I guess I better free up some cash in case.
I was disappointed in the breakdown on the Freelancer website that undermined growth for most of last year.
I was pleased we were in the right place at the right time to benefit from the Chinese domain bubble, even though it popped right when we could have used ongoing outsize revenues to make up for the marketplace issue (making the marketplace issue look worse).
As disappointments go, they are pretty mild. Nobody made strategic errors, or sent the business on an unrecoverable trajectory. They pursued faster growth, but discovered a couple of quarters later the change was ill-considered, so they reversed it (the one-click project listings). I suspect there was some hubris from management to stick with it longer than necessary, but they reversed themselves fairly quickly.
It's a shame they hit this speed hump after several years of consistent growth.
Because we follow the business closely, we know that the market over reacted, pricing the share as if it was a failed business model that couldn't make a profit or grow. But what really happened was a mis-step that has been corrected.
We have management on record saying mobile channel growth (unaffected by the website issue) stayed on trend.
We have management last quarter saying they see forward indicators pointing to growth returning to trend.
We have management confirming they will move to a cash positive, profitable business this year.
If you think global outsourcing was a trend that has run its course, then FLN might be a poor investment. I don't think that view is in touch with reality, so I will count on the clever, heavily invested owners to continue to develop a business that will provide great long term rewards.
One of the huge benefits this business has is management that are consistent and long term thinkers. I think this business will end up like a TPM or PBL under Kerry - a business that wins by just doing its own thing right, better and better, instead of changing strategy like the wind.
All that said, I bought all the way down, so it is nice to be in the black again. But I saw prices in the 40s as a gift, not a threat.
FLN Price at posting:
60.5¢ Sentiment: Buy Disclosure: Held
