Core Insights - Upwork (UPWK) shares increased by 10.2% following the release of its second-quarter 2025 results, driven by better-than-expected performance and strong guidance for 2025 [1][10] Financial Performance - In Q2 2025, Upwork reported non-GAAP earnings of $0.35 per share, exceeding the Zacks Consensus Estimate by 34.62% and reflecting a 35% year-over-year increase [1][10] - Revenues for Q2 2025 reached $195 million, a 0.9% year-over-year growth, surpassing the consensus estimate by 4.58% [1][10] - For the full year 2025, Upwork anticipates revenues between $765 million and $775 million, with adjusted EBITDA expected between $206 million and $214 million [2][10] - The adjusted EBITDA margin target for 2025 is set at 35% [2] Client and Revenue Breakdown - Marketplace revenues, which constitute 87.5% of total revenues, grew by 2.3% year-over-year to $170.7 million, while enterprise revenues (12.5% of revenues) declined by 7.8% to $24.3 million [5] - Active clients reached 796,000, with Gross Services Volume (GSV) per client increasing by 5% year-over-year to $5,002 [6] - GSV from AI-related work grew by 30% year-over-year, with the Prompt Engineering subcategory seeing a significant 51% increase [6][10] Operational Efficiency - The non-GAAP gross margin for Q2 2025 expanded by 30 basis points to 77.8% [9] - Operating expenses as a percentage of revenues decreased by 740 basis points year-over-year to 50.7% [9] - The adjusted EBITDA margin improved by 810 basis points year-over-year to 29.3% [11] Balance Sheet and Cash Flow - As of June 30, 2025, Upwork had cash and cash equivalents totaling $635 million, with long-term debt at $359 million [12] - Cash provided by operating activities was $72.5 million, and free cash flow reached $65.6 million [12] Future Guidance - For Q3 2025, Upwork expects revenues between $190 million and $195 million, with earnings projected between $0.28 and $0.30 per share [14]

Core Insights - Upwork is expanding its services beyond freelancers by acquiring Bubty and planning to acquire Ascen, aiming to provide a comprehensive solution for managing various workforce models [2][3][5] Group 1: Acquisitions and Strategy - The acquisition of Bubty will help Upwork manage a range of workforce models, including independent contractors and contingent W-2 workers [2] - Ascen is expected to enhance Upwork's capabilities with its digitally native solutions and easy-to-integrate APIs for contingent W-2 workers [2][3] - Upwork's President and CEO, Hayden Brown, emphasized the need for a singular solution that balances flexibility, compliance, speed, and scale for enterprise customers [5][6] Group 2: Market Demand and Performance - There is a growing demand from enterprise customers for access to diverse talent pools, which Upwork aims to fulfill with its new acquisitions [4] - Upwork has reported record revenue for 2024, partly driven by AI innovations and the connection to AI talent on its platform [7] - The gross services volume (GSV) from AI-related work grew by 30% year over year during the quarter, up from 25% in the same quarter last year, indicating a strong market trend towards AI expertise [8]

Jane, shares of Upwork up about 11% right now on strong second quarter earnings and a fullyear revenue guidance raise. Upwork attributing the performance to AI and recent M&A activity. So joining me now is Hayden Brown, CEO of Upwork.Hayden, it's great to have you on and let's start right there. Beaten race quarter, what drove it. We had two big highlights this quarter, Morgan.One was our AI strategies across the website which are really working. This is where we implement AI solutions for our customers, ma ...

Upwork (UPWK) came out with quarterly earnings of $0.35 per share, beating the Zacks Consensus Estimate of $0.26 per share. This compares to earnings of $0.26 per share a year ago. These figures are adjusted for non- recurring items. What's Next for Upwork? This quarterly report represents an earnings surprise of +34.62%. A quarter ago, it was expected that this online freelance marketplace operator would post earnings of $0.25 per share when it actually produced earnings of $0.34, delivering a surprise of ...

Financial Data and Key Metrics Changes - Upwork reported record Q2 revenue of $194.9 million, a significant increase driven by AI enhancements and client hiring in AI-related work [5][19] - Net income reached $32.7 million, marking a 47% increase year-over-year, and adjusted EBITDA was $57.1 million, resulting in a 29.3% adjusted EBITDA margin [5][26] - The company raised its full-year revenue guidance to a range of $765 million to $775 million, reflecting strong marketplace performance [27][28] Business Line Data and Key Metrics Changes - The Business Plus segment saw a 190% quarter-over-quarter increase in GSV, with active clients growing by 45% [11][54] - Revenue from ads and monetization grew 17% year-over-year, with Connects revenue increasing by 19% and Freelancer Plus subscription revenue by 13% [12][25] - Average GSV per active client rose 5% year-over-year, surpassing $5,000 for the first time since 2022 [20] Market Data and Key Metrics Changes - GSV from AI-related work accelerated to 30% year-over-year growth, up from 25% in the first quarter [9][10] - The number of clients posting AI jobs grew by 38% year-over-year, indicating strong demand for AI services [10] - GSV from prompt engineering grew 51% year-over-year in Q2, showcasing the increasing reliance on AI tools across various categories [10] Company Strategy and Development Direction - The company is focusing on a three-pronged strategy centered on AI, ads and monetization, and enterprise solutions, which is expected to drive GSV growth [18][30] - Two strategic acquisitions were announced to enhance enterprise capabilities, aiming to capture a larger share of the $650 billion contingent workforce market [13][15] - The integration of AI into operations is expected to improve internal efficiency and margin profiles, with over 35% of deployed code now AI-generated [17][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unpredictable macro environment but expressed confidence in the company's initiatives to offset pressures [40] - The company anticipates continued growth in GSV and revenue, particularly from AI-related work and the newly formed enterprise subsidiary [19][24] - The outlook for 2026 is optimistic, driven by multiple growth catalysts and the expected contributions from recent acquisitions [28][30] Other Important Information - Free cash flow for Q2 was $65.6 million, with $38 million used for share buybacks [26] - Non-GAAP gross margin reached 77.8%, reflecting disciplined cost management [25] - The company expects stock-based compensation to be between $60 million and $65 million for the year, indicating efforts to reduce expenses [29] Q&A Session Summary Question: Can you discuss the acquisitions and their integration into Upwork? - Management explained that the acquisitions will enhance Upwork's ability to serve enterprise clients with a comprehensive solution, addressing various contingent work needs [33][34] - The expected revenue contribution from these acquisitions is minor in 2025 but will grow significantly in 2026 [36] Question: How is the macro environment impacting the business? - Management noted that the macro environment remains unpredictable, but the company has successfully offset pressures through AI enablement and strategic initiatives [40] Question: What contributed to the take rate expansion this quarter? - The take rate increased by 50 basis points year-over-year, driven by supply and demand experimentation and growth in monetization products [45][46] Question: How are new customers using the platform? - Business Plus clients are converting faster and spending more than typical marketplace clients, indicating strong demand for the offering [54][55] Question: What is the distinction between the marketplace and enterprise business? - The marketplace serves smaller clients, while the enterprise business targets larger clients with complex needs, supported by the new acquisitions [60][62]

Financial Performance - Upwork's Q2 2025 adjusted EBITDA reached $57.1 million, a 40% year-over-year increase[21] - The company's Q2 2025 adjusted EBITDA margin hit a record 29.3%[21] - Upwork's Q2 2025 free cash flow generation was strong at $65.6 million[21] - Cash, cash equivalents, and marketable securities totaled approximately $635 million at the end of Q2 2025[21] - In Q2 2025, total GSV was $1,002.7 million, a decrease of 1% year-over-year[57] - In Q2 2025, total revenue was $194.9 million, an increase of 1% year-over-year[57] Growth Initiatives - GSV from AI-related work grew 30% year-over-year in Q2 2025, with some subcategories growing over 50% year-over-year[16] - Business Plus GSV grew 190% quarter-over-quarter in Q2 2025[17] - The company is positioned to increase wallet share within the $650 billion Enterprise opportunity[26] - Ads & monetization revenues grew 17% year-over-year[46]

