, the impact if they do not repay the ESP Loan or leave the Company. As of dilution, the share price at grant date and expected price the ESP removes the risk to participants from decreases in the volatility of the underlying share, the expected dividend yield share price by limiting the maximum loan amount repayable and the risk free interest rate for the term of the option. to the value of the ESP shares disposed and waiving the ESP The expected price volatility of the Company’s shares is Loan should the participant forfeit their ESP shares, whilst still based on the historical volatility of ASX listed companies allowing participants the rewards of any increase in share price, considered to be comparable to Freelancer Limited. (b) LTIP share option grants Set out below are summaries of LTIP options granted, issued and that have balances or movement during the year under the plan: Grant date 2021 22 October 2021 21 December 2021 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 $0.72 $0.73 - - - 63,889 13,699 77,588 - - - - - - 63,889 63,889 13,699 13,699 77,588 77,588 - - - 133 The assessed weighted average fair value at grant date of the effective Share Rights granted during the financial year is $0.296 per option (2020: n/a). Options were priced using a Black-Scholes option pricing model that takes into account the exercise price, the term of the Share Rights, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The expected price volatility of the Company’s shares is based on the historical volatility of ASX listed companies considered to be comparable to Freelancer Limited. (c) LTIP share option grants in subsidiary (Payments Pty Ltd) Set out below are summaries of LTIP options granted, issued and that have balances or movement during the year under the plan: 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 Grant date 2021 16 November 2021 $0.0576 Total - - 15,000,000 15,000,000 - - - - 15,000,000 15,000,000 15,000,000 15,000,000 - - The assessed weighted average fair value at grant date of the share, the expected dividend yield and the risk free interest rate effective Share Rights granted during the financial year is $0.0309 for the term of the option. The expected price volatility of the per option (2020: n/a). Options were priced using a Black-Scholes subsidiary’s shares is based on the historical volatility of ASX listed option pricing model that takes into account the exercise price, companies considered to be comparable to Payments Pty Ltd. the term of the Share Rights, the impact of dilution, the market price at grant date and expected price volatility of the underlying FREELANCER LIMITED ANNUAL REPORT2021 NOTES TO THE FINANCIAL STATEMENT 25. Related party transactions (a) Parent entity (d) Transactions with related parties Freelancer Limited is the parent entity and ultimate controlling entity. (b) Interests in controlled entities Interests in subsidiaries are set out in Note 28. (c) Transactions with key management personnel Disclosures relating to key management personnel are set out in Note 20 and the Remuneration Report. Receivable from and payable to related parties There were no receivables from or payable to related parties at reporting date in relation to transactions with related parties detailed above. Loans to / from related parties There were no loans to or from related parties at the reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 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 134 Investments in subsidiaries are accounted for at cost continues to be a standalone taxpayer in its own right. in the financial statements of Freelancer Limited. Investments in subsidiaries are tested for impairment In addition to its own current and deferred tax amounts, whenever changes in events or circumstances indicate Freelancer Limited also recognises the current tax that the carrying amount may not be recoverable. liabilities (or 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 Set out below is the supplementary have elected to form an income tax consolidated group. 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 2021 $000 35 35 9,814 31,958 41,772 5,198 5,198 2020 $000 (861) (861) 9,244 32,713 41,957 5,895 5,895 36,574 36,062 FREELANCER LIMITED ANNUAL REPORTContributed equity Reserves Accumulated losses Total equity NOTES TO THE FINANCIAL STATEMENT 38,780 5,047 (7,253) 36,574 38,446 4,904 (7,288) 36,062 Contingent liabilities Significant accounting policies The parent entity had no contingent liabilities at The accounting policies of the parent entity are consistent 31 December 2021 and 31 December 2020. with those of the Group, except for investments in subsidiaries which are accounted for at cost, less any impairment. Capital commitments The parent entity had no capital commitments as at 31 December 2021 and 31 December 2020. 