Freelancer Limited
Annual Report 2022

Plain-text annual report

2022 A N N U A L R E P O R T F R E E L A N C E R L I M I T E D A C N 1 4 1 9 5 9 0 4 2 Index PAGE CONTENTS 003 Chairman’s Letter 030 Directors’ Report 034 Review of Results and Operations 070 Consolidated Statement of Profit or Loss and Other Comprehensive Income 071 Consolidated Statement of Financial Position 072 Consolidated Statement of Changes in Equity 073 Consolidated Statement of Cash Flows 074 Notes to the Financial Statement 115 Directors’ Declaration 116 Independent Auditor’s Report 122 Additional ASX Information 124 Corporate Directory INDEX 001 FREELANCER LIMITED ANNUAL REPORT002 2022CH AIRMAN’S LE T TER Chairman’s Letter Dear Shareholders In 2022 Freelancer Limited delivered Gross Payment Escrow was affected by the tech wreck/crypto crash Volume $1,127.4 million, down 10.5% on pcp. that withdrew appetite for large value transactions, Breaking down by segment, Freelancer GMV was particularly “mega” domain name transactions as $128.4m, down 4.5% on pcp. Escrow GPV $953.4m, venture capital dropped 35% from a record 2021, down 11.7% on pcp. Revenue for the full year was $55.7m, down 3.1% on pcp, with Freelancer revenue flat at $45.6m down 1.1% on pcp. Escrow revenue was $10.1m, down 11.1% on pcp. Operating cash flow for the year was $(4.2) million and Operating NPAT was ($5.3m) for the group. Overall, it was not a great year coming out of Covid for Freelancer with flat revenue. which was an excellent year for Escrow where GPV grew 54% year on year and surpassed $1 billion for the first time. Despite this, Escrow was profitable in FY22. We have also seen the market start to recover in 4Q22, and we expect 1Q23 to be better again. A detailed analysis of the activities of the group are provided in the Review of Operations in the Directors’ Report. 003 FREELANCER LIMITED ANNUAL REPORTCH AIRMAN’S LE T TER Freelancer In FY22, the mission for the platform was: conversion in the main marketplace with upfront 1. Improving our visual design, responsiveness & UI/UX funding, the “wall of bids” effect from freelancers bidding too quickly, without affecting overall supply liquidity. We also got the paid marketing 2. Enhancements to payments, enterprise features, under control. matchmaking and collaboration In 2023, our product mission will encompass the 3. Acquisition, retention & engagement of clients following objectives: Despite revenue being flat, we made substantial 1. Elevating UX & design: transitioning from progress in each of these areas. consistency to delight The product teams made remarkable advancements 2. Enhancing collaborative features for increased towards delivering a new contemporary, sleek retention and engagement design for the platform in the year. Furthermore, we introduced various upgrades related to the payment systems and the ways in which freelancers get paid 3. Implementing personalization to boost core marketplace conversion rates on the site. We continued to deploy features to drive 4. Strengthening acquisition through enterprise adoption, and the standout performance organic channels of the enterprise division (GMV up 101.5% on pcp) in the year is testament to this. Finally, we made a large number of improvements in the collaborative tools which will be instrumental in driving growth in FY23. Each of these elements plays a crucial role in propelling GMV and revenue growth within the core marketplace. We eagerly anticipate sharing updates on our advancements in these areas in the Of note in the year, we also managed to solve coming quarters. what we believe was a long standing problem in Freelancer Enterprise Enterprise was one of the standouts in FY22 with (revenue & GMV) to develop delivery systems to GMV growing 101.5% on pcp. deliver genome editing machinery to target cell Highlights included connecting Deloitte MyGigs to the external freelancer cloud, with projects seeing types or specific tissues for the National Institutes of Health. an average bid count of 8.3 from external versus We are thrilled to be involved in a diverse range of 3.5 from the internal talent cloud, rolling out our enterprise collaborations, which encompass working field services with a global computer & technology with organisations from various sectors such as company offering to five countries and a workforce pharmaceuticals, professional services, global of over 100 engineers, and winning our biggest task transportation technology, HR technology, BPOs, order yet with NASA, valued at over $10.6 million and other G2000 companies, among others. Escrow.com Escrow.com had a tough year. While 1H22 witnessed in which Escrow.com has a dominant presence, the second-highest Escrow GPV in the company’s dropping from US$514M in FY21 to $411M in FY22. history, amounting to US$407 million, volume took a Furthermore, global venture capital funding fell downturn from May 2022, coinciding with the crypto/ by 35% to US$445 billion in FY22. This reduction tech collapse and a broader economic contraction. impacted “mega” domain transactions ($10m+), The third quarter of 2022 proved to be particularly challenging, as volumes experienced a significant decline. This was primarily attributed to a decrease in domain name transactions, a market segment where startups make substantial investments for instant brand recognition and enduring marketing benefits. However, the fourth quarter witnessed a recovery in volume, and the first quarter of 2023 is expected to show further improvement. 004 FREELANCER LIMITED ANNUAL REPORT2022 CH AIRMAN’S LE T TER In FY23, our product mission will encompass These core points are crucial to grow on both the transactional and partnership aspects of the platform. We aim to continue being the premiere service for high value transactions moving forward. the following: 1. Simplifying the onboarding and identity verification experience 2. Enhancing the end-to-end transaction experience 3. Providing support to more verticals and transaction formats 4. Strengthening partnerships and integrations Loadshift & Freightlancer In 2022, our freight division underwent a significant With all that work being done, FY23 will be a key transformation as we combined the Loadshift and year for this division to shine. Freightlancer platforms. The unified platform now operates solely under the Loadshift brand, utilising the Freelancer enterprise stack. Consequently, the Freightlancer brand has been retired. Conclusion Financial performance in FY22 could have been On behalf of The Board, I wish to thank our staff, better. We expected a great year and ramped shareholders and over 65 million users across the up hiring aggressively in the first half, which we group for your continued support. We look forward to corrected through cost reductions across the group a successful FY23. in the second half. This month (March 2023), the group expects to be profitable on an operating basis. We intend to keep the group profitable from here. Despite flat revenue for Freelancer in the year, we did a great amount of work getting the product in a position where the core marketplace can do significantly better in FY23. Escrow’s financial performance has been improving since 3Q22, quarter on quarter. Loadshift will start to break out in FY23 as we convert the circa. $1m a day of freight posted on the platform to a marketplace commission model. Regards, Matt Barrie Chairman 21 March 2023 005 FREELANCER LIMITED ANNUAL REPORT ABOUT FREEL ANCER Freelancer.com is the world’s largest freelancing marketplace 006 FREELANCER LIMITED ANNUAL REPORT2022ABOUT FREEL ANCER The world’s largest & lowest cost elastic cloud workforce, with an on-demand workforce of over 64m users, no crowdsourcing platform globally has the liquidity of Freelancer. For clients it’s free to post your job, review obligation-free quotes, chat with freelancers and review samples of work & portfolios. For freelancers it’s free to view projects posted, bid on projects, chat to clients, fill in your profile, upload your portfolio & provide samples of work. 007 FREELANCER LIMITED ANNUAL REPORTCH ANGE LIVES Change Lives With over 64 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 $30 a day or less. On Freelancer.com they can earn $10 an hour or more, as they develop their skills, education and reputation. 2700+ SKILLS 247 COUNTRIES, REGIONS AND TERRITORIES 34 39 LANGUAGES CURRENCIES 008 FREELANCER LIMITED ANNUAL REPORT2022MAKE IT REAL Make it real This Webflow website cost $80 USD and took 3 days to make $80 AUD 3 DAYS Freelancer.com helps small businesses, startups, entrepreneurs and large organizations turn that spark of an idea into reality. We provide easy access to talented freelancers from all around the world, who offer a wide range of services at competitive prices. 64.4M 22.2M 87% 41 TOTAL TOTAL JOBS REGISTERED POSTED OF PROJECTS RECEIVE BIDS AVERAGE NUMBER OF BIDS PER USERS WITHIN 5 MINS PROJECT 009 FREELANCER LIMITED ANNUAL REPORTFREEL ANCER CASE STUDIES Founder/Creative Director Riga, Italy Riccardo Capuzzo @capuzzorik 5.0 ( 12 reviews ) Company: Aquatic Creatures Website: https://aquaticcreatures.com/ Testimonial I am the founder and creative director of Aquatic Creatures by Riccardo Capuzzo and I have been using Freelancer.com for over a year now. One of the biggest advantages of using Freelancer.com is the peace of mind that comes with it. 010 FREELANCER LIMITED ANNUAL REPORT2022FREEL ANCER CASE STUDIES Founder Canyelles, Spain Marina Ametller Raventos @marinaxana 5.0 ( 6 reviews ) Xanababy Sleep App Website: https://xanababy.com/ Testimonial The nice thing about being on freelancer.com is that developers really need good reviews to get jobs, so they try really hard to make you happy. Also, having a recruiter helping out every time you have trouble, especially with communication and negotiation, is a big help. 011 FREELANCER LIMITED ANNUAL REPORTFREEL ANCER CASE STUDIES Founder Olimpia, USA Michael Fraidenburg @fraidmef 5.0 ( 8 reviews ) Book Promotion on LinkedIn Website: https://intelligentcourage.com Testimonial I was republishing a book and wished to market the book across LinkedIn, including my connections and various groups. I went to Freelancer.com to find freelancers who were skilled in social media marketing and book marketing. 012 FREELANCER LIMITED ANNUAL REPORT2022 FREEL ANCER CASE STUDIES Create the future We help entrepreneurs and organizations create products and services of the future. Freelancer.com has the unique ability to entries, we selected a winning design that looks crowdsource ideas to visualize novel ideas and like it came straight from Apple HQ, which also concepts that are yet to exist. As an example, we made global news in the US, UK and across Europe. launched a contest to our freelancers to imagine The headset is now a go-to image for technology and create 3D models of what Apple’s rumored reporters who write on rumors and leaks of the Virtual Reality Headset may look like. After 56 upcoming Apple VR headset. This Apple VR headset concept cost $500 AUD and had 56 entries in 14 days $500 56 AUD ENTRIES 14 DAYS 013 FREELANCER LIMITED ANNUAL REPORTPROJECTS AND CONTESTS Freelancer Projects Freelancer is a platform where clients can post a project and receive competitive bids from freelancers worldwide, all within minutes. With over 2,700 skill sets available, is where payments are based on the clients can choose from expert freelancer’s time spent working at freelancers to work on their project a clear and transparent hourly rate. and the flexibility to work the way Clients review the outcomes and they want to work. Clients have the billings for the project on a weekly option to pay freelancers a fixed basis, and a summary of all their price or by the hour, all secured by project’s activity is automatically the Milestone Payments system. sent to them. Clients can begin a project with a Hourly projects are a great choice if fixed scope and price in mind, which clients are looking to build long-term, is best for projects that have a open-ended working relationships well-defined scope and deliverables. with freelancers. The Freelancer.com Alternatively, hourly projects are a platform offers the freedom to work great choice if clients are looking to the way you want, with the security build ongoing, open-ended working of a payment system that ensures relationships with freelancers. This you get what you pay for. $252 AVERAGE PROJECT SIZE 7% UP ON PCP 87% OF PROJECTS RECEIVE A BID WITHIN 5 MINS 014 FREELANCER LIMITED ANNUAL REPORT2022PROJECTS AND CONTESTS Freelancer Contests By crowdsourcing your ideas to millions of freelancers on the Freelancer.com contest platform, you can get the perfect solution for any project, from visual design work through to idea generation. 320 AVERAGE NUMBER OF ENTRIES PER CONTEST Freelancers adapt to your feedback from thousands of freelancers. The and the larger the prize, the better platform is collaborative and allows the entries. The platform has been for instant feedback on new ideas used by large organizations such through contest sharing, polls, and as Deloitte, NASA and various US the Public Clarification Board. In Government Departments. 2022 alone, the platform generated 91% Within hours of posting your contest, you can receive new submissions over 13 million ideas to help contest holders find solutions quickly and collaboratively. OF CONTESTS RECEIVE ENTRIES WITHIN 1 HOUR 015 FREELANCER LIMITED ANNUAL REPORTFREEL ANCER® ENTERPRISE The world’s largest crowdsourcing marketplace The Freelancer Enterprise division finished the year strongly with growth in GMV and revenue quarter on quarter. 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 FY23. Deloitte US and Freelancer Enterprise completed expanded as a result of the technical integration its final phase of deployment for the MyGigs directly into their work management system. platform in 2H22, which now connects the internal platform to the external Freelancer marketplace. Deloitte consultants are now able to hire freelancers, manage projects and process payments at scale with the SAP Fieldglass integration. Over 30,000 Deloitte consultants have been onboarded to the platform already. The NASA Open Innovation Series 2 tender is a program whereby NASA effectively acts as a centre of excellence for crowdsourcing for the U.S. Government. Freelancer now has task order engagements with NASA, the U.S. Centers for Disease Control and Prevention, the National Institutes of Health, the U.S. Department of Our major engagement with a global technology Commerce and the U.S. Bureau of Reclamation. leader in computer & printer technology to build a disruptive and elastic global workforce powered by freelancers continued to expand across several countries. Beyond India, Australia and Indonesia, during 2022 we also added Malaysia and New Zealand, whilst also fielding enquiries from other countries around the world about future deployment. Additionally, work order volumes This work is across a number of high technology areas including computational fluid dynamics, electrical engineering, physics, data science, machine learning, physics, mechanical engineering, graphic design, UI/UX design, software engineering, network science, advanced manufacturing, software development, transcription and information security. 016 FREELANCER LIMITED ANNUAL REPORT2022FREEL ANCER® ENTERPRISE 101.5% UP IN GMV WITH A POSITIVE OUTLOOK FOR THE COMING YEAR AHEAD NOVEMBER AND AUGUST SET NEW MONTHLY RECORDS FOR GMV TRANSACTION VOLUME GLOBAL FLEET SERVICES CONTINUED TO EXPAND INTO FIVE COUNTRIES AND OVER 20 CITIES OUR LONG TERM PARTNERSHIP WITH NASA EXPANDED EVEN FURTHER, AND WE’RE NOW WORKING ON THE LARGEST TASK ORDER PROJECTS TO DATE GLOBAL FLEET SERVICES CONTINUED TO EXPAND INTO FIVE COUNTRIES AND OVER 20 CITIES 017 FREELANCER LIMITED ANNUAL REPORTESCROW.COM The world’s safest payment platform for high value transactions Escrow.com is the world’s largest and only multi-jurisdictional licensed online escrow company. There are fundamentally two sides of the Escrow business – a transactional side that covers the vast majority of the current business, and the checkout side where we are pioneering to provide easy to integrate escrow solutions for online marketplaces. From a counterparty risk perspective Escrow is the Escrow is the dominant payment method used for most secure payment method for transactions. We buying and selling of domain names and websites. safeguard both the buyer and seller with all funds As the largest licensed and audited online escrow kept in trust that are transacted in escrow. The end- company, we safely hold the buyer’s payment to-end process is focused on all parties agreeing to in a trust account until the entire transaction is terms, buyer submitting payment, seller delivering complete. Buyers can be confident that the domain goods/providing services, conducting an inspection will be registered in their name, and seller’s can be of the goods/services, and releasing the payment reassured they will be paid. This protects all parties once the transaction is complete. against fraud, deception and irresponsibility. 018 FREELANCER LIMITED ANNUAL REPORT2022ESCROW.COM THE ESCROW.COM BUSINESS WAS PROFITABLE FOR THE FULL YEAR 2022 THE FIRST HALF OF 2022 WAS THE SECOND HIGHEST HALF FOR ESCROW TRANSACTION VOLUME IN THE HISTORY OF THE COMPANY (US$407M) REACTIVATED SUPPORT FOR CANADIAN DOLLAR TRANSACTIONS, AND RECEIVED REGISTRATION APPROVAL FOR OUR CANADIAN PAYMENTS INC. ENTITY RECEIVED COMPLIANCE APPROVAL IN DECEMBER FOR THE REAL ESTATE VERTICAL IN 31 US STATES 019 Marketplaces for business acquisitions continued As we move into 2023 we remain focused on to be another strong vertical for account growth reaching out to the top partners across a range of through partners such as Acquire.com and Flippa. key verticals (IP, Construction, Services, Domains, In 4Q22, Escrow.com continued to introduce and M&A, Vehicles, Merchandise) and several distribution support a diverse range of marketplaces and channels: payment aggregators, shopping carts, brokers, both existing and new partners. multicategory marketplaces and peer to peer Another focus of the fourth quarter was also expanding our account management service offering. This included improving the customer experience for high value transactions by assigning a dedicated relationship manager with expert knowledge in the assets being transacted. This proactive allocation of specialist support staff contributed to improvement in the funding payments.However, there is no one metaverse, but many metaverses which all vary in size and popularity. This causes an issue if a person purchases a digital asset in that particular game. If the game goes under in a years’ time, then the person is stuck with nothing. There’s no real investment value here. The real investment opportunity is purchasing the real land of the metaverse – domain names. rate of high value transactions. When organizations are investing in virtual real The upcoming focus of our product development is to streamline the client onboarding process and KYC, improve the overall customer experience, and simplify our workflow to be as smooth and efficient as possible. estate, they look at buying a domain name, not a plot of land in a virtual game. Domain names are virtual real estate where companies build and launch their metaverse. They purchase a premium name on the best street available – the .com domain name. As leading provider of secure online payments and online transaction management, Escrow.com is where the metaverse is bought and sold. FREELANCER LIMITED ANNUAL REPORTLOADSHIF T 020 FREELANCER LIMITED ANNUAL REPORT2022LOADSHIF T Australia’s largest freight marketplace Founded in 2007, Loadshift is a pioneer in the digital freight industry in Australia, revolutionizing the way individuals and businesses connect with reliable transportation solutions. With over 100 million km worth of freight requests of loads completed, number of quotes and number annually, Loadshift is the go-to marketplace for all of carriers quoting via the platform throughout 2022. truck transportation needs, from palletized freight We have lifted the award rate of jobs on the platform to oversize loads like cars, dozers, and more. Our from 0% (no jobs being awarded under the bulletin platform supports all truck and trailer configurations, board model) to 10%. As shippers and carriers making it the ideal place to do business. take advantage of the features of the platform, the The year 2022 was transformational for our freight division as we merged the Loadshift and Freightlancer platforms, which now entirely operates under the feedback and reviews generated and adopt the secure payment system, we expect the award rate to grow by a number of multiples in FY23. Loadshift brand, and running on the Freelancer All in all, this resulted in the number of loads enterprise stack. The Freightlancer brand has completed under the marketplace model strongly been decommissioned. We continued to see significant increase in key metrics and hit record numbers for GMV, number growing. This year will be a marquee year for the Loadshift business as the number of completed loads (and revenue) continues to rise under the new model. $350M 74,096 99.1M NOTIONAL GROSS LOAD VALUE 7.4% UP ON PCP TOTAL LOADS POSTED DOWN ON PCP 11% TOTAL KILOMETERS POSTED DOWN ON PCP 16.5% 021 FREELANCER LIMITED ANNUAL REPORTCOLL ABORATION Built-in Collaboration Tools An integrated suite of tools purposely designed to manage an on-demand cloud workforce across desktop, tablet and mobile devices. • MESSAGING • • • • • • FILE SHARING AUDIO AND VIDEO CALLS SCREEN SHARING TASK LISTS SHORTLISTS GROUPS 022 FREELANCER LIMITED ANNUAL REPORT2022MANAGED SERVICES Managed services With a global presence, our elite managed services teams operate 24/7 to assist our clients to work with the top 1% of our talent. They ensure that projects get done smoothly, on time and on budget. 