Freelancer : 1Q22 Business Update

1Q22 Business Update

Freelancer Limited delivers Gross Payment Volume in 1Q22 of $326.5 million (up 30.8% on pcp) or US$237.3 million (up 23.0% on pcp):

• ● Freelancer GMV $32.3m down 3.9% on pcp (US$23.4m, down 9.9%)

• ● Escrow GPV of $282.3m, up 37.8% on pcp (US$205.3m, up 29.7%)

Group net cash receipts for 1Q22 of $15.2m (down 2.1% on pcp) or US$11.0m (down 8.1%):

• ● Freelancer cash receipts $12.3m down 6.1% on pcp (US$8.9m, down 11.9%)

• ● Escrow cash receipts $2.9m up 19.5% on pcp (US$2.1m, up 12.1%)

In Australian dollars, FX was a tailwind of 6.3% in the quarter as the Australian dollar depreciated against the USD from an average of 0.7726 to an average of 0.7237.

The group had positive net operating cash flow of $1.7 million for the quarter (1Q21: $4.2 million).

Cash & cash equivalents Mar 31 of $30.1 million, flat vs 31 Dec 2021.

Escrow ended the quarter with off balance sheet cash of US$52.5 million, up $13.8m or 35.7% on pcp.

SYDNEY, 27 April 2022 - Freelancer Limited (ASX: FLN) (OTCQX: FLNCF), the world's largest freelancing and crowdsourcing marketplace by total number of users and jobs posted, today released its business and activities update for 1Q22.

The Freelancer Group primarily consists of Freelancer.com- the largest cloud workforce in the world, Escrow.com- the world's largest online escrow company, which facilitates and secures large value payments, and Loadshift- Australia's largest online freight marketplace. All are market leading, broad, horizontal service offerings that consumers to large enterprises require as part of their everyday business.

Freelancer.com

Summary

Freelancer cash receipts $12.3m, down 6.1% on pcp (US$8.9m, down 11.9%). Freelancer GMV was $32.3m down 3.9% on pcp (US$23.4m, down 9.9%).

This can be attributed to a number of factors:

• ● In 1Q21 had an enterprise lump sum payment of US$825k (AU$1.06m) from a customer as a comparable for cash receipts.

• ● As we discuss in further detail below, we have now fully recovered our paid advertising volume, and this is now growing significantly (up 44%) on a pcp basis, with the US up 130% on pcp.

• ● This is reflected in an uptick in the average project size to US$244 per project in 1Q22 ($217 in 1Q21), and revenue from non-brand ad campaigns in five-eyes countries is now at its highest point since June 2020.

• ● We are yet to fully apply the same methods to our ad campaigns for the rest of the world. Our next most lucrative segment, broadly described as Europe + other high GDP countries, only achieved positive pcp growth in March, and the remainder of the segments are still negative pcp, which was a deliberate result of the retargeting changes.

• ● Moving forward, we will continue to optimise our ad spend, especially in the "non five-eyes" segments, whilst broadening our efforts to deeper, more scalable channels such as SEO.

• ● The war in Ukraine has affected both Russia and Ukraine. GMV from Ukrainian freelancers is so far holding up reasonably well, but the rapid deterioration in banking relationships between Russia and the West has heavily impacted Russian freelancer GMV, reducing it by approximately 70%. Furthermore, the introduction of strict sanctions for users in the Luhansk and Donetsk regions has also negatively impacted GMV. We estimate the total impact on GMV to be approximately 2% +/- 0.5%.

We are excited about the future of the core freelancer marketplace, as we roll off our previous work on technical debt and ad restructuring and shift towards new product development and new marketing channels.

US, Five-eyes Clients & Acquisition

As mentioned in prior reports, paid advertising was a significant revenue headwind throughout the latter half of FY21. This was a result of a conscious decision by us to improve the predictive long-term modelling of customer flows, which we have previously discussed inthe full year report. In doing so, we temporarily sacrificed volume, with a goal of recovering this volume profitably later. Despite being slower than anticipated at achieving this recovery, we are pleased to report that 1Q22 volume from Google Adwords non-brand campaigns now significantly exceeds that of 1Q21 (up 44% on pcp), and is rapidly approaching record levels.

Figure 1: Deposits from clients worldwide from SEM non-brand (30 day window)

The primary focus has been on US and five-eyes customers. For example, SEM non-brand new client deposits (30 day window) from the United States in 1Q22 are now up 130% on pcp and continue to rise.

Figure 2: Deposits from US clients from SEM non-brand (30 day window)

This is flowing through to overall US net deposits (all customers new/old, no time window), which are now roughly breakeven (-0.5% on pcp), and we believe this will continue to rise as the newly acquired US customers flow through and become established retained users.

Figure 3: Net Deposits from US clients (overall, no window)

Looking at the broader five-eyes countries, we can see that whilst our campaigns in these countries have begun to grow again, there remains significant upside within the five-eyes segment.

Figure 4: Deposits from new UK, AU and CA clients from SEM non-brand (30 day window)

We now need to apply similar methods to the remainder of our campaigns that target Europe and the rest of the world (ROW). As can be seen below, there remains significant room for growth in these as yet untouched segments.

Figure 5: Deposits from new EU and "rest of world" clients, from SEM non-brand (30 day window)

Furthermore, there is still significant room for optimisation of all campaigns (including US ones) now we have migrated to the new campaign structure. These campaigns are still largely unoptimised, as the focus to date has been volume recovery and expansion.

Moving into 2Q22, there will be an increasing focus on profitability again, however we do not anticipate any significant volume reductions to occur from this, as these profitability improvements will be primarily achieved through optimisation within the existing campaign structure. We will do this through utilising improved tooling added in 1Q22 that allows for granularity of targeting, without sacrificing control. Lastly, our reporting indicates that there is still a considerable untapped volume that Google may have available. Once our new structure is fully settled, we intend to leverage this potential.

Now that our paid search overhaul is under control, we will focus on sustainable and profitable expansion of volume, by utilising the dimensionality of our business. We operate in over 2,500 skills and technology areas - everything from "Angular" to "Zoom" - many of which are highly technical and obscure, and we can utilise this as a significant competitive advantage for our campaigns moving forward, utilising similar methods to those used by ecommerce businesses that sell physical products.

We expect to see increasing focus from our marketing team on other channels in 2H22. We have been developing new technology and testing new paid channels that will potentially reduce our reliance on Google, while at the same time growing the total size of the pie.

Organic Traffic (SEO)

Whilst we have had a heavy focus on improving the paid marketing in FY21 and 1Q22, for the remainder of FY22 our primary focus will shift towards deeper, more scalable acquisition channels. This will be a long-term, multi-quarter effort, however we expect to start seeing returns in the short to medium term.

One of these channels is SEO. Strategically, we are well positioned to leverage SEO as a growth channel. We possess the key ingredient- a large amount of User Generated Content

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