Core Insights - Upwork is optimistic about its future, emphasizing the excitement for customers, employees, and shareholders [1] Group 1: Company Overview - The company is hosting its 2025 Investor Day to discuss significant opportunities and strategies for long-term shareholder value [2] - The CFO highlights the importance of the event and the positive outlook for the company [1] Group 2: Forward-Looking Statements - The company will be making forward-looking statements during the event, which are subject to various risks and uncertainties [2] - Non-GAAP financial measures will be shared, with reconciliations provided in the presentation materials [2]

Core Insights - The freelance market in the US is a $1.5 trillion ecosystem, with 28% of knowledge workers engaged in contingent or flexible work [2][3] - Gig work represents a small fraction of this market, primarily consisting of small transactional projects, with projects under $300 accounting for only about 5% of total spend [3] - Freelancing is increasingly seen as a choice for workers seeking flexibility and control over their careers, with 53% of Gen Z knowledge workers opting for freelance work [6] Company Performance - Upwork's gross services volume (GSV) from AI-related work increased by 53% year-over-year in the third quarter, indicating strong demand for AI expertise [7][13] - The company has 250,000 AI experts on its platform, positioning itself as a resource for businesses lacking in-house AI skills [9] - Upwork's GSV growth turned positive, showing a 2% year-over-year increase, with expectations for further improvement in 2026 due to strategic initiatives [10][14] Market Trends - A significant challenge for businesses is the high failure rate of AI pilots, with 95% reported to be unsuccessful, leading them to seek external talent [8] - The rise of AI is creating a need for flexible or contingent workers to complement AI technologies, contributing to the growth of the AI work category [12][13] - Upwork's new business plus offering for small and medium-sized businesses (SMBs) grew by 33% in the quarter, reflecting a positive trend in the SMB market [14]

Financial Data and Key Metrics Changes - In Q3 2025, Upwork achieved a record revenue of $201.7 million, marking the first time quarterly revenue exceeded $200 million [5][18] - GAAP net income for Q3 was $29.3 million, a 6% increase compared to Q3 2024 [18] - Adjusted EBITDA reached an all-time high of $59.6 million, with an adjusted EBITDA margin of 29.6% [6][18] - Free cash flow for Q3 was a record $69.4 million, with cash, cash equivalents, and marketable securities totaling approximately $643 million at the end of the quarter [18] Business Line Data and Key Metrics Changes - Gross Services Volume (GSV) for Q3 was $1.02 billion, reflecting a 2% year-over-year growth, driven by both marketplace and enterprise businesses [13][18] - Average GSV per active client rose 5% year-over-year, remaining over $5,000, indicating success in attracting high-value relationships [13] - Marketplace revenue grew 4% year-over-year, while enterprise revenue increased by 3% year-over-year [15][16] Market Data and Key Metrics Changes - The number of clients engaging in AI-related projects increased by 45% year-over-year, with GSV from AI-related work growing 53% year-over-year [10][18] - The AI-enabled talent base on Upwork expanded by 41% compared to the previous year [10] Company Strategy and Development Direction - Upwork is transforming its marketplace into an AI-native platform, with significant enhancements to its AI tools, such as UMA, which has improved client and talent interactions [8][9] - The launch of the new subsidiary, Lyft, aims to unlock the $650 billion contingent work market by providing comprehensive talent sourcing and workforce management solutions [11][12] - The company is focusing on deepening its reach with small and medium-sized businesses (SMBs) through tailored offerings like Upwork Business Plus, which saw a 36% quarter-over-quarter growth in active clients [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued GSV growth, particularly in the AI category, and expects acceleration in this metric in 2026 [5][10] - The company anticipates that the integration of acquired assets will enhance its enterprise offering and contribute to significant GSV growth starting in the latter half of 2026 [24][25] - Management reiterated a long-term adjusted EBITDA margin target of 35%, despite expected dilution from investments in Lyft [39] Other Important Information - Upwork is increasing its full-year revenue guidance to a range of $782-$787 million, primarily due to the strength of its marketplace business [19] - The company is also increasing its full-year adjusted EBITDA guidance to a range of $222-$225 million, representing a more than six-point margin expansion versus 2024 [19] Q&A Session Summary Question: Integration of acquired assets and enterprise offering outlook - Management noted strong early indicators from the integration of acquired assets, with increased interest from both new and existing customers, and expects significant GSV growth impact from the Lyft strategy starting in late 2026 [24][25] Question: Drivers of AI-related GSV acceleration - The primary driver of the $100 million incremental GSV was the rebuilding of the search and recommendation stack, leveraging technology from recent acquisitions [28] Question: Broader macro backdrop and freelancer demand - The macro environment has remained stable, with GSV growth driven by successful AI and SMB initiatives, and management sees further opportunities for GSV growth [34] Question: Variable freelance fee testing and UMA proposal writer - Dynamic pricing is still in early stages, with minimal contribution in Q3, while UMA's proposal writer has improved conversion rates, enhancing the overall marketplace experience [62][66]