7,117 5-STAR RATINGS IN 2022 RECRUITER • PREFERRED FREELANCER PROGRAM • TECHNICAL CO-PILOT “I had a great first experience with your site, and to be honest, I wasn’t expecting it. Everything went extremely smoothly, and Timothy was very quick to respond and easy to work with. I would definitely recommend your services because they exceeded my expectations.” Adrian W. “Overall, I had a great experience with my Freelancer.com and my Recruiter Andy. He helped with my project and recommended skilled freelancers. The milestones option ensured satisfactory work, and the work was completed. Very satisfied with Freelancer.com.” Todd V. 023 FREELANCER LIMITED ANNUAL REPORTFREEL ANCER.COM This 3D visualisation cost $435 USD and took 3 weeks to make $453 3 USD WEEKS 024 FREELANCER LIMITED ANNUAL REPORT2022FREEL ANCER.COM 3 WEEKS This AI generated art cost $200 USD and took 7 days to make $200 USD 7 DAYS 025 FREELANCER LIMITED ANNUAL REPORTFREEL ANCER.COM This interior design cost $350 USD and took 7 days to make $350 USD 7 DAYS 026 FREELANCER LIMITED ANNUAL REPORT2022FREEL ANCER.COM 7 DAYS This Shopify website cost $300 USD and took 7 days to make $300 USD 7 DAYS 027 FREELANCER LIMITED ANNUAL REPORTFREEL ANCER.COM 2022 Awards 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. 028 2022 Stevie International Business Awards (IBA): Silver Stevie Award for Most Innovative Company of the Year – Up to 2,500 Employees Bronze Stevie Award for Achievement in Product Innovation 2022 Asia Pacific Stevie Awards: Gold Stevie Award for Innovation in Technology Management, Planning & Implementation for Other Service Industries Silver Stevie Award for Innovative Achievement in Growth Bronze Stevie Award for Innovative Achievement in Sales or Revenue Generation: Freelancer Enterprise HR Tech Awards 2022 by Lighthouse Research & Advisory Talent Acquisition: Best Virtual/Hybrid Solution Southeast Asia Business Awards 2022 by APAC Business Insider Best Cloud-Based Freelancing & Crowdsourcing Talent Platform 2022 FREELANCER LIMITED ANNUAL REPORT2022 FREEL ANCER.COM 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 2022. 029 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Directors’ Report Your Directors submit the financial report of Freelancer Limited (the Company) for the year ended 31 December 2022. 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: 030 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT Executive Chairman (appointed 10 April 2010) BE (Hons I) BSc (Hons I) GDipAppFin MAppFin MSEE (Stanford) GAICD SEP FIEAust Matt Barrie Founder and Executive Chairman of the Company. Serial entrepreneur with extensive experience and knowledge in the technology sector. Previously co-founded and was CEO of Sensory Networks Inc., a vendor of high performance network security processors, which was acquired by Intel Corporation Inc. in 2013. Formerly Adjunct Associate Professor at the Department of Electrical and Information Engineering at the University of Sydney. Co-author of over 20 US patent applications. Qualifications include first class honours degrees in Electrical Engineering and Computer Science from the University of Sydney, Masters in Applied Finance from Macquarie University, Masters in Electrical Engineering from Stanford, California, Graduate of the Stanford Executive Program at the Graduate School of Business, Fellow of the Institute of Engineers Australia and Councillor of the Electrical and Information Engineering Foundation at the University of Sydney. Relevant interest in 196,052,055 fully paid ordinary shares, including a relevant interest in 1,416,754 fully paid ordinary shares by virtue of having a voting power of over 20% in the Company, which has a relevant interest as a result of trading restrictions over shares issued under the Employee Share Plan. Beneficial interest in 194,635,301 fully paid ordinary shares (representing 43.03% of issued capital). Member of the Nomination and Remuneration Committee and Audit Committee. 031 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT Non-Executive Director Executive Director BSc (Hons I) from 1 November 2015 until 31 October 2015 PhD (Computer Science) (appointed 10 April 2010) MAICD Darren Williams Non-Executive Director of Company. Was the Chief Technology Officer and Executive Director of the Company until 31 October 2015. Extensive experience in computer security, protocols, networking and software. Previously co-founded and was CTO (and subsequently CEO) of Sensory Networks Inc., a vendor of high performance network security processors, which was acquired by Intel Corporation Inc. in 2013. Previously lectured Computer Science at the University of Sydney. Author of numerous articles, patents and papers relating to security technology, software and networking. Qualifications include first class honours degree in Computer Science and a Ph.D. in Computer Science specialising in computer networking from the University of Sydney. Beneficial and relevant interest in 10,627,165 fully paid ordinary shares (representing 2.35% of issued capital). Member of the Nomination and Remuneration Committee and Audit Committee. 032 FREELANCER LIMITED ANNUAL REPORT2022Non-Executive Director (appointed 10 April 2010) Simon Clausen DIRECTORS’ REPORT Founding investor and Non-Executive Director of the Company. Extensive experience in operating and investing in high growth technology businesses in both Australia and the United States. Previously founded and was CEO of PC Tools which was acquired by Symantec Corporation in October 2008. Currently the sole director of Startive Ventures, a specialised technology venture fund that actively maintains investments in a number of companies globally. Relevant interest in 161,916,754 fully paid ordinary shares, including a relevant interest in 1,416,754 fully paid ordinary shares by virtue of having a voting power of over 20% in the Company, which has a relevant interest as a result of trading restrictions over shares issued under the Employee Share Plan. Beneficial interest in 160,500,000 fully paid ordinary shares (representing 35.48% of issued capital). Member of the Nomination and Remuneration Committee and Audit Committee. 033 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT Company Secretary Mr Neil Katz held the position of Company Secretary during and at the end of the financial year (appointed 9 March 2012). He has been with the Group since 2009 and is also the Chief Financial Officer. Principal activities The principal activity of the consolidated entity (the Group) during the financial year was the provision of an online outsourcing marketplace and escrow payment services. 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 $5,413,000 (2021 loss: $2,257,000). Key Performance Highlights Year ended 31 December Financial metrics: Gross Payment Volume1 Net Revenue2 Gross Profit Gross margin (%) Operating EBITDA3,4 Operating EBIT3 Operating NPAT3 Operating Cash Flow Operational metrics: New Jobs5 (millions) Total Jobs Posted (millions) New Registered Users (excluding Escrow, millions) Total Registered Users6 (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 FY22 GPV A$173.9 million (down 3.6% on prior corresponding period), Payments segment GPV A$953.4 million (down 11.7% on prior corresponding period). 2 Net Revenue excluding Escrow.com for FY22 was $45.6m (down 1.1% on prior corresponding period). 3 Excludes non-cash share based payments expense of $159k in FY22 and $156k in FY21. 4 From FY19 lease expenses in respect of office leases have been accounted for in accordance with AASB 16 Leases. The impact is that lease expenses are no longer reflected in the P&L but are brought into account as depreciation on the right of use asset and interest paid on 034 FY22 $m FY21 $m % Change 1,127 55.7 46.9 84.3% (6.6) (6.9) (5.3) (4.2) 1.2 22.2 6.7 65.1 1,260 57.0 47.7 83.1% (2.7) (3.0) (2.1) 2.6 1.8 21.0 7.6 58.2 -11% -3.1% -1.7% +1.4% nm nm nm -258% -32% +6% -12% +12% the corresponding lease liability. Depreciation of $4.2m (FY21:$4.6m) and finance costs of $1.7m (FY21:$2.0m) relating to office leases (accounted for in accordance with AASB 16 Leases) are included in the EBITDA calculation. 5 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. 6 User and project/contest data includes all users and projects/contests from acquired marketplaces. Includes Escrow.com unique users. FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT Freelancer.com Summary Freelancer revenue was $45.6m (-1.1% on pcp) or secondary fee lines such as memberships largely US$31.7m (-8.4% on pcp). Freelancer GMV was unaffected. However, in FY22 we also made substantial $128.4m (-4.5% on pcp) or US$89.3m, -11.6% on pcp). improvements to the product, customer acquisition The year 2022 was mixed. We saw a rolling off of Covid super-seasonality, negatively impacting a number of core metrics, but primarily affecting project fees, with profitability, and rectified a number of long-standing marketplace problems towards the end of the year. Marketplace In FY22 we added 6.7m new users and 1.2m new Average project size lifted from $235 to $252 over projects to the marketplace, reaching 64.4m users and FY22 (up 7% on pcp), its highest value to date. 22.2m projects at the end of year. FIG.1  AVERAGE COMPLETED PROJECT SIZE Marketplace liquidity remains strong. The percentage out spammy bids, however the percentage of projects of projects receiving bids within 60 seconds has receiving bids within 90 seconds and above remains dropped slightly from a peak of ~59% in FY21 to ~51% unchanged, and the percentage receiving a bid within as of writing this report, due to the efforts to stamp 5 mins increased from ~84% to 87%. 035 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT FIG.2  TIME TO FIRST BID FOR PROJECTS SHOW REDUCTION IN SPAMMERS (FAST BIDS) Contest liquidity remains exceptional, with the average number of entries per contest exceeding 320. This is fairly remarkable given contests start at $10. FIG.3  AVERAGE NUMBER OF ENTRIES PER CONTEST Product & Engineering In FY22, the mission of product & engineering was to: 1. Improving our visual design, responsiveness & UI/UX 2. Enhancements to payments, enterprise features, matchmaking and collaboration 3. Acquisition, retention & engagement of clients We have made substantial progress in each of these areas: 036 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT Improving our visual The UI Engineering and Product Design achieved exceptional progress on the first goal, to bring a fresh, modern design, responsiveness look to the platform with the goal to create an intuitive, seamless user experience that engages. & UI/UX FIG.4  UPDATED VISUAL DESIGN Working closely with power users, improvements that is visually appealing and easier to navigate. were made to the way we represent elements like This was combined with updates provided by the users and projects, as well as the look and feel Design Systems team for the landing pages, banners, of UX components such as the newsfeed. These illustrations and other design elements. efforts have resulted in a revamped user interface FIG.5  UPDATED DESIGN BEING DEPLOYED ACROSS PLATFORM 037 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT FIG.6  IMPROVED USER EXPERIENCE Enhancements to payments On the payments front, in 2022 we launched our Quotations product, which introduces a new, freelancer-driven payments channel to the website. After launch in 1Q22, we made numerous improvements to the product, including allowing users to send quotations externally, polishing the UI/UX of the feature, improving new user onboarding to the feature, and more. FIG.7  EXAMPLE QUOTATION 038 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT We plan to add further UI polish, deeper integration The old hire-me funnel had issues: project budgeting into our other products, usage incentivisation & was difficult for clients, leading to lower conversion marketing, and feature expansion into areas such as rates; highly ranked freelancers received low-quality hourly billing and recurring subscription support. leads and had limited opportunities to negotiate; and In 4Q22 we worked on overhauling the hire-me funnel in an effort to improve conversion and reduce spam, by introducing quotations. the hire-me system was vulnerable to spam, negatively impacting freelancer trust. FIG.8  IMPROVED MOBILE EXPERIENCE The new “chat request” funnel replaces “hire-me” with a messaging system similar to social media. Clients send requests to freelancers, who can accept, reject, or block them. Freelancers can discuss the project and provide quotes if interested. Early data suggests positive customer feedback and comparable conversion rates, with further improvements expected as freelancers become more accustomed to the new system. Finally, in 4Q22 we also made improvements to the tipping interface for US and Canadian clients that led to a 30% increase in tips sent to freelancers. FIG.9  CHAT REQUESTS 039 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Enhancements In FY22, our enterprise product teams spent the We also made improvements to the invoicing to enterprise features majority of their time working directly with clients experience, including consolidating all invoices related building out integrations and features to support the to a project into a single document, overhauling their sales efforts. visual design, and finally allowing for the generation of “pro-forma” invoices. FIG.10  IMPROVED USER EXPERIENCE Enhancements to matchmaking In FY22 we largely solved the “spammy bids” problem getting steadily worse and increasingly impacting and adjusted the client funding process as from 2021, the overall marketplace experience, as freelancers the percentage of projects receiving their first bids increasing used software to bid. (within 30 seconds) rose sharply. This problem was FIG.11  SPAMMY (FAST) BIDS HAVE BEEN GREATLY REDUCED 040 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT In 3Q22 we used an innovative approach to put a stop to this behaviour. We were able to do this without impacting the overall liquidity of the marketplace – the number of bids within 60 seconds is largely unaffected. FIG.12  MARKETPLACE LIQUIDITY FROM GOOD BIDDERS IS LARGELY UNAFFECTED We also fixed a major conversion problem in the main funnel with projects. Substantial lifts in retention rates were seen, and we expect this will pay dividends in future quarters. Enhancements to collaboration In FY22 we made huge strides in our long-standing to support collaboration and communication at collaboration-focused product strategy, primarily scale, Groups enable everything from small teams through launching Groups in 3Q22, the pillar that will to millions of people to interact in a structured and support all of our collaboration products. Designed efficient manner. FIG.13  COLLABORATION TOOLS 041 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT In 4Q22, we improved the user interface and user Moving forward, we plan to integrate Groups as experience while integrating content from Groups a collaboration tool to improve engagement and into the main homepage. This increased engagement retention in 1H23. and visibility significantly. We also started using our own Groups product for internal communication, enhancing our understanding of user needs. FIG.14  GROUPS ENGAGEMENT TAKES OFF FIG.15  GROUPS INTERFACE 042 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT In addition to Groups, we also • • • Overhauled our Task lists product, redesigning the UI, and integrated with projects Added a number of modern messaging features including replies and screen-sharing Resigned the logged in homepage experience FIG.16  EXAMPLE OF GROUPS Acquisition, retention On the acquisition front, in 4Q22 we saw our year-long effort on SEM profitability come to fruition. Profitability & engagement of clients across all spending in 4Q22 is up 58% on its 2Q22 yearly low, and up 23% on pcp. Focusing on our non-brand Google account, profitability is up 77% on its 2Q22 yearly low, and 43% on pcp. 043 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT FIG.17  REVENUE FROM NEW CUSTOMERS THROUGH ACQUISITION CHANNELS The main focus of our paid marketing efforts in FY23 will be diversification away from our current focus on Google adwords, adding new paid channels to the overall mix, whilst grinding out incremental progress on our existing campaigns. FIG.18  WSJ REPORTS: FREELANCING SURGES AMID ECONOMIC UNCERTAINTY Moving into the new year, we have begun our yearly The campaign can be viewed here: “Back to Work” campaign. This year, the focus is on the Crazy Ideas that underpin every world-changing business, inspiring entrepreneurs to get off their couches and start their dream businesses. https://www.freelancer.com/crazyideas 044 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT FIG.19  CRAZY IDEAS CAMPAIGN We are also continuing to focus on improving our On the retention & engagement front, the majority landing page conversion rates. Whilst these tests are of our work here was focused around assisting the typically performed on smaller, more focused landing collaboration products, which are specifically designed pages, we have recently started running tests on our to drive engagement and retention. homepage. For example, a recent test we ran on the homepage resulted in a ~13% lift in conversion. 2023 outlook In 2023, our product mission will be • Improve acquisition through organic growth • • Taking UX & design to the next level: from Each of these three is instrumental in driving GMV and consistent to delight Collaborative tooling to drive retention & engagement revenue growth in the core marketplace, and we look forward to reporting in future quarters on our progress in each of these areas. 045 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Enterprise Freelancer Enterprise went from strength to strength • Executed with a global talent provider that will in FY22 with GMV up 101.5%. Key developments this quarter: • November 2022 was an all-time record for GMV, surpassing the record set in August 2022. be introducing their clients to the Freelancer. com platform. We are currently exploring deeper integration into the platform. • Ended the quarter with in-flight proposals for engineering services and/or ongoing program • We finalised commercials with the Middle- management including a strategic platform- Eastern branch of a Switzerland based global based transformation opportunity for a state pharmaceutical company with the agreement government, integration with a global BPO leader, subsequently being executed early in 1Q23 and a national telecommunications company and a we are currently working to onboard and activate global contingent workforce management leader. the partner with projects expected by the end of 1Q23. • On the downside, in 4Q22 we finalised an agreement with a global technology leader • We progressed commercials with the EMEA for a flexible and international technical entity of a top global professional services firm with an initial pilot agreement being support capacity by utilising the abilities of our freelancers. We signed a SOW, received a green executed in early 1Q23. We are also working on light on passing the externally audited vendor potential opportunities with their Australian and security & privacy assurance process, received a Indian entities. • We onboarded a new division of a global transportation technology leader to our platform, which is currently being used to support the expansion of their North American operations by procuring and managing freelancers for in- store tasks. They plan to expand globally using our platform and are leveraging our Local Jobs capabilities for this engagement. purchase order and personnel were undergoing onboarding & training. We were very recently informed that the division has been restructured and merged into an internal division. While a disappointment, the client has organised a meeting to discuss other opportunities within the 200,000 employee organization. Deloitte MyGigs MyGigs is a Deloitte branded version of the Freelancer A dedicated team of product managers and engineers InSource platform tailored to meet the needs of have been working closely with Deloitte to further tailor Deloitte practitioners and tightly integrated with SAP and enhance product and integration capabilities. Fieldglass. Projects are posted both “internally” (to Deloitte practitioners) and “externally” to the greater Freelancer.com marketplace. Projects have risen throughout the year with an average completed external project size of $1,469. External projects are also proving to be more liquid than internal projects, with an average bid count of 8.3 and 3.5, respectively. That liquidity will continue to grow as more freelancers are onboarded through a comprehensive enterprise- grade vetting process. In 1Q23, the engineering services engagement will expand as more Freelancer engineers are added. Deloitte has also added a marketing capability to their team. As the joint project starts to focus on activation and marketing to Deloitte users. 