Upwork Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Upwork fourth quarter and full year 2020 earnings conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Denise Garcia, Investor Relations. Thank you. Please go ahead now.

Thank you. Welcome to Upwork's discussion of its fourth quarter and full year 2020 financial results. Leading the discussion today are Hayden Brown, Upwork's President and Chief Executive Officer, and Jeff McCombs, Upwork's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I'll review the Safe Harbor Statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. In addition, any statements regarding the current and future impacts of the COVID-19 pandemic on our business and current and future impacts of actions we have taken in response to the COVID-19 pandemic are forward-looking statements and related to matters that are beyond our control and changing rapidly. For our discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our investor relations website, as well as the risks and other important factors discussed in today's press release. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 31st, 2020 when filed. In addition, Reference will be made to non-GAAP financial measures. Information regarding reconciliation of non-GAAP to GAAP measures can be found in the press release that was issued this afternoon on our Investor Relations website at investors.upwork.com. As always, reported figures are rounded unless otherwise noted. Comparisons of the fourth quarter of 2020 are to the fourth quarter of 2019, and comparisons for the full year 2020 are to the full year 2019. All measures are GAAP unless cited as non-GAAP. The prepared remarks corresponding to the information reviewed on today's conference call will also be available on our investor relations website shortly after the call has concluded. Now, I'll turn the call over to Hayden.

Thanks, Denise, and thank you all for joining today. I'm pleased to report that fourth quarter revenue grew 32% year-over-year to reach $106 million. and fourth quarter growth services volume grew 33% year-over-year to reach $728 million. This is our best year-over-year growth performance since going public and was driven by our aggressive execution during the pandemic to enable our customers with a better way to work. I applaud our team for greatly expanding our operating capabilities to serve our customers today while simultaneously building towards the future we envision. a reordering of the world of work with independent talent at the heart of every business. COVID has forced a mass experiment of remote work across the business landscape, proving what we always knew. Old models of work were in need of and capable of change. People can be just as, if not more productive when not in an office. Nearly a year into the pandemic, we see the remote work is actually getting easier. As shown in our recently published economist report, future workforce. But to focus solely on remote work would be to overlook something much more important. While most see 2020 as the year when people figured out how to work remotely, we see a much bigger trend emerging. There is a new openness across the spectrum of our clients to rethink not just where work happens, but to rethink who does the work and how it gets done. They realize that much of their critical work needs a more flexible, dynamic, skilled, and efficient solution. It needs to be done by independent talent. And this is where the real power of Upwork's Work Marketplace is unleashed. Companies that truly want to work with the best people for the job at hand are realizing that many of the best professionals today are now freelancers. This is an undeniable new reality in an age where in the U.S. alone, more than 50% of Gen Z college grads and 59 million Americans are now freelancers. So many more companies are awakening to this truth. Small businesses to large enterprises are bringing independent talent on to do more work ever closer to the core of their companies. We see that the work landscape has shifted, and we believe this has increased our total addressable market opportunity to more than $1 trillion. With this incredible potential still ahead of us, it's evident that the step change comfort that companies gained with remote work last year was only the first step on the path towards this exciting horizon. As we step into this new era of work, we see the work world rapidly evolving. The biases and barriers between full-time employees and independent talent are dissolving quickly. as their contributions are being equally valued and increasingly sought after at every level of the organization. We see everyone benefiting in this new way of working. Full-time employees gain access to much-needed partners who can traverse the increasingly fluid walls of their companies. Freelancers are able to contribute critical skills and expertise while continuing to work on their own terms. And companies benefit. from harnessing the power of a global, creative, and diverse talent pool that gives them exactly the people they need for the work at hand, offering the competitive advantages of agility and speed in an ever-changing environment. We know what it takes to unlock the market opportunity ahead of us. It takes more than being a gig company, a talent network, or a vertically integrated single category provider. to unlock the tremendous potential ahead requires being the work marketplace for the world. For clients, this means serving them with the multiple ways that they want to find and build their virtual talent bench, whether that is posting jobs in our talent marketplace, one-click models like project catalog, complex project and team collaboration offerings like our agency solution, Recruiting services, such as TalentScout, where our specialized recruiters pinpoint pre-vetted talent that aligns with our clients' goals, or our full range of enterprise solutions. For independent talent, being the work marketplace means serving them with high-quality clients and varied earning opportunities that they seek, the control to dial up or down the pipeline of work they want as they build their freelance careers. a suite of offerings to support their businesses, and the tools to nurture trusted client relationships for the long term. We know from experience that the ability to build trusted long-term relationships on our platform makes the work being done on our work marketplace further differentiated from what happens in other parts of the freelance economy. It is the unique characteristics of freelancing on Upwork that enables companies to change their entire operating models, to rely on the independent talent on our platform, and to completely reconsider not just with whom they work, but also how they get core work done, gaining incredible agility, productivity, and efficiency in the process. When businesses and talent fully embrace the power that they gain from this reimagining of what's possible, we see that they have