Upwork Reports First Quarter 2024 Financial Results

First-quarter GAAP Net Income of $18.4 million
First-quarter GAAP Diluted EPS of $0.13
First-quarter Adjusted EBITDA of $33.3 million
Raises revenue and Adjusted EBITDA outlook for 2024
Establishes five-year Adjusted EBITDA margin target of 35%

SAN FRANCISCO, May 01, 2024 (GLOBE NEWSWIRE) -- Upwork Inc. (Nasdaq: UPWK), the world’s largest work marketplace that connects businesses with independent talent from across the globe, today announced its financial results for the first quarter of 2024.

“We drove strong business momentum in the first quarter, delivering 19% year-over-year revenue growth and steadily increasing net income to $18.4 million and adjusted EBITDA to $33.3 million,” said Hayden Brown, president and CEO, Upwork. “We continue to accelerate profitability while investing in growth and innovation. Our comprehensive Upwork Updates launch reflects a huge slate of exciting new products—many of which are built on our innovative AI foundations—as well as extensive feature enhancements and partnerships across our work marketplace. We have been at the forefront of every major technology-driven shift in how work gets done over the last 20 years, and in the age of AI we will continue to lead the way in defining the future of work for businesses and professionals alike.”

“We have rapidly and successfully executed on our plans to identify ongoing cost optimization opportunities, allowing us to raise our outlook for adjusted EBITDA for the year,” said Erica Gessert, CFO, Upwork. “The inherent profitability of the business we’ve built combined with our ongoing discipline enables us to grow operating leverage, adjusted free cash flow, and shareholder returns this year, next year and into the future. This gives us confidence that we can achieve 35% adjusted EBITDA margins within the next five years, while continuing to invest in key growth drivers.”

First Quarter Financial Highlights

• Revenue grew 19% year-over-year to $190.9 million in the first quarter of 2024
• Marketplace take rate was 17.7% in the first quarter of 2024, compared to 14.7% in the first quarter of 2023
• Active clients grew 5% year-over-year to over 872,000
• Net income was $18.4 million in the first quarter of 2024, compared to net income of $17.2 million in the first quarter of 2023
• Diluted earnings per share was $0.13 in the first quarter of 2024, compared to diluted loss per share of $(0.15) in the first quarter of 2023
• Adjusted EBITDA* was $33.3 million in the first quarter of 2024, compared to adjusted EBITDA loss of $(2.9) million in the first quarter of 2023
• Cash provided by operating activities was $5.7 million in the first quarter of 2024, compared to cash used in operating activities of $(8.7) million in the first quarter of 2023
• Adjusted free cash flow* was $15.5 million in the first quarter of 2024, compared to negative adjusted free cash flow of $(11.6) million in the first quarter of 2023
• Repurchased 5.2 million shares of Upwork stock in the first quarter of 2024

* Explanation of non-GAAP measures and reconciliations to their most directly comparable GAAP measures can be found in the “Non-GAAP Financial Measures" section and the subsequent tables at the end of this press release.

First Quarter Operational Highlights

Innovation and Artificial Intelligence

• Highlighted an extensive list of innovative, customer-centric products and feature enhancements as part of Upwork Updates: Spring 2024 launch
• Unveiled Uma, Upwork’s Mindful AI, to power key experiences in the hiring and matching process as well as develop into a work companion that interacts with clients and freelancers throughout their Upwork journey
• In early testing, clients who used Uma started spending on Upwork in their first month at a 7% higher rate
• AI & Machine Learning category GSV grew 50% year-over-year, again representing the fastest-growing category on Upwork
• Launched instant consultations, a powerful way for clients to get expert advice within minutes from skilled professionals who are available to meet and consult in real time

Ads & Monetization

• Revenue from ads & monetization products grew 93% year-over-year, continuing to be Upwork’s fastest-growing revenue stream
• Surpassed 100,000 active subscriptions for Freelancer Plus, generating strong 76% year-over-year revenue growth for the offering
• Bundled exclusive access to Upwork Chat Pro into Freelancer Plus subscription, resulting in very strong adoption
• Continued investment in Boosted Proposals and Boosted Profiles, improving the quality of how ads are displayed and better integrating with search

Partnerships

• Extended Upwork Partner Experts partnership strategy launched last year with OpenAI by welcoming GoDaddy, BigCommerce, and Constant Contact as new Upwork Experts program partners, helping their customers tap specialized skill sets on the Upwork platform
• Added new apps & offers from GoDaddy, Dropbox, Notion and iStock by Getty Images to help freelancers boost their productivity and deliver higher-quality work

