• Revenue: $193.8 million, a 10% year-over-year increase.
• Net Income: $27.8 million, a record high for the company.
• Adjusted EBITDA: $43.2 million, representing a margin of 22.3%.
• Gross Margin: Increased to 78%.
• Marketplace Revenue: $167.3 million, a 12% increase year-over-year.
• Enterprise Revenue: $26.4 million, with slight growth.
• Managed Services Revenue: Grew 5% year-over-year.
• Active Client Base: Grew 2% year-over-year to 855,000.
• Marketplace Take Rate: Reached a record high of 18.3%.
• Free Cash Flow: $98 million, with an adjusted estimate of $52 million excluding timing impacts.
• Cash and Equivalents: Approximately $601 million at the end of the third quarter.
• Share Repurchase Authorization: New $100 million authorization announced.
• Fourth Quarter Revenue Guidance: $178 million to $183 million.
• Full Year 2024 Revenue Guidance: $756 million to $761 million, representing 10% growth at the midpoint.
• Full Year 2024 Adjusted EBITDA Guidance: $155 million to $159 million.
• Non-GAAP Diluted EPS Guidance: $1 to $1.02 for the full year 2024.

• Warning! GuruFocus has detected 5 Warning Sign with UPWK.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Upwork Inc (NASDAQ:UPWK) reported a 10% year-over-year revenue growth in Q3 2024, reaching $193.8 million, driven by improvements in managed services and ads products.
• The company achieved record highs in net income ($27.8 million) and adjusted EBITDA ($43.2 million), showcasing a strong commitment to profitability.
• Upwork Inc (NASDAQ:UPWK) introduced Business Plus, a new plan that has already attracted hundreds of clients, offering a more fully featured service with a higher take rate.
• AI-related work on the platform grew significantly, with GSV from AI projects increasing by 36% year over year, indicating strong demand for AI talent.
• The company announced a new $100 million share repurchase authorization, reflecting confidence in its financial health and commitment to shareholder value.

Negative Points

• Despite improvements, Upwork Inc (NASDAQ:UPWK) is still experiencing negative year-over-year GSV growth, reflecting ongoing macroeconomic challenges.
• The company implemented a 21% reduction in headcount as part of cost-saving measures, which may impact employee morale and operational capacity.
• Upwork Inc (NASDAQ:UPWK) remains cautious about top-line growth due to persistent macroeconomic pressures, including low tech job availability and inflation.
• The traditional enterprise plan deal numbers are expected to decline as the company shifts focus to Business Plus, potentially impacting enterprise revenue visibility.
• The company anticipates a slight decrease in take rate for the rest of the year, indicating potential challenges in maintaining pricing power.

Q & A Highlights

Q: Can you elaborate on the factors driving the positive trends in Q4 guidance and the new surfaces for freelancers to promote their listings? A: Erica Gessert, CFO, explained that improvements in top-of-funnel trends were observed starting in late August and into September, but some trends like work and contract starts remain negative year-over-year. The Q4 guidance reflects a steady state rather than an upswing in GSV trends. Hayden Brown, CEO, added that freelancers can promote their offerings through Boosted Profiles, Boosted Proposals, Freelancer Plus, and Connect purchases. These enhancements are expected to drive modest take rate increases without major pricing changes.

Q: How is Upwork focusing its resources and strategy, and what are the plans for cost management to achieve the 35% EBITDA margin target? A: Hayden Brown, CEO, highlighted a focus on five growth levers, including AI advancements and enterprise strategy, with smaller, more agile teams. Erica Gessert, CFO, noted that the $60 million in cost savings from organizational realignment will benefit adjusted EBITDA next year, with a focus on margin expansion and disciplined cost management.

Q: Can you provide more details on the acquisition of Objective and its integration into Upwork's ecosystem? A: Hayden Brown, CEO, stated that Objective is an AI-native search as a service company aimed at enhancing Upwork's search and match performance and Uma's capabilities. The acquisition builds on Upwork's successful M&A track record and is expected to have a meaningful impact on the platform.

Q: What is the outlook for advertising spend and customer acquisition strategy in light of the $60 million cost savings? A: Erica Gessert, CFO, mentioned that there will be no change to high ROI marketing investments, while non-working marketing spend adjustments will not affect customer acquisition. The company observed a GSV per client increase across all business segments, with relative strength in very small businesses.

Q: How does the Business Plus plan fit into Upwork's strategy, and what is the potential market for managed project services? A: Hayden Brown, CEO, explained that Business Plus opens up a larger pipeline of large buyers with a smoother entry path, serving as a stepping stone for clients to potentially graduate to enterprise plans. The managed project services, like those with Ocoya, represent an early-stage opportunity to deliver work outcomes through third-party ecosystems, expanding Upwork's reach.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.