[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward%2DLooking%20Statements) The report contains forward-looking statements about future operating results, financial position, business strategy, anticipated events, and trends, including acquisitions and share repurchases - The report contains forward-looking statements about future operating results, financial position, business strategy, anticipated events, and trends, including acquisitions and share repurchases[7](index=7&type=chunk) - These statements are based on current expectations and projections but are subject to a number of risks, uncertainties, and assumptions, particularly those detailed in the 'Risk Factors' section[8](index=8&type=chunk) - Readers should not rely on forward-looking statements as predictions of future events, and the company disclaims any duty to update such statements unless required by law[9](index=9&type=chunk) [PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements of Upwork Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations and comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, revenue disaggregation, fair value measurements, balance sheet components, business combinations, commitments, debt, net income per share, income taxes, segment information, and subsequent events [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) The company's financial position as of June 30, 2025, shows total assets of **$1.26 billion**, total liabilities of **$653.1 million**, and total stockholders' equity of **$608.7 million** | Metric (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $1,261,716 | $1,211,613 | | Total Liabilities | $653,062 | $636,236 | | Total Stockholders' Equity | $608,654 | $575,377 | | Cash and cash equivalents | $291,070 | $305,757 | | Marketable securities | $343,509 | $316,344 | | Funds held in escrow | $212,033 | $195,736 | | Goodwill | $141,473 | $121,064 | | Accumulated deficit | $(8,020) | $(78,476) | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) The company reported net income of **$32.7 million** for the three months ended June 30, 2025, and **$70.5 million** for the six months ended June 30, 2025, with corresponding diluted EPS of **$0.24** and **$0.50** | Metric (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $194,939 | $193,129 | $387,645 | $384,066 | | Gross profit | $151,507 | $149,277 | $302,407 | $296,021 | | Income from operations | $32,565 | $17,781 | $71,255 | $30,830 | | Net income | $32,726 | $22,220 | $70,456 | $40,662 | | Basic Net income per share | $0.25 | $0.17 | $0.53 | $0.30 | | Diluted Net income per share | $0.24 | $0.17 | $0.50 | $0.30 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Total stockholders' equity increased to **$608.7 million** as of June 30, 2025, from **$575.4 million** at December 31, 2024, reflecting net income and share repurchases | Metric (In thousands, except share amounts) | Balances as of Dec 31, 2024 | Balances as of June 30, 2025 | | :---------------------------------------- | :-------------------------- | :--------------------------- | | Common Stock (Shares) | 135,348,453 | 132,506,031 | | Common Stock (Amount) | $14 | $13 | | Additional Paid-in Capital | $653,575 | $615,937 | | Accumulated Other Comprehensive Income | $264 | $724 | | Accumulated Deficit | $(78,476) | $(8,020) | | Total Stockholders' Equity | $575,377 | $608,654 | - The company repurchased and retired **5.2 million shares** of its common stock for an aggregate amount of **$71.3 million** during the six months ended June 30, 2025[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Net cash provided by operating activities significantly increased to **$109.5 million** for the six months ended June 30, 2025, while investing activities used **$56.7 million** | Metric (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $109,479 | $54,017 | | Net cash (used in) provided by investing activities | $(56,673) | $156,529 | | Net cash used in financing activities | $(51,496) | $(101,115) | | Net change in cash, cash equivalents, and restricted cash | $1,310 | $109,431 | | Cash, cash equivalents, and restricted cash—end of period | $506,903 | $405,849 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, financial statement components, and significant events [Note 1—Organization and Description of Business](index=10&type=section&id=Note%201%E2%80%94Organization%20and%20Description%20of%20Business) Upwork Inc. operates a global work marketplace connecting businesses (clients) with independent talent, including professionals and agencies. The company is incorporated in Delaware and headquartered in Palo Alto, California - Upwork operates a work marketplace that connects businesses (clients) with independent talent[22](index=22&type=chunk) - Independent talent on the marketplace, including professionals and agencies, are an increasingly sought-after and expanding segment of the global workforce[22](index=22&type=chunk) [Note 2—Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%202%E2%80%94Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, condensing certain disclosures. The company changed the presentation of certain cash flows in 2024, reclassifying changes in trade and client receivables related to escrow funds from operating to financing activities, which increased operating cash flow by **$11.1 million** for the six months ended June 30, 2024, without affecting total cash balances. Management uses estimates and assumptions that may differ from actual results - The financial statements are unaudited and prepared in accordance with U.S. GAAP and SEC interim financial reporting rules, with certain information and note disclosures condensed or omitted[24](index=24&type=chunk) - In 2024, the company reclassified the change in Trade and client receivables relating to escrow funds from operating activities to financing activities, increasing cash flow provided by operating activities by **$11.1 million** for the six months ended June 30, 2024[27](index=27&type=chunk) - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Tax Disclosures) and 2024-03 (Disaggregation of Income Statement Expenses), effective for fiscal years beginning after December 15, 2024, and 2026, respectively[33](index=33&type=chunk)[34](index=34&type=chunk) [Note 3—Revenue](index=11&type=section&id=Note%203%E2%80%94Revenue) Upwork disaggregates revenue by two service types: Marketplace and Enterprise, and by geographic area based on the billing address of talent and clients. Marketplace revenue increased for both three and six months ended June 30, 2025, while Enterprise revenue decreased. Deferred revenue represents amounts billed in advance for services not yet rendered | Type of Service | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Marketplace | $170,660 | $166,786 | $336,953 | $331,116 | | Enterprise | $24,279 | $26,343 | $50,692 | $52,950 | | Total Revenue | $194,939 | $193,129 | $387,645 | $384,066 | | Geographic Area | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Talent | $110,272 | $111,345 | $218,067 | $221,528 | | Total Clients | $84,667 | $81,784 | $169,578 | $162,538 | | Total Revenue | $194,939 | $193,129 | $387,645 | $384,066 | - Revenue recognized during the three and six months ended June 30, 2025, that was included in deferred revenue as of March 31, 2025, and December 31, 2024, was **$7.5 million** and **$7.3 million**, respectively[41](index=41&type=chunk) [Note 4—Fair Value Measurements](index=13&type=section&id=Note%204%E2%80%94Fair%20Value%20Measurements) The company's financial instruments carried at fair value consist of Level I and Level II assets, primarily marketable securities and cash equivalents. As of June 30, 2025, total fair value of these instruments was **$500.9 million**, with **$157.4 million** in cash equivalents and **$343.5 million** in marketable securities. The company did not record any impairment charges for marketable securities, considering declines in fair value temporary due to interest rate changes | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :------- | :----------------------- | :--------------------------- | | Level I | $364,450 | $357,157 | | Level II | $136,465 | $152,668 | | Total | $500,915 | $509,825 | - The company considered decreases in market value of marketable securities to be temporary, attributable to changes in interest rates, and did not record any impairment charges for the periods presented[47](index=47&type=chunk) | Period | June 30, 2025 | June 30, 2024 | | :----- | :------------ | :------------ | | Three Months Ended | $6,700 | $6,200 | | Six Months Ended | $13,800 | $13,900 | [Note 5—Balance Sheet Components](index=15&type=section&id=Note%205%E2%80%94Balance%20Sheet%20Components) This note details the composition of key balance sheet items. Cash, cash equivalents, and restricted cash totaled **$506.9 million** as of June 30, 2025. Property and equipment, net, increased to **$38.1 million**, driven by capitalized internal-use software and platform development costs. Net intangible assets decreased to **$9.5 million**, primarily due to amortization. Accrued expenses and other current liabilities remained stable at **$58.8 million** | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Cash and cash equivalents | $291,070 | $305,757 | | Restricted cash | $3,800 | $4,100 | | Funds held in escrow, including funds in transit | $212,033 | $195,736 | | Total | $506,903 | $505,593 | | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Internal-use software and platform development | $69,092 | $59,815 | | Total property and equipment, net | $38,109 | $30,056 | | Category | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :------- | :-------------------------------- | :------------------------------------ | | Developed technology | $8,861 | $10,695 | | Assembled workforce | $664 | $1,461 | | Customer relationships | $0 | $833 | | Total | $9,525 | $12,989 | [Note 6—Business Combination](index=17&type=section&id=Note%206%E2%80%94Business%20Combination) On June 27, 2025, Upwork acquired