Enterprise

• Enterprise revenue growth accelerated to 10% year-over-year in the first quarter
• Continued strong pace of new Enterprise clients with 28 new clients added in the first quarter, including Ansys, Unisys, and WPP
• Partnered with Workday VNDLY and KellyOCG—Upwork’s first managed service provider partner—to expand the workforce management platforms integrated with Upwork Enterprise Suite and cast a wider net of acquisition among potential Enterprise clients

Financial Guidance & Outlook
Upwork’s guidance for revenue, adjusted EBITDA, diluted weighted-average shares outstanding, and non-GAAP diluted EPS for the second quarter of 2024 is:

• Revenue: $190 million to $195 million, representing year-over-year growth of 14.2% at the midpoint
• Adjusted EBITDA: $32 million to $36 million
• Diluted weighted-average shares outstanding: 139 million to 141 million
• Non-GAAP diluted EPS: $0.21 to $0.23

Upwork’s guidance for revenue, adjusted EBITDA, diluted weighted-average shares outstanding, non-GAAP diluted EPS, and stock-based compensation expense for full year 2024 is:

• Revenue: $770 million to $782 million, up from $760 million to $780 million
• Adjusted EBITDA: $140 million to $150 million, up from $125 million to $135 million
• Diluted weighted-average shares outstanding: 140 million to 144 million
• Non-GAAP diluted EPS: $0.88 to $0.92
• Stock-based compensation expense is expected to average slightly more than $20 million per quarter for 2024
  

⁽¹⁾ See Key Definitions in our first quarter 2024 earnings presentation.

⁽²⁾ In order to conform to the current period presentation as of March 31, 2024, we present revenue from Enterprise Solutions and Managed Services together as Enterprise revenue in prior periods and no longer report revenue from our Enterprise Solutions offering, previously referred to as Upwork Enterprise, in Marketplace revenue.

⁽³⁾ Explanation of non-GAAP measures and reconciliations to their most directly comparable GAAP measures can be found in the “Non-GAAP Financial Measures" section and the subsequent tables at the end of this press release.

First Quarter 2024 Financial Results Conference Call and Webcast
Upwork will host a conference call today at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss the company’s first quarter 2024 financial results. An audio webcast archive will be available following the live event for approximately one year at investors.upwork.com. Please visit the Upwork Investor Relations website at investors.upwork.com/financial-information/quarterly-results to view Upwork’s first quarter 2024 earnings presentation.

Disclosure Information
We use our Investor Relations website (investors.upwork.com), our Blog (upwork.com/blog), our X handle (twitter.com/Upwork), Hayden Brown’s X handle (twitter.com/hydnbrwn) and LinkedIn profile (linkedin.com/in/haydenlbrown), and Erica Gessert’s LinkedIn profile (linkedin.com/in/erica-gessert) as means of disseminating or providing notification of, among other things, news or announcements regarding our business or financial performance, investor events, press releases, and earnings releases and as means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD.

About Upwork
Upwork is the world’s largest work marketplace that connects businesses with independent talent from across the globe. We serve everyone from one-person startups to large, Fortune 100 enterprises with a powerful, trust-driven platform that enables companies and talent to work together in new ways that unlock their potential. Our talent community earned over $3.8 billion on Upwork in 2023 across more than 10,000 skills in categories including website & app development, creative & design, data science & analytics, customer support, finance & accounting, consulting, and operations. Learn more at upwork.com and join us on LinkedIn, Facebook, Instagram, TikTok, and X.

Contact:
David Niederman
Vice President, Investor Relations
investor@upwork.com

Safe Harbor:
This press release of Upwork Inc. (the “Company,” “we,” “us,” or “our”) contains "forward-looking" statements within the meaning of the federal securities laws. Forward-looking statements include all statements other than statements of historical fact, including any statements regarding our future operating results and financial position, including expected financial results for the second quarter and full year 2024, information or predictions concerning the future of our business or strategy, anticipated events and trends, potential growth or growth prospects, competitive position, technological and market trends, including artificial intelligence, industry environment, the economy, our plans with respect to our share repurchase program, and other future conditions.

