Freelancer Ltd
ASX:FLN
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Freelancer Ltd
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Welcome to the Freelancer Limited Quarter 1 2020 Business Update. I'd like to introduce your host, Matt Barrie, Chief Executive of Freelancer Limited. Go ahead, please, Matt.
Great. Thank you, and welcome to the First Quarter of 2020 Financial Results for Freelancer Limited. On the call today, we have Neil Katz, the Chief Financial Officer of the business; we have Adam Byrnes, who's the Vice President of Product; and we have Sarah Tang, who's the Vice President of Enterprise and Sales. So if you'd like to, after the commentary, address any questions to any of the 4, either of us will be happy to answer your question for you. So I'll move on now to the commentary. For those of you, I will be working through the release that we put out in the ASX about 1 hour ago. Starting with the quarterly cash flow and activity report. In the quarter, we delivered cash receipts of $13.9 million, which was down 1% on pcp. Group gross payment volume for the quarter was an all-time record of $210.2 million, up 2.9% on pcp. Dividing the segments, the Freelancer gross payment volume was $43.6 million, which was down 5% on pcp. And the Escrow segment GPV was an all-time record of $166.5 million, up 5.2% on pcp. We had positive net operating cash flow, about $0.5 million for the quarter and ended Q1 with cash and cash equivalents up 9% to $34.9 million on the fourth quarter. So breaking down by segments. In Freelancer, well, certainly, in 2020, we saw the great forced online work experiment commence. We saw a bit disruption in the beginning and midway through the quarter, followed by quite a marked uptick in activity as every business in the world was basically forced to the new way of doing things, which is basically work online. I mentioned that our segment's GPV was slightly down at $43.6 million, that's 5% down, and that cash receipt was down 1% in the first quarter. There was, as I will talk about in a second and kind of walk through the graphs used, I mean the disruption that happened in various regions. You can certainly see it quite clearly, the lockdowns as they occurred in country by country by country. In some countries, they were quite severe, such as China. In other countries, they are less severe and recovered fairly quickly and actually took key metrics to actually newer highs fairly rapidly. Revenue was affected in the quarter by a drop of $1.2 million in engineering services revenue primarily because we finished the bulk of the work for Arrow Electronics and moved forward from the minimum marketable product to basically a period where they're going to start marketing their products. So we expect that to be picked up by other customers shortly. We're, in fact, in contract negotiations as we speak with a couple of customers around engineering services revenue, and we think that will be supplanted fairly -- in a fairly straightforward manner. Now I'll talk a little bit more detail about sort of country-by-country and kind of what's been happening with Freelancer. First, start with the negative, which was China, where we saw a significant disruption as the country entered lockdown. In fact, we -- it was so severe in some areas that we thought the Internet basically was turned off or disrupted in some way that limited our ability -- limited the ability for the users to actually use the website. We've seen on the Internet reports that WeChat, for example, you couldn't even send images across as they're trying to suppress information leaving the country. Chinese users are primarily freelancers primarily working on very technical projects, such as software, mobile phone apps and so forth, which are originally higher-end projects. We did observe that the Internet connection or connectivity caused some disruption to projects that were underway. It was not until late February that we realized that we had to intervene with these projects and actually sub operational teams to move the people that posted these jobs to actually new freelancers because the freelancers weren't able to do the work. On top of that, there was some complication where we were basically ahead of a major spread on spam. We've been actually -- did a lot of work into our trust and safety group. And we're really trying to qualify the users up and make them jump through a lot more hurdles in terms of identifying themselves, payment verifying, ID, checking themselves with KYC and so forth to be able to participate in the marketplace. I mean, we had a very, very big crackdown happening in China at the same time. Overall, the impact from this is about 2.8% of GMV in the quarter relative to the fourth quarter for China.But then moving on to the rest of the world, and there's some pictures in the commentary on this. We could again clearly observe the lockdowns as they kind of rolled country-by-country in our metrics. The 1st of March, 2020, was kind of the peak for the year-to-date up until that point. The 8th of March was when kind of the reality hit the Western world and it became clear this is not just a Chinese virus. And in fact, it was going to become a global pandemic, and that was the week that the S&P officially crashed. Around the 9th of March, Italy imposed the national quarantine, restricting the movement of people and eventually transitioning from working from the office to working from home. And California, followed suit in the 20th and New York on the 22nd. Around that time, we did see a drop in stats, as you can see in the graphs that we've got attached. We were verifying those stats with other -- our peers in the market. For example, I'm good friends with Patrick Llewellyn from 99designs who actually saw a very similar impact in their metrics. We were basically really on top of the infrastructure to make sure that the tests, tweaks and so forth, to make sure that it actually wasn't something that we had internally caused and that, in fact, it was from our external, basically traffic and lack of economic activity on the Internet. What we did see pretty much from the week of the 15th onwards was basically after the initial drop, we saw a pretty steady trend up. For the first 2 weeks, it was still in recovery mode, but a fairly linear trend up. But then by the time that it got to the 29th of March, we were hitting new highs for the year. And consistently, for the last 3 weeks, each week has been hitting a new high after that. So we have seen a pretty rapid recovery to work from home. And in fact, now the activity is much higher than it was for the rest of the beginning of the year. Anecdotally, I mean, we had a fairly smooth transition to work from home with our staff, with that 400-and-something staff in the business. We had very good planning by Yves Sy, who's our Associate Vice President of Technical Operations. But anecdotally, the first week for us was setting up computers properly at home, getting the work environment in order and getting used to the new sort of working paradigm. We also have noticed that since the lockdowns commenced that the Western world, at least, is working a lot more. They're working weekends as well as weekdays, where the weekends now for a Saturday, Sunday looks a little bit more like a Monday or a Friday. So we're getting a lot more activity coming through really on all days of the week. Typically, during Easter, you see a dip in metrics. This Easter, basically, no one went on holiday and everyone worked through it, and we've had a pretty phenomenal Easter period compared to every other Easter we've had. On the freelancing side, we're seeing also a lift in metrics, and I've kind of talked about projects and contests here, both separately. For contests, we're seeing a huge increase in number