Bubty B.V., a Netherlands-based platform for enterprise contingent workforce solutions, for **$20.4 million** in cash. This acquisition aims to enhance workforce management capabilities and platform for global talent. The purchase price is preliminarily recorded as goodwill, with final allocation expected in Q3 2025 - On June 27, 2025, a subsidiary of Upwork acquired 100% of the equity interest of Bubty B.V. for **$20.4 million** in cash[63](index=63&type=chunk) - Bubty B.V. is a Netherlands-based platform supporting enterprise management of contingent workforce solutions, which advances Upwork's strategic objectives and platform for clients managing global talent[63](index=63&type=chunk) - The **$20.4 million** cash consideration has been preliminarily recorded as goodwill, and the purchase price allocation is expected to be completed in the third quarter of 2025[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 7—Commitments and Contingencies](index=18&type=section&id=Note%207%E2%80%94Commitments%20and%20Contingencies) Upwork has irrevocable letters of credit totaling **$0.3 million** as of June 30, 2025, collateralized by restricted cash. The company accrues for probable and estimable contingent liabilities but was not a party to any material legal proceedings or claims as of June 30, 2025. Upwork also enters into indemnification agreements with officers, directors, and certain clients for various claims, including worker misclassification - As of June 30, 2025, Upwork had irrevocable letters of credit outstanding in the aggregate amount of **$0.3 million**, collateralized by restricted cash[66](index=66&type=chunk) - As of June 30, 2025, the company was not a party to any material legal proceedings or claims, nor was it aware of any pending or threatened litigation that could have a material adverse effect[68](index=68&type=chunk) - Upwork provides indemnification to its officers, directors, and certain clients (especially for worker classification services) for losses arising from various claims, including intellectual property infringement and worker misclassification[69](index=69&type=chunk) [Note 8—Debt](index=19&type=section&id=Note%208%E2%80%94Debt) Upwork has **$361.0 million** aggregate principal amount of 0.25% convertible senior notes due August 15, 2026, outstanding as of June 30, 2025. These notes are senior, unsecured obligations, convertible into common stock, cash, or a combination at the company's election, with an initial conversion price of **$66.08 per share**. The company also has privately negotiated capped call transactions to reduce potential dilution from conversions, with an initial cap price of **$92.74 per share** | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Convertible senior notes | $360,998 | $360,998 | | Less: unamortized debt issuance costs | $(2,149) | $(3,070) | | Debt, noncurrent | $358,849 | $357,928 | | Weighted-average interest rate | 0.77% | 0.76% | - As of June 30, 2025, **$361.0 million** aggregate principal amount of 0.25% convertible senior notes due August 15, 2026, remained outstanding[72](index=72&type=chunk)[73](index=73&type=chunk) - The notes have an initial conversion rate of **15.1338 shares** of common stock per **$1,000 principal amount** (equivalent to approximately **$66.08 per share**) and are subject to customary adjustments[74](index=74&type=chunk) - In connection with the notes, the company entered into privately negotiated capped call transactions with an initial cap price of **$92.74 per share** to reduce potential dilution[83](index=83&type=chunk) [Note 9—Net Income per Share](index=21&type=section&id=Note%209%E2%80%94Net%20Income%20per%20Share) This note provides the computation of basic and diluted net income per share. For the three months ended June 30, 2025, basic EPS was **$0.25** and diluted EPS was **$0.24**. For the six months ended June 30, 2025, basic EPS was **$0.53** and diluted EPS was **$0.50**. Potentially dilutive shares, including options, RSUs, PSUs, and ESPP shares, were excluded if anti-dilutive | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Net income | $32,726 | $22,220 | $70,456 | $40,662 | | Diluted Net income | $33,305 | $22,866 | $71,614 | $41,954 | | Basic Weighted-average shares | 132,183,392 | 131,435,839 | 133,687,429 | 133,808,901 | | Diluted Weighted-average shares | 140,198,161 | 138,265,913 | 141,865,567 | 140,798,457 | | Basic Net income per share | $0.25 | $0.17 | $0.53 | $0.30 | | Diluted Net income per share | $0.24 | $0.17 | $0.50 | $0.30 | | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Options to purchase common stock | 1,747,494 | 1,996,063 | 1,500,000 | 1,900,265 | | Common stock issuable upon vesting of RSUs and PSUs | 8,016,737 | 12,558,255 | 7,899,176 | 12,494,595 | | Common stock issuable in connection with ESPP | 764,897 | 963,958 | 759,879 | 963,958 | | Total | 10,529,128 | 15,518,276 | 10,159,055 | 15,358,818 | [Note 10—Income Taxes](index=22&type=section&id=Note%2010%E2%80%94Income%20Taxes) Upwork's income tax provision significantly increased to **$5.7 million** for Q2 2025 and **$13.0 million** for H1 2025, compared to **$1.2 million** and **$2.5 million** in the prior year periods, respectively. This rise is primarily due to the absence of a valuation allowance on U.S. deferred tax assets in 2025, reflecting sustained profitability, and income in the U.S. offset by R&D tax credits and FDII deduction. The company is evaluating the impact of Public Law 119-21 enacted July 4, 2025, which introduces changes to U.S. tax law | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $(5,717) | $(1,181) | $(12,994) | $(2,510) | - The increase in income tax provision for 2025 is primarily due to the absence of a valuation allowance on U.S. federal and state deferred tax assets, reflecting sustained profitability, compared to the prior year[89](index=89&type=chunk)[91](index=91&type=chunk) - The company is currently evaluating the impact of Public Law 119-21, enacted July 4, 2025, which introduces changes to U.S. tax law, including **100% bonus depreciation** and the expensing of domestic research costs[93](index=93&type=chunk) [Note 11—Segment Information](index=23&type=section&id=Note%2011%E2%80%94Segment%20Information) Upwork operates as a single operating and reportable segment, as its Chief Executive Officer (CODM) reviews financial information on a consolidated basis to assess performance and allocate resources. The CODM uses consolidated net income for these purposes - Upwork operates as one operating and reportable segment, with its Chief Executive Officer serving as the Chief Operating Decision Maker (CODM)[96](index=96&type=chunk) - The CODM reviews financial information presented on a consolidated basis and uses consolidated net income to assess performance, evaluate cost optimization, and allocate resources[95](index=95&type=chunk)[96](index=96&type=chunk) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $194,939 | $193,129 | $387,645 | $384,066 | | Cost of revenue (excl. stock-based comp & D&A) | $40,470 | $41,590 | $79,672 | $83,498 | | Research and development (excl. stock-based comp & D&A) | $36,529 | $42,935 | $75,073 | $87,594 | | Sales and marketing (excl. stock-based comp & D&A) | $34,664 | $43,931 | $68,414 | $88,837 | | General and administrative (excl. stock-based comp & D&A, warrant expense, acquisition costs) | $24,446 | $22,064 | $47,386 | $47,276 | | Stock-based compensation expense | $15,977 | $19,238 | $28,249 | $36,180 | | Depreciation and amortization | $5,879 | $3,629 | $10,740 | $6,775 | | Segment net income | $32,726 | $22,220 | $70,456 | $40,662 | [Note 12—Subsequent Events](index=24&type=section&id=Note%2012%E2%80%94Subsequent%20Events) On August 5, 2025, a subsidiary of Upwork entered into a definitive agreement to acquire Ascen Inc., a tech-enabled employer of record (EOR) for contingent labor. The transaction is expected to close in the second half of 2025, and its impact on financial statements is currently being evaluated - On August 5, 2025, a subsidiary of Upwork entered into a definitive agreement to acquire 100% of the equity interest of Ascen Inc., a tech-enabled employer of record (EOR) for the contingent labor space[99](index=99&type=chunk) - The transaction is expected to close in the second half of 2025, and the company is currently evaluating its impact on the condensed consolidated financial statements[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Upwork's financial condition and operational results for the three and six months ended June 30, 2025, compared to 2024. It highlights strategic initiatives driving growth and efficiency, key financial metrics, and a detailed analysis of revenue, expenses, liquidity, and capital resources. The company achieved significant net income and Adjusted EBITDA growth despite macroeconomic headwinds, driven by cost-saving measures and monetization efforts [Overview](index=25&type=section&id=Overview) Upwork operates the world's largest human and AI-powered work marketplace that connects businesses with independent talent from across the globe, as measured by gross services volume (GSV) - Upwork operates the world's largest human and AI-powered work marketplace that connects businesses with independent talent from across the globe, as measured by gross services volume (GSV)[101](index=101&type=chunk) - Talent includes independent professionals and agencies, while clients range from independent professionals and small businesses to Fortune 100 companies[101](index=101&type=chunk) [Financial