Upwork(UPWK) - 2025 Q2 - Quarterly Results

Executive Summary Q2 2025 Performance Overview 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] - Acquired Bubty and agreed to acquire Ascen to enhance full-stack offering for enterprise clients, targeting a $650 billion Enterprise TAM opportunity[2][3] - Raised FY2025 revenue and adjusted EBITDA guidance, demonstrating ability to grow revenue while increasing profitability[1][3] 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 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 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][13] - GSV from AI-related work accelerated to 30% year-over-year growth in Q2 2025, up from 25% in Q1 2025[13] - 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] - Continued strength in ads & monetization, with revenue increasing 17% year-over-year[13] - 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] Building the World's Human and AI-Powered Work Marketplace - 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][7] - New features include instant interviews, a reimagined job posting experience, Upwork Video Meetings, and Uma™-powered search[7] Growing AI Work on the Marketplace - Uma™ adoption increased 24% quarter-over-quarter[13] - Improved search and match capabilities drove GSV and revenue outperformance, lifting average spend per contract by 4% and increasing Connects revenue by 3%[13] - Uma™ Proposal Writer improvements led to a 58% increase in freelancers utilizing Uma™ to submit proposals[13] - 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] - Clients are hiring AI specialists across 365+ different skills, with GSV in Prompt Engineering subcategory growing 51% year-over-year[13] - Average GSV per active client engaged in AI work is more than 3x larger than average GSV per active client across the Marketplace[13] Unlocking the Enterprise Opportunity - Announced acquisition of Bubty and agreement to acquire Ascen through Upwork's new wholly-owned Enterprise subsidiary[13] - Bubty is a platform for managing various contingent workforce models (independent contractors, contingent W-2 workers)[13] - Ascen is a digitally native solution for contingent W-2 workers with easy-to-integrate APIs[13] - 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] Generating New Value through Ads & Monetization Strategies - Ads & monetization revenue increased 17% year-over-year[13] - Freelancer Plus subscription revenue grew 13% year-over-year[13] - Connects revenue grew 19% year-over-year[13] - GSV from Business Plus increased 190% quarter-over-quarter, with active clients up 45% quarter-over-quarter[13] Investing in AI Infrastructure - Accelerated investments in Upwork's internal AI infrastructure, such as embedded AI copilots and autonomous agents, to drive productivity and streamline operations[13] - 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] - AI now contributes to over 35% of deployed engineering code[13] - Fine-tuned LLM evaluation of match quality reduced model iteration costs and cycle times by over 70% in Q2, accelerating product releases[13] Financial Guidance & Outlook Q3 2025 Guidance 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 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 Key Financial and Operational Metrics Table 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 Second Quarter 2025 Financial Results Conference Call and Webcast 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] - Audio webcast archive available at investors.upwork.com for approximately one year[17] Disclosure Information 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] About Upwork 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] - The platform offers on-demand access to professionals across more than 10,000 skills, including AI & machine learning, software development, and sales & marketing[19] - Upwork's platform has facilitated over $25 billion in economic opportunity for talent worldwide[20] Safe Harbor Statement 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] - 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] - Upwork does not undertake any obligation to update or revise forward-looking statements, and actual results may differ materially and adversely from expectations[21] Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations 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 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 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 Explanation of Non-GAAP Measures 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] - 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] - 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] - 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] - 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] Reconciliation of GAAP to Non-GAAP Results 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 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 |