of users entering in contests and the number of entries in contests. So we're seeing a lift of close to 30% in the number of users entering contests in the last 3 months. And we're seeing the number of entries are up 65% on last year in January '19. So in fact, we get about 912,000 entries in contests per month at the moment, and that seems to be still rising. What that means is that if you post a contest on the website, you'll get, on average, about 200 entries for your contest. And you've got to remember, the contests start at $10 and go up. Anecdotally, I ran a logo contest 2 weeks ago at the beginning of April for $100, and I got over 940 entries for my contest. So they're, in some ways, victims of their own success. You have a lot of work being done actually for a relatively small amount of money. And the last business card contest we ran for $10 got over 430 entries, and those numbers are still rising quite rapidly. So there's a lot of activity happening. Likewise, on projects, the number of active bidders per month lifted in the quarter, where it lifted 67% from January 2020 to March 2020. So there's a lot more people looking for work on the marketplace. As you'd expect with that, you're going to see more competition, and the average bid amount has been trending down over the last 2 years. However, that's not been reflected in the average project size. We've been doing things to increase the ability for people to work together and slowly rolling out functionality for people working in teams. So the average project size -- completed project size has still generally been rising across the board. ,In terms of product development, we've really put a big focus in, as you know, quarter-by-quarter, improving the front end of our web app and new stack, which will make it very fast to load pages, improve the look and feel as well as improve the conversion rates. We've had a pretty heavy focus on that. Also, we'll make the pages fully responsive. And that will continue in Q2 where we hope in the quarter to be able to remove our legacy m.freelancer.com mobile website because the old way in which you used to cater for mobile was build a completely separate website for mobile. Nowadays, you can do it with a responsive web, and we hope to start working out the logged out pages of that this quarter. This should lead to a pretty decent gain in SEO and mobile conversion rates because the m dot version of the website is a very much cut-down version of the main website, and there's a lot of content missing and a lot of functionality missing. So that will be a huge win for us, and we're hoping to achieve that this quarter. And Adam Byrnes will talk about it a little bit further on in the Q&A. We also put a fair bit of work into improving the look and feel and the general layout of the pages. And particularly in this quarter, we focused a lot on modernizing how content looks, reducing the page load times to a subsecond regime in some cases, and we have to roll that across the whole website. And it's also had the by-product improving developer productivity and product release velocity. So we're actually starting to cope with guests to a certain extent on getting features out with the website, which has been great after going through a long period of paying off technical team.We've also spent a fair bit of work on the enterprise offering. We expanded our features to allow for a smooth on-boarding, integration and management, including single sign-on and other work-related billing, contract management and analytics for our enterprise customers.And we've also been improving our hourly payment system in the desktop app, and we've seen growth in tracked hours by about 21% on the pcp in that. In our Recruiter, our managed services offerings, which is our 24/7 assisted coverage, where we can -- one of our members of our team will kind of help you find the right Freelancer and guarantee a placement as well as our co-pilots which will help you on an hourly basis, work with anything that needs to be done in your project. We saw an increase of 10%, up from the fourth quarter to the first quarter in terms of utilization of the Recruiter service and 35% on pcp. We were also able to increase our elite top 1% of the platform, which has grown engagement from the fourth quarter by about 10% and total number of participants in the program by about 15% since last year.In local jobs and field services, we've also deployed some great improvements. We've actually done sort of an end-to-end upgrade, the ability for you to basically nominate the source and destination locations as well as equipment and bits of training for doing location-based jobs. We've done that because we've got 2 major enterprise customers doing pilots in the field services, one is in telecommunications and one is in computer hardware. Telecommunications is actually going to roll across multiple countries in terms of that pilot. The hardware is in one country in Asia. And there's some pretty exciting things which we'll be able to talk about later on as we are able to show photos of kind of what people have been doing and talk about in a little bit more detail. But so far, we've been building some pretty good results for that computer hardware company. And again, there's global potential with this going through the pilot. And then we've got -- also got some pretty exciting things happening with the API. We've got actually a demo app coming out very shortly, which will show off the power of what you can actually do with Freelancer. And this demo app is basically an Uber for photography. So you'll be able to put in a location and -- anywhere in the world, have some [indiscernible] location, take a photo within a matter of hours and send it in, and it's going to show off the reach and liquidity of our marketplace very, very clearly. So you can look forward to that. Probably in Q2, that's going to be released into demo. In terms of sales, we continue to sign MSAs, including a global communications firm, FMCG and so forth. Sarah Tang is available on the call if you want to ask her anything more about this activity. Note that our default MSAs have no minimum volume commitments. And where they do, we will call that out explicitly. We have also noticed that a number of our enterprise customers are now adopting enterprise as part of their COVID-19 strategy. An example of that is Deloitte, where we delivered MyGigs. The CEO got up on stage and said this is now part of their coronavirus response strategy, and we're rapidly expanding that to 50,000 users. As of today, it's over 13,000 -- I mean, actually 14,000 users on the platform. And that's very rapidly going to 52,000 users. And it's part of what they call in-sourcing -- or were turning in-sourcing, where you can increase the utilization of your workforce by having your own staff get to post projects to your own staff. And that is obviously a gateway to be able to post projects to freelancers and make use of cloud labor and all the efficiencies and scale and the reach you can achieve by doing that. We've also started a pilot with another FAANG technology company for photography in the U.S. and also an airline. And there's a number of really good examples that we'll increasingly showcase in terms of kind of what we're doing with our enterprise customers over time. But again, Sarah Tang is in the call and are able to answer any questions you may have. I will call out, there's also a fair bit of work we still have to do with compliance. This is an ongoing thing that -- because we operate in every jurisdiction in the world, we have quite a number of things that we have to deal with on a kind of a month-by-month basis. In India now, there's another taxation requirement where we'll be seeing a bit of work there around withholding of taxes and so forth. Neil