Core Thesis - Upwork Inc. is viewed positively due to its operational performance, margin expansion, and strategic initiatives, despite limited market attention [2][5][6] Financial Performance - As of September 30th, Upwork's share price was $18.57, with trailing and forward P/E ratios of 11.13 and 14.39 respectively [1] - The company has achieved a revenue growth rate of 22% CAGR over the past three years, although the most recent quarter showed negligible year-over-year growth [2] - Adjusted EBITDA margins improved significantly from 11% in FY2024 to 22%, with Q2 2025 margins reaching approximately 29%, and management targeting 35% in the near term [3] Strategic Initiatives - Upwork's strategy focuses on advertising/monetization, enterprise solutions, and AI-driven initiatives, all of which are performing well [4] - The enterprise segment is particularly promising, with recent acquisitions and a new subsidiary aimed at large clients, positioning Upwork to capture enterprise staffing demand [4] Investment Opportunity - Even without a significant revenue rebound, the margin expansion provides a strong investment case, indicating a resilient free cash flow profile [5] - The current valuation reflects muted growth expectations, suggesting a favorable risk/reward dynamic for investors [4][5] - Upwork presents a compelling opportunity for investors seeking operational efficiency, undervaluation, and potential for future growth [5][6]

Core Insights - The article discusses the undervaluation of certain growth stocks within the gig economy, highlighting that investor sentiment is currently bearish due to perceived risks associated with artificial intelligence [1] Group 1 - The comparison focuses on identifying which of the gig economy platforms represents a better investment opportunity despite their undervaluation [1] - Investor concerns are primarily driven by the potential impact of artificial intelligence on these platforms, leading to a cautious outlook [1] - Stock prices referenced are from the afternoon of October 8, 2025, indicating a specific timeframe for the analysis [1]

Core Viewpoint - Fiverr is restructuring to focus on artificial intelligence (AI), resulting in the layoff of 250 employees across various departments [1][3]. Company Strategy - The CEO emphasized the need to accelerate AI integration in all aspects of the business, including coding, marketing, and customer care [2][3]. - Fiverr aims to build a modern, AI-focused infrastructure from the ground up, adopting a startup mentality with speed, agility, and a flatter organizational structure [3][4]. Financial Performance - Fiverr reported a nearly 15% year-over-year increase in revenue, attributed to a surge in demand for AI-related services, such as AI agents and workflow automation [4][5]. - The company reiterated its guidance for the third quarter and the fiscal year, indicating stability in business activities despite the restructuring [4]. Market Position - Fiverr's platform is increasingly relevant as the labor market evolves and AI blurs the lines between products and services, with millions of businesses relying on it to remain competitive [4]. - The company recognizes larger opportunities in AI applications, enterprise budgets, and long-term projects that have yet to be fully explored [4]. Industry Trends - The integration of AI is fundamentally changing interactions between humans and machines, enabling non-technical entrepreneurs to leverage technology effectively [5]. - Fiverr's freelancers play a crucial role in bridging the gap between available AI tools and the real-world problems faced by customers [5].

Core Viewpoint - Upwork Inc. has initiated a $100 million stock buyback program, indicating that the current stock price may be undervalued and that management anticipates further growth potential [2][12]. Financial Performance - Upwork reported a record second quarter with net revenue of $194.9 million, driven by an increase in connections between businesses and labor opportunities [7]. - Free cash flow increased significantly to $65.6 million from $35.5 million year-over-year, enabling reinvestment in growth and shareholder benefits [11]. Market Position and Growth Potential - Upwork has 796,000 active clients, positioning the company well to meet the anticipated demand during the employment rebound in the U.S. [8]. - Recent acquisitions of Bubty and Ascen are expected to expand Upwork's market reach into a total addressable market (TAM) of $650 billion [9]. Future Outlook - Analysts have set a 12-month stock price forecast for Upwork at $18.67, representing a 9.77% upside from the current price of $17.01 [9]. - Management has raised guidance figures for the remainder of 2025, suggesting additional upside potential not yet reflected in the stock price [10]. Investment Efficiency - The company has a return on invested capital rate of 24.9% over the past 12 months, indicating strong compounding potential for the $100 million buyback program [13].

