• Revenue: $191.5 million for Q4 2024, up 4% year over year; $769.3 million for the full year 2024, up 12% year over year.
• Gross Margin: 77.7% for Q4 2024; 77.4% for the full year 2024.
• Adjusted EBITDA Margin: 26.2% for Q4 2024; 21.8% for the full year 2024.
• Enterprise Revenue: $27.8 million for Q4 2024, up 5% year over year; $107.2 million for the full year 2024, up 4% year over year.
• Marketplace Revenue: $163.7 million for Q4 2024, up 4% year over year.
• Managed Services Revenue: Grew 8% year over year for Q4 2024; 12% for the full year 2024 to $59.4 million.
• Free Cash Flow: $34.7 million for Q4 2024; $139.1 million for the full year 2024.
• Cash and Equivalents: Approximately $622 million at the end of Q4 2024.
• Net Income: GAAP net income of $147.2 million for Q4 2024, including a $140.3 million tax benefit.
• Stock-Based Compensation: $68.4 million for 2024, an 8% decline from the previous year.
• Guidance for Q1 2025: Revenue between $186 million and $191 million; Adjusted EBITDA between $46 million and $50 million.
• Full-Year 2025 Guidance: Revenue between $740 million and $760 million; Adjusted EBITDA between $180 million and $190 million.

• Warning! GuruFocus has detected 3 Warning Sign with UPWK.

Release Date: February 12, 2025

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

Positive Points

• Upwork Inc (NASDAQ:UPWK) achieved record revenue and profitability in 2024, with a 12% year-over-year revenue growth, outperforming the broader staffing industry.
• The company saw a significant increase in AI-related work, with gross services volume (GSV) from AI-related projects growing 60% year over year.
• Upwork Inc (NASDAQ:UPWK) successfully launched new products like Uma, an AI-powered job post generator, which improved job post activity and quality, leading to higher fill rates.
• The Enterprise segment outperformed targets, with managed services revenue growing 12% year over year, indicating strong demand for fully managed work outcomes.
• The ads and monetization business provided a substantial revenue tailwind, growing 51% year over year, enhancing marketplace quality and efficiency.

Negative Points

• Upwork Inc (NASDAQ:UPWK) faces ongoing macroeconomic headwinds, with top-of-funnel weakness affecting growth prospects.
• The company anticipates modest revenue declines in 2025 after Q1, reflecting caution due to macroeconomic uncertainties.
• Despite improvements, the active client base at the end of 2024 was 832,000, reflecting earlier top-of-funnel weaknesses.
• Marketplace take rates experienced a sequential decline from Q3 to Q4, with expectations of only modest growth in 2025.
• There is a cautious outlook for 2025 due to macroeconomic conditions, with potential impacts on growth and profitability if conditions do not improve.

Q & A Highlights

Q: Can you explain the dynamics behind the modestly higher revenue declines after Q1 in your full-year outlook? A: Erica Gessert, CFO, explained that despite a record year in 2024, Upwork is facing ongoing macroeconomic headwinds. The top-of-the-funnel dynamics haven't changed, and there's a six- to nine-month lag in business response to macro changes, leading to uncertainty reflected in the 2025 guidance.

Q: How is AI impacting your business, and what are the building blocks to accelerate AI-related GSV spend? A: Erica Gessert, CFO, highlighted that Upwork benefits from the AI trend, with the platform adapting to customer demand for AI skills. AI-related work grew 60% year over year in 2024, and Upwork is enhancing its platform with AI capabilities like Uma to improve matching and productivity.

Q: Can you explain the sequential decline in Marketplace take rates from Q3 to Q4 and the trajectory for 2025? A: Erica Gessert, CFO, noted that the decline was due to one-time testing in Q4. Take rates are expected to grow modestly in 2025, with promising strategies in development for late 2025 and early 2026.

Q: What are the areas of cost savings and minor investments planned for 2025? A: Erica Gessert, CFO, stated that cost savings are focused on the Enterprise business and R&D, with minor investments in AI and Enterprise strategy. These investments are expected to slightly lower margins in Q2 and Q3 compared to Q1.

Q: What is driving the improvement in the Enterprise segment, and what is the outlook? A: Hayden Brown, CEO, explained that focusing on top clients and expanding wallet share has paid off. Managed services grew 12% year over year, and GSV per active enterprise account increased. The Business Plus strategy is expected to drive growth in 2026 and beyond.

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