Highlights](index=25&type=section&id=Financial%20Highlights) Upwork implemented strategic initiatives that contributed to Marketplace take rate expansion and revenue growth, leading to improved net income and Adjusted EBITDA due to cost-saving measures - Upwork implemented strategic initiatives including dynamic pricing for job proposals, expanded ads and monetization products, operational efficiency, a flat talent service fee structure, a new Enterprise strategy, and continued investment in generative AI capabilities[102](index=102&type=chunk) - These strategic initiatives contributed to Marketplace take rate expansion and revenue growth in the three and six months ended June 30, 2025, despite evolving macroeconomic conditions[103](index=103&type=chunk) | Metric (In millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Marketplace revenue | $170.7 | $166.8 | $337.0 | $331.1 | | Net income | $32.7 | $22.2 | $70.5 | $40.7 | | Adjusted EBITDA | $57.1 | $40.8 | $113.1 | $74.2 | - Improvements in net income and adjusted EBITDA are primarily due to cost-saving measures implemented in recent years, including reduced investments in brand marketing, vendor spend, and workforce reductions, which are expected to continue positively impacting results throughout 2025[106](index=106&type=chunk)[107](index=107&type=chunk) [Key Financial and Operational Metrics](index=26&type=section&id=Key%20Financial%20and%20Operational%20Metrics) Gross Services Volume (GSV) declined by **1%** for both the three and six months ended June 30, 2025, while Marketplace revenue and Adjusted EBITDA showed growth | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | GSV (in thousands) | $1,002,650 | $1,008,267 | (1)% | $1,990,363 | $2,017,063 | (1)% | | Marketplace revenue (in thousands) | $170,660 | $166,786 | 2% | $336,953 | $331,116 | 2% | | Marketplace take rate | 18.5% | 18.0% | 54 bps | 18.4% | 17.9% | 54 bps | | Net income (in thousands) | $32,726 | $22,220 | 47% | $70,456 | $40,662 | 73% | | Adjusted EBITDA (in thousands) | $57,061 | $40,835 | 40% | $113,072 | $74,160 | 52% | | Metric | As of June 30, 2025 | As of June 30, 2024 | % Change | | :----- | :------------------ | :------------------ | :------- | | Active clients (in thousands) | 796 | 868 | (8)% | | GSV per active client | $5,002 | $4,745 | 5% | - GSV declined **1%** for both the three and six months ended June 30, 2025, compared to the same periods in 2024, due to macroeconomic conditions, while active clients decreased by **8%** and GSV per active client increased by **5%**[109](index=109&type=chunk)[137](index=137&type=chunk) [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA is a non-GAAP measure used by management for planning and evaluating core operating results, excluding certain non-cash or significant items, but has limitations due to excluded recurring expenses - Adjusted EBITDA is a non-GAAP measure defined as net income adjusted for stock-based compensation expense; depreciation and amortization; other income (expense), net; income tax benefit (provision); and certain other non-cash or significant isolated gains, losses, benefits, or charges[116](index=116&type=chunk) - Management uses adjusted EBITDA for planning, budgeting, and evaluating core operating results and business strategy effectiveness, believing it provides useful period-to-period comparisons and comparability with peer companies[119](index=119&type=chunk) - Limitations of adjusted EBITDA include the exclusion of significant recurring stock-based compensation expense, capital expenditure requirements, changes in working capital needs, interest expense, and tax payments[118](index=118&type=chunk) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $32,726 | $22,220 | $70,456 | $40,662 | | Stock-based compensation expense | $15,977 | $19,238 | $28,249 | $36,180 | | Depreciation and amortization | $5,879 | $3,629 | $10,740 | $6,775 | | Other income, net | $(5,878) | $(5,620) | $(12,195) | $(12,342) | | Income tax provision | $5,717 | $1,181 | $12,994 | $2,510 | | Other (warrant expense, acquisition costs) | $2,640 | $187 | $2,828 | $375 | | Adjusted EBITDA | $57,061 | $40,835 | $113,072 | $74,160 | [Components of Our Results of Operations](index=29&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section details the revenue streams from Marketplace and Enterprise services, along with the primary components of cost of revenue and operating expenses - Marketplace revenue is primarily generated from talent service fees (variable **0-15%** for new contracts, flat **10%** for older) and client marketplace fees (**5%** on transactions, or **3%** via ACH; **10%** or **8%** for Business Plus plans)[121](index=121&type=chunk)[122](index=122&type=chunk) - Enterprise revenue includes Enterprise Solutions (client fees, subscriptions, talent service fees) and Managed Services, where Upwork is deemed the principal and recognizes the entire GSV of projects as revenue[125](index=125&type=chunk)[126](index=126&type=chunk)[128](index=128&type=chunk) - Cost of revenue consists primarily of payment processing fees, amounts paid to talent for Managed Services, personnel-related costs for services and support, third-party hosting fees, and amortization of capitalized internal-use software[129](index=129&type=chunk) - Operating expenses include Research and Development (personnel costs, capitalized software), Sales and Marketing (advertising, personnel costs), General and Administrative (personnel, consulting, legal, accounting, insurance), and Provision for Transaction Losses (fraud, bad debt, chargebacks)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) The company reported total revenue of **$194.9 million** for Q2 2025 and **$387.6 million** for H1 2025, with significant increases in income from operations and net income compared to the prior year | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $194,939 | $193,129 | $387,645 | $384,066 | | Cost of revenue | $43,432 | $43,852 | $85,238 | $88,045 | | Gross profit | $151,507 | $149,277 | $302,407 | $296,021 | | Total operating expenses | $118,942 | $131,496 | $231,152 | $265,191 | | Income from operations | $32,565 | $17,781 | $71,255 | $30,830 | | Net income | $32,726 | $22,220 | $70,456 | $40,662 | | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $200 | $497 | $387 | $963 | | Research and development | $5,615 | $8,106 | $11,427 | $15,476 | | Sales and marketing | $1,674 | $3,393 | $3,175 | $6,329 | | General and administrative | $8,488 | $7,242 | $13,260 | $13,412 | | Total stock-based compensation | $15,977 | $19,238 | $28,249 | $36,180 | [Comparison of the Three and Six Months Ended June 30, 2025 and 2024](index=32&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2025, versus the prior year [Revenue](index=32&type=section&id=Revenue_2.2.7.1) Total revenue increased by **1%** for both periods, driven by Marketplace growth, while Enterprise revenue declined due to reduced client spend | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :------ | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | Marketplace | $170,660 | $166,786 | +2% | $336,953 | $331,116 | +2% | | Enterprise | $24,279 | $26,343 | (8)% | $50,692 | $52,950 | (4)% | | Total Revenue | $194,939 | $193,129 | +1% | $387,645 | $384,066 | +1% | - Total revenue increased by **1%** for both the three and six months ended June 30, 2025, compared to the same periods in 2024[138](index=138&type=chunk) - Marketplace revenue increased by **2%** due to higher revenue from ads, monetization products, and client marketplace fees, partially offset by a decrease in talent service fees resulting from the 2023 transition to a flat fee model[139](index=139&type=chunk) - Enterprise revenue decreased by **8%** and **4%** for the three and six months, respectively, primarily due to lower revenue from Managed Services as a result of reduced client spend, with further declines expected for the remainder of 2025[140](index=140&type=chunk) [Cost of Revenue and Gross Margin](index=32&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin) Cost of revenue decreased due to cost-optimization efforts, leading to a **1 percentage point** increase in gross margin to **78%** for both periods | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | Cost of revenue | $43,432 | $43,852 | (1)% | $85,238 | $88,045 | (3)% | | Total gross margin | 78% | 77% | +1 pp | 78% | 77% | +1 pp | - Cost of revenue decreased due to reductions in data center and customer support costs (**$1.1 million** and **$3.0 million**, respectively) and lower costs associated with the Upwork Professional offering (**$0.9 million** and **$2.0 million**, respectively), reflecting hosting optimization and workforce reductions[141](index=141&type=chunk)[142](index=142&type=chunk) - Gross margin increased to **78%** for both the three and six months ended June 30, 2025, primarily due to lower cost of revenue driven by cost-optimization efforts implemented in the prior year[143](index=143&type=chunk) [Research and Development](index=33&type=section&id=Research%20and%20Development_2.2.7.3) Research and development expense decreased by **15%** and **14%** for the three and six months, respectively, primarily due to workforce reductions and cost-saving measures | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | R&D expense | $44,843 | $52,465 | (15)% | $90,995 | $105,381 | (14)% | | Percentage of total revenue | 23% | 27% | -4 pp | 23% | 27% | -4 pp | - Research and development expense decreased primarily due to reductions