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 Data and Key Metrics Changes - Revenue for Q1 2025 was $192.7 million, exceeding guidance and representing a 1% year-over-year growth [7][21] - Adjusted EBITDA reached a record high of $56 million, with an adjusted EBITDA margin of 29%, the highest ever for the company [8][23] - Gross margin was reported at 78.3%, reflecting disciplined cost management [18][22] - GAAP net income for Q1 was $37.7 million, a 105% increase compared to Q1 2024 [23] - Free cash flow for the quarter was $30.8 million, with $33.1 million used for share buybacks [23] Business Line Data and Key Metrics Changes - The core marketplace saw Gross Services Volume (GSV) of $988 million, with GSV per active client increasing by 3% year-over-year [19] - Enterprise revenue was $26.4 million, relatively flat year-over-year, while managed services revenue grew by 3% to $15.3 million [21] - Business Plus, a premium offering, saw active clients more than double quarter-over-quarter, with approximately 40% being new customers [14][15] Market Data and Key Metrics Changes - GSV per active client in the large client segment grew by 11% year-over-year [20] - The marketplace take rate increased to 18.3% in Q1 2025 from 17.7% in Q1 2024, driven by growth in ads and monetization [22] Company Strategy and Development Direction - The company is focusing on AI integration, with 80,000 AI specialists on the platform and investments in Ooma, an AI-driven tool to enhance customer experience [11][12] - The strategy includes unlocking spend from larger clients and enhancing the Business Plus offering to attract high-value customers [16][56] - The company is committed to achieving a 35% adjusted EBITDA margin target over five years and is increasing its full-year adjusted EBITDA guidance for 2025 [19][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience despite macroeconomic pressures, noting that customer spend dynamics improved in Q1 [32][34] - The company anticipates reacceleration of GSV growth in 2026, driven by AI-related investments and enterprise strategies [81] - Management acknowledged slight macro headwinds affecting customer activity but emphasized the essential nature of the work being done on the platform [70][96] Other Important Information - The company has a $100 million buyback authorization, with approximately $67 million remaining at the end of Q1 [26] - Stock-based compensation is expected to be between $60 million and $65 million for the year, with proactive steps taken to reduce expenses [26] Q&A Session Summary Question: Broader economy impact on guidance - Management noted that customer spend dynamics improved in Q1, driven by product enhancements, but slight macro headwinds were also observed [32][33] Question: AI as a driver for client growth and pricing - AI-related work is commanding a 40% premium in freelancer earnings, driving new client acquisition and increased volumes [35][36] Question: Growth in larger customers - The growth in larger customer spend is attributed to strategic efforts to unlock spending from this segment, with positive early signs from Business Plus [40][42] Question: Search and recommendation enhancements - New features in semantic search and client dashboard enhancements are positively impacting client metrics [49][51] Question: Business Plus client onboarding - Business Plus is attracting larger customers with features like enterprise-vetted talent and special shortlisting capabilities [56][57] Question: Top of funnel pressures - Active client numbers are affected by broader organic channels, with no significant impact from AI [65][66] Question: Tariff and macro impacts - No significant impact from tariffs or public sector job releases was observed, with a diverse client base contributing to resilience [75][76] Question: Ooma's impact on GSV growth - Early indicators show that Ooma is contributing to GSV gains, with confidence in its role for future acceleration [102] Question: Margin guidance and investments - Guidance reflects plans to invest in growth opportunities, particularly in AI and enterprise strategies [90][91]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $192.7 million, exceeding guidance and representing a 1% year-over-year growth [6][15][18] - Adjusted EBITDA reached a record high of $56 million, with an adjusted EBITDA margin of 29%, the highest ever for the company [6][15][20] - Gross margin was reported at 78.3%, reflecting disciplined cost management [15][20] - GAAP net income was $37.7 million, a 105% increase compared to Q1 2024 [20] - Free cash flow for the quarter was $30.8 million [20] Business Line Data and Key Metrics Changes - The core marketplace saw Gross Services Volume (GSV) of $988 million, with average GSV per active client increasing by 3% year-over-year [16][18] - GSV per active client in the large client segment grew by 11% year-over-year [17] - Managed services revenue grew by 3% year-over-year to $15.3 million [18] Market Data and Key Metrics Changes - Active client count experienced pressure, but client activations increased quarter-over-quarter for the first time in over a year [17] - Enterprise revenue was relatively flat at $26.4 million year-over-year due to a shift in focus towards Business Plus [18] Company Strategy and Development Direction - The company is focusing on AI integration, with 80,000 AI specialists on the platform and investments in AI features driving customer engagement [9][10] - Business Plus, aimed at larger clients, has seen active clients more than double quarter-over-quarter, indicating strong demand [12] - The enterprise strategy is evolving to capture a greater share of traditional contingent staffing budgets [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience despite macroeconomic pressures, highlighting strong customer spend dynamics [30][32] - The company reiterated its revenue guidance for 2025 and increased adjusted EBITDA guidance, reflecting optimism about future growth opportunities [21][23] - Management noted that 2025 will focus on market share gains while growing profitability and free cash flow [14] Other Important Information - The company is committed to a $100 million buyback authorization, with approximately $67 million remaining at the end of Q1 [24] - Stock-based compensation is expected to be between $60 million and $65 million for the year [24] Q&A Session Summary Question: Broader economy impact on guidance - Management noted slight macro headwinds affecting customer activity but emphasized strong customer spend dynamics driven by product improvements [30][31] Question: AI as a driver for client growth and pricing - AI-related work is commanding a 40% premium in freelancer earnings, contributing to new client acquisition and increased volumes [34][35] Question: Growth in larger customers - The growth in larger customer spend is attributed to strategic efforts to unlock spending from this segment, with positive early signs from Business Plus [39][41] Question: Search and recommendation enhancements - Recent enhancements include semantic search and a new recommendation experience, positively impacting client metrics [46][48] Question: Top of funnel pressures - Active client numbers reflect broader organic demand pressures, with no significant impact from AI [62][64] Question: Tariff and macro exposure - Management confirmed no direct impact from tariffs or public sector job releases, highlighting the diversity of the client base [72][74] Question: Ooma's impact on GSV growth - Early indicators suggest Ooma is contributing to GSV gains, with confidence in its role for future acceleration [102][103]