27. Business Combinations Business combinations occur where an acquirer comprehensive income. The acquisition of a business may result obtains control over one or more businesses. in the recognition of goodwill or a gain from a bargain purchase. A business combination is accounted for by applying the (a) Acquisition of Loadshift business 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 initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted 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 On 7 May 2021, the Group entered into a business and asset sale and purchase agreement to acquire the business of loadshift.com for a total purchase price was $7.67 million. The Group assumed control of the business on 24th May 2021. Loadshift.com is a provider of a subscription based freight classified services. Loadshift.com contributed revenues of $0.6 million for the period 24th May 2021 to 31 December 2021. 135 The Group has determined it impracticable to disclose the revenue and net profit/loss included in the consolidated statement of profit or loss and other comprehensive income had the acquisition of the business of Loadshift.com occurred at the beginning of the reporting period. The Group has assessed that an objective determination of the revenue and net profit since the beginning of the reporting period was not able to be made due to the integrated nature of the Group’s website operations and as such disclosure has not been made. Purchase consideration: Cash Fair value of net identifiable assets acquired: Goodwill on acquisition Total purchase consideration A$000 7,662 7,662 7,662 FREELANCER LIMITED ANNUAL REPORT2021NOTES 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 ** Photo Anywhere Holdings Pty Ltd *** 136 Photo Anywhere Pty Ltd *** Photo Anywhere Technology 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 Internet Escrow Services UK 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 *** Incorporated in 2021 Country of Incorporation Percentage Owned (%) 2021 Percentage Owned (%) 2020 Australia Australia Australia 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 53 53 53 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 55 55 55 - - - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 FREELANCER LIMITED ANNUAL REPORT 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 since 31 December 2021 that have significantly affected, or may significantly affect: • • • the aggregated entity’s operations in the future financial years, or the results of those operations in future financial years, or the aggregated entity’s state of affairs in the future financial affairs. 31. Reconciliation of loss after tax to net cash flow from operating activities 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) in trade and other receivables (Increase) in deferred tax assets Decrease / (Increase) in other assets Increase in trade and other creditors (Decrease) / Increase in provision for income tax (Decrease) / Increase in deferred tax liabilities Increase in provisions for employee benefits Increase / (Decrease) in other provisions Net cash inflow from operating activities Non cash information During the period, the group recognised $2.03 million of interest charge relating to rent free period under AASB 16: Leases. 2021 $000 (2,257) 4,894 156 1,313 (1,007) (697) 11 188 (39) (356) 277 160 2,643 137 2020 $000 (646) 4,712 192 (1,439) (501) (5,794) (647) 6,355 28 5,540 142 (29) 7,913 FREELANCER LIMITED ANNUAL REPORT2021 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 determination of basic earnings per share to take into account: • • the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of shares assumed bonus elements in ordinary shares issued during to have been issued for no consideration in the year and excluding treasury shares. 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: 138 Loss from continuing operations Diluted earnings per share: Loss attributable to the ordinary equity holders of the Company 2021 Cents (0.50) (0.50) (0.50) (0.50) $000 2020 Cents (0.14) (0.14) (0.14) (0.14) $000 (2,257) (646) (2,257) 2021 Shares (646) 2020 Shares (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used in calculating basic earnings per share 450,166,182 449,964,621 Adjustments for calculation of ordinary shares used in calculating diluted earnings per share: ESP shares Share grants 2,875,150 3,005,447 - Weighted average number of ordinary shares used in calculating diluted earnings per share 453,041,332 452,970,068 (b) 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 REPORTNOTES TO THE FINANCIAL STATEMENT 33. Other significant accounting policies (a) Principles of consolidation The consolidated financial statements incorporate all of Cash flows are presented in the cash flow statement the assets, liabilities and results of Freelancer Limited and on a gross basis. The GST and VAT components of all subsidiaries. Subsidiaries are all entities over which cash flows arising from investing or financing activities the Group has control. The Group controls an entity when which are recoverable from, or payable to, the taxation it is exposed to, or has rights to, variable returns from its authority are presented as operating cash flows included involvement with the entity and has the ability to affect in receipts from customers or payments to suppliers. those returns through its power to direct the activities of the entity. A list of the subsidiaries is provided in Note 28. Commitments and contingencies are disclosed net of the amount of GST and VAT recoverable from, The assets, liabilities and results of all subsidiaries are fully or payable to, the relevant taxation authority. consolidated into the financial statements of the Group from the date on which control is obtained by the Group. (c) Research & development The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Costs relating to research and development of new software products are expensed as incurred until technological feasibility in the form of a working model has been established. At such time costs may be capitalised, subject to recoverability. Software development costs incurred subsequent to the establishment of technological feasibility have not been significant, and the Group has not capitalised any software development costs to date. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. (b) Goods and Services Tax (GST) and Valued Added Tax (VAT) Revenues, expenses and assets are recognised net of the amount of associated GST and VAT, except where the amount of GST and VAT incurred is not recoverable from the relevant taxation authority. In these circumstances, the GST and VAT is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated inclusive of the amount of GST and VAT receivable or payable. The net amount of GST and VAT recoverable from, or payable to, the relevant taxation authority is included with other receivables or payables in the statement of financial position. (d) Foreign currency transactions and balances Functional and presentation currency The functional currency of each of the Group entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional and presentation currency. 139 Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at 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. Exchange differences arising on the translation of monetary items are recognised in the profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non- monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. FREELANCER LIMITED ANNUAL REPORT2021NOTES 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 currency is translated as follows: • • • Assets and liabilities are translated at period end exchange rates prevailing at that reporting date. Income and expenses are translated at average exchange rates for the period. Retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is 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 to determine whether there is any indication that those assets have been impaired. If such an indication exists, 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. 140 Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. 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 The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Business Combinations Following the guidance in AASB 3: Business Combinations, the Group has made assumptions and estimates to determine the purchase price of businesses acquired as well as its allocation to acquired assets and liabilities. To do so, the Group 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. The assumptions and estimates made by the Group have an impact on the asset and liability amounts recorded in the financial statements. In addition, the estimated useful lives of the acquired amortisable assets, the identification of intangible assets and the determination of the indefinite or finite useful lives of intangible assets acquired will have an impact on the Group’s future profit or loss. Impairment of intangible assets The Group assesses impairment at each reporting date by 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 When required by Accounting Standards, comparative incorporate a number of key estimates. During the year ended figures have been adjusted to conform to changes 31 December 2021, no impairment has been recognised in in presentation for the current financial year. respect of intangible assets. The Group assessed recoverability of goodwill based on the present value of cash flow projections Where the Group has retrospectively applied an over a 6 year period. Should any of the intangible assets accounting policy, made a retrospective restatement or fail to perform, an impairment loss would be recognised reclassified items in its financial statements, an additional up to the maximum carrying value of intangible assets at statement of financial position as at the beginning of 31 December 2021 of $34,119,000 (2020: $26,457,000). the earliest comparative period will be disclosed. 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 REPORTNOTES TO THE FINANCIAL STATEMENT Share based payments Deferred tax assets The Group measures the cost of equity settled transactions Deferred tax assets are recognised for deductible temporary with employees by reference to the fair value of the equity differences and unused tax losses as management considers instruments at the date at which they are granted. The fair that it is probable that future taxable profits will be available value is determined with the assistance of an external valuation to utilise those temporary differences and unused tax losses. with the assumptions detailed in Note 24. The accounting Significant management judgement is required to determine the estimates and assumptions relating to equity settled share amount of deferred tax assets that can be recognised, based based payments would have no impact on the carrying upon the likely