in personnel-related costs (**$7.3 million** and **$12.8 million**, respectively) reflecting workforce reductions and other cost-saving measures implemented in 2024[145](index=145&type=chunk) - The company capitalized an additional **$1.1 million** and **$2.2 million** of internal-use software and platform development costs during the three and six months ended June 30, 2025, respectively[145](index=145&type=chunk) - Total research and development expenses are expected to decrease throughout the remainder of 2025 compared to 2024, despite ongoing innovation with a focus on generative AI[146](index=146&type=chunk) [Sales and Marketing](index=34&type=section&id=Sales%20and%20Marketing_2.2.7.4) Sales and marketing expense decreased significantly by **23%** and **24%** for the three and six months, respectively, driven by cost-optimization efforts and workforce reductions | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | S&M expense | $36,671 | $47,333 | (23)% | $72,422 | $95,184 | (24)% | | Percentage of total revenue | 19% | 25% | -6 pp | 19% | 25% | -6 pp | - Sales and marketing expense decreased significantly due to cost-optimization efforts, including a **$7.3 million** and **$16.7 million** reduction in personnel-related costs and a **$2.9 million** and **$4.8 million** decrease in marketing and advertising expense, respectively[147](index=147&type=chunk) - Sales and marketing expense is expected to continue decreasing throughout the remainder of 2025 compared to 2024, primarily due to ongoing workforce-related changes and other cost-saving initiatives[148](index=148&type=chunk) [General and Administrative](index=34&type=section&id=General%20and%20Administrative_2.2.7.5) General and administrative expense increased by **19%** for the three months and **3%** for the six months, primarily due to higher personnel-related costs and acquisition-related legal fees | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | G&A expense | $35,659 | $29,924 | +19% | $63,707 | $61,925 | +3% | | Percentage of total revenue | 18% | 15% | +3 pp | 16% | 16% | 0 pp | - General and administrative expense increased primarily due to higher personnel-related costs (**$3.8 million** and **$1.2 million**, respectively) largely from increased bonus expense based on 2025 financial performance[149](index=149&type=chunk) - Legal fees also increased (**$1.4 million** and **$1.1 million**, respectively) primarily driven by acquisition-related costs[149](index=149&type=chunk) - General and administrative expenses are expected to increase for the remainder of 2025 compared to 2024, primarily due to an increase in stock-based compensation[150](index=150&type=chunk) [Provision for Transaction Losses](index=34&type=section&id=Provision%20for%20Transaction%20Losses_2.2.7.6) The provision for transaction losses remained stable for the three months but increased by **49%** for the six months ended June 30, 2025, compared to the prior year | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | Provision for transaction losses | $1,769 | $1,774 | (0)% | $4,028 | $2,701 | +49% | | Percentage of total revenue | 0.9% | 0.9% | 0 pp | 1.0% | 0.7% | +0.3 pp | - The provision for transaction losses increased by **$1.3 million** for the six months ended June 30, 2025, compared to a lower provision in 2024 primarily due to better than expected collections during that period[151](index=151&type=chunk) - The provision for transaction losses is expected to remain at a normalized level of approximately **1% of revenue** for the remainder of 2025[151](index=151&type=chunk) [Other Income, Net](index=35&type=section&id=Other%20Income%2C%20Net_2.2.7.7) Other income, net, remained relatively consistent for both the three and six months ended June 30, 2025, compared to the same periods in 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | Other income, net | $5,878 | $5,620 | +5% | $12,195 | $12,342 | (1)% | - Other income, net, remained relatively consistent for both the three and six months ended June 30, 2025, compared to the same periods in 2024[152](index=152&type=chunk) [Income Tax Provision](index=35&type=section&id=Income%20Tax%20Provision_2.2.7.8) The income tax provision significantly increased for both periods due to the absence of a valuation allowance on U.S. deferred tax assets in 2025, reflecting sustained profitability | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $(5,717) | $(1,181) | $(12,994) | $(2,510) | | Effective tax rate | 14.9% | 5.0% | 15.6% | 5.8% | - The increase in effective tax rates for the three and six months ended June 30, 2025, was primarily driven by the absence of a valuation allowance on U.S. deferred tax assets in the current periods, which had lowered tax expense in the prior year[154](index=154&type=chunk) - The income tax provision for 2025 was primarily driven by income in the United States and non-deductible compensation, partially offset by the generation of research and development tax credits and the benefit from the Foreign-Derived Intangible Income deduction[155](index=155&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Upwork's liquidity is primarily supported by cash, cash equivalents, and marketable securities, which are believed to be sufficient for the next 12 months, though future needs depend on various business and economic factors - Upwork's principal sources of liquidity are cash and cash equivalents (**$291.1 million** as of June 30, 2025) and marketable securities (**$343.5 million** as of June 30, 2025)[156](index=156&type=chunk) - The company believes its existing cash, cash equivalents, marketable securities, and cash flow from operations will be sufficient for at least the next 12 months to meet working capital and capital expenditure requirements[157](index=157&type=chunk) - The ability to support future working capital and capital expenditure requirements depends on factors such as revenue growth, customer cash receipts, sales and marketing expansion, R&D spending, new offerings, market adoption, acquisitions, macroeconomic conditions, and financing availability[157](index=157&type=chunk) - Inability to raise additional capital on acceptable terms could materially adversely affect the company's results of operations, financial condition, and ability to achieve business objectives[158](index=158&type=chunk) [Commitments and Contingencies](index=36&type=section&id=Commitments%20and%20Contingencies_2.2.9) Upwork's primary commitments include convertible senior notes, future purchase commitments for cloud infrastructure, and operating lease obligations, with no material commitments from unconsolidated entities - Upwork's principal commitments consist of convertible senior notes, future purchase commitments for cloud infrastructure and other services, and obligations under non-cancellable operating leases for office space[159](index=159&type=chunk) - The company did not have any material commitments or obligations arising from arrangements with unconsolidated entities or persons that are reasonably likely to have a material current or future effect on its financial condition[160](index=160&type=chunk) [Notes](index=36&type=section&id=Notes_2.2.10) Assuming no conversion, repurchase, or redemption of outstanding convertible senior notes, annual interest expense will be **$1.4 million** for the remainder of 2025 and **$1.8 million** in 2026, with the **$361.0 million** principal due August 15, 2026 - Assuming the outstanding convertible senior notes are not converted, repurchased, or redeemed, annual interest expense will be **$1.4 million** for the remainder of fiscal year 2025 and **$1.8 million** in 2026, with the **$361.0 million** principal payable upon maturity on August 15, 2026[161](index=161&type=chunk) [Future Purchase Commitments for Cloud Infrastructure](index=36&type=section&id=Future%20Purchase%20Commitments%20for%20Cloud%20Infrastructure) As of June 30, 2025, Upwork had remaining non-cancellable purchase commitments of **$16.7 million** for cloud infrastructure and other services under a two-year agreement - As of June 30, 2025, Upwork had remaining non-cancellable purchase commitments of **$16.7 million** for cloud infrastructure and other services under an agreement commenced in July 2024, totaling **$40.0 million** over two years[162](index=162&type=chunk) [Operating Leases for Office Space](index=36&type=section&id=Operating%20Leases%20for%20Office%20Space) There were no material changes to the company's commitments under its office space lease agreements compared to those disclosed in its 2024 Annual Report on Form 10-K - There were no material changes to the company's commitments under its lease agreements for office space from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[163](index=163&type=chunk) [Share Repurchase Program](index=37&type=section&id=Share%20Repurchase%20Program_2.2.13) The company repurchased **5.2 million shares** for **$70.9 million** during the six months ended June 30, 2025, under a **$100.0 million** authorization, with **$29.1 million** remaining - In October 2024, the board of directors authorized a share repurchase program for up to **$100.0 million** of outstanding common stock (2024 Share Repurchase Authorization)[164](index=164&type=chunk) - During the three and six months ended June 30, 2025, the company repurchased and retired **2.9 million** and **5.2 million shares**, respectively, for an aggregate of **$37.9 million** and **$70.9 million**, at average prices of **$13.00** and **$13.52 per share**[165](index=165&type=chunk) - As