046 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT FIG.20  DELOITTE MYGIGS Global Fleet/ Field Services In the quarter, we completed the technology This paves the way for significantly higher volumes integration of the Freelancer platform with the global across all markets and provide a standardised, computer & printer company’s CRM and workflow automated single global solution. management platform in several countries. FIG.21  FIELD SERVICE ENGINEERS BASED IN INDIA UNDERTAKING TRAINING AND CERTIFICATION, AND COMPLETING ON-SITE FIELD REPAIRS 047 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT In brief: India: As of the time of writing this report, technical Malaysia: Signed SOW, focusing on recruitment and integration launched in Hyderabad, Pune and training. Work orders launched in Feb ’23 in regional Kolkata and is already live in Bangalore. Chennai, areas to reduce turnaround times for repairs before Ahmedabad and Delhi will go live on the 23rd February expanding to metro areas. then Mumbai on the following Monday. Focus on enhancing freelancer experience and productivity. Expanded service to Vizag and Lucknow, covering 10 out of 18 cities. A proposal in development for installation work in India. Indonesia: Contract extended across six cities with high-quality work and great customer satisfaction. Rest of World: Interest from across the globe with presentations to country heads. Part consumption compared to partners opened doors to Americas, aiming to penetrate the break fix market. 13 countries on the initial target list out of 50 regions. Overall 2022 Review: Established groundwork for Freelancer Global Fleet field services program. End- Australia/New Zealand: Engagement extended, to-end offering includes freelance support for cost enabling expansion into any city. Cost-effective savings, remote work, and seasonal fluctuations. solution maintaining consistent volumes to explore Expanded services to new cities and countries other markets. for consumer and commercial segments. Aim to expand to installation work and penetrate the Americas market. NASA & 2022 was a great year for the NASA and U.S. In November, Freelancer also awarded Phase 1 of U.S. Government Government project team. The key takeaway with this the US$300,000 NOIS2-071 Counting Every Drop engagement is that Freelancer is delivering high end, Challenge in partnership with GEONOR on behalf of sophisticated work, by high end freelancers, to major Bureau of Reclamation, USDA Natural Resources US government agencies. Conservation Service (NRCS) and NASA. Seven In October, Freelancer awarded Phase 2b of the US$1 million NOIS2-064 CommanDING Tech Challenge and launched Phase 3 the following day. This task order is in partnership with the National Institute of Standards solutions were awarded US$10,000 each. The teams have now joined Phase 2 where they will develop their precipitation gauge prototype based on their Phase 1 White Paper. and Technology’s Public Safety Communications The following are the winning teams/individuals: • • • • • • • Rahavi Brothers (Canada) | Intelligent Precipitation Measurement System (IPMS) The Planet Earth (Canada) PMASS (USA) | Precipitation Measurement with Advanced Solid-state Sensors PGRAWS (USA) | Precipitation Gauge with Redundant Array of Weight Scales Top Solvers (USA) Orion Labs (USA) Rixel (Hungary) Research (PSCR) Division. In Phase 2b, contestants developed their incident command dashboards and presented them to the Judging Panel in virtual meetings. Eight winners were awarded a total of US$200,000 in cash prizes and a sensor package each, for testing and developing their prototype, valued at US$3,000. The following are the winning teams/individuals of Phase 2b: • • • • • • • • BadVR, Inc. (United States) Cloud Responder (United States) Engineering Dynamics (United States) Headwall (United States) Red Volta (United States) Televerse Robot, LLC (United States) TurnRock Labs (United States) Valoarus (United States) 048 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT The full list of task orders won to date: ID Sponsor Skills Value (AUD) Task Order Purpose NOIS2-090 National Institutes of Health Genome Editing $10,630,000 NOIS2-071 Bureau of Reclamation Hydrologic Engineering $590,200 Develop delivery systems to deliver genome editing machinery to target cell types or specific tissues. Develop new and improved designs for ground-based precipitation measurement devices. NOIS2-064 Department of Commerce – National Institute of Standards and Technology UI/UX Design, Software Development $1,950,000 Advance incident command dashboard technologies to allow for real-time tracking of assets, personnel, and objects of interest. NOIS2-068 NASA Aeronautics Research Mission Directorate Graphic Design $85,162.13 Seek freelance graphic illustration and facilitation expertise. NOIS2-069 NASA Aeronautics Research Mission Directorate English Transcription Services $8,840 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 NOIS2-038 NASA Game Changing Development Program Machine Learning, Artificial Intelligence $130,000 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. NOIS2-039 Department of Commerce – International Trade Administration UI/UX Design, Software Development $1,071,200 Promote cross-border data flows through the creation of a data privacy certification software program. NOIS2-043 Bureau of Reclamation Computational Fluid Dynamics $721,500 Optimise and speed up the sparse matrix linear equations solver for computational fluid dynamics models. NOIS2-017 National Institute of Child Health & Human Development Data Science $624,431.60 Identify factors and interventions that impact maternal morbidity and severe maternal morbidity. NOIS2-006 Bureau of Reclamation Electrical Engineering $486,834.40 Improve the reliability of hydropower plant generation. By automating safety equipment testing and reducing plant downtime. 049 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT Escrow.com Escrow.com is the world’s largest and only multi- Despite this drop, the Escrow.com business was jurisdictional licensed online escrow company. There profitable in FY22. are fundamentally two sides of the Escrow business- transactional which is the vast majority of the current business and checkout which we are trying to pioneer in the space of large value transactions. February 2023 is shaping up to be the best month since July 2022,possibly June 2022, and we are fairly confident that 1Q23 GPV will be higher than 4Q22, however volume has yet to fully return to the heights Transactional volume flew in FY21 and 1H22 was the seen in 2021/early 2022. second highest half for Escrow GPV in the history of the company (US$407m). From May 2022 volume crashed with the crypto/tech wreck and general economic contraction. Over 75% of the fall in 4Q22 is attributable to the decrease in the volume of domain name transactions, a market segment in which Escrow.com has a dominant position, which decreased by 20% from Escrow.com Gross Payment Volume (GPV) in 4Q22 US$514M in FY21, to $411M in FY22. Global venture was AU$189.5m down 48% on pcp or (US$124.5m capital funding in FY22 fell 35% to US$445 billion. down 53.2% on pcp). For the FY22, Escrow GPV This drop followed through to a fall in “mega” domain was $953.4m, down 11.7% on pcp (US$668.4m, transactions ($10m+) where startups pay top dollar down 17.3%). for instant brand recognition and a permanent tail wind for their marketing. FIG.22  ESCROW.COM DOMAIN SALES Through the first half of 2022, we saw many large value a boom in VC funding certain sectors such as generative transactions ($10–20m), particularly in the crypto space. artificial intelligence. In 1Q23 we have already quoted a We saw some signs of life in the latter part of the year, ‘mega’ domain transaction that would be a substantial lift where our domain transaction volume had a 5.5% uplift on our all-time record for a single domain transaction by in 4Q22 at $83m from 3Q22’s $79m. We do, however, several multiples and have seen one ‘mega’ transaction expect to see it come strong back in FY23 as we expect in the $10–20m range. 050 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT 051 FIG.23  ESCROW.COM TOTAL DOMAIN NAME TRANSACTION VALUE PER QUARTER FIG.24  ESCROW GROSS PAYMENT VOLUME (USD) BY QUARTER SINCE INCEPTION FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Product For 1H23, the priorities for product are as follows: Prioritise customer feedback • • Provide a better partnership experience Automate internal transaction processes Improve the overall KYC experience to best in class These reflect our commitment to designing a product Reduce friction of the end-to-end transaction flow Support more verticals and transaction types that enhances user experience and is fully customer centric in its design and transaction flow. • • • • Partner Activity In 4Q22, Escrow.com continued to introduce and Estate vertical in 31 US states. We started outbound support a diverse range of marketplaces and brokers, sales for real estate and construction marketplaces both existing and new partners. Towards the end of with the goal of focusing on buyer deposits for real December, we received approval from compliance to estate bids. get started on a specific pricing structure for the Real M&A Marketplaces Marketplaces for business acquisitions continued focused on profitable software companies. We are to be a strong vertical for partner growth. Escrow also seeing increased volume coming through from spent the year working closely with MicroAcquire to app marketplaces including Flippa and Zipos Apps. support their growth while MicroAcquire has excelled Some of these marketplaces are also looking to at small business acquisitions and have become branch into full M&A of businesses, which Escrow.com acquire.com to support larger business acquisitions. will support. They are the largest startup acquisition marketplace IP Addresses We continue to see growth in new IP address We attended RIPE in Belgrade, Serbia as well as platforms and growth opportunities. We continue LACNIC 38 IP in Latin America. In FY23 we expect to to see IP partners grow revenue with UAB Voldeta release an IP transaction type and IP leasing with a and HMB Holding GmbH in Europe both onboarding number of partners. last quarter. Construction and Real Towards the end of December, the sales team of focusing on buyer deposits, as a jumping off point. Estate Marketplaces received approval from compliance for the Real Estate Our first home renovation marketplace is preparing to vertical in 31 US states. We started reaching to real launch in 2Q23. estate and construction marketplaces with the goal Domain Names We attended Namescon Global in Austin, Texas in The focus on this vertical is to upgrade and automate 4Q22. New accounts included Stenning Limited, who Domain Name Holding, streamline the client subsequently closed their first transaction with us. onboarding process and KYC, revamp partner tools, Escrow will be attending the next NamesCon Global in integrated partnership reports, and overall improve the Austin, Texas at the end of May, 2023. experience for our partners and their customers. Other We are equally focused on reaching out to big Merchandise, etc.) and distribution channels: prospects as new partners across verticals (IP, payment aggregators, shopping carts, multicategory Construction, Services, Domains, M&A, Vehicles, marketplaces, and peer to peer payments. 052 FREELANCER LIMITED ANNUAL REPORT2022Loadshift DIRECTORS’ REPORT The year 2022 was transformational for our freight As explained in previous quarterlies, pre-merger in division as we merged the Loadshift and Freightlancer August ‘22, all loads expired in three days, which platforms, which now entirely operates under the resulted in a number of reposted jobs under the old Loadshift brand, and running on the Freelancer system. On the new marketplace, loads stay up until enterprise stack. The Freightlancer brand has awarded or expire in 30 days, so looking at the two been decommissioned. Total loads posted for FY22 were 74,096 (down 11.0% on pcp). Total kilometres posted were 99,102,593 (down 16.5% on pcp), representing $350 million of Notional Gross Load Value (up 7.4% on pcp). numbers is not a direct comparison. Additionally, a few accounts were banned that were cross posting jobs to the old classifieds site but going off-site to complete them. 4Q21 volume was also abnormally high due to lockdowns (which ended in NSW & Victoria in October 2021). FIG.25  MAXTRAK MOBILE CRUSHER MOVED FROM HENDERSON WA TO UNANDERRA NSW IN 4Q22 • • • • • • Records achieved in 4Q22 include (note: compared to the quarter immediately before): 2H22 GPV up 63.6% on 1H22 Average completed load size: $5,184 The key objective in FY23 is to transition the Loadshift business to a marketplace model, where payments flow through and a commission is levied. The commission model is superior for a number of reasons that are beneficial for all parties. One of the Average freight charge: $3.49/km (up 21.6% main advantages is the ability to “close the loop” by on pcp) All-time lowest median time from post to first quote providing visibility into the entire process. In the past, the bulletin board had no information after a listing was made, with no idea of which carrier performed the load, whether it was done on-time, or whether quality All-time record for most quotes/day, unique work was performed. shippers quoting/day All-time lowest median time from post to first quote (1.5 hours) 053 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT 054 FIG.26  CATERPILLAR GRADER MOVED FROM BUNBURY, WA TO BATHURST, NSW The regulatory environment has changed significantly Additionally, integrations are now able to be performed and now all participants in the movement of heavy with platforms that need freight to be performed freight are in the “Chain of Responsibility”. This means every day (e.g. automotive, machinery or auctions), that compliance and safety improves overall as the adding a level of efficiency and streamlining previously platform, being a trusted third party, is now ‘in the not possible. An enhanced set of offerings are now loop’ as to the movement of the freight and carriers, available for both carriers and shippers, as well as which results in an overall better experience for all enterprise features such as invoicing financing (via a parties involved. Another major advantage is the secure payment third party provider, Butn), makes the process more convenient and efficient for all parties. system through the marketplace, which prevents bad Finally, carriers now have more flexibility in how actors from running away from deposits or performing they use the platform, they have the choice to either poor service. Reputable carriers can earn feedback pay a membership and a reduced commission, or and reviews, which allows them to increase rates for no membership and a 10% commission, providing better services and differentiate themselves in the them with the ability to choose what works best market, thus creating a win-win situation for both for them and their business, which results in a carriers and shippers. more customised and tailored experience for all Shippers are no longer left to themselves either, as our operations team liaises with both shipper and carrier parties involved. Additionally for 2023, the plan will be to increase to ensure loads are completed successfully, providing volume and conversion by: a level of support and guidance that was previously not available. Enterprise customers can take advantage of our managed services, which includes project management for complex movements, adding a level of convenience and professionalism that was • • previously not available. Growing the carrier network New features for shippers & carriers FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT FIG.27  DAILY QUOTING CARRIERS (SINCE MERGER) FIG.28  QUOTES PER DAY (SINCE MERGER) FIG.29  GROUP FREIGHT POSTED SINCE INCEPTION (LOADS) 055 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT We continued to see significant increase in key model) to 10% as of the date of this commentary metrics and hit record numbers for GMV, number of in February. Currently the bias in awarded jobs is loads completed, number of quotes and number of towards lower end jobs, as they more easily convert, carriers quoting via the platform in 4Q22. We have however we expect the award rate to continue to rise lifted the award rate of jobs on the platform from rapidly through FY23. 0% (no jobs being awarded under the bulletin board FIG.30  LOADSHIFT AWARD RATE New features were launched to increase load conversion. The proforma invoice feature generates proforma invoices for every quote submitted through the system, which allows companies to have the accounting documentation required for load awarding. Other features such as SMS notifications and insurance/certification verification were also introduced. Carriers can now upload their insurance and certification documents, and carriers with proper certifications can showcase their credentials and increase their reputation on the platform. Additionally, the layout of the load view page was improved to make it easier for carriers to scan and submit quotes. As carriers take advantage of the features of the platform, the feedback and reviews generated and adopt the secure payment system, we expect the award rate to grow by a number of multiples in FY23. All in all, this resulted in the number of loads completed under the marketplace model strongly growing. This year will be a marquee year for the Loadshift business as the number of completed loads (and revenue) continues to rise under the new model. This is reflected in Gross Payment Volume (GPV) which is the most important for the division. FIG.31  LOADSHIFT PROFORMA INVOICE 056 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT FIG.32  LOADSHIFT INSURANCE VERIFICATION Looking forward to the rest of the year, we will be marketplace with better notification and payment continuing to improve the platform with a view flow, GPS tracking, proof of delivery workflows, to build the tools required for both carriers and integration with other marketplaces, insurances, credit shippers for end to end management of freight. This management and fleet management tools. includes features such as optimisation of the current Freight Categories The freight moved by the group is consistent with the This is followed by vehicles, cars 11.8%, trucks 7.4%, numbers prior to integration. It is diversified but primarily pallets less than a load 8.7%, general part loads 7.9% heavy machinery (21.2% mobile, 6.7% stationary) for the and general full loads 7.7%. mining, construction and industrial sectors. FIG.33  FREIGHT CATEGORIES BY TYPE (%) IN 4Q22 057 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Review of Financial Performance The Company achieved Net Revenue of $55.7 million in Revenue excluding Escrow.com was $45.6 million FY22 (down 3.1% on the previous corresponding period), (down 1.1% on the previous corresponding period). and Gross Payment Volume of $1,127.4 million (down 10.5% on the previous corresponding period). Escrow.com revenue was $10.1 million (down 11.1% on the previous corresponding period). FIG.34  NET REVENUE FOR THE FREELANCER GROUP BY FINANCIAL YEAR 1. Gross Payment Volume (GPV) is calculated 2. Take rate for the Marketplace segment is as the total payments to Freelancer or Escrow 3% employer commission and 10% freelancer users for products and services transacted commission, which has not changed since 2010. 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. 