Been doing some more thinking

I have invested a small-moderate amount in ART (see previous posts for my investment case)

The thing that is stopping me putting more in is simple:

FEES

ART charges fees to both sides of the transaction. The "tasker" (ie person doing the job) gets charged a "service fee" of 20% (although this can reduce for taskers who do a LOT of jobs and have good feedback, see below). There is also a "connection fee" paid by the customer of 15.95%, minimum $4.95, maximum $49.45.

So for a typical $250 job, the tasker will pay a $50 fee and the customer will also pay a connection fee of $40. The customer pays $290, the tasker gets $200 and ART gets $90.

To be fair, there are tiers for the service fee. But the requirements are pretty onerous. To get Silver tier you need to have earned over $880 on the platform in the past 30 days, PLUS have "okay" completion in your past 20 tasks. For that, you get to pay "only" 18.5%, instead of 20%. To qualify for the best "Platinum tier" with a 12.5% service fee, you need to have earned at least $5300 on the platform in the past 30 days, PLUS have "excellent" completion.

Even if the tasker is "Platinum", the breakdown for a $250 job would look like this: customer pays $290, tasker gets $218.75, ART gets $71.25

Things are slightly better (but still too high IMO) for a $500 job. The customer pays $549.45, the tasker gets between $400 and $437.50, depending on tier, and ART makes between $111.95 and $149.45.

TOO EXPENSIVE ?

I would love to get other opinions on this. For me these fees just seem too expensive. Am I being a tight arse? Does anyone want to make the case that fees like that are reasonable?

OR DOESN'T MATTER?

To make the counter-argument, the fees do include 3rd party liability insurance. Plus I suppose if you phone up a company to get someone to come and do a job at your house, they probably take a higher percentage than ART. And you will be paying that fee again for any repeat business. Perhaps the argument can be made that ART is expensive because it is essentially just an introduction service. You pay a high fee for the first job, but if you are happy with the work, you just contact the person directly for sebsequent jobs (and pay no fees).

The other major argument against fees being too high, is that the business has been performing. Despite these fees, the Australian business has been growing and profitable, and the overseas businesses are showing promise. The proof is in the pudding, and recently the pudding has been pretty good.

CONCLUSION

I still can't help thinking that ART could do so much better with a different (lower) fee structure. The marginal costs of running the website are pretty low. If fees were lower, I really believe that the platform would get a LOT more use. Less advertising would be required and I wouldn't be surprised if profits ended up higher.

I really hope that Tim (the founder/CEO) agrees to an interview. I would love to hear his response.

Also it would be great to get some other opinions from SM. I am genuinely conflicted about this one.

It is hard to go all in on something that feels like a bit of a rip-off.

I have had a pretty good look at ART over the past week or so

For me it's a high conviction buy

I think the progress in the business is being overlooked by the market for the following reasons:

1. The stock got overhyped post IPO. The IPO price was already expensive. Then it went a lot higher. Then the "weighing machine" kicked in and the share price dropped something like 85% over around 2 years (2021 - 2023).
2. The profitability of the underlying business is masked by the fact that they are investing all of the Australian profits in overseas expansion
3. Not many analysts cover the stock, due to its small market cap. It is not in any major indices
4. It is not as high quality a business as other digital marketing businesses (eg REA, Carsales)

BUT

Despite all of the above. Despite the fact that it is more like a "dating service" (it earns a fee for the initial introduction, but then the tasker and client can connect directly for subsequent jobs). Despite the fact that peeple try to exchange contact details and then cancel the job to avoid fees. Despite all of this, the business is performing. Plus it is at an inflexion point. Current revenue covers costs (sort of). Future revenue increases will mostly flow straight into profit.

Here is total revenue for the last 4 financial years:

2021 $26571

2022 $31469

2023 $ 44171

2024 $46643

2025 $52700

There was disruption by COVID, and the Oneflare acquisition in 2022 (which added around $6 million of annual revenue). But the overall trend is pretty good. This was during a period that was not easy for the business (with pandemic lockdowns etc)

The vast majority of revenue (over $49 million) is still from the Australian business. The latest quarter showed growth of over 20% in revenue from the AU business (vs PCP). Revenue growth from the core Airtasker marketplace is even better than this (Oneflare, with annual revenue around $8 million, actually shrank slightly). Growth in the Australian business is actually accelerating, due to a combination of improvements to the pricing model and increased marketing. Even including the extra spend on marketing, the Australian business is throwing off cash. EBITDA was $2.5 million for the quarter and $8.1 million for the FY (for the AU business). This is after deducting all head office costs and AU marketing. Some of the marketing is "non-cash" (see below), so the free cash flow from the AU business is even higher ($4.8 million for the quarter)

The Australian business alone is almost certainly worth more than the current market cap ($159 million). Growing rapidly, throwing off cash and only valued at a little over 3 times revenue. Plus they have $19 million in cash and no debt (although there are share repurchase liabilities, see below).

ART is founder-led. Tim Fung still owns over 10% of the company. He appears to have a long-term focus. Most of the marketing is "above the line" brand marketing, aimed at increasing brand awareness. This takes longer to pay off than some other forms of advertising, but is the right thing to do for the long-term.

Airtasker's overseas expansion is mainly focussed on the UK and the USA. It has been slower than might have been hoped initially. But real progress has occurred in the past 12 months, particularly in the UK business. Increased marketing and platform improvements are starting to work. UK revenue for the trailing 12 months was $2.9 million, an increase of 123%. The US is up over 400% for the same period, but much earlier stage (TTM revenue $560k).

It is important to understand that some of the increased marketing has been funded by equity sales and convertible notes. Details are in a previous post. There was $53 million in "share repurchase liabilities" in the last HY report. Only around half of this money has actually been spent to date (we will see exactly how much when the annual report comes out shortly). It will have to be repaid over the next few years (or converted to equity at a discount). But it is important to note that the liabilities are held against the overseas businesses only, and the expiry dates are staggered over several years. It was a way for ART to obtain cheap funding to "kick-start" the overseas marketing, by allowing partners to share in the upside. And there is good evidence that it is working

Conclusion

So in conclusion, you have an Australian business growing well and profitable, which is investing in an overseas expansion that is starting to work. The Australian business alone is worth more than the current market cap. Overseas is the cream on top

If the trends of the past 12 months continue (or even get close) ART can easily multi-bag. Even if it stagnates in Australia and fails overseas, you are still not going to lose all your money. Risks skewed to the upside IMO

This is actually surprisingly good

I had pretty much written off this business. Last time I took a look, it was growing too slowly, unprofitable, and not really getting traction overseas (UK and USA)

Things have improved.

Now they are cash flow positive. Basically generating cash from the more mature Australian business and investing it in the UK and USA.

Overall, group revenue up over 20% for the quarter (vs PCP). It's even better for the core Airtasker marketplace business (the Oneflare acquisition is not performing as well). Australia is growing quite strongly and generating cash. UK is growing rapidly (from a small base) and USA is growing even more rapidly (but from a tiny base, still very early days).

Current EV is only $125 million (even after a big jump today), which is around 2.5 time revenue. They have cash on hand and basically no debt.

This is a multibagger IF they can maintain the trend of the last few quarters. It's a big IF, but the signs are there

Definitely worth a look IMO