Katz is on the call if you want to ask any questions about that. But it's important to note because we operate in every jurisdiction, we do have a lot of compliance work we have to do with engineering. Moving on to Escrow. The escrow segment, we achieved all-time gross payment volume of $166.5 million, up 5.2% on pcp. In U.S. dollars, it's $110 million. Transaction volume continues to grow through partnerships in some of our most popular categories, domain and IP addresses. We've got pretty -- some of these categories where we have a very, very good affinity with the product, we grow extremely rapidly. We have about 70% of all North American IP for just brokers actually using us. And as I've mentioned in the full year report, we grew about 530% in this category to about USD 51 million in GPV over the last 2 years. We added Canadian dollar support in 2019 with a key partner in the automotive space, which is still in the rollout phase, and we also received a money services business license in Québec, completing our Canadian licensing requirements. In the U.S., we're now licensed or otherwise approved to operate in 48 of the U.S. states after being granted a money transmission license in Alabama. We are in the very, very final stages of being granted a license in New York. And then after that, we just have Hawaii and Nevada and we're done for the U.S. Hawaii has a peculiar avenue, where you can't use the word escrow in your name unless you have a real estate license. We're just working through with them how we do that. We have a fairly diminished volume in Hawaii. And Nevada has a peculiarity, where they won't accept third-party background checks from Bishops or Kroll, et cetera. So we've supplied Australian federal police background checks, New South Wales police background checks and so forth. And we're just trying to kind of work through with that on that particular peculiarity of that licensing regime.And we also -- I'm very pleased to report finally, after talking about this for several quarters, submitted our U.K. authorized payments institution license application. So that's in now for the U.K. So we basically have the U.K., filed; Canadian, granted; Australian, granted; and the U.S., 48 out of 50 states. And then there's a couple of minor territories where we do diminished volume [indiscernible] with 4 out of the 5 countries in the Five Eyes. We continue to drive partnerships with Escrow. We're actively integrating with 2 major automotive marketplaces in North America, both they're #1 in their categories. In addition to that, the commercial vehicles marketplace, an app marketplace. We have actually a second major app marketplace that we're in commercial negotiations with right now and multiple marketplaces for the sale and distribution of personal protective equipment. Just on that. On PPE, we are seeing increasingly -- an increasing number of PPE transactions being set up on Escrow. The setup volume, I would characterize as substantial. We're starting to see some of those close. We are getting probably between somewhere around 6 and 10 transactions coming in per day, and some of them are fairly large numbers. So we're just working through that now. That's off the back of, obviously, a bunch of press they've been doing about PPE. We've been stopping actually quite a number of scams in this space. We've found quite a number of websites that are setting up -- are purporting to sell things like N95 respirator masks, where, in fact, they're scammers who will ask the 30% of your payment upfront, 40% when they load onto a truck and the rest later on. Of course, they take the first payment and they're away. Some of those sites have been pulled down already. We've been working with various reporters to bust them. There's a link to a Mashable article where we caught -- someone masqueraded themselves as 3M Spain. We have another site, which is still up, which we're working with a reporter now to pull down and do the exposé on. And in addition, we also found $20 million worth of stolen Red Cross equipment in China. At least, we didn't get to inspect the goods, but we sent inspectors to go take a look, and we found out that, well, denied access, and then we're on the phone to the brokers who were trying to sell the equipment. It came out that they admitted it was stolen. So we reported that to Red Cross as well. So there's quite a lot of activity there, and I think that we'll continue to get quite a lot of recognition for our work and actually stop scams in this space. You can understand that this is a very, very active space right now with COVID-19 around the world. In addition, there's a lot of distrust in the market. There's traditional distribution channels broken down here. And there's a lot of intermediaries brokering transition -- transactions between buyers and sellers, and there's a lot of demand, a lot of demand in this space. So I think this is another space that can -- another area that's going to grow quite rapidly for us. I'll now just talk briefly just about Startcon. We obviously ran that last year at about 4,300 attendees, which are up about 14% year-on-year. We had some great speakers there. We had Honorable Malcolm Turnbull at keynote, the former Prime Minister of Australia. Dr. Christyl Johnson from NASA. We had John McAfee and so forth. We won't be running it in 2020 due to COVID-19, and that will improve group earnings by approximately $0.5 million. We also expect the annual report to be released on the 24th of April, so stay tuned for that. That's in a few more days. And we had a positive net operating cash flow of $0.5 million for the quarter and ended with cash and cash equivalents of $34.9 million, up 9% on the fourth quarter. Now operator, I'd like you to open it up for Q&A. Again, I'll remind you that on the call, we'll have Neil Katz, the Chief Financial Officer; Adam Byrnes, the VP of Growth and Product; and Sarah Tang, who's the VP of Enterprise and Sales. So you can now address your question to any of the 4 of us. And if you can open up now for questions, that would be greatly appreciated.
[Operator Instructions] We've got someone here for the first one. So Dean from Cyan.
Just wanted to get a little bit more clarity on the status of Arrow and that enterprise agreement. I just wasn't quite clear on the -- it looked like there might have been a bit of runoff in revenue.
Yes. So the -- about 99% of the revenue we've been generating from Arrow so far has just been engineering services revenue. So this is basically money that they've paid off to customize a website for them, which is ArrowPlus powered by Freelancer. We have achieved that and shipped that, and it is live. And so that customization work has dropped off fairly substantially because there's not more work to do. And now they've told us that, that is what they call the minimum marketable product and now that they are basically focusing on marketing. So there's -- basically, we aim to make money off GMV from these engagements, not from engineering services. And the engineering services engagement, the customization work has basically completed successfully.
Okay. So you've done all the account work from the agreement kind of in the year ago.
Yes. Now it's up to Arrow to really drive volume through the marketplace. The volume is not very high at this point in time, but it's up to them to drive the marketing for that, not up to us.
Our next question is from [ Arthur, St. Hill ].
At the AGM, am I right -- and I traveled from Melbourne to Sydney to join you at the AGM. And at that time, you said you had some big announcements coming at the end of 2019. I didn't hear them. Did something happen?
I have to think back to what the big announcements were that we were referring to at that time. Do you remember what they were in reference to exactly?