tapped into the full potential of our work marketplace. Our singular focus this year is bringing this transformational awareness to the market in a bigger way while continuing to enhance and innovate our platform as we bolster our position as not just the market leader, but the only company offering these unique capabilities. This is our 2021 strategy. We are innovating, scaling, and evangelizing the work marketplace for the world. With that perspective, let's step back and take a look at our fourth quarter performance, focusing on the key drivers of our growth, namely new client acquisition, client retention, product, and sales. I'll start with new client acquisition. We started the year with an aggressive plan for growth in SEO, SEM, mobile, and international, and we executed strongly against that plan, adding a record number of new clients at attractive acquisition costs. We acquired new clients at a faster clip and with greater efficiencies during the fourth quarter than in any of the previous quarters since becoming a public company. The efficiencies and success of the programs we've been building with discipline throughout the year were evident. For example, new clients from SEM grew 86% year over year in Q4 and 50% for the year as a whole. Our laser focus in 2020 on tuning our marketing programs around lifetime value was also apparent as the new clients we acquired in Q4 spent over 10% more per client than new clients in the same quarter of the previous year. We saw our best quarter of growth in both international and mobile client acquisition with further runway ahead. In 2021, we will increase our SEM spend given these strong signals in order to drive additional new customers to Upwork and help them see the value of our expanding work marketplace. Moving to client spend retention, we were pleased with an acceleration to 102% in the fourth quarter, as our core clients increased by more than 6,400, 64% more than the increase in Q4 2019. GSV from clients acquired before Q4 was up 30%, and GSB from clients acquired before 2020 was up 27%, as existing and new clients deepened their usage of Upwork to build, operate, and grow their companies. I'd like to now talk about some of our fourth quarter product developments, which are being led by our new Chief Product and Experience Officer, Sam Bright, who joined us from eBay in November. Last quarter, we announced Project Catalog, a brand new way to use Upwork. We launched Project Catalog a full month earlier than planned across 300 marketplace categories. The customer response has been positive. Project Catalog allows clients to immediately understand the massive breadth of talent on Upwork through predefined, ready-to-purchase projects. Not only does it create a powerful new client pathway into Upwork, It allows existing clients to augment larger and more complex role-based work with smaller, well-defined projects and serves as a strong discovery engine for the rest of the platform. We see Project Catalog as an ideal complement to our other offerings, together broadening the spectrum of pathways to get work done in our work marketplace. In the quarter, we expanded our direct contracts offering for freelancers, to enable them to invoice and bill their clients for hourly work in addition to using our escrow protections for fixed-price jobs. While this offering is still nascent, we see freelancers continue to grow the portfolio of clients and work they are billing through our platform as they consolidate more of their freelance work on Upwork. Throughout the course of 2020, we saw increased demand from clients wanting to onboard their various team members and agencies onto Upwork for easy and unified billing, program management and collaboration, and competitive bidding in our marketplace. Our larger clients are enthusiastic about our bring your own talent or BYOT solution, not just because we automatically handle all of the money movement, local currency payments on a global scale and associated paperwork, but also because for our enterprise compliance clients, we solve the worker classification other headaches normally associated with these tasks, which are increasingly daunting for many companies in a fragmented and distributed work landscape. To enhance this experience, we launched an integrated onboarding process in Q4 that reduced our industry-leading start time on payroll contracts from nine to two and a half days. This past quarter, we landed a global tech firm that onboarded over 1,000 freelancers, running over a million dollars through this BYOT product, all within Q4. We are bullish on the prospects that our highly attractive offering has for the expanding set of clients seeking solutions for their challenges paying and project managing distributed teams. Building the world's work marketplace. means both developing and integrating best of breed tools that customers love to use for their work. During the fourth quarter, we announced a partnership with Zoom that integrates Zoom's video and voice communication tools into Upwork. This provides our customers a frictionless and secure communications experience for interviewing candidates, vetting opportunities, and collaborating on projects. The customer feedback has been phenomenal. resulting in a significant increase in calls and collaboration activity on our platform and is an example of the types of further integrations we have in the pipeline. Our sales team has fully implemented the changes we announced last quarter and has been making progress against our sharper go-to-market strategy. Our team is engaged in strategic conversation at the highest levels to help clients implement and manage their remote and independent talent programs. and is pleased by the reception in the market. One example was recent work we did for a leading global technology conglomerate. The client needed a solution that would enable them to continue working with their existing independent talent while aggressively scaling their team. We seamlessly onboarded more than 30 freelancers in five countries in the first day and now serve as the operational backbone of their globally distributed team, spanning 30 subcategories of work. Since inception, the account has seen 400% growth in new projects. 2020 was a watershed year for Upwork. We understood early on that although the tide of remote work was rising, it was imperative to create long-term strategies that would retain customers on our platform and grow their value over time, well after COVID passed, laying the foundation for Upwork's durable, long-term growth. As we look to 2021, our focus is clear. We have a single strategic priority, innovating, scaling, and evangelizing the work marketplace for the world. We are humbled and excited to be in a position to transform work so positively for so many people, pursuing with purpose our mission to create economic opportunities so people have better lives. I'll now turn the call over to Jeff to discuss our financial results in more detail.