Upwork Inc. Q2 FY2025 earnings call

• Delivered record Q2 revenue of $194.9 million, with net income of $32.7 million and adjusted EBITDA of $57.1 million. • Raised full-year guidance for revenue and adjusted EBITDA. • AI enhancements: Uma's capabilities like interviewing talent, video meetings with transcripts, Objective AI integration, reimagined job posting; Uma Proposal Writer led to 58% increase in freelancers using it. • Business Plus: Exceeding goals in attracting and expanding share of wallet with larger customers, 35% of Q2 Business Plus clients were new to Upwork. • Acquisitions: Wholly owned enterprise subsidiary acquired Bubty (workforce management platform) and signed to acquire Ascen (contingent employment solution), to complete enterprise feature set. • Margin expansion: Adjusted EBITDA margin hit 29.3%, non-GAAP gross margin 77.8%, non-GAAP operating expense 51% of revenue.

Upwork generated its highest ever Q2 revenue of $194.9 million. Business Plus saw active clients increase 45% quarter-over-quarter and GSV from those clients surge 190% quarter-over-quarter. GSV from AI-related work accelerated to 30% year-over-year growth from 25% in the first quarter. Ads and monetization revenue grew 17% year-over-year. AI-related work GSV: 30% YoY growth; Business Plus: active clients up 45% QoQ, GSV up 190% QoQ; Ads and monetization: 17% YoY growth.

• Third quarter 2025 revenue expected in range of $190 million to $195 million. • Third quarter 2025 adjusted EBITDA guided to range of $47 million to $51 million (25%-26% margin). • Full-year 2025 revenue guide increased to $765 million to $775 million. • Full-year 2025 adjusted EBITDA guide increased to $206 million to $214 million (27% midpoint margin). • Expect to be active in share repurchases in the back half of 2025.

• Macro environment uncertainty which could impact business. • Integration risks related to the acquisitions of Bubty and Ascen, including potential dilutive impacts on adjusted EBITDA in the back half of 2025.

Q: Talk about the acquisitions and how they will work with the Upwork platform and flow through revenue and GSV?

A: Historically partnership approach limited serving full range of enterprise opportunities. Acquisitions bring fully comprehensive digitally native solutions combining talent pool with Bubty’s workforce management and Ascen’s contingent employment solution. These will let Upwork serve enterprises in all contingent program ways. In 2025, small revenue benefit, more meaningful in late 2026.

Q: How is the macro environment impacting the business?

A: Slower acquisition environment impacts active client metrics, but Upwork is offsetting via AI enablement, AI categories growth, enterprise strategy, leading to Q2 beat and increased revenue guide.

Q: Talk about bending the GSV curve and take rate expansion?

A: Take rate expansion due to supply and demand experimentation, Connects and Freelancer Plus growth. GSV bright spots from 3-pronged strategy, AI features driving volume, enterprise as big opportunity with game-changing offering.

Q: Prioritizing investments in AI, enterprise, ads and monetization against returning capital to shareholders?

A: Focusing on organic growth with yield prospects, smart M&A, and returning capital to shareholders, having executed $170 million share buyback in last 18 months.

Q: Evolution of new customers using Business Plus and mature cohorts?

A: Business Plus clients convert faster, spend more, 35% new to Upwork, adoption similar to established customers. Retained clients grew 2% YoY in Q2.

Q: Distinction between Marketplace, Business Plus, and acquisitions; migration and revenue recognition?

A: Core marketplace vs enterprise customers with different needs. Clear upgrade path from marketplace to enterprise. Enterprise contracts recognized as work executed, majority likely gross revenue recognition, no change to adjusted EBITDA margin target, enterprise unit EBITDA accretive from 2027.

Q: Testing of freelancer fees and AI efficiencies?

A: Freelancer fee testing still early, not fully rolled out, expected to drive GSV and revenue. AI efficiencies: 35% of code shipped touched by AI, customer support agents with faster response times, AI used in finance and HR for forecasting and feedback analysis.