No. I just felt -- I felt it was a lovely tease on your part, and I looked forward. But there we are. My real question is this. And that is I'm very impressed with what you do, and I thank you very much for all your hard work. You've sired a wonderful race for us here. It's got good bud lines. It's got -- it's well trained. But who have you got in your organization that's making it run? Because I see this wonderful series of products, but I don't hear about marketing. And I'm a bit wondering if you're just allowing people to be so attracted by it that they come to you rather than you having to go to them. Can you comment on the marketing aspect of your organization?
Sure. Well, we do a fair bit of communications and press. In fact, I was up at YM this morning talking with the U.S. team on that. We've got probably about 10 things that are coming out in the next month, which we think that quite a number of them should be fairly substantial hits will get in the press. Adam Byrnes, you can probably talk about from the search engine marketing side and the SEO side, kind of what we do there. We do spend a relatively small percentage of revenue on marketing compared to our U.S. Silicon Valley style peers who would typically spend anywhere from 50% to 200% of revenue on marketing. What -- the way we think about marketing is we like to ensure that we get a good return on our dollar fairly quickly when we spend on paid marketing. So we have some pretty strict criteria about how quickly we need to generate a financial return. And what we don't want to do is we don't want to do what quite a lot of Silicon Valley companies will do, which was they'll calculate the long-term value of a customer over a period of years, and then they'll spend that in terms of the cost to acquire that customer. And then they'll hope that over the next 3 or 4 years that they get payback. We've got a much shorter payback period in terms of our marketing spend. And so we can be a little bit more nimble to adjust to channels as they change in terms of their profitability. What we don't want to be is we don't want to be a company that kind of takes the Uber model of growth, which is basically find a bigger pool of investor and keep raising money, raising money, raising money and diluting the equity holders in order to basically synthesize growth. We believe that one of our peers in the U.S. is kind of doing that, that basically is deeply cash flow negative. Because they spend a huge amount of money on marketing to try and pump the revenue number, and I think that is unsustainable, particularly if at some point that capital markets for them close up. I think they may have a bit of a problem. But we are doing a lot of things on the marketing front. We try and maximize our bang for buck when we do so. Adam Byrnes, do you maybe want to comment about what we're doing on the digital side with SEO, with GiveGet, with searching engine marketing and all the other paid and organic marketing channels we work on?
Yes, absolutely. So as Matt mentioned, obviously, we have a mix of sort of public relations and other sort of more, I guess, soft marketing, but then we also do a lot of digital marketing as well. We have quite a significant outward spend, very significant, actually. And we do -- we have a couple of people who sort of manage that spend on a day-to-day basis. They typically advertise on high-intent keywords with the goal of obviously driving people to the business. We also do a bit more sort of brand awareness stuff as well on some of the more longer-tail keywords. And we've actually been expanding that a little bit recently. And then, I guess, moving on to sort of the GiveGet and other things, we also do a lot of -- well, we're starting to and we will hopefully be doing a lot more in the near future around viral marketing. The basic scheme here is I give sort of an up promotion where someone can receive $20 for, in turn, inviting a friend and that friend of themselves gets $20. And that's really, really addictive and really powerful. Uber, for example, uses that to drive a decent chunk of their new business. So we have that scheme going currently, and we've obviously been making a number of tweaks to improve the conversion of that. But yes, I would say that those are, I think, primarily I'll mention. The other one that we spend a lot of time on is SEO, and that's driven by our content team. The content team right now has been really heavily focused on all the coronavirus and really trying to talk about that, both from the lens of Escrow and from the lens of Freelancer. But basically, all that time, the content team is basically building up a large table of content, which in turn Google indexes and brings traffic onto the sites on that. Despite the fact that it's not sort of, I guess, traditional marketing with traditional marketing messaging, it actually does drive a lot of traffic and we're seeing quite a dramatic amount of growth from that particular channel.
And I think you mentioned -- where I thought you're getting originally with the question was kind of talking about the team behind it and sort of the individuals who are really driving this. I will say that the content team is run by Adam Smith, who was at finder, and finder basically generated $100 million a year revenue line from content marketing. So Adam has come on in the last year, and he's really been spearheading this, and it's really starting to execute quite well, but we're seeing good results there.
Well, that's great. It's well known that Australians invent wonderful things and spend 90% of their money inventing it and developing it and then market it at 10%, whereas Americans spend 20% of the money developing something and 80% marketing it. And I just wanted to make this comment to ensure we weren't going too far the Australian way.
No, I appreciate that very much. I actually have a YouTube video where I talk about this in detail, my philosophy around marketing. It's called the growth mindset. I'll be happy if you want to follow up and send me an e-mail at matt@freelancer.com. I can share you a copy of it. But it talks about quite a lot of detail about how I think about marketing and kind of how we approach it. I'll be happy to share it with you if you send me an e-mail.
That's mattbarrie@freelancer.com?
Matt. matt@freelancer.com.
Okay. And one last thing. I mean I've been with you fellows since you floated. And every time the share price sags a bit, I buy a few more. And I like that very much. However, you can't be too thrilled at the present level of the share price. Is that because you're not very visible? Or because people have an unrealistically dim outlook as to your future? Can you comment on that?
