Upwork Reports Second Quarter 2024 Financial Results

Second-quarter GAAP Net Income of $22.2 million, Upwork’s highest ever
Second-quarter GAAP Diluted EPS of $0.17
Second-quarter Adjusted EBITDA of $40.8 million

SAN FRANCISCO, Aug. 07, 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 second quarter of 2024.

“We produced strong revenue growth of 15% year-over-year and our highest-ever net income amid a challenging and dynamic macroeconomic environment,” said Hayden Brown, President and CEO, Upwork. “The strength of our model and our market leadership position enable us to continue outperforming traditional incumbents across the hiring industry while investing in the quality of our marketplace. Our confidence in the long-term growth prospects for our business continues as we innovate work solutions for customers harnessing the AI transformation of work.”

“Upwork continues to deliver durable growth on the top and bottom lines, driven by disciplined cost management and improved operating efficiencies,” said Erica Gessert, CFO, Upwork. “Our profit margin was 12% in the second quarter, while our adjusted EBITDA margin was 21%, more than double our adjusted EBITDA margin in the second quarter of 2023. We also returned $33.1 million to shareholders through share repurchases, representing nearly 100% of the free cash flow generated during the second quarter. I am confident that we can grow profitability and free cash flow and achieve 35% adjusted EBITDA margins within the next five years.”

Second Quarter Financial Highlights

• Revenue grew 15% year-over-year to $193.1 million in the second quarter of 2024
• Active clients grew 6% year-over-year to over 868,000
• Net income was $22.2 million in the second quarter of 2024, compared to net loss of $(4.0) million in the second quarter of 2023
• Diluted earnings per share was $0.17 in the second quarter of 2024, compared to diluted loss per share of $(0.03) in the second quarter of 2023
• Adjusted EBITDA* was $40.8 million in the second quarter of 2024, compared to adjusted EBITDA of $14.4 million in the second quarter of 2023
• Cash provided by operating activities was $37.3 million in the second quarter of 2024, compared to cash provided by operating activities of $4.3 million in the second quarter of 2023
• Free cash flow* was $33.5 million in the second quarter of 2024, compared to free cash flow of $1.0 million in the second quarter of 2023
• Repurchased 2.9 million shares of Upwork stock in the second 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.

Second Quarter Operational Highlights

Artificial Intelligence

• GSV from AI-related work grew 67% year-over-year in Q2
• Number of clients engaging in AI-related projects grew 50% year-over-year in Q2
• Daily active users of Upwork Chat Pro, powered by Uma™, Upwork’s Mindful AI, grew 68% quarter-over-quarter
• Freelance professionals working on AI-related work earned 47% more per hour than freelancers working on non-AI-related work in Q2

Ads & Monetization

• Revenue from ads & monetization products grew 75% year-over-year, continuing to be one of Upwork’s fastest-growing revenue streams
• Revenue from Connects, virtual tokens for talent to bid on projects and ads products on Upwork’s work marketplace, grew 81% year-over-year

Partnerships

• Expanded ecosystem of distribution channels for skilled talent on Upwork by more than doubling number of partner deals quarter-over-quarter
• Delivered Upwork’s highest monthly revenue derived from partnerships to date in May

Enterprise

• Successfully tested a modified Enterprise offering, resulting in increased sales team win rates and adding 27 new logos through the new offering
• Added 46 total new Enterprise clients, including Builders FirstSource, Guidepoint, and Labelbox
• Announced a new VMS partnership with Beeline, extending Upwork’s market penetration to more than 60% of businesses using VMS platforms
  

Financial Guidance & Outlook

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

• Revenue: $179 million to $184 million
• Adjusted EBITDA: $36 million to $39 million
• Diluted weighted-average shares outstanding: 139 million to 141 million
• Non-GAAP diluted EPS: $0.23 to $0.25

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: $735 million to $745 million
• Adjusted EBITDA: $140 million to $150 million
• Diluted weighted-average shares outstanding: 139 million to 143 million
• Non-GAAP diluted EPS: $0.90 to $0.94
• Stock-based compensation expense is expected to average slightly less than $20 million per quarter for 2024

*Not meaningfu

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

⁽²⁾ In order to conform to the current period presentation as of June 30, 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.

Second 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 second 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 second 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:
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 third 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 share repurchases, 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 Quarterly Report on Form 10-Q for the three months ended March 31, 2024, filed with the SEC on May 1, 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 June 30, 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 June 30, 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 condensed consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows as of the following (in thousands):

Non-GAAP Financial Measures
To supplement our condensed 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 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. Free cash flow is defined as cash provided by (used in) operations less purchases of property, plant and equipment and cash outflows from internally developed software.

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 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 third 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 six months ended June 30, 2023, we recognized a gain of $38.9 million on the early extinguishment of a portion of our 0.25% convertible senior notes due 2026, which is included in other income, net.

⁽²⁾ During each of the three and six months ended June 30, 2024 and 2023, we incurred $0.2 million and $0.4 million, respectively, 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 a portion of our 0.25% convertible senior notes due 2026, 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.