3. Core Freelancer FY22 GPV of A$173.9m. Escrow FY22 GPV of US$668.4m, average AUD/USD FX of 0.70109= A$953.5m 058 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT FIG.35  GROSS PAYMENT VOLUME (GPV) FOR THE FREELANCER GROUP BY YEAR The Company’s gross margin of 84.3% in FY22 Operating expenses were 5.6% higher than the prior compared to the previous corresponding period (FY21: corresponding period. Payroll costs, which represent 83.1%), and remains within a consistent range since 49% of operating costs were up by 5.9% and marketing 2011. The Company’s cost of sales predominantly costs were up by 21.4%. These increases were consists of transaction costs that are incurred from substantially as a result of a ramp up of employee and the various gateways relied upon to process user marketing expenses in 1H22 in anticipation of higher payments, as well as various provisions taken for revenues. In 2H22 the group implemented numerous credit card chargebacks and fraud risks. Cost of sales cost efficiencies across all expense categories. also includes direct labour costs incurred in generating Operating costs in 2H22 were 15.2% lower than enterprise services revenue. The Company reported an Operating NPAT (loss) of $(5.3) million in FY22 (FY21: $(2.1) million). NPAT (loss) was $(5.4) million in FY22, which included a tax 1H22. These cost efficiencies, together with ongoing strategies to improve revenue growth will become evident in FY23 as the group trends to profitability. As of 31 January 2023, the company had 376 FTE staff. benefit of $1.6 million (FY21: $(0.9) million). The Company posted a negative operating cash flow Operating NPBT (loss) was $(6.9) million in FY21 (FY21: $(3.0) million). The escrow.com division made a NPBT of $0.4 million. of $4.2 million in FY22 down from (FY21: $2.6 million). Operating cash flow excludes $3.8 million (FY21: $3.5 million) of lease payments associated with office premises, which have been reflected as finance costs in accordance with AASB 16 Leases. 059 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT Balance Sheet As at 31 December 2022, the Company held cash and Trade and other payables includes user obligations equivalents of $23.4 million and no net debt, down (user balances and milestone payments held on 23% on FY21. balance sheet). These decreased by 4% from FY21 Escrow ended the year with off balance sheet cash of Operating cost efficiencies are expected to drive $54.8 million. (FY21:$64.7 million). profitability and will strengthen the balance sheet Trade and other receivables include receivables from various payment gateways and enterprise customers. These decreased by 22% from FY21 in FY23. Dividends paid or recommended There have been no dividends paid or provided for the The Company has established a Dividend financial year ended 31 December 2022 (2021: nil). Reinvestment Plan (DRP). The full terms and conditions of the DRP are available on the Company’s website, www.freelancer.com. Significant changes in state of affairs There have been no significant changes in the state of affairs for the current financial year. Subsequent Events As at the date of this report, the Directors are not financial years, the results of those operations in aware of any circumstance that has arisen since 31 future financial years, or the Group’s state of affairs December 2022 that has significantly affected, or may in future financial years. significantly affect the Group’s operations in future Future developments 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. Environmental regulations The operations of the Group do not involve any of any material issues affecting the Group or its activities that have a marked influence on the compliance with the relevant environment agencies environment. As such, the Directors are not aware or regulatory authorities. 060 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT Insurance and indemnification of Directors and Officers During the financial year, the Group paid premiums been disclosed as it is subject to the confidentiality based on normal commercial terms and conditions provisions of the insurance policy. to insure all directors, officers and employees of the Group against the costs and expenses in defending claims brought against the individual while performing services for the Group. The premium paid has not 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 in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. 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 were Company during the financial year, with attendances 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 7 7 7 7 7 7 2 2 2 2 2 2 - - - - - - 061 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Non-audit services Details of amounts paid or payable to the auditor for • all non-audit services have been reviewed and non-audit services provided during the year by the approved to ensure that they do not impact the auditor and its related parties amounted to $20,000 integrity and objectivity of the auditor; and (2021: $40,000). • none of the services undermine the general The Directors are satisfied that the provision of non- principles relating to auditor independence as audit services in the form of tax compliance services set out in Code of Conduct APES 110 Code of during the year by the auditor (or another person Ethics for Professional Accountants issued by or firm on the auditors’ behalf) is compatible with the Accounting Professional & Ethical Standards the general standard of independence for auditors Board, including reviewing or auditing the 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: auditors own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Officers of the Company who are former audit partners of the auditor There are no officers of the Company who are former audit partners of Hall Chadwick. Auditor’s independence declaration The auditor’s independence declaration is included on page 69 and forms part of the Directors’ Report for the year ended 31 December 2022. Shares issued under Employee Share Plan (ESP) or Long Term Incentive Plan (LTIP) No ESP shares or LTIP share options have been granted to Directors during the financial year. No ESP shares or LTIP share options have been granted to Directors since the end of the financial year. Proceedings on behalf of Company No proceedings have been brought or intervened in on behalf of the Company, nor have any applications for leave to do so been made in respect of the Company, under section 237 of the Corporations Act 2001. 062 FREELANCER LIMITED ANNUAL REPORT2022 DIRECTORS’ REPORT Remuneration Report This audited Remuneration Report for the Group Key management personnel (KMP) comprise: which forms part of the Directors’ Report for the financial year ended 31 December 2022, details the nature and amount of remuneration for each Director and the Executives. • • • • R.M. Barrie – Executive Chairman S.A. Clausen – Non-Executive Director D.N.J. Williams – Non-Executive Director N.L. Katz – Chief Financial Officer and Company Secretary Remuneration policy The performance of the Group depends upon the The Nomination and Remuneration Committee quality of its directors and executives. The Group assesses the appropriateness of the nature recognises the need to attract, motivate and retain and amount of remuneration of Directors and highly skilled directors and executives. Executives on a periodic basis by reference to The Board of Directors, through its Nomination and Remuneration Committee, accepts responsibility for determining and reviewing remuneration arrangements for the Directors and Executives. relevant employment market conditions, giving due consideration to the overall profitability and financial resources of the Group, with the objective of ensuring maximum stakeholder benefit from the retention of a high-quality Board and executive team. Non-Executive Fees and payments to Non-Executive Directors determined by the Company in general meeting. Director remuneration reflect the demands which are made of the Directors The most recent determination was at a General in fulfilling their responsibilities. Non-Executive Meeting held on 9 October 2013 where the Director fees are reviewed annually by the Board. The shareholders approved an aggregate remuneration Constitution of the Company provides that the Non- of $300,000. Annual Non-Executive Directors’ fees Executive Directors of the Company are entitled to currently agreed to be paid by the Company are such remuneration, as determined by the Board, which $25,000 (2021:$25,000) to S.A. Clausen and D.N.J. must not exceed in aggregate the maximum amount Williams inclusive of superannuation. Executive and Executive Fixed remuneration consists of base remuneration Executive and Executive Director remuneration Director remuneration (which is calculated on a total cost basis and includes levels are reviewed annually by the Nomination and any fringe benefits tax charges related to employee Remuneration Committee through a process that benefits, including motor vehicles), as well as considers the overall performance of the Group. The employer contributions to superannuation funds. Executive Directors are not paid any director fees in addition to their fixed remuneration as Executives. Performance Performance based remuneration is at the discretion to participate in the Company’s Employee Share Plan based remuneration of the Nomination and Remuneration Committee. (ESP) or invitations to participate in the Company’s These can take the form of cash bonuses, invitations Long Term Incentive Plan (LTIP). 063 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ 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 $ $ $ $ - - 2,288 2,232 25,904 25,904 $ $ - - - - - - 25,000 25,000 25,172 25,116 618,078 615,148 Executive Directors S.A. Clausen 2022 2021 D.N.J. Williams 2022 2021 Executive Directors R.M. Barrie 2022 2021 Other KMP N.L. Katz 2022 2021 Total 2022 2021 - - - - - - - - 569,096 23,078 569,096 20,148 25,000 25,000 22,884 22,884 - - - - 378,319 21,512 27,600 94,500 521,931 357,314 18,242 27,600 39,815 442,971 47,884 947,415 44,590 47,884 926,410 38,390 55,792 55,736 94,500 1,190,181 39,815 1,108,235 The remuneration of key management personnel in the years ended 31 December 2022 and 2021 were 100% fixed, and there is no link between remuneration and the market price of the Company’s shares. 064 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ REPORT ESP shares Details of ESP shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows: 2022 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total 2021 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 - - 440,539 440,539 - - 685,539 685,539 - - - - - - - - - - - - - - (245,000) (245,000) - - - - - - - - - - - - - - 440,539 308,378 132,161 440,539 308,378 132,161 - - - - - - 440,539 396,486 44,053 440,539 396,486 44,053 Ordinary share Details of ordinary shares options in Payments Pty Ltd held directly, options in subsidiary indirectly or beneficially, by KMP, including their related parties, is as follows: (Payments Pty Ltd) 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 2022 Directors R.M. Barrie D.N.J. Williams Other KMP - - N.L. Katz 10,000,000 Total 2021 Directors R.M. Barrie D.N.J. Williams Other KMP N.L. Katz Total - - - - - - - - - - - 10,000,000 10,000,000 - - - - - - - - - - - - - - - - - - - - - - 10,000,000 9,000,000 1,000,000 10,000,000 9,000,000 1,000,000 - - - - 10,000,000 10,000,000 10,000,000 10,000,000 - - - - 065 FREELANCER LIMITED ANNUAL REPORT DIRECTORS’ REPORT Ordinary share capital Details of ordinary shares in the Company held directly, indirectly or beneficially, by KMP, including their related parties, is as follows: Balance at the start of the year Received as part of remuneration Purchase of shares Sale of shares Balance at the end of the year 2022 Directors R.M. Barrie1 195,281,931 S.A. Clausen 160,500,000 D.N.J. Williams2 10,758,165 Other KMP N.L. Katz3 Total 2021 Directors 595,000 367,135,096 R.M. Barrie1 195,281,931 S.A. Clausen 160,500,000 D.N.J. Williams2 10,758,165 Other KMP N.L. Katz3 Total 350,000 366,890,096 - - - - - - - - - - 632,870 - - - - - - - 245,000 245,000 - - - - - - - - - - 195,914,801 160,500,000 10,758,165 595,000 367,767,966 195,281,931 160,500,000 10,758,165 595,000 367,135,096 Loans to The following loan balances are outstanding at not be considered issued to participants until the directors and key the reporting date in relation to remuneration corresponding loan has been repaid, at which time management personnel arrangements with Executive Directors and KMP in there will be an increase in the issued capital and respect of fully paid shares and shares issued under increase in cash. Further information relating to the the Employee Share Plan (ESP). ESP is set out in Note 24 of the financial statements. As the ESP is considered in substance a share option, the ESP shares issued and corresponding loan receivable are not recognised by the Group in its financial statements. The ESP shares will Loans provided in respect of fully paid shares are recognized in the financial statements. 066 FREELANCER LIMITED ANNUAL REPORT2022 Directors: R.M. Barrie S.A. Clausen D.N.J. Williams Other KMP: N.L. Katz* Total loans to Directors and KMP DIRECTORS’ REPORT 2022 $000 2021 $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. 1 1,279,500 shares as at 31 December 2022 (2021: 1,279,500) are held directly or indirectly by related parties. 2 131,000 shares as at 31 December 2022 (2021: 131,000) are held directly or indirectly by related parties. 3 131,000 shares as at 31 December 2022 (2021: 131,000) are held directly or indirectly by related parties. Executive The employment terms and conditions of Group Executives and KMP are formalised in service agreements. 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. 067 FREELANCER LIMITED ANNUAL REPORTDIRECTORS’ REPORT Other transactions There were no other transactions conducted The Directors’ Report, incorporating the Remuneration with KMP or their between the Group and KMP or their related parties, Report, is signed in accordance with a resolution related parties other than those disclosed above relating to equity, of the directors made pursuant to s298(2) of the compensation and loans, that were conducted other Corporations Act 2001. 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. On behalf of the Directors Matt Barrie Chairman 22 February 2023 068 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ DECL ARATION 069 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 S307C 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 review of the financial report of Freelancer Limited for the year ended 31 December 2022, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a)the auditor independence requirements as set out in the Corporations Act 2001 inrelation to the review, and(b)any applicable code of professional conduct in relation to the reviewHall Chadwick (NSW) Level 40, 2 Park Street Sydney, NSW 2000 Sandeep Kumar Partner Dated: 22 February 2023FREELANCER LIMITED ANNUAL REPORTCONSOLIDATED STATEMENT Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2022 Revenue Cost of sales Gross profit Other income Employee expenses Administrative expenses Marketing related expenses Occupancy expenses Foreign exchange losses Depreciation and amortisation expenses Share based payments expense Finance costs Loss before income tax Income tax benefit Loss after tax Exchange differences on translation of foreign operations Total comprehensive loss for the year Loss is attributable to: Owners of Freelancer Limited Non-controlling interests Total comprehensive income for the year is attributable to: Owners of Freelancer Limited Non-controlling interests Earnings per share Basic earnings per share Diluted earnings per share Note 5 5 6 6 6 6 6 19 6 7 19 2022 $000 55,660 (8,740) 46,920 1,993 2021 $000 57,419 (9,689) 47,730 2,155 (27,315) (25,793) (11,602) (11,914) (8,573) (7,063) (878) (1,291) (4,470) (159) (1,655) (7,030) 1,617 (305) (838) (4,894) (156) (2,035) (3,113) 856 (5,413) (2,257) 250 279 (5,163) (1,978) (5,413) (2,257) - - (5,413) (2,257) (5,163) (1,978) - - (5,163) (1,978) Cents (1.20) (1.20) Cents (0.50) (0.50) 32 32 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 070 FREELANCER LIMITED ANNUAL REPORT2022 Consolidated Statement of Financial Position CONSOLIDATED STATEMENT As at 31 December 2022 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 2022 $000 2021 $000 8 9 10 9 11 12 13 10 7 14 13 15 7 16 17 7 16 13 17 18 19 23,358 4,825 2,614 30,797 794 491 34,120 17,832 491 12,520 66,248 30,316 6,448 2,191 38,955 732 639 34,119 18,753 496 11,633 66,372 97,045 105,327 39,647 5,562 121 18 2,798 685 48,831 4,622 960 15,519 648 21,749 41,259 5,709 121 43 2,871 846 50,849 5,605 822 16,082 639 23,148 70,580 73,997 26,465 31,330 38,918 1,288 38,779 4,764 (17,415) (15,887) 3,674 26,465 3,674 31,330 The above statement of financial position should be read in conjunction with the accompanying notes. 071 FREELANCER LIMITED ANNUAL REPORT CONSOLIDATED STATEMENT Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Attributable to owners of Freelancer Limited Contributed Equity $000 Note Share Based Payments $000 Foreign currency translation reserve $000 (Accumulated losses) $000 Non- controlling interests $000 Total Equity $000 Balance at 1 January 2021 38,446 4,903 (574) (13,630) 20 29,165 - - - - - - - - - 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 capital contributed by non-controlling interests Contributions of equity arising from repayment of ESP loans Share based payments Balance at 31 December 2021 18 24 - 333 - 156 - (2,257) 279 - 279 (2,257) - - - (2,257) 279 (1,978) - - - - - - 3,654 3,654 - - 333 156 38,779 5,059 (295) (15,887) 3,674 31,330 Attributable to owners of Freelancer Limited Contributed Equity $000 Note Share Based Payments $000 Foreign currency translation reserve $000 (Accumulated losses) $000 Non- controlling interests $000 Total Equity $000 Balance at 1 January 2022 38,779 5,059 (295) (15,887) 3,674 31,330 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: Shares issued during the year Share based payments reserve no longer required Share based payments Balance at 31 December 2022 139 - - (3,885) 159 - (5,413) 250 - 250 (5,413) - - - - 3,885 - - - - - - - (5,413) 250 (5,163) 139 - 159 38,918 1,333 (45) (17,415) 3,674 26,465 The above statement of changes in equity should be read in conjunction with the accompanying notes. 072 FREELANCER LIMITED ANNUAL REPORT2022 Consolidated Statement of Cash Flows For the year ended 31 December 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income taxes paid CONSOLIDATED STATEMENT Note 2022 $000 2021 $000 58,128 60,990 (60,458) (56,164) 99 56 (1,653) (2,034) (295) (205) 2,643 (429) (7,662) (8,091) Net cash (outflow)/inflow from operating activities 31 (4,179) 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 (148) (1) (149) Contributions of equity arising from repayment of ESP loans 18 - 333 Repayment of lease liabilities Issue of shares in subsidiaries Net cash inflow/(outflow) from financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year 8 (3,845) (3,479) - (3,845) (8,173) 30,316 1,215 23,358 3,654 508 (4,940) 34,341 915 30,316 The above statement of cash flows should be read in conjunction with the accompanying notes. 073 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT Notes to the Financial Statement For the year ended 31 December 2022 Contents of the notes to the consolidated financial statements NOTE CONTENTS 01. Reporting entity 02. Basis of preparation PAGE 075 075 03. Financial risk management 076 04. Operating segments 05. Revenue 06. Expenses 07. Income tax 080 082 084 085 NOTE CONTENTS 19. Equity – reserves PAGE 097 20. Key management personnel disclosures 098 21. Remuneration of auditors 099 22. Contingent liabilities 099 23. Commitments for expenditure 24. Share based payments 100 100 08. Cash and cash equivalents 087 25. Related party transactions 107 09. Trade and other receivables 087 26. Parent entity information 107 10. Other assets 11. Plant and equipment 12. Intangible assets 13. Leases 089 089 091 093 14. Trade and other payables 094 15. Borrowings 16. Provisions 17. Contract liabilities 18. Contributed equity 094 095 096 096 27. Business Combinations 108 28. Interests in controlled entities 109 29. Fair value measurements 110 30. Events occurring after the reporting date 110 31. Reconciliation of loss after tax to net cash flow from operating activities 110 32. Earnings per share (EPS) 111 33. Other significant accounting policies 112 074 FREELANCER LIMITED ANNUAL REPORT2022 NOTES TO THE FINANCIAL STATEMENT 01. Reporting entity Freelancer Limited (the Company) is a company The Group is a for-profit entity and primarily is involved domiciled in Australia. The address of the Company’s in operating an online marketplace for services and registered office is Level 37, Grosvenor Place, 225 providing escrow payment services. The separate George Street, Sydney, NSW, 2000. The consolidated financial statements of the parent entity, Freelancer financial statements of the Company as at and for the Limited, have not been presented within this financial year ended 31 December 2022 comprise the Company report as permitted by the Corporations Act 2001. and its subsidiaries (together referred to as the Group and individually as Group entities). 