We have based these forward-looking statements largely on our current expectations and projections as of the date hereof about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. As such, they are subject to inherent uncertainties, known and unknown risks, and changes in circumstances that are difficult to predict and in many cases outside our control, and you should not rely on such forward-looking statements as predictions of future events. We make no representation that the projected results will be achieved or that future events and circumstances will occur, and actual results may differ materially and adversely from our expectations. The forward-looking statements are made as of the date hereof, and we do not undertake, and expressly disclaim, any obligation to update or revise any forward-looking statements, to conform these statements to actual results, or to make changes in our expectations, except as required by law. Additional information regarding the risks and uncertainties that could cause actual results to differ materially from our expectations is included under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 15, 2024, and in our other SEC filings, which are available on our Investor Relations website at investors.upwork.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the three months ended March 31, 2024, when filed.

All third-party trademarks, including names, logos, and brands, referenced in this press release are property of their respective owners. All references to third-party trademarks are for identification purposes only and shall be considered nominative fair use under trademark law.

⁽¹⁾ In 2023, we changed the name of our Upwork Enterprise offering to Enterprise Solutions. Concurrently, to align with customer needs and internal decision-making, we combined Enterprise Solutions and Managed Services into a suite of Enterprise offerings. In order to conform to the current period presentation as of March 31, 2024, we present revenue from Enterprise Solutions and Managed Services together as Enterprise revenue in prior periods and no longer report revenue from our Enterprise Solutions offering, previously referred to as Upwork Enterprise, in Marketplace revenue.

The following table reconciles cash, cash equivalents, and restricted cash as reported in the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows as of the following (in thousands):

Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), we present certain non-GAAP financial measures in this press release, including adjusted EBITDA, adjusted EBITDA margin, and adjusted free cash flow.

We define Adjusted EBITDA as net income (loss) adjusted for stock-based compensation expense; depreciation and amortization; other income (expense), net, which includes interest expense; income tax benefit (provision); and, if applicable, certain other gains, losses, benefits, or charges that are non-cash or are significant and the result of isolated events or transactions that have not occurred frequently in the past and are not expected to occur regularly in the future. “Adjusted free cash flow” is defined as cash flow from operations less purchases of property, plant and equipment and cash outflows from internally developed software, adjusted for the timing of our invoicing and cash collection from Marketplace clients as a result of Upwork being subject to escrow regulations.

We use non-GAAP financial measures in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. These measures provide consistency and comparability with past financial performance, facilitate period-to-period comparisons of our core operating results, and also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. In addition, adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to certain items that can vary substantially from company to company, and adjusted free cash flow allows investors to evaluate the cash generated from our underlying operations across periods.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as analytical tools, and investors should not consider them in isolation or as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. In particular, (1) adjusted EBITDA excludes stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy, (2) although depreciation and amortization expense are non-cash charges, the assets subject to depreciation and amortization may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements, and (3) adjusted EBITDA does not reflect: (a) changes in, or cash requirements for, our working capital needs; (b) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (c) tax payments that may represent a reduction in cash available to us. In addition, the non-GAAP measures we use may be different from non-GAAP financial measures used by other companies, including companies in our industry, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures. Reconciliations of the non-GAAP measures presented in this press release to their most directly comparable GAAP financial measures have been provided below, and investors are encouraged to review the reconciliations and not rely on any single financial measure to evaluate our business.

We have not reconciled our adjusted EBITDA guidance to GAAP net income or non-GAAP diluted EPS guidance to GAAP diluted EPS because certain items that impact GAAP net income and GAAP diluted EPS are uncertain or out of our control and cannot be reasonably predicted. In particular, stock-based compensation expense is impacted by the future fair market value of our common stock and other factors, all of which are difficult to predict, subject to frequent change, or not within our control. The actual amount of these expenses during the second quarter of 2024 and fiscal year 2024 will have a significant impact on our future GAAP financial results. Accordingly, a reconciliation of adjusted EBITDA guidance to GAAP net income and non-GAAP diluted EPS guidance to GAAP diluted EPS is not available without unreasonable effort.

⁽¹⁾ During the three months ended March 31, 2023, we recognized a gain of $38.9 million on the early extinguishment of debt, which is included in other income, net.

⁽²⁾ During the three months ended March 31, 2024 and 2023, we incurred $0.2 million of expense related to our Tides Foundation warrant.

⁽¹⁾ During the three months ended March 31, 2023, we recognized a gain of $38.9 million on the early extinguishment of debt, which is included in other income, net.

⁽²⁾ For all periods presented, we incurred $0.2 million of expense related to our Tides Foundation warrant.

⁽¹⁾ Adjusted for the timing of our invoicing and cash collection from Marketplace clients as a result of Upwork being subject to escrow regulations.