Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Upwork Inc (UPWK, Financial) reported a strong first-quarter revenue of $190.9 million, marking a 19% growth year over year.
- GAAP net income for the quarter was $18.4 million, with adjusted EBITDA at $33.3 million, demonstrating profitable growth.
- The company raised its 2024 outlook for both revenue and adjusted EBITDA, reflecting confidence in continued financial performance improvement.
- Upwork Inc (UPWK) saw a 5% year-over-year growth in active clients, reaching 872,000 in the first quarter.
- The introduction of new AI-enabled products and features, such as Uma and Upwork Chat Pro, has been well received, showing early success in lifting GSV and enhancing user experience.
Negative Points
- GSV growth was relatively modest at approximately 1% year over year, partly due to headwinds from the transition to a new flat-fee pricing structure.
- Despite overall revenue growth, the enterprise business unit's revenue growth was slower at 10% year over year.
- The transition to the new pricing model created temporary disruptions, impacting GSV growth negatively by about 2%.
- While non-GAAP gross margin improved, there was a significant increase in non-GAAP R&D expenses by 23% year over year, reflecting higher investment in innovation which could pressure short-term profitability.
- The company faces ongoing macroeconomic uncertainties which could impact client budgets and spending behavior.
Q & A Highlights
Q: Can you provide any color on the performance of cohorts and any changes in stabilization of spend there?
A: Erica Gessert, CFO of Upwork, noted some stabilization in newer cohort spend in 2024. The company publishes a cohort chart annually in their 10-K, which has shown this trend.
Q: Regarding the 100,000 active subscribers for Freelancer Plus, how big can this get over time?
A: Hayden Brown, CEO of Upwork, expressed excitement about the progress and potential for growth in Freelancer Plus and other monetization avenues. He highlighted the opportunity to enhance offerings and the potential for significant revenue growth from ads and monetization, similar to models seen in companies like Airbnb and Instacart.
Q: On the increased full-year revenue guidance, is that largely due to momentum with freelancer costs and ads products?
A: Erica Gessert confirmed that strong growth in ads and monetization products contributed to the increased revenue outlook. She also mentioned strength in the enterprise business and positive leading indicators in new client growth across both marketplace and enterprise segments.
Q: Could you discuss the components that have held back GSV growth and the outlook for GSV growth going forward?
A: Erica Gessert explained that a 2% headwind from pricing changes impacted GSV growth, which is expected to continue throughout the year. However, strong leading indicators like active client growth and new product innovations are expected to stimulate GSV growth moving forward.
Q: Regarding the 35% adjusted EBITDA target within five years, what scale is needed, and what efficiencies or leverage are anticipated to achieve this goal?
A: Erica Gessert stated that significant operating leverage can be achieved without substantial growth in scale, based on cost optimization opportunities across the company. Investments in areas like engineering productivity and data optimization are expected to yield benefits and contribute to achieving the EBITDA margin target.
Q: Can you provide more details on the enterprise VMS partnerships and the growth in AI categories?
A: Hayden Brown discussed how VMS partnerships open up new opportunities by making Upwork an approved vendor for enterprise customers' existing VMS systems, enhancing the enterprise business unit's growth. Regarding AI, he noted significant demand for AI services, with freelancers on Upwork being more adept at using AI tools compared to non-freelancers, which is driving premium wages and growth in this category.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