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]

Core Insights - Demand for workers with artificial intelligence skills significantly boosted Fiverr's performance in the second quarter, leading to a nearly 15% year-over-year revenue increase [2][3] Company Performance - Fiverr reported a revenue increase of nearly 15% year-over-year, attributed to a "surging demand" for AI-related services, particularly in AI agents and workflow automation [2] - The company's marketplace business experienced a 2% dip in revenue during the quarter [4] AI Integration and Workforce Dynamics - CEO Micha Kaufman highlighted that AI is transforming human-machine interactions, enabling non-technical entrepreneurs to utilize technology effectively [3] - Fiverr's freelancers are described as "AI native," often ahead of full-time workers in adopting new technologies, which enhances their work outputs [4] Market Strategy and Future Outlook - The company is focusing on AI and targeting high-value buyers to mitigate exposure to economically vulnerable segments [5] - Despite the positive outlook regarding AI integration, the company remains cautious about incorporating these expectations into future guidance due to macroeconomic uncertainties [5] Human Oversight in AI Applications - Research indicates that human oversight is essential in AI tasks, with oversight needed 60% to 100% of the time in goods and services companies, and 50% to 100% for more routine functions like email summaries [6]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $108.6 million, representing a 15% year-over-year growth [14] - Adjusted EBITDA for Q2 was $21.4 million, with an adjusted EBITDA margin of 20%, an improvement of 80 basis points from the previous year [14] - Free cash flow totaled $25 million, up 21% year-over-year [14] Business Line Data and Key Metrics Changes - Marketplace revenue was $74.7 million, driven by 3.4 million active buyers and a spend per buyer of $318 [15] - Services revenue reached $34 million, representing a year-over-year growth of 8431% [16] - Over 50% of GMV on the Marketplace came from transactions over $200, indicating a shift towards larger, more complex projects [16] Market Data and Key Metrics Changes - Strong demand for AI-related services was noted, with categories such as AI agents and workflow automation experiencing five to tenfold growth over the past six months [6][75] - The company is seeing robust growth in key verticals such as programming and tech, digital marketing, and video animation [5][64] Company Strategy and Development Direction - The company is focused on leveraging AI to enhance its marketplace, with plans to integrate Fiverr's talent network into AI-driven workflows [9] - Fiverr aims to expand its value-added services and maintain a balanced approach between growth and profitability [15] - The company is committed to reaching a 25% adjusted EBITDA margin by 2027 and achieving a 40% CAGR in free cash generation for the three years ending in 2027 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the structural tailwinds within the marketplace segment, particularly around AI and upmarket adoption, which are expected to offset broader economic headwinds [16] - The company reiterated its revenue and adjusted EBITDA guidance for the full year 2025, expecting revenue to be in the range of $425 million to $438 million [17] Other Important Information - The company is actively exploring strategic partnerships to enhance its AI capabilities and improve customer experiences [58] - Fiverr Go, an AI assistant for freelancers, has shown strong engagement and conversion uplift [12] Q&A Session Summary Question: What key investments are needed to unlock continued scaling of service revenue? - Management expects service revenue to continue growing at a healthy double-digit rate, driven by value-added services and synergies between AutoDS and Fiverr [23] Question: Can you elaborate on the managed services offering and the progress in upmarket strategy? - Managed services are part of the upmarket strategy, with over 50% of business coming from transactions over $200, indicating a shift towards more sophisticated customer needs [28] Question: How is the balance of supply and demand in the marketplace? - The company is in a good position regarding supply and demand, with AI-native freelancers enhancing service offerings [36] Question: What is the outlook for marketplace growth? - Management believes that efforts around AI and upmarket strategies will lead to growth, even without macroeconomic improvements [38] Question: How does AI impact entry-level jobs and demand for Fiverr services? - AI is elevating the capabilities of entry-level workers, allowing them to perform more complex tasks, which benefits Fiverr's service offerings [42] Question: Can you provide insights on the mix of recurring versus transactional revenue in services? - Services revenue is primarily from promoted gigs, Seller Plus, and AutoDS, with ongoing momentum in all areas [46] Question: What is the visibility on marketplace growth and the mix shift between complex and simple services? - Management is optimistic that the mix shift towards complex services will eventually lead to marketplace growth, despite current macroeconomic conditions [54]