UPWORK, INC Q1 FY2025 earnings call

• Upwork had a strong Q1 with revenue exceeding guidance, record adjusted EBITDA, and margin. - AI initiatives: Upwork is critical for AI, with 80,000 AI specialists on the platform; Uma AI work agent driving positive impacts on proposals, hiring rates, etc. - Business Plus: New premium marketplace offering for larger clients is performing well, with active clients more than doubling quarter-over-quarter. - Strong cost discipline led to record adjusted EBITDA and margin. - Business remains resilient despite macro uncertainties, with clients using Upwork for mission-critical work.

Revenue for the first quarter of 2025 was $192.7 million, exceeding the high end of guidance. Core marketplace GSV was $988 million, with GSV per active client growing 3% year-over-year, including an 11% growth in the large client segment. Enterprise revenue was $26.4 million (relatively flat year-over-year), managed services revenue grew 3% to $15.3 million. Marketplace take rate was 18.3% in Q1 2025 (up from 17.7% in Q1 2024). Gross margin reached a record high of 78.3%. Adjusted EBITDA was $56 million with an adjusted EBITDA margin of 29% (record high). Free cash flow for the quarter was $30.8 million.

• Q2 2025: Revenue expected to be in the range of $184 million to $189 million; adjusted EBITDA guided to $45 million to $49 million. - Full year 2025: Reiterates revenue guidance of $740 - $760 million; increases adjusted EBITDA guidance to $190 - $200 million (26% margin midpoint); non-GAAP diluted EPS expected between $1.05 - $1.10; stock-based compensation between $60 - $65 million. - Capital allocation: $100 million buyback authorization, with ~$67 million remaining at end of Q1.

• Macro uncertainty: Continued macroeconomic pressures could impact customer activity. - Competition: Intense competition in the freelance work marketplace could affect market share. - AI adoption: Slow adoption of AI by clients could limit growth opportunities.

Q: Broader economy impact on guidance and AI monetization A: Erica Gessert mentioned Q1 customer spend dynamics driven by product improvements, with slight macro headwinds factored into guidance. Hayden Brown discussed AI as a catalyst for new client acquisition, higher volumes, and premium earnings.

Q: Business Plus and LTV A: Hayden Brown said Business Plus is unlocking larger customers, with new clients and upgrades showing positive signs like higher conversion rates and spend.

Q: Search enhancements and go-to-market change A: Hayden Brown talked about search and recommendation enhancements driving client metrics, while Erica Gessert noted optimization of performance marketing spend lifting LTV per client.

Q: Business Plus details and margin investment A: Hayden Brown explained Business Plus unlocks larger customers with features like enterprise vetted talent and net 30 terms. Erica Gessert said Q1 was margin high watermark, with reinvestment in growth areas like enterprise and AI.

Q: Macro and AI impact on hiring trends A: Hayden Brown and Erica Gessert discussed no focused AI impact on hiring trends, with AI-related GSV growing 25% and positive client spending despite macro uncertainty.

Q: Tariffs and public sector exposure A: Erica Gessert and Hayden Brown stated no direct exposure to tariffs or public sector impacts, with business diversity supporting resilience.

Q: AI GSV growth and take rate A: Hayden Brown expects GSV re-acceleration in 2026 from AI investments, while Erica Gessert noted take rate stability with room for expansion in 2026.

Q: EBITDA guidance and macro impact A: Erica Gessert said guidance reflects overperformance and investment in growth, with balanced outlook despite macro.

Q: Uma impact and macro top of funnel A: Hayden Brown quantified Uma's GSV benefits, with Erica Gessert clarifying Q1 top of funnel weakness predating recent federal announcements.