02. Basis of preparation These general purpose financial statements have been of applying the Group’s accounting policies. The areas prepared in accordance with Australian Accounting involving a higher degree of judgement or complexity, or Standards and Interpretations issued by the Australian areas where assumptions and estimates are significant Accounting Standards Board and the Corporations to the financial statements are disclosed in Note 33(g). 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. (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. (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. (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. (h) Materiality These consolidated financial statements have included information that is deemed to be material and relevant to the understanding of the financial statements. (c) Functional and presentation currency Disclosure may be considered material and relevant if These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency (d) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires 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 management to exercise its judgement in the process important to future performance. 075 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 03. Financial risk management Financial risk The Group’s activities expose it to a variety of financial Risk management is carried out by senior finance management policies risks: market risk (including currency risk), credit risk executives (Finance) under policies approved by the and liquidity risk. The Group’s overall risk management Board of Directors (Board). These policies include program focuses on the unpredictability of financial identification and analysis of the risk exposure of markets and seeks to minimise potential adverse the Group and appropriate procedures, controls and effects on the financial performance of the Group. The risk limits. Finance identifies, evaluates and hedges Group uses different methods to measure different financial risks within the Group’s operating units. types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks and ageing analysis for credit risk. The Group holds the following financial instruments: Financial Assets Cash and cash equivalents Trade and other receivables Total financial assets Financial Liabilities Trade and other payables Lease liabilities Total financial liabilities Note 2022 $000 2021 $000 8 9 14 13 23,358 5,619 28,977 39,647 21,081 60,728 30,316 7,180 37,496 41,259 21,791 63,050 The carrying value of the assets and liabilities Amortised cost is calculated as the amount at which disclosed in the table above closely approximates the financial asset or financial liability is measured or equals their fair value. The carrying amounts of at initial recognition less principal repayments and trade receivables and trade and other payables are any reduction for impairment, and adjusted for any assumed to approximate their fair values due to their cumulative amortisation of the difference between short-term nature. that initial amount and the maturity amount calculated Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the Group commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted). using the effective interest method. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of Financial instruments are initially measured at fair the financial instrument to the net carrying amount of value plus transaction costs, except where the the financial asset or financial liability. instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense Classification and subsequent measurement item in profit or loss. Financial instruments are subsequently measured at The Group does not designate any interests fair value, amortised cost using the effective interest in subsidiaries, associates or joint venture method, or cost. Where available, quoted prices in an entities as being subject to the requirements of active market are used to determine fair value. In other Accounting Standards specifically applicable to circumstances, valuation techniques are adopted. financial instruments. 076 FREELANCER LIMITED ANNUAL REPORT2022 NOTES TO THE FINANCIAL STATEMENT 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 if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). measured at amortised cost. Gains or losses are When the terms of financial assets that would otherwise recognised in profit or loss through the amortisation have been past due or impaired have been renegotiated, process and when the financial asset is derecognised. the Company recognises the impairment for such Held-to-maturity investments financial assets by taking into account the original terms as if the terms have not been renegotiated so that the Held-to-maturity investments are non-derivative loss events that have occurred are duly considered. financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s (a) Market risk 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. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset (or a group 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. The Group’s exposure to foreign currency exchange risk at the reporting date, expressed in each currency, was of financial assets) is deemed to be impaired if, and only as follows: 2022 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 4,282 9,487 Trade receivables 1,368 1,142 109 43 648 1,093 302 8,133 1,015 347 54,099 175 309 14 523 437 263 44,060 Other financial assets 2,174 207 - 26 - - 14,352 - 10 221 Payables (2,067) (1,566) (1) (155) (3) (12) (8,482) (15) (238) 5,022 193 377 - 29 User obligations (2,636) (15,586) (168) (968) (829) (253) (2,590) (2,587) (1,011) (64,345) (305) Net exposure 3,121 (6,316) (17) (274) 570 51 11,936 (1,150) (629) 39,057 294 077 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT 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 14,192 161 845 1,334 401 10,784 1,067 Trade receivables 4,330 318 40 142 384 32 681 469 Other financial assets 1,711 239 Payables (1,258) (1,448) - - 29 (14) - - - 13,617 (5) (52,738) - - 785 293 72,541 22,164 150 525 5 258 - (59) (66) 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) (40) 28,587 276 The Group had net liabilities of $10,809,000 against the Australian dollar in the short term denominated in foreign currencies as at 31 December subsequent to 31 December 2022. The table 2022 (comprising assets of $24,070,000 less liabilities summarises the range of possible outcomes that of $34,880,000). The Group had net liabilities of would affect the Group’s net profit and equity as a $9,007,000 denominated in foreign currencies as at result of foreign currency movements on year end 31 December 2021 (comprising assets of $28,772,000 foreign denominated assets and liabilities. less liabilities of $37,779,000). The impact of potential movements in exchange The analysis below reflects management’s view of rates on the profit or loss is as follows: possible movements in relevant foreign currencies AUD to USD (Range +5% to -5%) AUD to NZD (Range +5% to -5%) AUD to GBP (Range +5% to -5%) AUD to HKD (Range +5% to -5%) AUD to SGD (Range +5% to -5%) AUD to PHP (Range +5% to -5%) AUD to EUR (Range +5% to -5%) AUD to CAD (Range +5% to -5%) AUD to INR (Range +5% to -5%) Net movement 2022 $000 2021 $000 High 442 1 23 (5) (3) (15) 86 32 (33) 528 Low (489) (1) (26) 6 3 17 (95) (36) 37 (584) High 280 1 20 (4) (7) 39 87 1 (25) 392 Low (310) (2) (22) 4 7 (43) (96) (1) 28 (435) Price risk Cash balances The Group is not exposed to significant equities As at 31 December 2022 the Group had $23,358,000 price risk. Interest rate risk (2021: $30,316,000) held in bank accounts and online wallets. The Group’s cash balances are predominantly held in interest bearing bank accounts. Funds that The Group is not exposed to any significant interest are excess to short term liquidity requirements are rate risk. generally invested in short term deposits. 078 FREELANCER LIMITED ANNUAL REPORT2022 NOTES TO THE FINANCIAL STATEMENT (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to The 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. the financial statements. The Group does not hold Maturities of financial assets any collateral. Credit risk is managed by a risk assessment process for all customers, which takes into account past experience. (c) Liquidity risk The following table details the Group’s remaining contractual maturity for its financial instrument assets. The table has been drawn up based on the undiscounted cash flows of financial assets based on the earliest date on which the financial assets are required to be paid. The tables include both interest Liquidity risk management requires the Group to and principal cash flows disclosed as remaining maintain sufficient liquid assets (mainly cash and contractual maturities and therefore these totals may cash equivalents) to be able to pay debts as and when differ from their carrying amount in the statement of they become due and payable. financial position. 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years 2022 Note $000 $000 $000 $000 Remaining contractual maturities $000 Non-derivatives Non-interest bearing Trade Receivables 2021 Non-derivatives Non-interest bearing Trade Receivables 2,008 2,008 1,648 1,648 4,408 4,408 - - 8,064 8,064 2,064 2,064 2,001 2,001 5,139 5,139 918 918 10,122 10,122 Maturities of financial liabilities The following table details the Group’s remaining required to be paid. The tables include both interest contractual maturity for its financial instrument and principal cash flows disclosed as remaining liabilities. The table has been drawn up based on the contractual maturities and therefore these totals may undiscounted cash flows of financial liabilities based differ from their carrying amount in the statement of on the earliest date on which the financial liabilities are financial position. 079 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years 2022 Note $000 $000 $000 $000 Non-derivatives Non-interest bearing Trade Receivables 14 Lease liabilities 2021 Non-derivatives Non-interest bearing Trade Receivables Lease liabilities 14 13 39,649 5,562 45,211 41,259 5,709 46,968 - 6,033 6,033 - 4,485 4,485 - 13,446 13,446 - 11,597 11,597 - - - - - - Remaining contractual maturities $000 39,649 25,041 64,690 41,259 21,791 63,050 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 The CODM assess the performance of the operating consistent with the internal reporting provided to the segments based on a measure of revenue and operating chief operating decision maker. These include items EBITDA (earnings before share based payments, directly attributable to a segment as well as those that interest, tax, depreciation and amortisation). The can be allocated on a reasonable basis. Unallocated accounting policies adopted for internal reporting to items comprise mainly corporate assets (primarily the CODM are consistent with those adopted in the the Company’s headquarters), head office expenses, financial statements. and 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 the Group has staff and operations Identification of reportable operating segments in Philippines, United Kingdom, Argentina, the United The Group is organised into two operating segments: namely an online marketplace and online payment services. These segments are based on the internal reports that are reviewed and used by the CODM States and Canada in addition to Australia, these geographic operations are considered, based on internal management reporting and the allocation of resources by the Group’s CODM, as one geographic segment. in assessing performance and in determining the The information reported to the CODM is at least allocation of resources (AASB 8 para. 5(b)). on a monthly basis. 080 FREELANCER LIMITED ANNUAL REPORT2022 NOTES TO THE FINANCIAL STATEMENT Year end 31 December 2022 Online Marketplace Online Payments Total Segment revenue Segment revenue Total segment revenue Segment result Segment profit/(loss) Share based payments Depreciation and amortisation expenses Interest paid Loss before income tax Income tax benefit Loss for year Segment Assets At 31 December 2022 Segment assets Intergroup eliminations Deferred tax assets Intangibles Total assets Segment liabilities At 31 December 2022 Segment liabilities Intergroup eliminations Deferred tax liabilities Total liabilities 45,591 45,591 (1,459) (159) (4,224) (1,607) (7,449) 46,760 (1,497) - - 10,069 10,069 713 - (248) (46) 419 6,542 - - - 45,263 6,542 (63,225) - - (63,225) (4,231) 1,497 - (2,734) 55,660 55,660 (746) (159) (4,472) (1,653) (7,030) 1,617 (5,413) 53,302 (1,497) 12,520 32,720 97,045 (67,456) 1,497 (4,621) (70,580) 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 Segment Assets At 31 December 2021 Segment assets Intergroup eliminations Deferred tax assets Intangibles Total assets Segment Assets At 31 December 2021 Segment liabilities Intergroup eliminations Deferred tax liabilities Total liabilities 46,099 46,099 2,059 (156) (4,702) (1,981) (4,780) - 54,006 (2,673) - - 11,320 11,320 1,913 - (191) (55) 1,667 - 9,641 - - - 57,419 57,419 3,972 (156) (4,893) (2,036) (3,113) 856 (2,257) 63,647 (2,673) 11,633 32,720 51,333 9,641 105,327 (65,042) - - (65,042) (6,022) 2,672 - (3,350) (71,064) 2,672 (5,605) (73,997) 081 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 05. Revenue The Company’s net revenues result from transaction contact are completed. Under AASB 15: Revenue and other fees generated in its online marketplaces from Contracts with Customers, this happens over and in providing online escrow services. Revenues time. The Group has an enforceable right to payment are recognised when evidence of an arrangement for work completed to date and therefore, revenue is exists, the fee is fixed and determinable, no significant recognised over time. The Group considers the cost- obligation remains and collection of the receivable is to-cost method an appropriate measure of progress reasonably assured. Amounts disclosed as revenue for the completion of the performance obligation. The are net of refunds and amounts collected on behalf of cost-to-cost method is based on the proportion of third parties. Where services have not been provided costs incurred for work performed to date relative to but the Company is obligated to provide the services the estimated total contract costs. in the future, revenue recognition is deferred. Provision for doubtful accounts and transaction losses are made at the time of revenue recognition based on the Company’s historical experience. The provision for doubtful accounts and transaction losses are recorded as charges to cost of sales. A customer is billed for the project services when a certain series of milestones have been achieved. A contract asset is recognised for revenue recognised but not yet billed due to the milestone billing arrangement. Once an invoice is issued, the corresponding contract asset is reclassified to trade Revenue is recognised for the major business receivables. A contract liability is recognised if the activities as follows: Marketplace services milestone payment exceeds the revenue recognised to date under the cost-to-cost method. No significant financing components have been identified in the The Group enters into short-term contracts with contracts with customers, as the period between the customers for marketplace services. Such contracts payment and the recognition of revenue (cost-to-cost are entered into before the delivery of the service method) is always less than 12 months. which is paid in advance of receipt of the service. The performance obligation is the delivery of the Interest income service which is recognised by the system controls. Interest revenue is recognised using the effective The system does not draw fees from the customer interest rate method, which, for floating rate financial until the delivery of the service. Therefore, revenue assets, is the rate inherent in the instrument. is recognised at a point in time upon delivery of the service when the system recognizes that the service Government grants has completed. No rebates or volume discounts are Government grants are recognised at fair value where provided to customers. Payment services. there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income The Group enters into both long-term and short-term over the periods necessary to match the grant to the contracts with customers for payment services. costs it is compensating. In respect of long-term contracts, revenue is recognised over the period of the contract. In respect Sublease rent of short-term contracts, revenue is recognised by Sublease rental income of office space is recognised reference to stage of completion of the services on a straightline basis over the term of the sub-lease. as this is consistent to the pattern of performance The Company recognises the right-of-use asset obligation i.e. availability of the open transaction to resulting from the head lease. Refer to Note 13. be executed progressively in the future and on the Escrow.com platform. Enterprise Services The enterprise services revenue stream focuses on projects negotiated with customers to meet their needs on short to long-term contracts. Revenue is recognised when milestones as determined in the 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. 082 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT 2022 $000 42,305 10,069 3,286 55,660 99 1,834 60 1,993 2021 $000 43,374 11,320 2,725 57,419 56 1,834 265 2,155 57,653 59,574 Sales revenue Marketplace and payment services Payment services Enterprise services Other revenue Interest income Sublease rent Other Total revenue 083 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 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 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 Interest expense on lease liability 2022 $000 24,771 2,974 27,745 6,051 1,478 1,477 1,156 723 717 2021 $000 23,325 2,648 25,973 6,009 1,324 1,763 1,013 771 1,034 11,602 11,914 7,780 686 107 8,573 292 4,178 4,470 878 878 1,291 1 1,654 5,457 744 862 7,063 267 4,627 4,894 307 307 838 1 2,034 1 Inclusive of employee expenses included in cost of sales Total employee benefits expenses are inclusive of: Short-term obligations Employee benefits that are expected to be settled within 12 months have been measured at the amounts expected to be paid when the liabilities are settled, plus related on-costs. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. 084 FREELANCER LIMITED ANNUAL REPORT202207. Income tax NOTES TO THE FINANCIAL STATEMENT Other long-term employee benefit obligations Short-term incentive plans Employee benefits payable later than 12 months have The Group recognises a liability and an expense been measured at the present value of the estimated for bonuses payable under short term incentive future cash outflows to be made for those benefits. plans. Short term incentive plans are based on the In determining the liability, consideration is given to achievement of targeted performance levels that employee wages increases and the probability that may be set at the beginning of each financial year. the employee may satisfy any vesting requirements. The Group recognises a liability to pay out short Those cash flows are discounted using market term incentives when contractually obliged based on yields on national government bonds with terms to the achievement of the stated performance levels, maturity that match the expected timing of cash flows or where there is a past practice that has created a attributable to employee benefits. constructive obligation. The income tax expense or revenue for the period is to recover or settle the carrying amount of its assets the tax payable on the current period’s taxable income and liabilities. based on the applicable tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where 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. appropriate on the basis of amounts expected to be A deferred tax asset is recognised for unused tax losses, paid to the tax authorities. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series • temporary differences related to investments in of judgements about future events. New information subsidiaries, associates and jointly controlled may become available that causes the Group to entities to the extent that the Group is able change its judgement regarding the adequacy of to control the timing of the reversal of the existing tax liabilities; such changes to tax liabilities temporary differences and it is probable that they will impact the tax expense in the period that such a will not reverse in the foreseeable future. determination is made. • taxable temporary differences arising on the The Company and its wholly-owned Australian initial recognition of goodwill. resident entities are part of a tax consolidated 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, group. As a consequence, all members of the tax- consolidated group are taxed as a single entity. The head entity within the tax-consolidated group is Freelancer Limited. 085 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT (a) Income tax Current tax Deferred tax Income tax (benefit) Deferred income tax expense included in income tax benefit comprises: (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 Under/(Over) provision in prior years Non Taxable income Other non-allowable items Income tax (benefit) (c) Deferred tax assets The balance comprises temporary differences attributable to: 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 Net deferred tax assets Movements: Opening balance at beginning of year Credited to the profit or loss statement Exchange differences Closing balance at end of year 2022 $000 2021 $000 249 (1,866) (1,617) (854) (1,012) (1,866) (7,065) (2,120) - 38 48 336 81 - 171 (1,027) (856) (661) (365) (1,026) (3,115) (934) (11) (114) 47 (33) 5 184 (1,617) (856) 429 178 - 576 1,138 28 5,401 4,565 205 357 151 (9) 430 1,101 39 6,216 3,000 348 12,520 11,633 11,633 10,965 855 32 661 7 12,520 11,633 086 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT (109) (242) (4,271) (4,622) 5,605 (1,012) 29 4,622 - 18 66 (181) (205) (5,219) (5,605) 5,957 (365) 13 5,605 - 43 66 (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) 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% 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 or less that are readily convertible to known amounts and cash equivalents includes cash on hand, deposits of cash and which are subject to an insignificant risk held at call with banks, other short term highly liquid of changes in value, and bank overdrafts. investments with original maturities of three months Current Cash at bank and on hand Term deposits Total cash and cash equivalents 09. Trade and other receivables 2022 $000 2021 $000 20,623 27,593 2,735 2,723 23,358 30,316 Trade receivables are recognised initially at fair value Trade receivables are generally due for settlement no and subsequently measured at amortised cost using more than 30 days from the date of recognition. They the effective interest method, less provision for are presented as current assets unless collection impairment. This provision includes amounts that are is not expected for more than 12 months after the not considered to be recoverable from debtors and reporting date. amounts that are expected to be credited to debtors. 087 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT Collectability of trade receivables is reviewed on an The Group applies the simplified approach to providing ongoing basis. A provision for impairment of trade for expected credit losses prescribed by AASB 9, which receivables is established when there is objective permits the use of the lifetime expected loss provision evidence that the Group will not be able to collect all for all trade receivables. To measure the expected credit amounts due according to the original terms of the losses, trade receivables have been grouped based on receivables. Significant financial difficulties of the shared credit risk characteristics and the days past due. debtor, probability that the debtor will enter bankruptcy The loss allowance provision as at 31 December 2022 or financial reorganisation, and default or delinquency is determined as follows; the expected credit losses in payments are considered indicators that the also incorporate forward-looking information. trade receivable is impaired. In addition, the trade receivables balances are considered for credit notes that are expected to be raised against individual and collective balances. The “amounts written off” are all due to customers declaring bankruptcy, or term receivables that have now become unrecoverable. Current Trade receivables Payment gateway receivables 2022 $000 6,534 1,859 2021 $000 7,672 2,241 Less: provisions for impairment of receivables (3,795) (3,669) 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 4,598 227 4,825 794 5,619 3,669 (107) 233 3,795 6,244 204 6,448 732 7,180 3,518 (53) 204 3,669 4,194 4,929 358 182 3,659 (3,795) 4,598 915 491 3,578 (3,669) 6,244 (c) Expected losses 2022 1–30 days $000 31–60 days $000 31–60 days $000 90+ days $000 Total $000 Expected loss rate (% of Aged Receivables) Gross carrying amount Loss allowing provision 5% 228 228 33.79% 58.79% 91.25% 121 121 107 107 3,339 3,339 3,795 3,795 088 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT 2021 Expected loss rate Gross carrying amount Loss allowing provision 1–30 days $000 31–60 days $000 31–60 days $000 90+ days $000 - - - 14% 129 129 30.78% 94.74% 151 151 3,389 3,389 Total $000 3,669 3,669 10. Other assets Current Prepayments Other Total current other assets Non-current Security deposits Total non-current other assets 2022 $000 2021 $000 2,276 338 2,614 491 491 1,996 195 2,191 496 496 Total other assets 3,105 2,687 11. Plant and equipment Plant and equipment is stated at historical cost less the expected net cash flows that will be received from depreciation, amortisation and impairment losses. the asset’s employment and subsequent disposal. The Historical cost includes expenditure that is directly expected net cash flows have not been discounted in attributable to the acquisition of the items. determining recoverable amounts. The carrying amount of plant and equipment is Depreciation of all fixed assets is calculated using reviewed annually by directors to ensure it is not in the straight-line method to allocate their cost, net of excess of the recoverable amount from these assets. their residual values, over their estimated useful lives, The recoverable amount is assessed on the basis of as follows: Fixtures and fittings Office and computer equipment Software Leasehold improvements 4–5 years 4–5 years 3 years 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 Gains and losses on disposals are determined by reviewed, and adjusted if appropriate, at the end of comparing proceeds with the carrying amount. These each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. gains or losses are recognised in the profit and loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. 089 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT Non-current Office and computer equipment – at cost Accumulated depreciation Carrying value of office and computer equipment Fixtures and fittings – at cost Accumulated depreciation Carrying value of fixtures and fittings Software – at cost Accumulated depreciation Carrying value of software Leasehold improvements – at cost Accumulated amortization Carrying value of leasehold improvements 2022 $000 2021 $000 3,221 (2,736) 485 503 (499) 4 2 (1) 1 440 (439) 1 3,109 (2,480) 629 502 (495) 7 2 - 2 451 (450) 1 Total carrying value of plant and equipment 491 639 Reconciliations Reconciliations of the carrying amount of plant and equipment and leasehold improvements at the beginning and end of the current financial year are set out below: Office and computer equipment $000 Fixtures and fittings $000 Software $000 Leasehold improvements $000 Balance at 1 January 2021 Additions Disposals Depreciation and amortization Balance at 31 December 2021 Additions Disposals Depreciation and amortization Balance at 31 December 2022 351 534 - (256) 629 140 - (284) 485 15 3 - (11) 7 4 - (7) 4 - 2 - - 2 - - (1) 1 1 - - - 1 - - - 1 Total $000 367 539 - (267) 639 144 - (292) 491 090 FREELANCER LIMITED ANNUAL REPORT2022 NOTES TO THE FINANCIAL STATEMENT 12. Intangible assets Goodwill Intellectual Property Goodwill is initially recorded at the amount by which Intellectual property is valued at cost of acquisition. the purchase price for a business combination exceeds Intellectual property is tested for impairment the fair value attributed to the interest in the net fair annually or more frequently if events or changes in value of identifiable assets, liabilities and contingent circumstances indicate that it might be impaired, liabilities acquired at date of acquisition. Goodwill is not either individually or at the cash generating unit level. amortised. Instead goodwill is tested for impairment Useful lives are also examined on an annual basis annually or more frequently if events or changes in and adjustments, where applicable, are made on a circumstances indicate that it might be impaired and is prospective basis. carried at cost less accumulated impairment losses. Trademarks Domain Names Trademarks are valued at cost of acquisition and are Domain names are valued at cost of acquisition. amortised on a straight-line basis over the period Domain names are tested for impairment annually or in which the benefits are expected to be realised. more frequently if events or changes in circumstances Trademarks are tested for impairment where an indicate that it might be impaired, either individually or indicator of impairment exists, either individually or at the cash generating unit level. Useful lives are also at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where examined on an annual basis and adjustments, where applicable, are made on a prospective basis. applicable, are made on a prospective basis. Non Current Domain names – at cost Accumulated impairment Carrying value of domain names Intellectual property – at cost Accumulated impairment Carrying value of intellectual property Goodwill Accumulated impairment Carrying value of goodwill 2022 $000 2021 $000 4,938 (28) 4,910 2,198 - 2,198 27,012 - 4,938 (28) 4,910 2,198 - 2,198 27,011 - 27,012 27,011 Total carrying value of intangible assets 34,120 34,119 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: Domain names $000 Intellectual property $000 Goodwill $000 Balance at 1 January 2021 Additions Balance at 31 December 2021 4,910 - 4,910 2,198 - 2,198 19,349 7,662 27,011 Total $000 26,457 7,662 34,119 091 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT Domain names $000 Intellectual property $000 Goodwill $000 Additions Balance at 31 December 2022 - 4,910 - 1 2,198 27,012 34,120 Total $000 1 The Directors have determined the useful life of calculation using a discounted cash flow model, domain names is indefinite and subject to an annual based on a 12 month projection period for the Group test for impairment of the fair value of the domain approved by management and extrapolated for a names. The Directors have assessed the recoverability further 5 years with a discounted terminal value. of domain names, intellectual property and goodwill based on value in use calculations. Goodwill and other intangibles are allocated to cash- generating units which are based on the Group’s The recoverable amount of the Group’s intangible reporting segments: assets has been determined by a value-in-use Online marketplace Online payments Total 2022 $000 22,385 11,734 34,120 2021 $000 22,385 11,734 34,119 The recoverable amount of each cash-generating estimate of the time value of money and the Group’s unit above is determined based on value-in-use weighted average cost of capital adjusted for the risk calculations. Value-in-use is calculated based on free rate and the volatility of the share price relative to the present value of cash flow projections over a 5 market movements. year period with the period extending beyond 5 years extrapolated using a 2% terminal growth rate. The cash flows are discounted based on management’s 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 rates are pre-tax and are adjusted to incorporate risks on budgets for each reporting segment. These associated with a particular segment. budgets use historical weighted average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated weighted average inflation rates over the period, which are consistent with inflation rates applicable to the locations in which the segments operate. Discount Based on the above, management is satisfied that there are no indicators of impairment to the current carrying value of intangible assets. 092 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT 13. Leases The Group as lessee At inception of a contract, the Group assesses if the – the exercise price of purchase options, if the lessee contract contains or is a lease. If there is a lease is reasonably certain to exercise the options; and present, a right-of-use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (ie leases 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. – 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 Initially the lease liability is measured at the present measurement of the right-of-use assets is at cost less value of the lease payments still to be paid at the accumulated depreciation and impairment losses. commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability is as follows: Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the – – fixed lease payments less any lease incentives; specific asset is depreciated over the useful life of the variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; underlying asset. The Group’s lease portfolio comprises commercial leases for office property. As at 31 December 2022 these – the amount expected to be payable by the lessee leases had remaining lives ranging from 1 month up to under residual value guarantees; 78 months. Options to Extend The options to extend or terminate are contained in The extension options or termination options which or Terminate several of the Group’s property leases. These clauses were probable to be exercised have been included in provide the Group opportunities to manage leases in the calculation of the right-of-use asset. order to align with its strategies. All of the extension or termination options are only exercisable by the Group. (i) AASB 16 related amounts recognised in the balance sheet Right of use assets Leased office property: Opening balance Addition to right-of-use asset Depreciation expense for the year ended Exchange differences Net carrying amount Lease liabilities Current Non-current Total 2022 $000 2021 $000 18,753 3,426 (4,178) (169) 22,418 953 (4,627) 9 17,832 18,753 5,562 15,519 21,081 5,709 16,082 21,791 093 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT (i) AASB 16 related amounts recognised in the balance sheet Depreciation charge related to right-of-use assets Interest expense on lease liabilities (under finance costs) (i) AASB 16 related amounts recognised in the balance sheet Interest expense on lease liabilities (under finance costs) Repayment of lease liabilities 2022 $000 4,178 1,654 2022 $000 1,654 3,845 2021 $000 4,627 2,034 2021 $000 2,034 3,478 14. Trade and other payables These amounts represent liabilities for goods are unsecured and are payable as and when they and services provided to the Group and amounts are due. Trade and other payables are presented as outstanding to users of the Company’s websites at the current liabilities unless payment is not due within end of financial year which are unpaid. The amounts 12 months from the reporting date. 2022 $000 2021 $000 2,740 603 36,304 39,647 2,930 1,612 36,717 41,259 2022 $000 121 121 2021 $000 121 121 Current Trade payables Sundry payables and accrued expenses User obligations Total trade and other payables 15. Borrowings 094 Current Working capital loan Total borrowings The working capital loan has been provided from non-controlling shareholders of Freightlancer Holdings Pty Limited to provide working capital funding. The loan is unsecured, interest free and has no fixed date of repayment. FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT 16. Provisions Provisions are recognised when the Company has A provision for onerous contracts is recognised when a legal or constructive obligation, as a result of past the expected benefits to be derived by the Group events, for which it is probable that an outflow of from a contract are lower than the unavoidable cost economic benefits will result, and that outflow can be of meeting the obligations under the contract. The reliably measured. Provisions recognised represent provision is stated at the present value of the future the best estimate of the amounts required to settle the net cash outflows expected to be incurred in respect obligation at reporting date. of the contract. Current Provision for user disputes and refunds Provision for indirect taxes Employee benefits Provision for penalties Total current provisions Non-current Make-good provisions Employee benefits Total non-current provisions 2022 $000 594 320 1,884 - 2,798 551 409 960 2021 $000 503 397 1,683 288 2,871 511 311 822 Total provisions 3,758 3,693 Movements For the year ended 31 December 2022 Provision for User Disputes /Refunds $000 Provision for Indirect Taxes $000 Employee Benefits $000 Provision for Penalties $000 Provision for Make-good $000 Balance at 1 January 2021 Additional provisions Amounts used Unused amounts reversed Foreign exchange differences Balance at 31 December 2021 Additional provisions Amounts used Unused amounts reversed Foreign exchange differences Balance at 31 December 2022 538 - - (65) 30 503 50 - 41 594 216 1,744 (1,570) - 7 1,716 1,223 (678) (273) 6 397 1,994 1,830 (1,904) - (3) 1,072 (876) (20) 123 320 2,293 272 - - - 16 288 - - (308) 20 - 431 133 (58) - 5 511 34 - - 6 551 Total Provisions $000 3,173 3,100 (2,306) (338) 64 3,693 2,986 (2,780) (328) 187 3,758 095 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT 17. Contract liabilities Refer to Note 5 for the accounting policy on marketplace and payment services revenue recognition policy. Revenue is recognised when these conditions are met. Amounts received in advance of delivery for services Total contract liabilities Current Non-current There were no significant changes in the contract liability balances during the 2022 year. 2022 $000 1,333 1,333 685 648 1,333 2021 $000 1,485 1,485 846 639 1,485 18. Contributed equity (a) Share capital Ordinary shares Fully paid Total share capital Note 2022 Number 2021 Number 18(b) 452,331,636 452,516,636 2022 $000 38,918 38,918 (b) Movements in ordinary share capital Reconciliation to 31 December 2021 Number of shares Average price Balance at 1 January 2021 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 2021 453,123,619 330,527 (937,510) - 452,516,636 $0.83 $0.65 - Reconciliation to 31 December 2022 Number of shares Average price Balance at 1 January 2022 Issue/(cancellation) of ordinary shares: Issue of ESP shares 1 Buy-back and cancellation of ESP shares Balance at 31 December 2022 452,516,636 315,000 (500,000) 452,331,636 $0.44 $0.67 2021 $000 38,779 38,779 $000 38,446 - - 333 38,779 $000 38,779 139 - 38,918 096 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT (c) Ordinary shares Ordinary shares have the right to receive dividends as declared, and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. 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. (d) Employee Share Plan (ESP) The capital risk management policy remains Information relating to the ESP, including details of unchanged from the 2021 Annual Report. shares issued under the plan, is set out in Note 24. (e) Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. 1 As the ESP is considered in substance a share option, the ESP shares issued and corresponding loan receivables are not recognised by the Group in its financial statements. The loan receivable does not satisfy the “probable future benefits following to the entity” criteria on the basis that the loan is non-recourse. The ESP shares will not be considered issued to participants until the corresponding loan has been repaid, at which time there will be an increase in the issued capital and increase in cash. 19. Equity – reserves (a) Movements Current Share based payment reserve movements Balance at the beginning of the period Share based payments reserve no longer required 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 2022 $000 5,059 (3,885) 159 1,333 (295) 250 (45) 2021 $000 4,903 - 156 5,059 (574) 279 (295) Total reserves 1,288 4,764 (b) Nature and purpose of reserves Share-based payments reserve Foreign currency translation reserve This amount represents the value of the ESP share The foreign currency translation reserve is used grants to employees under the Freelancer Employee to record exchange differences arising from Share Plan and other compensation granted in the the translation of the financial statements of its form of equity. overseas subsidiaries. 