Yes. Look, I think there's a few things going on here. First of all, we have a fairly low free float. So we tend to get knocked around any of the direction fairly easily. So for example, today, right now, if I look at the sell side, there's only 61,000 shares for sale. So if someone actually put a market order in to buy $40,000 worth of stock, the stock price would go to infinity, right? So we do tend to get up and down a fair bit, number one. Number two, I think the market has been just waiting for some good results. We've obviously kicked a few on goals in Italy over the last recent periods. And we view it -- my focus has really been heads down on the product, getting it great, doing -- paying off the technical debt, really getting the product in a wonderful state to really drive the metrics. I think we also have the serendipity happening right now. In some ways, if you think of it, every cloud has a silver lining. Obviously, COVID-19 is a terrible thing for the world. But it's actually going to be a very positive thing for us medium to long term. In fact, from now onwards, it looks like it's going to be very strong for us. So rather than going out there and doing a lot of investor relations, obviously, we've been focusing on the product, focusing on sales, focusing on enterprise customers, focusing on escrow. And I really want to demonstrate the results in quarterly results rather than go out there and having really more the American method of doing things, which is just promote the business regardless. So I think that we will be recognized in time for the work we've done. We have really bitten off a huge amount of technical debt, which I think has been to the detriment of the share price, but I think very positive to the long-term nature of the business. If we can get through the key items of getting all the web app working out there, which is basically the new stack, the front end, and we're really now starting to go over the hump for that -- and I think, Adam, maybe, you could talk about that in a second after I finish. That's one big thing we've been doing with performance and so forth. We put a lot of work into the testing environments to make sure that when we push code, it's a vital code, that we are not part of that Silicon Valley mantra of move fast and break things. So we can actually get quality float out there and build on that incrementally. Removing this mobile website, the old way of basically doing mobile and with the new front-end technology having been responsive, I think that will lift a whole bunch of different things. And we've also got a new series of apps that are coming out, which will replace both our Android and our iOS app, where effectively you bundle this responsive web app technology into the apps. And so you'll have the full functionality of the website in a great experience on effectively native mobile for iOS and Android, which will mean that mobile users will no longer feel like second-class citizens, and that we'll just have one code base everywhere. There'll be one code base for desktop, one code base for mobile web, one code base for our native applications, which will mean that: a, the experience will be a lot better; b, you'll have all the features there; and c, our developers are going to move a lot quicker and also will be a lot slicker. So that was a huge amount of work. You've got to understand that many, many years ago, when we started this business, we acquired a website that was built really just by some Ukrainian freelancers. And it was very poorly written but had a lot of activity on it. And then for the first few years because I bootstrapped that business, I only raised enough money to purchase the website and $0 for operating capital until we went public. Really what we're doing, we were just doing tweaks to the website to really drive the revenue. Now that works really well for driving revenue growth, but then it got to a point where we really had to pay off a lot of the technical debt and do the really hard surgery to build a proper global web business at the back of that. And so we've been going through that. We're now coming out the other side of that, and you'll start to see some pretty amazing things. I want to also call out that we've actually got a -- we've also rebuilt the entire design team. And we -- over the course of the next few months, you're going to see some pretty amazing things in terms of the look and feel of the design. The new art director for the business has won over 200 awards, and we've got some just incredible things coming out. So it's been -- I know investors have been a bit patient since the IPO. I know it's just trading a little bit lower than the actual original IPO price, and it's been a bit of a rollercoaster, that we think we've really done a lot of the hard work that needs to be done. And I think from here on -- with hard work and patience and so forth, that we should see a sort of strip -- stay trend up in terms of the cap and so forth of the business. And I think when people start to realize what we actually have in our network, that we have the largest network of freelancers globally, 42 million users, that we have the biggest liquidity globally, that we have the reach with the ability to find any person you need very, very, very quickly for everything, sort of skill set, I think they'll realize that -- just how undervalued this business is. And I think that we'll be pretty quickly recognized, again, because of the low free float, that would be pretty quickly recognized, a bit of the scramble from trying to get in front of it.
Thanks for the full answer. And thanks very much indeed to all of you, Matthew, in particular, for all the very hard and successful work, and we -- I applaud that and support you vigorously.
Great. And thank you very much for your support, and thank you for your question.
Our next question is from [ Matthew Stevens ] in [ Efficient Capital.]
Just following on from Dean's question a bit. With the Deloitte MyGigs service agreement, I recall there being an engineering services fee and the per-seat licensing with no minimum volume commitment.
Yes.
So just to confirm, are the 13,000-or-so fleets currently that Deloitte have, are they currently revenue earning?
Yes, they are. The engineering services -- the bulk of the engineering services has not commenced yet for Deloitte. So we've only done a fairly minor amount of work for them, and we're actually in the middle of contract negotiation for a much larger amount of work. So we've yet to generate the major amount of fees that we expect to generate from engineering services to Deloitte. Yes, they are currently paying per-seat licensing. That per-seat licensing number you've quoted was just for the initial pilot period, which is only up to about 10,000 seats. We're actually now expanding to 50,000 seats. So there's some stuff happening there as well, which will expand that revenue line.
Our next question is from [ Adrian Lee ].
I just want to follow on from the question when you talk about how GPV was the main driver of revenue for enterprise. In regards -- so is that on the actual Freelancer side that you get the revenue, not the freelance employer?
Yes. So the revenue model with enterprise is very similar to the revenue model with the main marketplace, which is we charge 3% on the job poster side of work that's been awarded and accepted, and we charge 10% on the freelancer side. Now the difference for enterprise is if they -- if we believe that they're going to do over 5 million GMV per annum, and really the minimum criteria for entering into an enterprise sales engagement with the enterprise team is 30 million GMV per annum, so we're only really working with the very, very, very top companies with our actual field service representatives. Anything smaller than that, we pass off to Co-pilot, which is our managed service offering. We will waive that 3%. However, almost 100% -- and Sarah, you can maybe correct me on those, but almost 100% of our engagements with enterprise go through our Preferred Freelancer Program. And our Preferred Freelancer Program charges an extra 5% on the freelancer side. So it goes from 3% on one side and 10% on the other side to 0% on the employer side and 15% on the other. So actually, it's a net gain of 2% with the enterprise customers.
Yes. Okay. Is there, I guess, any -- I guess, with the case of Arrow where there's not enough volume or not as much volume as you're sort of envisaging, is there sort of other pipeline of features that you can sort of get more revenue from that where you sort of have no control over that volume?