timing and the level of future taxable profits. amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Trust assets and liabilities The Group’s Online Payments segment, namely the business Lease term of contracts with renewal options of Escrow.com, is a regulated entity that holds funds on The Group determines the lease term as the non-cancellable behalf of its users in trust bank accounts. At 31 December term of the lease, together with any periods covered by an option 2021 the cash balance in trust amounted to A$64,681,451 to extend the lease if it is reasonably certain to be exercised, or (2020: A$36,181,757), which has a corresponding any periods covered by an option to terminate the lease, if it is liability of the same amount owing to its users. reasonably certain not to be exercised. After initial recognition, the Group reassesses the lease term if there is a significant event The Group has determined that trust cash is not a resource or change in circumstances that is within its control and affects controlled by the Group, nor does the Group derive any its ability to exercise (or not to exercise) the option to renew. economic benefit from these user funds, and therefore the Income taxes Group does not have the risks and rewards of ownership of the funds. Consequently, trust assets are not recognised The Group is subject to income taxes in Australia and as an asset in the Group’s financial statements, and jurisdictions where it has foreign operations. Judgment is neither is the corresponding trust liability recognised required in determining the worldwide provision for income as a liability in the Group’s financial statements. taxes. There are transactions and calculations undertaken during the ordinary course of business for which the ultimate (h) Changes in accounting policies tax determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made. The accounting policies applied by the Group in this consolidated financial report are the same as those applied by the Group in its consolidated financial report for the year ended 31 December 2021. 141 FREELANCER LIMITED ANNUAL REPORT2021DIRECTOR'S DECLARATION DIRECTORS' DECLARATION In the Directors’ opinion: (a) the Financial Statements and notes of the consolidated entity set out on pages 96 to 141 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 2021 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; 142 (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 2021. This declaration is made in accordance with a resolution of the Directors. On behalf of the directors Matt Barrie Chairman 22 February 2022 FREELANCER LIMITED ANNUAL REPORT 143 FREELANCER LIMITED ANNUAL REPORT2021INDEPENDENT AUDITOR'S REPORT INDEPENDENT AUDITOR'S REPORT FREELANCER LIMITED ABN 66 141 959 042 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FREELANCER LIMITED AND CONTROLLED ENTITES Opinion We have audited the accompanying financial report of Freelancer Limited (the Group), which comprises the consolidated statement of financial position as at 31 December 2021, 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 2021 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001 ii. 144 as disclosed in Note 2(a). (b) the financial report also complies with International Financial Reporting Standards 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 INDEPENDENT AUDITOR'S REPORT 145 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 Reliance on automated process and controls Freelancer’s revenue is primarily generated from new and existing users posting and fulfilling projects and contests on the Freelancer.com website and therefore a significant part of the Group’s 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 the business that includes 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 Group’sbusiness processes•Mix of manual and automated controls•Multiple internal and outsource support arrangements•Large volume of low value transactionsOur 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. Recoverability of Intangible Assets Refer to Note 12 – Intangible Assets and Note 2 (d) - Critical Accounting Estimates. The Group has recognised intangible assets of $34.1 million at 31 December 2021 resulting from business combinations and asset acquisitions. The intangibles are compromised of domain names, intellectual property and goodwill. The assessment of recoverability of the Group’s intangible asset balances incorporated significant judgement in respect of factors such as general market conditions, discount rates, revenue growth and cost assumptions. We have focussed on this area as a key audit matter due to amounts involved being material; the inherent subjectivity associated with critical judgements being made in relation to forecast future revenue and costs; discount rates; and terminal growth rates. Our procedures included, amongst others: We evaluated management’s goodwill and intangible assets impairment assessment. Key inputs in the value of 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 and considered any alternative positions that may indicate impairment. 