097 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT 20. Key management personnel disclosures (a) Directors (b) Other key management personnel The following persons were Directors The following persons also had the authority and of Freelancer Limited during the financial year: responsibility for planning, directing and controlling Mr Robert Matthew Barrie – Executive Chairman Mr Darren Nicholas John Williams – Non-Executive Director Mr Simon Alvin Clausen – Non-Executive Director (c) Key management personnel compensation Short-term employee benefits Share based employee benefits Other long-term benefits Total benefits the major activities of the Group, directly or indirectly, during the financial year: Mr Neil Leonard Katz – Chief Financial Officer and Company Secretary 2022 $000 1,039 95 56 1,190 2021 $000 1,012 40 56 1,108 Short-term employee benefits Share based payments These amounts include fees and benefits paid to the These amounts represent the expense related to the Non-Executive Directors as well as all salary, paid participation of KMP in equity-settled schemes as leave benefits, fringe benefits and cash bonuses measured by the fair value of the options rights and awarded to Executive Directors and other KMP. shares granted on grant date. Other long-term benefits These amounts represent long service leave benefits accruing during the year, long-term disability benefits and deferred bonus payments. Further information in relation to KMP remuneration can be found in the Remuneration Report, which is included in the Director’s Report. 098 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT 21. Remuneration of auditors During the year the following fees were paid for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (a) Hall Chadwick Audit and other assurance services Audit and review of financial reports 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 2022 $000 2021 $000 130 3 20 153 78 85 34 197 127 2 40 169 83 65 6 154 22. Contingent liabilities Except for the items listed below, there are no other as security for any contractual compensation contingent liabilities as at 31 December 2022: arising under these agreements; • a collateral amount of USD300,000 (2021: • included in cash is an amount of $2,651,679 on USD450,000) is in place in one of the Group’s term deposits (31 December 2021: $2,643,759), PayPal accounts in favour of PayPal Australia which is secured against bank guarantees that Pty Ltd; • term deposits of $78,780 (2021: $75,047) are have been provided to lessors in respect of premises occupied by the Company in Sydney; secured for corporate credit card facilities • Included in cash is an amount of USD187,000 in place; • deposits of $788,509 (2021: $728,308) are held by various credit card processing providers, (2021: USD240,000), which is held as a reserve to satisfy escrow regulatory requirements in respect of credit card transactions. 099 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 23. Commitments for expenditure Leases in which a significant portion of the risks and (a) Non-cancellable operating services 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. 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 2022 and may be subject to variation due to changes in exchange rates. The amounts are as follows: Less than one year Between one and five years More than five years 2022 $000 5,107 - - 2021 $000 4,893 4,893 - Total operating service commitments 5,107 9,786 (b) Other capital commitments There were no other capital commitments as at 31 December 2022. 24. Share based payments Employee Share Plan The Group operates an employee share plan. The of the shares at grant date less the present value of fair value of the effective option over the shares dividends expected to be distributed between the granted under the Company’s Employee Share Plan grant date and the vesting dates. (ESP) is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the ESP shares. During the year ended 31 December 2013, the Company established a share based payment plan, the Employee Share Plan (ESP) to assist the Company in retaining and attracting current and future employees by providing them with the opportunity to The fair value at grant date is independently own shares in the Company. Resolutions to amend determined using a Black-Scholes option pricing and approve the ESP were passed at the AGM held on model that takes into account the exercise price, the 17 May 2016. term of the ESP shares, the vesting and performance criteria, the impact of dilution, the non-tradeable The key terms of the ESP are as follows: nature of the ESP share, the share price at grant date • the Board may invite a person who is employed and expected price volatility of the underlying share, or engaged by or holds an office with the Group the expected dividend yield and the risk-free interest (whether on a full or part-time basis) and who is rate for the term of the ESP share. The fair value of share grants issued outside of the ESP is independently determined based on the value 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); 100 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT invitations to apply for ESP shares offered to the Company will not have any further recourse Eligible Employees subsequent to the Company’s against the ESP Participant; initial public offering are to be made on the basis of the market price per share defined as the volume weighted average price at which the Company’s shares have traded during the 30 days immediately preceding the date of the invitation; • invitations to apply for ESP shares under the ESP will be made on a basis determined by the Board (including as to the conditionality on the achievement of any key performance indicators) and notified to Eligible Employees in the invitation, or if no such determination is made by the Board, on the basis that ESP shares will be subject to a 4 year vesting period, with: • any dividends received by the ESP Participant whilst the whole or part of the ESP Loan remains outstanding must be applied to the repayment of the ESP Loan. In addition, an ESP Participant may make pre-payments at any time; • the maximum number of ESP shares for which invitations may be issued under the ESP together with the number of ESP shares still to be issued in respect of already accepted invitations and that have already been issued in response to invitations in the previous 5 years (but disregarding ESP shares that are or were issued following invitations to non-residents, – 10% of ESP shares applied for vesting on the date that did not require a disclosure document under that is the first anniversary of the issue date of the Corporations Act, or that were issued under the ESP shares; – 20% of ESP shares applied for vesting on the date that is the second anniversary of the issue date of the ESP shares; a disclosure document under the Corporations Act) must not exceed 5% of the total number of ordinary shares on issue in the Company at the time the invitations are made; – 30% of ESP shares applied for vesting on the date • in the event of a corporate reconstruction, the that is the third anniversary of the issue date of Board will adjust, subject to the Listing Rules (if the ESP shares; and – 40% of ESP shares applied for vesting on the date that is the fourth anniversary of the issue date of the ESP shares. • 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: applicable), any one or more of the maximum number of Shares that may be issued under the ESP (if applicable), the subscription price, the buy-back price and the number of ESP shares to be vested at any future vesting date (if applicable), as it deems appropriate so that the benefits 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 – the fourth anniversary of the issue date of the down to the nearest whole share; Employee Offer Shares; and – if the ESP Participant ceases to be an Eligible Employee, either: • ESP Participants will continue to have the right to participate in dividends paid by the Company despite some or all of their ESP shares not › the date 30 days after the date of cessation, having vested yet or being subject to an ESP if the Eligible Employee is a good leaver (as Loan. If an ESP Loan has been made to the ESP 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 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; outstanding ESP Loan, or it notifies the Company • ESP shares which have not vested and/or are that it cannot, then such number of ESP shares subject to repayment of the ESP Loan will be that equal by value (using the price at which the restricted (escrowed) from trading; 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 • the Company may buy-back at the issue price any ESP shares which: ESP Participant must accept. The buy-back of – have not vested, or are incapable of vesting such number of ESP shares will be considered at any time (including as a result of the ESP full and final satisfaction of the ESP Loan and Participant failing to meet any key performance 101 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT indicators on which vesting of ESP shares is subject to the repayment of any outstanding conditional); or – remain in escrow and/or are the subject of an ESP Loan, on the occurrence of: › the ESP Participant ceasing to be an Eligible Employee (unless the Board, in its sole and absolute discretion determines otherwise, subject to any conditions that it may apply, including the repayment of any outstanding ESP Loan); or › the expiration of the term of the ESP Loan. ESP Loan by the curator, executor or nominated beneficiary(ies) (as the case may be) within 30 days of their appointment (or such longer period as the Company in its discretion may allow). Failing such repayment, the Company will buy- back all ESP shares in respect of which there is an outstanding ESP Loan; • the rules of the ESP and any amendment to the rules of the ESP must be in accordance with the Listing Rules and the Corporations Act; • any bonus securities issued in relation to ESP • if, while the Company’s shares are traded on the shares which remain unvested or are subject to an ESP Loan which becomes repayable in full will be the subject of a buy-back by the Company at the issue price for no consideration; • on the death or permanent disability of an ESP Participant, all ESP shares held by the ESP Participant or their estate will immediately vest 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. The Group operates a long term incentive plan The key terms of the LTIP are as follows: 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 a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the Share Rights. The fair value at grant date is independently determined using a Black-Scholes option pricing • A Share Right includes (without limitation): › › Performance Rights (i.e. Share Rights with no exercise price); Options (i.e. Share Rights generally with an exercise price equal to the market value of a Share on the date of grant or such other exercise price determined by the Board); and › Premium Priced Options (i.e. Share Rights with an exercise price that is greater than the market value of a Share on the date model that takes into account the exercise price, the of grant). term of the Share Rights, the vesting and performance • Eligibility and grant of securities – Employees 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. During the year ended 31 December 2021, the Company established a long term incentive plan, the Long Term Incentive Plan (LTIP) 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 implement the LTIP was passed at the AGM held on 28 July 2021. 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 that do not vest will lapse (unless otherwise determined Long Term Incentive Plan 102 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT by the Board). Performance Criteria/vesting subject to any further restrictions on dealing, conditions can be waived by the Board in its other than to the extent prohibited by the absolute discretion. Freelancer Securities Trading Policy. • Exercise and allocation of Share Rights – Upon • Cessation of employment – If a participant 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 issued under the Plan 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 › Shares that are registered or allocated (as expiry date. applicable) 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). • 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: › Shares issued under the Plan will rank equally with all other existing Shares as at the time of issue in all respects, including with respect to voting rights and rights to receive dividends and bonus shares and to participate in rights issues. › A participant may only participate in a new issue of Shares or other securities to holders of Shares if Shares have been allocated to the participant and registered or allocated – commits any act of fraud or defalcation or gross misconduct in relation to the 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 (as applicable) in the name of the participant – purports to dispose of or otherwise deal with in accordance with the Plan rules before the (including by granting any security interest over) record date for determining entitlements to their Share Rights other than as permitted under the issue. the Plan. › Shares allocated to a participant following The Plan rules contain other circumstances exercise of their Share Rights will not be where such Share Rights may lapse. In addition, 103 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT the Board may determine in the above and other makes a bonus issue of Shares to existing circumstances that any Shares acquired by (or holders of Shares (other than an issue of Shares cash paid to) a participant following the vesting in lieu or in satisfaction of dividends or by way of Share Rights for the after tax value of the of dividend reinvestment) and no Share has Share Rights at the time they converted into been issued in respect of a Share Right before Shares (or at such other time determined by the the record date for determining entitlements to Board) be paid to the Company. • 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 the bonus issue, then the number of underlying Shares over which the Share Right is convertible will be 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. security interest over) a Share Right. • Plan Trustee – The Plan may be administered • 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: in conjunction with an employee share trust, the trustee of which may acquire Shares for the purposes of transfer to Participants or to be held for Participants (whether on an unallocated and/ or allocated basis). The transfer of a Share by – the Performance Criteria applicable to some or the trustee of such a trust to a Participant, or the all unvested Share Rights will be assessed as at a allocation of a Share in the Participant’s name date determined by the Board or are waived; which continues to be held by the trustee for – 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); 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 – some or all Share Rights are to be replaced by the Plan rules or any offer letter at any time rights to shares of the new controlling company in any manner the Board thinks fit (subject to on substantially the same terms and subject prescribed limitations in the Plan rules) and/ to substantially the same conditions as the or to waive any terms or conditions (including Share Rights with any appropriate amendments, any Performance Criteria/vesting conditions) in including to Performance Criteria; relation to any Share Rights. – some or all unvested Share Rights lapse as at a date determined by the Board. • Foreign participants – The Board may adopt amended rules of the Plan applicable in any • Reorganisation of Capital and Bonus Issues jurisdiction under which Share Rights are offered – In the event of any reorganisation of the under the Plan and the way in which the Plan share capital of the Company (including any is operated may be subject to additional or sub-division, consolidation, reduction or return modified terms, having regard to any securities, of the share capital of the Company), the exchange control or taxation laws or regulations number of Share Rights, and/or the number of or similar factors that may apply to a Participant Shares subject to the Share Rights, and/or the or to any member of the Group in relation to the exercise price (if any) of Share Rights, will be Share Rights or any of the provisions of the Plan. 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 104 FREELANCER LIMITED ANNUAL REPORT2022NOTES 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 2022 18 October 2018 20 February 2019 19 February 2020 2 March 2020 30 July 2020 $0.53 $0.53 $0.47 $0.45 $0.53 200,000 407,226 640,539 200,000 100,000 11 December 2020 $0.52 38,462 14 April 2021 28 May 2021 $0.62 $0.95 Total 2021 120,000 210,527 1,916,754 4 November 2016 $1.34 100,000 8 December 2017 $0.52 472,771 18 October 2018 $0.53 800,000 12 November 2018 20 February 2019 6 May 2019 19 February 2020 2 March 2020 30 July 2020 $0.65 100,000 $0.53 $0.65 $0.47 $0.45 $0.53 407,226 100,000 640,539 200,000 300,000 11 December 2020 $0.52 38,462 - - - - - - - - - - - - - - - - - - - - - 200,000 - 200,000 407,226 162,891 244,335 (200,000) 440,539 308,378 132,161 - 200,000 140,000 60,000 (100,000) - - - 38,462 - - 120,000 108,000 (200,000) 10,527 - - 38,462 12,000 10,527 (500,000) 1,416,754 719,269 697,485 - - - - - - - - - - (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) - - - - - - - - - - 640,539 576,486 200,000 180,000 (200,000) 100,000 90,000 - - - 38,462 - 120,000 120,000 210,527 210,527 - 64,053 20,000 10,000 38,462 - - 14 April 2021 28 May 2021 Total $0.62 $0.95 - - 120,000 210,527 3,158,998 330,527 (635,261) (937,510) 1,916,754 1,542,072 374,682 All Eligible Employees who accepted an offer of ESP an option to the ESP shares due to the ESP Loans shares were given an interest free loan from the being non-recourse. As such, this arrangement is Company to finance the whole of the purchase of the accounted for under AASB 2. ESP shares they were invited to apply for (ESP Loan). The assessed weighted average fair value at grant The ESP Loans are provided to participants on a date of the effective share options granted during non-recourse basis and upon vesting must be repaid the financial year is n/a (2021: $0.42 per option). in order to remove trading restrictions on vested Options were priced using a Black-Scholes option ESP shares. The term of the ESP Loan is four years; pricing model that takes into account the exercise however, participants may forfeit their ESP shares if price, the term of the option, the impact of dilution, the they do not repay the ESP Loan or leave the Company. share price at grant date and expected price volatility As the ESP removes the risk to participants from of the underlying share, the expected dividend yield decreases in the share price by limiting the maximum and the risk free interest rate for the term of the loan amount repayable to the value of the ESP shares option. The expected price volatility of the Company’s disposed and waiving the ESP Loan should the shares is based on the historical volatility of ASX participant forfeit their ESP shares, whilst still allowing listed companies considered to be comparable to participants the rewards of any increase in share price, Freelancer Limited. the Company has effectively granted the participants 105 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT (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: 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 2022 22 October 2021 $0.72 63,889 21 December 2021 $0.73 13,699 Total 2021 22 October 2021 $0.72 21 December 2021 $0.73 Total - - - - - - - 63,889 13,699 77,588 - - - - - - - - - - - - 63,889 50,000 13,889 13,699 - 13,699 77,588 50,000 27,588 63,889 63,889 - 13,699 - 13,889 77,588 63,889 13,889 The assessed weighted average fair value at grant of the underlying share, the expected dividend yield date of the effective Share Rights granted during the and the risk free interest rate for the term of the financial year is n/a (2021: $0.296 per option). Options option. The expected price volatility of the Company’s were priced using a Black-Scholes option pricing shares is based on the historical volatility of ASX model that takes into account the exercise price, the listed companies considered to be comparable to term of the Share Rights, the impact of dilution, the Freelancer Limited. share price at grant date and expected price volatility (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 2022 16 November 2021 $0.057672 15,000,000 Total 2021 15,000,000 - - 16 November 2021 $0.057672 Total - - 15,000,000 15,000,000 - - - - - - - - 15,000,000 13,500,000 1,500,000 15,000,000 13,500,000 1,500,000 15,000,000 15,000,000 15,000,000 15,000,000 - - The assessed weighted average fair value at grant date of date and expected price volatility of the underlying share, the effective Share Rights granted during the financial year the expected dividend yield and the risk free interest rate is n/a (2021: $0.0309 per option). Options were priced for the term of the option. The expected price volatility of using a Black-Scholes option pricing model that takes the subsidiary’s shares is based on the historical volatility into account the exercise price, the term of the Share of ASX listed companies considered to be comparable to Rights, the impact of dilution, the market price at grant Payments Pty Ltd. 106 FREELANCER LIMITED ANNUAL REPORT2022 25. Related party transactions NOTES TO THE FINANCIAL STATEMENT (a) Parent entity (d) Transactions with related parties Freelancer Limited is the parent entity and ultimate Receivable from and payable to related parties controlling entity. (b) Interests in controlled entities Interests in subsidiaries are set out in Note 28. 