Yes. Well, Arrow actually does have a minimum volume commitment. So they actually have a minimum revenue to us of USD 50,000 a month irrespective of the volume that gets going through. So there is actually a minimum volume commitment for Arrow, but we would like to see the Arrow GMV number substantially larger than where they are. But I will point out that it is not our job to be driving the demand for the Arrow products. In some ways, the other product does compete a little bit with our main marketplace because you can hire electrical engineers through freelancing.com, and you can hire them through Arrow. And so really, we've got a clear line drawn in the sand, where we said it's 100% responsibility of Arrow to drive any volume into the Arrow product. We'll do the fulfillment with our freelancers, and we'll make sure operation, everything works, et cetera. But it's up to them to drive the demand. So we're not going to be out there marketing the Arrow product because it's basically causing -- it will cause channel conflict with our main products.
Matt, we don't have any further questions in the queue.
Okay. Well, we'll keep it open for a few more minutes. Adam, Sarah or Neil, is there anything that you'd like to maybe comment on while we've got the microphone kind open to you guys? Yes, Neil?
Yes. No, I'm just going to say that the company is well placed. I mean the majority of the company's cash on hand is held in foreign currencies, so we are quite -- a relatively small percentage of our cash is in Australian dollars, roughly about 11%, 12%, which is good with the volatility of the Australian dollar.
Majority of our earnings are in U.S. dollars?
Yes.
Okay. Sarah, do you, maybe, want to talk a little bit about the sale side of things?
Hi there. Yes.. Hello, everyone. I'll just quickly mention some insights from the market and some -- from some of our marquee customers over the past few months or so, especially in response to COVID-19, is that we're having a lot of big customers within financial institutions, professional services firms and consumer goods company, hospitality, even some of the biggest hotel brands in the world coming to us and saying that there's a real shift in demand within the organization. And they're looking for ways to rapidly redeploy their in-house talent to the most interested and critical areas of their business to grow faster and especially in these times of accelerating change and uncertainty. And they're looking to a platform solution like Freelancer Enterprise to help them increase their staff utilization so that they really don't have to furlough any people, and they can keep some of their best talent on payroll. And so I were really noticing that some of the world's smartest companies are seeing opportunities in the recent market and health downturn. And they're really looking for Freelancer Enterprise to help empower and to be agile in response to the changes in the market. And so actually, some of the work that we've done with Deloitte has really been pivotal in helping us to drive this conversation. And a lot of other companies are coming to us to look for the Deloitte MyGigs-like model to redeploy their talent into critical areas of their business. And the best -- the most interesting part about this is that it creates a really good pathway towards driving GMV within our main marketplace and creating a pathway or an access point to the 42 million freelancers. In addition, I think some of the work that we've been doing in terms of really curating the top talent for some of our Freelancer Enterprise customers is really increasing the resale value of -- or the remarketing value of some of the top freelancers within kind of the custom curative pools. And so we have a lot of learnings. And I think the future, like Matt has said, looks really bright especially amidst -- in times of uncertainty and in times of kind of economic change and social change. And so a lot of these big companies, some of the smartest and biggest brands in the world are really -- we really notice the increase in the funnel of new customers within the last month or so.
Yes. I will say as well, if I can add to that, the biggest thing that's set the entire industry a lot ever was the global financial crisis. That was the thing that really brought crowdsourcing and freelancing to the limelight. You had 3 factors that were happening here. One is you obviously have people who are out of work looking for jobs. The second is you had lots of businesses trying to figure out more cost-efficient ways of doing things, where they didn't have to hire full time, that they could use sort of elastic workforce on demand. And the third was you have a lot of people out of work, particularly in the U.S., that were saying to themselves, I'm not going to start my next job just yet. What I'll do is I work on my side projects for about 6 months. I'll take a bit of time off before I actually get serious and go back and get a full-time job. So they go work on e-commerce sites for the white shoe store or the kid's soccer team or whatever it may be. So that was the biggest thing ever for the entire industry, which was around 2007, 2008 when we went into the industry. COVID-19, I think, is GFC squared. And so I think that if the GFC is anything to go by, that this is going to be very, very, very positive for the freelance business. Now with the Escrow business, the GFC was negative because there was less large-ticket transactions going through, but we have been pretty agile to find new niche areas to move into. And PPE as a topic is going to be very, very broad. The other thing is that back in 2007, 2008 with Escrow, they didn't actually have a sales team working in the business. Now we have a sales team. So -- and we have an API and the integration of over 300 partners integrated. So we actually anticipate that Escrow will continue to grow actually fairly well even though we're hitting into this crisis. So our businesses are actually in a fairly good position even though the world is in a lot of turmoil right now. And as Neil mentioned, I mean most of our revenue is in U.S. dollars. Most of our costs are in Australian dollars. We hold a smaller amount of cash in Australian dollars, and we're really maximizing things like our U.S. dollar holdings. So we're in a pretty good position all around given the crisis, especially compared to many other companies out there.
Matt, could I just support you in saying that the market trend really -- is really pointing towards adoption of -- of creating an elastic workforce within a platform model like Freelancer.com. And especially with the global cataclysmic events like COVID-19, you really see a move, a trend towards 2 things that's the real drivers, I think, of a platform like Freelancer.com really is: first is remote work; and second is project-based work. So even the companies initially who came to us and said, love your product, love what you're doing, but we don't have these remote working policies, and we'll never let freelancers work on software development products that needs systems access. Well, now at this time, they're forced to figure out how they actually create all these remote working policies so that eventually a lot of the enterprise customers will be -- see that it's much more efficient and convenient for them to just scale the workforce using elastic workforce model. So that's kind of what we're seeing in the market now.
Yes. And also, everyone needs to understand our market position. I mean nobody has a workforce as large as we do that's in every country in the world where we can operate and all different skill sets that ranges from very, very highly skilled professionals right down to basically entry level. And with the activity we have in our marketplace, we're clearly solidifying our lead. You can see with the metrics around bidding activity and entries in contest, I mean no one can compete. I mean how can you compete with Freelancer, for example, in a logo contest where if you put $100 down, you get close to 1,000 entries? I mean nowhere in the world can you do this, nowhere. And I encourage all of you, either investors or potential investors, just try it out, like go there and post a contest or post a project, and you'll the activity we're getting on the site. I mean no one comes close to this anywhere in the world. And nobody can undercut this. I mean how do you undercut close to 1,000 options for $100? I mean people are not going to want 10,000 options for $100, right? So it's pretty amazing what we've built. And I think the team has made, I think, the right decisions over the last periods to really pay off the technical debt, get the product great, overhaul the front end, overhaul the back end, we're going to rip out that m-Dot site, et cetera. And I think we're going to be -- I mean the design is -- the design coming through now internally is incredible. So stay tuned and kind of just watch, but I think we're really coming into our own in the next quarter.
