Core Insights - Upwork's third quarter results showed a significant positive market reaction, indicating successful growth strategies after previous challenges [1] - Key contributors to growth included new AI-powered platform features and increased adoption of Upwork Business Plus by small and midsize businesses [1] - CEO Hayden Brown described the quarter as a turning point, highlighting visible payoffs from the company's strategy [1] Financial Performance - Revenue reached $201.7 million, exceeding analyst estimates of $193.4 million, representing a 4.1% year-on-year growth [6] - Adjusted EPS was $0.36, beating analyst estimates of $0.29 by 25.9% [6] - Adjusted EBITDA was $59.63 million, surpassing analyst estimates of $50.12 million, with a margin of 29.6% [6] - Revenue guidance for Q4 CY2025 is set at $195.5 million, above analyst estimates of $192.2 million [6] - Full-year Adjusted EPS guidance was raised to $1.36, reflecting a 17.2% increase [6] - EBITDA guidance for the full year is $223.5 million, above analyst estimates of $212.7 million [6] - Operating margin improved to 14.8%, up from 10.7% in the same quarter last year [6] - Gross services volume was reported at 794,000, down 61,000 year on year [6] - Market capitalization stands at $2.28 billion [6] Analyst Insights - Eric Sheridan from Goldman Sachs inquired about the integration of enterprise acquisitions, with CEO Brown noting strong early demand but indicating that large deals will take several quarters to close [6] - Sang-Jin Byun from Jefferies asked about the acceleration of AI-related gross services volume, with Brown attributing it to platform improvements and new AI features [6] - Matthew Condon from Citizens sought clarity on freelancer demand trends, with Brown stating that GSV growth is due to internal execution and AI workflow expansion [6] - Marvin Fong from BTIG questioned the potential reduction of hours per contract due to AI efficiency gains, with Gessert noting that AI projects are typically more complex [6] - Ronald Josey from Citi asked about the impact of dynamic pricing and the Uma Proposal writer features, with Gessert reporting early results as limited but promising [6]

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]

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]

Financial Performance - Upwork Inc. achieved record first-quarter revenue of $192.7 million, with a GAAP net income of $37.7 million and adjusted EBITDA of $56.0 million, resulting in a profit margin of 20% and an adjusted EBITDA margin of 29% [1][2][6] - Revenue grew by 1% year-over-year, while net income more than doubled from $18.4 million in Q1 2024 to $37.7 million in Q1 2025 [6][20] - Adjusted EBITDA increased by 68% year-over-year from $33.3 million in Q1 2024 to $56.0 million in Q1 2025 [6][33] Operational Highlights - Active clients reached 812,000, with Gross Services Volume (GSV) per active client increasing by 3% year-over-year to $4,912, marking positive growth for the first time in six quarters [6][10] - The company reported a 150% increase in cash provided by operating activities, totaling $37.0 million in Q1 2025 compared to $14.8 million in Q1 2024 [6][23] - Free cash flow also saw significant growth, rising to $30.8 million in Q1 2025 from $12.1 million in Q1 2024 [6][36] AI and Product Development - Upwork's strategic investments in AI are enhancing customer productivity and engagement, with Uma™, Upwork's Mindful AI, seeing a 52% increase in user engagement in Q1 2025 compared to Q4 2024 [4][6] - GSV from AI-related work grew by 25% year-over-year, while GSV from prompt engineering increased by 52% year-over-year [6][9] - The company plans to launch several high-impact features in Q2 2025 aimed at increasing engagement and revenue [6][9] Financial Guidance - Upwork reiterated its FY2025 revenue guidance and raised its full-year adjusted EBITDA guidance, reflecting confidence in ongoing profitability and market share expansion [1][2][9] - For Q2 2025, the revenue guidance is set between $184 million to $189 million, with adjusted EBITDA guidance of $45 million to $49 million [9][10]