of June 30, 2025, **$29.1 million** remained available for repurchases under the 2024 Share Repurchase Authorization[165](index=165&type=chunk) [Escrow Funding Requirements](index=37&type=section&id=Escrow%20Funding%20Requirements) As a licensed internet escrow agent, Upwork holds customers' escrowed and in-transit cash in trust, restricting operating cash to match shortages for hourly billings not yet collected - As a licensed internet escrow agent, Upwork is required to hold customers' escrowed cash and in-transit cash in trust as an asset and record a corresponding liability for escrow funds[167](index=167&type=chunk) - To satisfy escrow funding requirements, the company restricts its operating cash every Sunday to match the shortage of cash in trust for hourly billings not yet collected from clients[167](index=167&type=chunk) - As of June 30, 2025, funds held in escrow, including funds in transit, were **$212.0 million**, compared to **$195.7 million** at December 31, 2024[167](index=167&type=chunk) [Convertible Senior Notes Due 2026 and Capped Calls](index=37&type=section&id=Convertible%20Senior%20Notes%20Due%202026%20and%20Capped%20Calls_2.2.15) **$361.0 million** in convertible senior notes due 2026 remain outstanding, with capped call transactions in place to reduce potential dilution, subject to a cap price of **$92.74 per share** - As of June 30, 2025, **$361.0 million** aggregate principal amount of the 0.25% convertible senior notes due August 15, 2026, remained outstanding[168](index=168&type=chunk)[169](index=169&type=chunk) - The company may, from time to time, repurchase outstanding notes in the open market or through other transactions, depending on prevailing market conditions and liquidity[170](index=170&type=chunk)[171](index=171&type=chunk) - Capped call transactions are in place to generally reduce potential dilution to common stock upon conversion of the notes or offset cash payments in excess of principal, subject to a cap price of **$92.74 per share**[172](index=172&type=chunk)[173](index=173&type=chunk) [Cash Flows](index=38&type=section&id=Cash%20Flows) This section summarizes the net cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $109,479 | $54,017 | | Net cash (used in) provided by investing activities | $(56,673) | $156,529 | | Net cash used in financing activities | $(51,496) | $(101,115) | | Net change in cash, cash equivalents, and restricted cash | $1,310 | $109,431 | [Operating Activities](index=38&type=section&id=Operating%20Activities) Net cash provided by operating activities significantly increased to **$109.5 million** for the six months ended June 30, 2025, driven by net income and non-cash adjustments - Net cash provided by operating activities was **$109.5 million** for the six months ended June 30, 2025, resulting from net income of **$70.5 million**, non-cash adjustments of **$42.8 million**, and net cash outflows of **$3.8 million** from changes in operating assets and liabilities[176](index=176&type=chunk) - This represents a significant increase from **$54.0 million** provided in the prior year period[176](index=176&type=chunk)[177](index=177&type=chunk) - Primary uses of cash from operating activities include personnel-related expenditures, payment processing fees, talent payments for Managed Services, and third-party hosting costs[175](index=175&type=chunk) [Investing Activities](index=38&type=section&id=Investing%20Activities) Net cash used in investing activities was **$56.7 million** for the six months ended June 30, 2025, a shift from a net cash inflow in the prior year, primarily due to marketable securities purchases and an acquisition - Net cash used in investing activities was **$56.7 million** for the six months ended June 30, 2025, a change from **$156.5 million** provided in the prior year[178](index=178&type=chunk)[179](index=179&type=chunk) - Key outflows in 2025 included **$259.1 million** in marketable securities purchases, **$20.4 million** for the acquisition of Bubty B.V., **$8.2 million** in internal-use software development, and **$4.9 million** for property and equipment[178](index=178&type=chunk) - These outflows were partially offset by **$232.4 million** in proceeds from maturities of marketable securities and **$3.5 million** from sales[178](index=178&type=chunk) [Financing Activities](index=39&type=section&id=Financing%20Activities) Net cash used in financing activities decreased to **$51.5 million** for the six months ended June 30, 2025, primarily due to common stock repurchases, partially offset by increased escrow funds payable - Net cash used in financing activities was **$51.5 million** for the six months ended June 30, 2025, down from **$101.1 million** in the prior year[180](index=180&type=chunk)[181](index=181&type=chunk) - The primary use of cash in 2025 was **$70.9 million** for common stock repurchases, partially offset by a **$16.6 million** increase in escrow funds payable, **$2.2 million** from the employee stock purchase plan, and **$0.7 million** from stock option exercises[180](index=180&type=chunk) - In 2024, the main use was **$100.0 million** for stock repurchases and a **$4.8 million** decrease in escrow funds payable[181](index=181&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The preparation of financial statements requires management to make estimates and assumptions, with no material changes to critical accounting policies reported compared to the 2024 Annual Report on Form 10-K - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses[182](index=182&type=chunk) - An accounting policy is deemed critical if it requires estimates based on highly uncertain assumptions, if different estimates could reasonably be used, or if changes in estimates could materially impact financial statements[183](index=183&type=chunk) - No material changes to critical accounting policies and estimates were reported compared to the 2024 Annual Report on Form 10-K, except as disclosed in Note 2[184](index=184&type=chunk) [Recent Accounting Pronouncements](index=39&type=section&id=Recent%20Accounting%20Pronouncements) The company refers to Note 2 for information on recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report - The company refers to 'Note 2—Basis of Presentation and Summary of Significant Accounting Policies' for information on recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Upwork's exposure to market risks, primarily interest rate risk and foreign currency exchange rates. The company's investment portfolio is relatively insensitive to interest rate changes, and it mitigates foreign currency risk through forward contracts or secured exchange rates, resulting in immaterial impacts to date [Interest Rate Risk](index=39&type=section&id=Interest%20Rate%20Risk) Upwork's fixed-rate convertible senior notes and investment portfolio are relatively insensitive to interest rate changes, with no material impact expected from hypothetical rate fluctuations - Upwork has **$361.0 million** aggregate principal amount of fixed-rate convertible senior notes outstanding, and its investment portfolio's fair value is relatively insensitive to interest rate changes[187](index=187&type=chunk)[188](index=188&type=chunk) - The company does not believe that a hypothetical increase or decrease in interest rates of **100 basis points** would have a material impact on its operating results or financial condition[189](index=189&type=chunk) [Foreign Currency Risk](index=40&type=section&id=Foreign%20Currency%20Risk) Upwork's operating results are subject to foreign currency fluctuations, which the company mitigates through forward contracts or secured exchange rates, with immaterial impacts to date - Upwork's operating results and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, as clients can settle invoices in various non-USD currencies[190](index=190&type=chunk) - To mitigate foreign currency risk, the company may enter into forward contracts or secure foreign currency exchange rates, which have resulted in an immaterial impact on operating results to date[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Upwork's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2025, and concluded they were effective. There were no material changes to internal control over financial reportin