Matt, I do have a couple of questions here in the queue if you're ready to go ahead with the next one.
Yes.
[ Ray Johnson ].
Matt, do you have some thoughts on the trajectory of the level of global business activity? There's talk that a lot of firms aren't going to survive. We've seen Virgin go into administration locally today. And there's other talk of companies that are sort of leveraged on debt might not have the resources to survive. So the absolute level of activity is going to drop. Do you have any thoughts on the trajectory of that?
I do. And first of all, I want to make it distinct between the general level of economic activity in the world and the economic activity on Freelancer. But in terms of the former, we're actually publishing in the next few days, we've done a second global coronavirus survey where we sent it out to our 42 million customers, and we asked them about the impact economically on their business. So the first survey we sent out was a month ago. We got 20,000 responses. We sent out a second survey, which was a lot more detailed, which the results came in, in the last few days. We haven't published it yet, but it will be broken by the Tier 1s in the next few days, which our comms team is up looking at the moment to like the Wall Street Journal and so forth. But we've got 15,500 responses. And of that, in March, 6% said -- 6.6% of businesses surveyed out of 19,000 said their revenue was growing, 21% said that it was falling, and 72% said they were unaffected. In April, 6.2% said that their business was growing in revenue, 66% now said that their revenue was falling, and 27% said it was unaffected. Of those businesses that said -- which is now 66% of businesses is saying their revenue is falling, the median percentage that they're saying revenue has fallen is 50.0%, and the average is 51%, and that was over 10,761 responses. For revenue rising, and this is about 6.2% of businesses, the median was 25%, and the average was 35%. And then when we surveyed on the question do you expect a future impact on your revenue in the next 6 months, 53.6% said it would fall, 25% said it would rise, and 21% said, no impact. So -- and then in terms of objectives for the next 6 months, for those businesses that said that it would rise, 25% said it would rise, the median was about 40.0%. So how much the revenue -- sorry, for those who said the revenue would fall over the next 6 months, which was 53.6% of businesses, the median was a negative 40% fall; on average, negative 41.6%. And for those who said their business -- their revenue would rise, the median was 40%, and the average was 46.6%, and that was 25.4% businesses. So that's, at least from our survey which we'll be publishing in the next few days online, and that should be, hopefully, a big Tier 1 hit where we've got over 100 pages of results around coronavirus. And of course, the reason why we're doing this is because obviously is marketing Freelancer because some of the latter questions in the survey are around your use of freelancers. Will you let your businesses increasingly work from home. Will you be freelancing more online to increase your income or that sort of thing. So there's a strong marketing and all that for Freelancer, but -- so I think stay tuned and we'll send that out. Well, first of all, it will get broken in the press. And then second of all, we send it to our users. So if you have a Freelancer.com account, you'll get that in your e-mail probably early next week. In terms of activity on Freelancer, well, it's really been about 3 weeks, a very, very strong uptrend. I don't want to predict that or project that out in a forecast because it's really up in the air in terms of what might happen. But my strong feeling is that we're going to -- while people are in lockdown, they're going to be working harder from home. And the weekends are not going to be like weekends. People will be working through the weekends. And I think that currently, businesses will be changed even post lockdown. And the survey results from that say that they believe that -- of the 15,000 responses, that they believe on the median is going to be -- we're going to be -- the outbreak is going to continue for at least 4 months, and the average is 5.7 months to October. And they believe that lockdown and social distancing is going to be also median of 4 months and average of 5.6 months to October. So certainly, while everyone is on lockdown, they're going to be increasingly forced to work online. And then [indiscernible] and have a lot more experience working online. People would want to continue working from home, at least partly. And I think the nature of the organization is going to change. And certainly, we're seeing that from our enterprise customers who are all saying that they believe that some percentage of their workforce, and they're not sure whether it's 5%, 10% or 20%, will be permanently from the cloud in the future. But they're not sure whether that's 1 year away, 3 years away or longer.
That's a pretty good answer, Matt. I'd have to say that it wasn't a Dorothy Dixer. I'm not a plant. Any other answers in the folder to questions that haven't been asked yet?
Plenty. But just to reference, that survey will be out shortly. We just -- I was up at 1 a.m. this morning working with the U.S. team to try and get that placed. And we work -- hopefully, that would be a big, big, big -- a certain hit across the world. There's some pretty explosive questions in here that were answered. Of 15,377 responses, for example, 55.5% thought that it was a manmade virus and so on. So there's some pretty interesting things here and so on. So yes, stay tuned for that. You should see it in the press about this. And it's actually 10 or 12 stories which are going to get placed now for various parts of the business and various angles. Thank you.
The last question we have in the queue is from Greg Ward from Trafalgar Capital.
Just a couple of questions. So just in terms of that surge of demand that you saw, can you give us a bit more color where it's come from in terms of regions? Was it new customers? Or was it existing customers doing more work? And then the profile of the jobs posted, is it kind of lower detail, lower quality or actually more sophisticated work?
Okay. Probably the best person to answer would be Adam Byrnes. Adam, why don't you comment on the surge of activity, where is it coming from, what type of jobs are they as across the board, is it new users, is it old users and so forth?
Yes. Sure. So there's a few things at play here. There's definitely a big surge in new paying users, which is the primary metric we track on the acquisition side of things. I would say, currently, that's up around 20%, to give you a feeling, and it seems to be -- and again, I don't want to make a forecast either, but the trend is certainly up over the last, say, 3 weeks. But obviously, it's very uncertain times and so on. It's not just new users, however. We're seeing a very similar trend among our existing users. And again, the primary metrics that we track, they are all up. They're not up as much as 20%. They're maybe up sort of somewhere between 10% and 15%. By the way, for those who are listening along, you can see this in the quarterly report. We've actually kind of given sort of rough -- very rough numbers here.
