This topic summarizes Upwork Q1 2024 earnings results. Insights from the earnings call will also be posted here.
- Upwork revenue rose by 18.7% y/y to $190.9 million, exceeding our estimate of $185.8 million and management’s upper guidance of $188 million.
- Its GSV was up by 0.6% y/y to $1.0 billion, lower-than our estimate of $1.02 billion (+1.5%), its take rate was 18.9%, above our estimate of 18.2% and active clients came in at 872,000, higher-than our estimate of 844,000.
- Upwork’s non-GAAP EPS was $0.22, above analysts’ estimate of $0.18 and management upper guidance of $0.19 while operating margin was 6.83% vs -15.5% in Q1 2023.
- Upwork raised its outlook for the full year 2024, revenue guidance is now in the range of $770- $782 million, up from $760- $780 million, adjusted EBITDA is now in the range of $140-$150 million, up from $125-$135 million while non-GAAP EPS outlook moved up from $0.77-$0.81 to $0.88 - $0.92.
- Their midpoint revenue guidance for 2024 ($776 million), is now above our estimate of $774 million while their midpoint non-GAAP EPS of $0.90 is now above our estimate of $0.87.
- Upwork is guiding Q2 revenue in the range of $190-$195 million ($192.5 million or +14.2% at the midpoint) vs analysts estimate of $192.0 million and non-GAAP EPS in the range of $0.21 to $0.23 vs analysts estimate of $0.20.
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In the earnings call;
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Upwork said they experienced some churn during the quarter caused by the final shift to the simplified pricing model and similar churn is expected throughout the year.
“We estimate that at about 2% of GSV growth and it impacts us in Q1 and throughout the year. From there, we’ll lap that. And I think for all the reasons we’ve talked about expect to see GSV continue to step up.”
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They said their active client growth was driven by activations and reactivations and that they expect the same trend to continue throughout the year.
“Both activations and reactivations are doing nicely. So we do expect client growth to continue each quarter through the year,” CFO Erica Gessert noted.
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The signaled that they will continue increasing pricing in the platform while improving value for clients and talent.
“Our marketplace take rate at 17.7% remains one of the lowest in the industry, which means that we have the capacity to continue to develop targeted monetization opportunities on the platform that will bring value to our customers,” CFO Erica Gessert noted.
" And I think examples of that span everything from enhancing memberships on the platform to continuing to price connects more accurately to continue to bring in revenue from new streams like our partnership program. So there’s really a lot of runway here. And I think, again, our goal is going to be governed around enhancing our take rate, but doing so in a way that really is creating more value for customers and getting them to spend more overall with us, which is really the ultimate goal," CEO Hayden Brown said.
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They pointed out that some of the negative macro impacts on large businesses are moderating.
“I think we continue to see very good growth in kind of the small business side, very small business side of our platform. And some of the negative kind of impacts from large business from last year is moderating in the current environment.” CFO Erica Gessert said.
Assessment of the earnings
Upwork outperformed expectations in a number of key areas. However, I don’t like that its GSV was weaker than our estimates and continues to be negatively impacted by the pricing change. Also, it’s not good that its growth in active clients was driven mostly by reactivations. In my opinion, the reactivated clients could leave the platform once they feel it’s more expensive than they left. Additionally, it seems the management is now focused on increasing pricing in the platform, which could make the platform more expensive than its rivals. Therefore, more confidence on the trajectory of the GSV and addition of new clients is needed.