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Q2 2025 Performance Overview](index=1&type=section&id=Q2%202025%20Performance%20Overview) Upwork achieved record Q2 financial results, outperforming expectations with AI features and strategic acquisitions, raising full-year guidance - Upwork delivered an **exceptional second quarter**, significantly outperforming across all key financial metrics, driven by AI features[3](index=3&type=chunk) - Acquired Bubty and agreed to acquire Ascen to enhance full-stack offering for enterprise clients, targeting a **$650 billion** Enterprise TAM opportunity[2](index=2&type=chunk)[3](index=3&type=chunk) - Raised **FY2025 revenue and adjusted EBITDA guidance**, demonstrating ability to grow revenue while increasing profitability[1](index=1&type=chunk)[3](index=3&type=chunk) Q2 2025 Key Financial Highlights | Metric | Value | | :-------------------- | :------------ | | Revenue | $194.9 million | | GAAP Net Income | $32.7 million | | Profit Margin | 17% | | Adjusted EBITDA | $57.1 million | | Adjusted EBITDA Margin | 29% | [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Upwork reported robust financial growth in Q2 2025, with revenue increasing 1% year-over-year, net income surging 47%, and adjusted EBITDA up 40%, alongside significant increases in operating and free cash flow Q2 2025 Financial Highlights (YoY Change) | Metric | Q2 2025 Value | YoY Change | | :--------------------------------- | :-------------- | :--------- | | Revenue | $194.9 million | +1% | | Net income | $32.7 million | +47% | | Diluted earnings per share | $0.24 | From $0.17 | | Adjusted EBITDA | $57.1 million | +40% | | Cash provided by operating activities | $72.5 million | +85% | | Free cash flow | $65.6 million | +85% | [Second Quarter Operational Highlights](index=1&type=section&id=Second%20Quarter%20Operational%20Highlights) Upwork's Q2 2025 operational highlights demonstrate a strong focus on AI integration, enterprise expansion, and monetization strategies - Uma™ adoption increased **24% quarter-over-quarter**, with new features like instant interviews and Uma™-powered search accelerating hiring and collaboration[7](index=7&type=chunk)[13](index=13&type=chunk) - GSV from AI-related work accelerated to **30% year-over-year growth** in Q2 2025, up from **25% in Q1 2025**[13](index=13&type=chunk) - Announced acquisition of Bubty and agreement to acquire Ascen to enhance full-stack contingent work solutions for large enterprises, including access to over **250,000 AI experts**[13](index=13&type=chunk) - Continued strength in ads & monetization, with revenue increasing **17% year-over-year**[13](index=13&type=chunk) - Accelerated investments in internal AI infrastructure, including embedded AI copilots and autonomous agents, and ramped up usage of customer service AI agent Upwork Assist[13](index=13&type=chunk) [Building the World's Human and AI-Powered Work Marketplace](index=1&type=section&id=Building%20the%20World's%20Human%20and%20AI-Powered%20Work%20Marketplace) - Upwork Updates, announced July 23, included **major advancements to Uma™**, Upwork's Mindful AI, enabling it to take action on behalf of customers to accelerate hiring, collaboration, and work outcomes[5](index=5&type=chunk)[7](index=7&type=chunk) - **New features** include instant interviews, a reimagined job posting experience, Upwork Video Meetings, and Uma™-powered search[7](index=7&type=chunk) [Growing AI Work on the Marketplace](index=2&type=section&id=Growing%20AI%20Work%20on%20the%20Marketplace) - Uma™ adoption increased **24% quarter-over-quarter**[13](index=13&type=chunk) - Improved search and match capabilities drove GSV and revenue outperformance, lifting average spend per contract by **4%** and increasing Connects revenue by **3%**[13](index=13&type=chunk) - Uma™ Proposal Writer improvements led to a **58% increase** in freelancers utilizing Uma™ to submit proposals[13](index=13&type=chunk) - GSV from AI-related work accelerated to **30% year-over-year growth** in Q2 2025, compared to **25% year-over-year growth** in Q1 2025[13](index=13&type=chunk) - Clients are hiring AI specialists across **365+ different skills**, with GSV in Prompt Engineering subcategory growing **51% year-over-year**[13](index=13&type=chunk) - Average GSV per active client engaged in AI work is more than **3x larger** than average GSV per active client across the Marketplace[13](index=13&type=chunk) [Unlocking the Enterprise Opportunity](index=2&type=section&id=Unlocking%20the%20Enterprise%20Opportunity) - Announced acquisition of Bubty and agreement to acquire Ascen through Upwork's new wholly-owned Enterprise subsidiary[13](index=13&type=chunk) - Bubty is a platform for managing various contingent workforce models (independent contractors, contingent W-2 workers)[13](index=13&type=chunk) - Ascen is a digitally native solution for contingent W-2 workers with easy-to-integrate APIs[13](index=13&type=chunk) - These acquisitions provide a fully integrated, digitally native solution for a full range of contingent workforce models, sourced from Upwork's talent pool, including over **250,000 AI experts** globally[13](index=13&type=chunk) [Generating New Value through Ads & Monetization Strategies](index=2&type=section&id=Generating%20New%20Value%20through%20Ads%20%26%20Monetization%20Strategies) - Ads & monetization revenue increased **17% year-over-year**[13](index=13&type=chunk) - Freelancer Plus subscription revenue grew **13% year-over-year**[13](index=13&type=chunk) - Connects revenue grew **19% year-over-year**[13](index=13&type=chunk) - GSV from Business Plus increased **190% quarter-over-quarter**, with active clients up **45% quarter-over-quarter**[13](index=13&type=chunk) [Investing in AI Infrastructure](index=2&type=section&id=Investing%20in%20AI%20Infrastructure) - Accelerated investments in Upwork's internal AI infrastructure, such as embedded AI copilots and autonomous agents, to drive productivity and streamline operations[13](index=13&type=chunk) - Ramped up usage of customer service AI agent Upwork Assist, expanding from chat to voice channels, with a pilot program reaching over **80% adoption**[13](index=13&type=chunk) - AI now contributes to over **35% of deployed engineering code**[13](index=13&type=chunk) - Fine-tuned LLM evaluation of match quality reduced model iteration costs and cycle times by over **70% in Q2**, accelerating product releases[13](index=13&type=chunk) [Financial Guidance & Outlook](index=2&type=section&id=Financial%20Guidance%20%26%20Outlook) [Q3 2025 Guidance](index=3&type=section&id=Q3%202025%20Guidance) Upwork provided its financial guidance for the third quarter of 2025, projecting revenue between **$190 million and $195 million**, and adjusted EBITDA between **$47 million and $51 million** Q3 2025 Financial Guidance | Metric | Guidance Range | | :--------------------------------- | :----------------- | | Revenue | $190 million to $195 million | | Adjusted EBITDA | $47 million to $51 million | | Diluted weighted-average shares outstanding | 140 million to 141 million | | Non-GAAP diluted EPS | $0.26 to $0.28 | [Full Year 2025 Guidance](index=3&type=section&id=Full%20Year%202025%20Guidance) For the full year 2025, Upwork raised its guidance, expecting revenue to be between **$765 million and $775 million**, and adjusted EBITDA between **$206 million and $214 million** Full Year 2025 Financial Guidance | Metric | Guidance Range | | :--------------------------------- | :----------------- | | Revenue | $765 million to $775 million | | Adjusted EBITDA | $206 million to $214 million | | Diluted weighted-average shares outstanding | 140 million to 142 million | | Non-GAAP diluted EPS | $1.14 to $1.18 | | Stock-based compensation expense | $60 million to $65 million | [Key Financial and Operational Metrics](index=4&type=section&id=Key%20Financial%20and%20Operational%20Metrics) [Key Financial and Operational Metrics Table](index=4&type=section&id=Key%20Financial%20and%20Operational%20Metrics%20Table) This section provides a detailed overview of Upwork's key financial and operational metrics for the three and six months ended June 30, 2025, compared to the same periods in 2024, highlighting revenue, profit, and cash flow growth despite a slight decrease in GSV and active clients Key Financial and Operational Metrics (Q2 2025 vs Q2 2024 & H1 2025 vs H1 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (YoY) | H1 2025 (in thousands) | H1 2024 (in thousands) | Change (YoY) | | :--------------------------------- | :---------- | :---------- | :----------- | :---------- | :---------- | :----------- | | GSV | $1,002,650 | $1,008,267 | (0.6)% | $1,990,363 | $2,017,063 | (1.3)% | | Marketplace revenue | $170,660 | $166,786 | 2% | $336,953 | $331,116 | 2% | | Enterprise revenue | $24,279 | $26,343 | (8)% | $50,692 | $52,950 | (4)% | | Gross profit | $151,507 | $149,277 | 1% | $302,407 | $296,021 | 2% | | Gross profit margin | 78% | 77% | 43 bps | 78% | 77% | 94 bps | | Operating expenses | $118,942 | $131,496 | (10)% | $231,152 | $265,191 | (13)% | | Net income | $32,726 | $22,220 | 47% | $70,456 | $40,662 | 73% | | Adjusted EBITDA | $57,061 | $40,835 | 40% | $113,072 | $74,160 | 52% | | Profit margin | 17% | 12% | 528 bps | 18% | 11% | 759 bps | | Adjusted EBITDA margin | 29% | 21% | 813 bps | 29% | 19% | 986 bps | | Cash provided by operating activities | $72,514 | $39,203 | 85% | $109,479 | $54,017 | 103% | | Free cash flow | $65,626 | $35,456 | 85% | $96,416 | $47,605 | 103% | | Active clients (as of June 30) | 796 | 868 | (8)% | | | | [Company Information & Disclosures](index=4&type=section&id=Company%20Information%20%26%20Disclosures) [Second Quarter 2025 Financial Results Conference Call and Webcast](index=4&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Conference%20Call%20and%20Webcast) Upwork hosted a conference call on August 6, 2025, to discuss its second quarter 2025 financial results, with an audio webcast archive available for approximately one year on the company's investor relations website - Conference call held on **August 6, 2025**, at **2:00 p.m. Pacific Time/5:00 p.m. Eastern Time**[17](index=17&type=chunk) - Audio webcast archive available at investors.upwork.com for approximately **one year**[17](index=17&type=chunk) [Disclosure Information](index=4&type=section&id=Disclosure%20Information) Upwork utilizes its Investor Relations website, blog, X (formerly Twitter) handles, and LinkedIn profiles as official channels for disseminating news, announcements, and material nonpublic information, ensuring compliance with Regulation FD - Official disclosure channels include investors.upwork.com, upwork.com/blog, X handles (@Upwork, @hydnbrwn), and LinkedIn profiles (Hayden Brown, Erica Gessert)[18](index=18&type=chunk) [About