Adam, and this is over what time period? Do you want to make it clear what you're seeing as 20%, over what time period?
Yes. So it's over -- it's sort of -- it's over the last probably 2 weeks. So 20% over a week. So we sort of measure the value over a weekly cycle, and then we compare it to previous weeks. So that's obviously to the positive. Many of these projects are smaller projects. This is, however, somewhat expected. And the reason why that is, is, as I mentioned, a good chunk of these new business coming in is from new employers. And new employers, in general, do tend to post smaller projects for their first project. And then once they get a bit more comfortable with the site, they start posting sort of the larger projects. So I don't know if that trend will play out. As I said, it's very unprecedented times at this point, but that is something that may potentially happen. The final trend that we're seeing, which is really interesting, is that we're seeing the evolution of the weekend. You can sort of see this in the graphs that are being published in the report as well. But typically, we sort of see a sort of periodic sort of 7-day rise. It looks a little bit like a sort of sine wave, if you will, or something like that, like a bit of a wave. And the trough of the wave or the bottom of the wave is actually lifted a lot, which is representing a dramatic increase in activity over the weekend. Again, obviously, I just don't want to make a forecast moving forward, but that's what we're seeing at the moment. So I hope that largely answers your question.
And I don't want to make a commentary on some very short-term data. But in the quarterly, we obviously show kind of the uptrend that's been happening since the 29th of March in sort of week by week by week. You can see the trend there. I mean, Adam, maybe just extremely briefly, we've now just headed into the fourth week, and in the last 24 hours, we were just talking about it before the call, the trend seems even stronger this week, but it's only 1 day of data.
Yes, that's correct. We're only really looking at 1 full day of data, unfortunately. So obviously, I'm quite reluctant to make any strong comments there. But it is true that the metrics are currently -- actually, the trend seems to be increasing, if anything. But again, just so we're all very clear about this, but that's only 1 day's worth of data. So I would be very careful to say anything beyond that.
Yes.
Okay. And in terms of the new customers, is there a sub-industry that's overrepresented? And similarly, geography, is Europe the one that's actually led it? Or is it more the U.S.?
It's actually worldwide. There is no dramatic standout geography, which is it's sort of globally representative, I would say. In terms of categories of work, I would say similar things. However, that said, obviously, again, like I mentioned previously, there is a reasonably large influx of new customers. And those new customers do tend to post lower-value work, and lower-value work tends to reside within the categories of design, copyrighting, small bits of like web development, things like that. But -- and again, if trends continue and if normality were to be the case, then maybe we would see bigger projects coming in the future.
Okay. I've got -- I actually got a graph in front of me right now by category. I'm just looking at them, and I'm looking at the monthly view. I mean websites and IT is very strongly up. Design is very strongly up. Writing and content is not as strongly up. It's kind of just back to where it was probably at the end of last year. Sales and marketing is not so strong. It is not so strong. Mobile apps are way up.
So this would explain the weekend, is that fair? It sounds like they're all start-up kind of star business.
Yes. Yes, it looks like the technical jobs are the ones that are kind of way up, like their websites, IT, mobile software, design, business and accounting. The writing is up but not as much. The sales and marketing is not so much up. The data entry is not so much up. So it's good quality projects all around. And engineering is up. Engineering and science is up. Very strong growth in the U.S., which is great, which is a key market. The market has been doing well. It's China, China is way down. But the U.S. is something that's up.
And just on the U.S., have you seen a noticeable decline of marketing by Fiverr and Upwork? Could that partly explain why because those guys have cut back their spend?
Adam?
Not to my knowledge. We do keep a bit of an eye on their spend. I haven't seen any obvious trends yet, but that actually might be a good question to ask moving into -- for the Q2 results because, again, it's very early days. Marketing spend is that -- it's very hard to measure on sort of at a day-by-day basis. You can only get sort of general trends out. Occasionally, our Google representative will tell us a little bit of insider information around what the competitor spend is actually doing. But in general, yes, they really don't sort of give that information away as such. But we're not seeing anyway dramatic changes, for example, in their spend numbers. It's not like they've cut their spend to 0 or anything like that, at least not that we've observed to date.
They were very actively advertising outdoor, like those -- the billboards and bus advertising and what have you, particularly around the IPO and just after the IPO, we know that, that sort of spend is not [indiscernible].
Okay. Great. And a question for Sarah. Just on the Deloitte integration, the internal bidding system. Sarah, the -- have there been any technical issues of actually having the system work? And what's been the biggest challenge of actually getting adoption internally?
I think the biggest challenge for us is replicating all the change management practices that Deloitte has been doing to really drive this internally. I mean they have really taken the initiatives, being management and strategy consultants themselves, to create training materials and gift cards, a whole array of incentives. It's even driven by their CEO who hosted a virtual seminar with everybody to make sure that everybody actually is onboarded onto MyGigs during COVID-19 times, an urgent matter. So they're even talking about actually having MyGigs as part of their onboarding and training materials for all new starters. I mean the big goal is to eventually have all 250,000 global Deloitte consultants onto MyGigs and then thereby extending it to other categories within Deloitte as globally they have about 440,000 people, including the tax and accounting and other areas, which I'm currently in conversations with. So I think the biggest challenge for us really is just to make sure that we have the operations infrastructure and support to make sure that they scale at the speed in which they're talking about right now.
Thank you, Matt. We have no further questions.
Okay. Thanks, Sue. I'd just like to point out just on the PPE, while we've been doing this conference call today, that we've had 1 to 3 inquiries into escrow for PPE transactions, so it's quite an active space. Okay. Unless there's any other questions, thank you very much for joining the Freelancer First Quarter 2020 Financial Results, and I look forward to talking to you in the next call. And as always, any time you'd like to do one-on-one with management, just please e-mail us at investor@freelancer.com, and we can try and arrange that. Thank you. Well, thank you, operator.