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 (c) Transactions with key management personnel There were no loans to or from related parties at the Disclosures relating to key management personnel are reporting date. set out in Note 20 and the Remuneration Report. 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 Limited (as the head entity) and its Freelancer Limited has been prepared on the same wholly-owned Australian entities (as members of the basis as the consolidated financial statements, except Freelancer income tax consolidated group) account for as set out below. Investments in subsidiaries their own current and deferred tax amounts. These tax amounts are measured as if each entity in the income tax consolidated group continues to be a standalone Investments in subsidiaries are accounted for at cost taxpayer in its own right. in the financial statements of Freelancer Limited. Investments in subsidiaries are tested for impairment whenever changes in events or circumstances indicate that the carrying amount may not be recoverable. Income tax consolidation legislation In addition to its own current and deferred tax amounts, Freelancer Limited also recognises the current tax liabilities (or assets) assumed from its wholly-owned entities in the income tax consolidated group. Set out below is the supplementary information about Freelancer Limited and its wholly-owned Australian the parent entity. entities have elected to form an income tax consolidated group. Statement of comprehensive income Profit after tax Total comprehensive loss Statement of financial position Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets 2022 $000 553 553 10,485 31,071 41,556 4,218 4,218 2021 $000 35 35 9,814 31,958 41,772 5,198 5,198 37,338 36,574 107 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT Contributed equity Reserves Accumulated losses Total equity 38,918 1,234 38,780 5,047 (2,814) (7,253) 37,338 36,574 Contingent liabilities Significant accounting policies The parent entity had no contingent liabilities at 31 The accounting policies of the parent entity are December 2022 and 31 December 2021. consistent with those of the Group, except for Capital commitments The parent entity had no capital commitments as at 31 December 2022 and 31 December 2021. investments in subsidiaries which are accounted for at cost, less any impairment. 27. Business Combinations Business combinations occur where an acquirer acquisition of a business may result in the recognition obtains control over one or more businesses. of goodwill or a gain from a bargain purchase. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exceptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to 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 comprehensive income. The (a) Acquisition of Loadshift business 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. 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 108 A$000 7,662 7,662 7,662 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT 28. Interests in controlled entities The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 33: Country of Incorporation Percentage Owned (%) 2022 Percentage Owned (%) 2021 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 ** Loadshift Pty Ltd ** Photo Anywhere Holdings Pty Ltd 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 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 Freelancer (Shanghai) Information Technology Co., Ltd. China Westmor Management, Inc. * Escrow.com, Inc. * EC Services Corporation* Internet Escrow Services, Inc. * Freightlancer, Inc. ** * Escrow.com group ** Freightlancer group 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 53 100 100 100 100 100 100 100 100 100 100 53 53 53 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 53 109 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 2022 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 2022 $000 2021 $000 (5,413) (2,257) 4,470 159 535 2,018 (924) (419) (3,592) (26) 4,894 156 1,313 (1,007) (697) 11 188 (39) (1,013) (356) 299 (273) 277 160 (4,179) 2,643 Non cash information During the period, the group recognised $1.65 million of interest charge relating to rent under AASB 16: Leases. 110 FREELANCER LIMITED ANNUAL REPORT2022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 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, the determination of basic earnings per share to take into account: • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and adjusted for bonus elements in ordinary • the weighted average number of shares assumed shares issued during the year and excluding to have been issued for no consideration in 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: Loss from continuing operations Diluted earnings per share: Loss attributable to the ordinary equity holders of the Company 2022 Cents (1.20) (1.20) (1.20) (1.20) $000 2021 Cents (0.50) (0.50) (0.50) (0.50) $000 (5,413) (2,257) (5,413) (2,257) 2022 Shares 2021 Shares (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used in calculating basic earnings per share 450,765,581 450,166,182 Adjustments for calculation of ordinary shares used in calculating diluted earnings per share: ESP shares Share grants Weighted average number of ordinary shares used in calculating diluted earnings per share 1,885,247 2,875,150 - 452,650,828 453,041,332 (e) Information on the classification of securities ESP shares and share grants ESP shares granted to employees under the ESP and ESP shares and share grants have not been included shares granted to employees outside of the ESP are in the determination of basic earnings per share. considered to be potential ordinary shares and have Details relating to the ESP shares are set out in Note been included in the determination of diluted earnings 24.ESP shares are set out in Note 24. per share to the extent to which they are dilutive. The 111 FREELANCER LIMITED ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENT 33. Other significant accounting policies (a) Principles of consolidation Cash flows are presented in the cash flow statement on The consolidated financial statements incorporate all of the assets, liabilities and results of Freelancer Limited and all subsidiaries. Subsidiaries are all entities over which the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. A list of the subsidiaries is provided in Note 28. a gross basis. The GST and VAT components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating cash flows included in receipts from customers or payments to suppliers. Commitments and contingencies are disclosed net of the amount of GST and VAT recoverable from, or payable to, the relevant taxation authority. The assets, liabilities and results of all subsidiaries (c) Research & development are fully consolidated into the financial statements Costs relating to research and development of new of the Group from the date on which control is software products are expensed as incurred until obtained by the Group. The consolidation of a technological feasibility in the form of a working subsidiary is discontinued from the date that control model has been established. At such time costs may ceases. Intercompany transactions, balances and be capitalised, subject to recoverability. Software unrealised gains or losses on transactions between development costs incurred subsequent to the group entities are fully eliminated on consolidation. establishment of technological feasibility have not Accounting policies of subsidiaries have been been significant, and the Group has not capitalised changed and adjustments made where necessary to any software development costs to date. ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially (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 recognises non-controlling interests that are present economic environment in which that entity operates. ownership interests in subsidiaries and are entitled to The consolidated financial statements are presented a proportionate share of the subsidiary’s net assets on in Australian dollars, which is the parent entity’s liquidation at either fair value or at the non-controlling functional and presentation currency. 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 Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing comprehensive income. Non-controlling interests at the date of the transaction. Foreign currency monetary are shown separately within the equity section of items are translated at the period-end exchange rate. the statement of financial position and statement of Non-monetary items measured at historical cost comprehensive income. (b) Goods and Services Tax (GST) and Valued 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 Added Tax (VAT) fair values were determined. 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. 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. 112 FREELANCER LIMITED ANNUAL REPORT2022NOTES TO THE FINANCIAL STATEMENT Group companies The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency is translated as follows: 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 • • • Assets and liabilities are translated at period end accounting estimates will, by definition, seldom exchange rates prevailing at that reporting date. equal the related actual results. The estimates and Income and expenses are translated at average exchange rates for the period. 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 Retained earnings are translated at the exchange discussed below. 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. 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 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 recoverable amount of the cash generating unit to The Group assesses impairment at each reporting which the asset belongs. (f) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group has retrospectively applied an accounting policy, made a retrospective restatement or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed. 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 incorporate a number of key estimates. During the year ended 31 December 2022, no impairment has been recognised in respect of intangible assets. The Group assessed recoverability of goodwill based on the present value of cash flow projections over a 6 year period. Should any of the intangible assets fail to perform, an impairment loss would be recognised up to the maximum carrying value of intangible assets at 31 December 2022 of $34,120,000 (g) Critical accounting estimates and judgments (2021: $34,119,000). The directors evaluate estimates and judgements incorporated into the financial report based on 113 FREELANCER LIMITED ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENT 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. Share based payments The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined with the assistance of an external valuation with the assumptions detailed in Note 24. The accounting estimates and assumptions relating to equity settled share based payments would have no impact on the carrying amounts of assets and liabilities within the the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Deferred tax assets Deferred tax assets are recognised for deductible temporary differences and unused tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences and unused tax losses. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits. next annual reporting period but may impact expenses Trust assets and liabilities and equity. Lease term of contracts with renewal options The Group determines the lease term as the non- cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. After initial recognition, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. Income taxes The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Judgment is required in determining the worldwide provision for income taxes. There are transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of the tax law. Where The Group’s Online Payments segment, namely the business of Escrow.com, is a regulated entity that holds funds on behalf of its users in trust bank accounts. At 31 December 2022 the cash balance in trust amounted to A$54,768,004 (2021: A$64,681,451), which has a corresponding liability of the same amount owing to its users. The Group has determined that trust cash is not a resource controlled by the Group, nor does the Group derive any economic benefit from these user funds, and therefore the Group does not have the risks and rewards of ownership of the funds. Consequently, trust assets are not recognised as an asset in the Group’s financial statements, and neither is the corresponding trust liability recognised as a liability in the Group’s financial statements. (h) Changes in accounting policies 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 2022. 114 FREELANCER LIMITED ANNUAL REPORT2022DIRECTORS’ DECL ARATION DIRECTORS’ DECLARATION In the Directors’ opinion: (a) the Financial Statements and notes of the consolidated entity set out on pages 70 to 114 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 2022 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; (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 2022. This declaration is made in accordance with a resolution of the Directors. On behalf of the directors Matt Barrie Chairman 22 February 2023 115 FREELANCER LIMITED ANNUAL 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 ENTITIES 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 2022, 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 2022 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001 ii. (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a). Basis of Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor’s responsibility section of our report. We are independent of the Consolidated Entity in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We 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 116 FREELANCER LIMITED ANNUAL REPORT2022 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 ENTITIES 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’s business processes • Mix of manual and automated controls • Multiple internal and outsource support arrangements • Large volume of low value transactions Our procedures included, amongst others: We understood and tested management’s controls over its systems relevant to financial reporting. We conducted 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. We 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. Our procedures included, amongst others: We evaluated management’s goodwill and intangible assets impairment assessment. recognised The Group has intangible assets of $34.1 million at 31 December 2022 resulting from business combinations and asset acquisitions. The intangibles are compromised of domain names, intellectual property and goodwill. 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 where applicable. 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 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. We have focussed on this area as a key audit matter due to amounts inherent involved being material; subjectivity associated with critical judgements being made in relation to forecast future revenue and costs; discount rates; and terminal growth rates. the We also have considered alternative evidence in relation to the carrying value of intangibles where there were indicators of impairment for certain scenarios. 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. 117 FREELANCER LIMITED ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT 118 FREELANCER LIMITED ABN 66 141 959 042 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FREELANCER LIMITED AND CONTROLLED ENTITIES 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 2022 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 REPORT2022INDEPENDENT AUDITOR’S REPORT 119 FREELANCER LIMITED ABN 66 141 959 042 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FREELANCER LIMITED AND CONTROLLED ENTITIES – Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. – Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. – Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. – Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. FREELANCER LIMITED ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT 120 FREELANCER LIMITED ABN 66 141 959 042 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FREELANCER LIMITED AND CONTROLLED ENTITIES Report on the Remuneration Report We have audited the remuneration report included in pages 63 to 68 of the directors’ report for the year ended 31 December 2022. 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 2022 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 2023 FREELANCER LIMITED ANNUAL REPORT2022INDEPENDENT AUDITOR’S REPORT 121 FREELANCER LIMITED ANNUAL REPORTADDITIONAL ASX INFORMATION Additional ASX Information Shareholder information Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report. This additional information was applicable as at 19 March 2023. Substantial shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are: Robert Matthew Barrie1 Simon Clausen and Startive Holdings Limited and its related bodies1 Number of Shares 196,711,249 161,916,754 1 Includes a relevant interest in 1,416,754 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. Top 20 Shareholders as at 19 March 2023 Rank Name Number of ordinary shares held % of ordinary shares held 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 BNP PARIBAS NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA HSBC CUSTODY NOMINEES CUSTODIAL SERVICES LIMITED TAIPAN INVESTMENT MANAGEMENT NATIONAL NOMINEES LIMITED MRS RIKA WESTWOOD MR RODNEY JOHN SELLICK MR NICHOLAS PETER DE JONG MR NEIL LEONARD KATZ INFILSEC PTY LTD STUART JOHN NATTRASS DUNRAY NOMINEES PTY LTD MAROBAR HOLDINGS PTY MR GREGORY JAMES WARD MR MICHAEL JOHN RUHFUS Total Top 20 Total Remaining Total of Securities 122 191,435,150 163,365,606 14,615,034 10,605,660 9,211,031 7,200,935 4,211,877 3,553,753 1,797,555 1,747,870 1,700,000 1,109,833 1,001,849 995,539 978,727 900,000 810,000 789,500 726,112 694,831 417,450,862 34,880,774 452,331,636 42.3% 36.1% 3.2% 2.3% 2.0% 1.6% 0.9% 0.8% 0.4% 0.4% 0.4% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 92.3% 7.7% FREELANCER LIMITED ANNUAL REPORT2022 Analysis of Holdings as at 19 March 2023 Restricted securities as at 19 March 2023 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 Holders 542 765 239 364 71 14 7 6 2,008 Total Units 301,574 2,131,437 1,827,046 11,469,851 15,059,469 9,986,106 15,122,737 396,433,416 452,331,636 Class of restricted securities Nature of restriction Number of Shares Quoted ESP shares Various dates ending no later than 19 February 2023 Unquoted ESP shares Various dates ending no later than 27 May 2025 LTIP share options Various dates ending no later than 20 December 2025 Total securities subjected to trading restrictions 607,226 809,528 77,588 1,494,342 Voting Rights The voting rights attaching to ordinary shares, There are no voting rights attached to unlisted options, set out in the Company’s Constitution are: voting rights will be attached to unlisted ordinary shares once issued and to options upon exercise. (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. On-market Buy Back There is no current on-market buy back. 123 FREELANCER LIMITED ANNUAL REPORTCORPORATE DIRECTORY Corporate Directory Company Directors Mr Robert Matthew Barrie – Chairman and Chief Executive Officer Mr Darren Nicholas John Williams – Non-Executive Director Mr Simon Alvin Clausen – Non-Executive Director Company Secretary Mr Neil Leonard Katz Registered Office Level 37 Grosvenor Place 225 George Street Sydney NSW 2000 Telephone: +61 (02) 8599 2700 Share Registry Level 12 Boardroom Limited 225 George Street Sydney NSW 2000 External Auditors Level 40 Hall Chadwick 2 Park Street Sydney NSW 2000 Securities exchange listing Freelancer Limited shares are listed on the Australian Securities Exchange (Listing code: FLN) 124 FREELANCER LIMITED ANNUAL REPORT2022 

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