Upwork](index=4&type=section&id=About%20Upwork) Upwork is the world's largest work marketplace, connecting businesses with highly skilled, AI-enabled independent talent globally, facilitating over $25 billion in economic opportunity - Upwork is the world's largest work marketplace connecting businesses with highly skilled, AI-enabled independent talent[19](index=19&type=chunk) - The platform offers on-demand access to professionals across more than **10,000 skills**, including AI & machine learning, software development, and sales & marketing[19](index=19&type=chunk) - Upwork's platform has facilitated over **$25 billion** in economic opportunity for talent worldwide[20](index=20&type=chunk) [Safe Harbor Statement](index=5&type=section&id=Safe%20Harbor%20Statement) This section contains forward-looking statements, subject to inherent uncertainties and risks, with actual results potentially differing materially - The press release contains "forward-looking" statements regarding future operating results, financial position, business strategy, and anticipated events[20](index=20&type=chunk) - These statements are based on current expectations and projections but are subject to inherent uncertainties, known and unknown risks, and changes in circumstances outside the company's control[21](index=21&type=chunk) - Upwork does not undertake any obligation to update or revise forward-looking statements, and actual results may differ materially and adversely from expectations[21](index=21&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Upwork's condensed consolidated statements of operations for Q2 2025 show total revenue of **$194.9 million**, with Marketplace revenue growing **2% year-over-year**, gross profit of **$151.5 million**, and net income significantly increasing to **$32.7 million** Condensed Consolidated Statements of Operations (Q2 2025 vs Q2 2024 & H1 2025 vs H1 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Marketplace revenue | $170,660 | $166,786 | $336,953 | $331,116 | | Enterprise revenue | $24,279 | $26,343 | $50,692 | $52,950 | | Total revenue | $194,939 | $193,129 | $387,645 | $384,066 | | Cost of revenue | $43,432 | $43,852 | $85,238 | $88,045 | | Gross profit | $151,507 | $149,277 | $302,407 | $296,021 | | Total operating expenses | $118,942 | $131,496 | $231,152 | $265,191 | | Income from operations | $32,565 | $17,781 | $71,255 | $30,830 | | Net income | $32,726 | $22,220 | $70,456 | $40,662 | | Diluted EPS | $0.24 | $0.17 | $0.50 | $0.30 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Upwork reported total assets of **$1.26 billion**, an increase from **$1.21 billion** at December 31, 2024, with current assets at **$939.0 million**, total liabilities at **$653.1 million**, and total stockholders' equity increasing to **$608.7 million** Condensed Consolidated Balance Sheets (as of June 30, 2025 vs December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $291,070 | $305,757 | | Marketable securities | $343,509 | $316,344 | | Funds held in escrow | $212,033 | $195,736 | | Total current assets | $938,983 | $911,054 | | Total assets | $1,261,716 | $1,211,613 | | Escrow funds payable | $212,033 | $195,736 | | Total current liabilities | $279,624 | $268,433 | | Total liabilities | $653,062 | $636,236 | | Total stockholders' equity | $608,654 | $575,377 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q2 2025, Upwork generated **$72.5 million** in cash from operating activities, an **85% increase year-over-year**, with investing activities resulting in a net cash inflow of **$150.4 million**, and financing activities using **$35.7 million**, leading to a net increase of **$153.9 million** in cash, cash equivalents, and restricted cash Condensed Consolidated Statements of Cash Flows (Q2 2025 vs Q2 2024 & H1 2025 vs H1 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income | $32,726 | $22,220 | $70,456 | $40,662 | | Net cash provided by operating activities | $72,514 | $39,203 | $109,479 | $54,017 | | Net cash (used in) provided by investing activities | $150,389 | $(51,450) | $(56,673) | $156,529 | | Net cash (used in) financing activities | $(35,737) | $(38,352) | $(51,496) | $(101,115) | | Net change in cash, cash equivalents, and restricted cash | $153,855 | $(17,288) | $1,310 | $109,431 | | Cash, cash equivalents, and restricted cash—end of period | $506,903 | $405,849 | $506,903 | $405,849 | [Non-GAAP Financial Measures Reconciliation](index=11&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) [Explanation of Non-GAAP Measures](index=11&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Upwork presents non-GAAP measures for internal evaluation and peer comparison, cautioning investors on their limitations - Non-GAAP financial measures presented include adjusted EBITDA, adjusted EBITDA margin, free cash flow, and non-GAAP diluted EPS[31](index=31&type=chunk) - Adjusted EBITDA is defined as net income adjusted for stock-based compensation, depreciation and amortization, other income (expense) net, income tax, and certain other non-cash or isolated items[32](index=32&type=chunk) - Free cash flow is defined as cash provided by operations less purchases of property, plant and equipment and cash outflows from internally developed software[32](index=32&type=chunk) - Investors are cautioned about material limitations of non-GAAP measures and should not consider them in isolation or as a substitute for GAAP measures[34](index=34&type=chunk) - Reconciliation of adjusted EBITDA guidance to GAAP net income and non-GAAP diluted EPS guidance to GAAP diluted EPS is not provided due to the uncertainty and unpredictability of certain items like stock-based compensation expense[35](index=35&type=chunk) [Reconciliation of GAAP to Non-GAAP Results](index=12&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Results) This section provides detailed reconciliations of GAAP net income to Adjusted EBITDA and other non-GAAP metrics, showing adjustments for specific items for the three and six months ended June 30, 2025 and 2024 Reconciliation of GAAP Net Income to Adjusted EBITDA (Q2 2025 vs Q2 2024 & H1 2025 vs H1 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income (GAAP) | $32,726 | $22,220 | $70,456 | $40,662 | | Stock-based compensation expense | $15,977 | $19,238 | $28,249 | $36,180 | | Depreciation and amortization | $5,879 | $3,629 | $10,740 | $6,775 | | Other income, net | $(5,878) | $(5,620) | $(12,195) | $(12,342) | | Income tax provision | $5,717 | $1,181 | $12,994 | $2,510 | | Other (Tides Foundation Warrant, acquisition costs) | $2,640 | $187 | $2,828 | $375 | | **Adjusted EBITDA** | **$57,061** | **$40,835** | **$113,072** | **$74,160** | | Profit margin | 17% | 12% | 18% | 11% | | Adjusted EBITDA margin | 29% | 21% | 29% | 19% | | Diluted EPS (GAAP) | $0.24 | $0.17 | $0.50 | $0.30 | | Diluted EPS (Non-GAAP) | $0.35 | $0.26 | $0.69 | $0.48 | [Reconciliation of Cash Provided by Operating Activities to Free Cash Flow](index=14&type=section&id=Reconciliation%20of%20Cash%20Provided%20by%20Operating%20Activities%20to%20Free%20Cash%20Flow) Upwork's free cash flow for Q2 2025 was **$65.6 million**, calculated by subtracting capital expenditures and internally developed software cash outflows from operating cash flow Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Q2 2025 vs Q2 2024 & H1 2025 vs H1 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Cash provided by operating activities | $72,514 | $39,203 | $109,479 | $54,017 | | Less: purchases of property, plant & equipment and cash outflows from internally developed software | $(6,888) | $(3,747) | $(13,063) | $(6,412) | | **Free cash flow** | **$65,626** | **$35,456** | **$96,416** | **$47,605** |

Strategic Acquisition - Upwork is acquiring a company to expand its presence in corporate staffing beyond freelancers [1] Industry Focus - The tech industry is observing Upwork's move into broader corporate staffing solutions [1]

Financial Performance - Company achieved record revenue of $194.9 million in Q2 2025, representing a 1% year-over-year growth [6][26] - GAAP net income reached $32.7 million, up 47% year-over-year, with a diluted earnings per share of $0.24 compared to $0.17 in Q2 2024 [6][26] - Adjusted EBITDA was $57.1 million, reflecting a 40% year-over-year increase and a 29% adjusted EBITDA margin [6][26] Operational Highlights - Active clients totaled 796,000, with a Gross Services Volume (GSV) per active client of $5,002, which increased by 5% year-over-year [6][26] - The company announced the acquisition of Bubty and an agreement to acquire Ascen, enhancing its offerings for large enterprises [6][10] - AI-related work GSV accelerated to 30% year-over-year growth in Q2 2025, compared to 25% in Q1 2025 [10][6] Strategic Initiatives - The acquisitions of Bubty and Ascen are expected to position the company to capitalize on a $650 billion Enterprise Total Addressable Market (TAM) opportunity [6][10] - Continued strength in advertising and monetization strategies, with revenue increasing 17% year-over-year [10] - Investments in AI infrastructure are ramping up, with AI now contributing to over 35% of deployed engineering code [10][6] Financial Guidance - The company raised its full-year guidance for both revenue and adjusted EBITDA, projecting revenue between $765 million to $775 million and adjusted EBITDA between $206 million to $214 million for FY 2025 [10][6] - Guidance for Q3 2025 includes revenue of $190 million to $195 million and adjusted EBITDA of $47 million to $51 million [10][6]