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 REPORT2021INDEPENDENT AUDITOR'S REPORT 146 FREELANCER LIMITED ABN 66 141 959 042 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FREELANCER LIMITED AND CONTROLLED ENTITITES Accounting for Business Combinations Refer to Note 27 – Business Combinations The Group entered into a business and asset sale and purchase agreement to acquire the business of Loadshift.com for a total purchase price was $7.67 million. Loadshift.com is a provider of a subscription based freight classified services. Accounting for acquisitions is complex and involves a number of significant judgements. We focused on this area as a key audit matter due to amounts involved being material and the judgements involved in determining the fair value of the assets acquired and liabilities assumed. Our procedures included, amongst others, the following: •Reviewed the purchase agreements to understandthe terms and conditions of the acquisition andevaluating management’s assessments underAASB3 Business combinations•Assessed the fair value of the assets acquired andthe liabilities assumed•checked the accuracy of purchase price byvouching to bank statements and sale andpurchase agreements; and•Assessed the adequacy of the Group’s disclosuresin the financial statements.FREELANCER LIMITED ANNUAL REPORTINDEPENDENT AUDITOR'S REPORT 147 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 2021, 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. 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 fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control–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 REPORT2021INDEPENDENT AUDITOR'S REPORT 148 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. FREELANCER LIMITED ANNUAL REPORTINDEPENDENT AUDITOR'S REPORT 149 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 89 to 94 of the directors’ report for the year ended 31 December 2021. 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 2021 complies with s 300A of the Corporations Act 2001. Hall Chadwick (NSW) Level 40, 2 Park Street Sydney NSW 2000 SANDEEP KUMAR Partner Dated: 22 February 2022 FREELANCER LIMITED ANNUAL REPORT2021ADDITIONAL ASX INFORMATION ADDITIONAL ASX INFORMATION Shareholder information Substantial shareholders Additional information required by the Australian The names of substantial shareholders who have Securities Exchange Limited Listing Rules and not notified the Company in accordance with section disclosed elsewhere in this report. This additional 671B of the Corporations Act 2001 are: information was applicable as at 31 March 2022. Robert Matthew Barrie1 Simon Clausen and Startive Holdings Limited and its related bodies 1 1 Includes a relevant interest in 1,916,754 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. 150 Top 20 Shareholders as at 31 March 2022 Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 MATT BARRIE CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMS (NZ) LTD MR DARREN WILLIAMS UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMS PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CUSTODIAL SERVICES LIMITED NATIONAL NOMINEES LIMITED MR RODNEY JOHN SELLICK MR NICHOLAS PETER DE JONG MR NEIL LEONARD KATZ INFILSEC PTY LTD DUNRAY NOMINEES PTY LTD MAROBAR HOLDINGS PTY LIMITED STUART JOHN NATTRASS MR GREGORY JAMES WARD Total Top 20 Total Remaining Total of Securities Number of Shares 195,919,185 162,416,754 Number of ordinary shares held % of ordinary shares held 191,435,150 163,293,585 10,853,684 10,605,660 8,340,330 6,728,246 5,665,214 4,561,765 3,523,999 2,217,904 1,798,753 1,409,112 1,109,833 1,001,849 995,539 978,727 810,000 789,500 750,000 726,112 417,594,962 34,921,674 452,516,636 42.3% 36.1% 2.4% 2.3% 1.8% 1.5% 1.3% 1.0% 0.8% 0.5% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 92.3% 7.7% FREELANCER LIMITED ANNUAL REPORTTop 20 Shareholders as at 31 March 2022 Holdings Ranges 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-500,000 500,001-1,000,000 1,000,001-5,000,000 5,000,001-9,999,999,999 Totals ADDITIONAL ASX INFORMATION Number of shareholders Number of Shares 569 863 274 387 70 11 7 7 322,723 2,379,626 2,118,412 11,974,015 15,006,961 8,169,815 15,623,215 396,921,869 2,188 452,516,636 Restricted securities as at 31 March 2022 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 Securities Quoted ESP shares Unquoted ESP shares LTIP share options Total shares subjected to trading restrictions Various dates ending no later than 19 February 2023 607,226 Various dates ending no later than 27 May 2025 1,309,528 151 Various dates ending no later than 20 December 2025 77,588 1,994,342 Voting Rights On-market Buy Back The voting rights attaching to ordinary shares, There is no current on-market buy back. set out in the Company’s Constitution are: (a) at meetings of members, each member is entitled to vote in person or by proxy, attorney or representative; and (b) on a show of hands, every person present who is a member has one vote, and on a poll every member present has a vote for each fully paid share owned. There are no voting rights attached to unlisted options, voting rights will be attached to unlisted ordinary shares once issued and to options upon exercise. FREELANCER LIMITED ANNUAL REPORT2021 CORPORATE DIRECTORY Corporate Directory 152 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

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