Upwork Inc.

Thank you for standing by. Welcome to the Upwork fourth quarter 2021 earnings conference call. At this time, all participants are on a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you can press star one on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star zero. I would like to hand the conference over to our speaker today, Evan Barbosa. Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Upwork's discussion of its fourth quarter and full year 2021 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 our current and future impacts of options 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 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 shareholder letter. Additional information will be set forth in our annual report on Form 10-K, for the year ended December 31, 2021, when filed. In addition, reference will be made to non-GAAP financial measures. Information regarding a reconciliation of non-GAAP to GAAP measures can be found in the shareholder letter 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 2021 are to the fourth quarter of 2020. and comparisons to the full year of 2021 are to the full year of 2020. All measures are GAAP unless cited as non-GAAP. Now, I'll turn the call over to Hayden.

Thanks, Evan, and thank you all for joining us today for our fourth quarter and full year 2021 earnings call. 2021 was a remarkable year for Upwork, not only in how far we pushed our business forward, but also in how clearly it has set our path for continued performance in 2022 and beyond. GSV grew 41% year over year to reach 3.5 billion, and revenue grew 35% year over year to reach 503 million for the full year 2021. Additionally, during the fourth quarter, we surpassed $15 billion in lifetime talent earnings on Upwork. This achievement highlights the magnitude of impact we have had and signals how we are leading the global movement to reimagine work. Last year, we launched a host of powerful products and features, including Project Catalog, Talent Scout, and Virtual Talent Bench, as well as valuable partnerships with technology and benefits providers, such as Loom and Catch. We had successful, high-profile collaborations with leading brands, including Budweiser and Kristin Kitsch, launched the Perfect Fit brand campaign, to raise awareness of Upwork to customers and prospects. And in the third quarter, as a result of our confidence in the long-term value creation opportunity in enterprise sales, we announced our intentions to double the number of account executives on our sales team by the end of 2022. And we are just getting started. We believe timing matters and timeframe matters. In terms of timing, the time continues to be now for investing in our business to win customer market share at a time when customer needs for our offering are accelerating and our brand awareness is low. We will do this with conviction in the year ahead as planned because we are building a powerful and sustainable business with leading share, economics, and growth rates for the long term. In terms of timeframe, 2021 was the first year executing our three-part strategy to innovate, evangelize, and scale our work marketplace. We have always known this strategy will take multiple years to fully deliver, and we are pleased with our progress to date. Due to this progress and our confidence in our execution, we are accelerating our target of achieving a billion dollars in revenue by one year to 2024, up from our previous timeline of 2025 with a compound annual growth rate of approximately 25 percent over the next three years. We're also excited to announce that we are setting an enterprise revenue target of $300 million by 2025, almost 10 times what we delivered in 2021, which represents a compound annual growth rate over the next four years of more than 70 percent. our innovation ambitions are bigger than ever. Amidst the backdrop of the work awakening, a time in which people are reevaluating what they want in work and life and realigning their priorities accordingly, we have embraced an expanded vision for Upwork as the world's work marketplace. We build for companies to flex into the new operating models of the new world, and we build for talent to flex into new ways of working. We anticipate that the businesses who embrace this work awakening will be poised to out-innovate companies who do not. 2022 is the year that Upwork takes the next steps in evolving from being the largest global freelance marketplace as measured by GSV to broadening our horizon as the world's work marketplace. Our focus has evolved because the world has evolved. The old binary notion of freelance versus full-time employee work are being revisited in a world where remote work is rampant, where career and work innovation is happening all around us, and where talent and clients are searching for new solutions to both new and old challenges they're struggling with. Many professionals are seeking to unbundle aspects of traditional full-time work to get benefits in new ways, while others are seeking new benefits without shackling themselves to a full-time job. We are poised to innovate these solutions with and for our customers, and our strong foundations help us do just that. We have distinctive know-how in building and delivering relationship-centered, flexible solutions for knowledge workers. We have products in the market that already empower workers to seamlessly transition from freelance to full-time work and back. And we have teams that already design and deliver modern work models at scale for our enterprise clients. This year, we will build on our existing foundations with a lineup of new offerings that will continue to make the transition from freelance to full-time and vice versa, and the integration of both working models seamless for all our customers. We at Upwork are focused on accelerating the work awakening, empowering professionals by building their online home for work that grows and flexes with them across their career and as their needs change, and for businesses delivering a singular destination that gives them access to the freelance and full-time professionals they need on the work marketplace that makes these powerful relationships and the tools to manage them a foregone conclusion. We have always seen ourselves as the pacesetters of innovation in work and in a time when the speed and creativity with which people are constructing their careers is accelerating and companies are rethinking their workforces. Upwork will be the work marketplace that empowers them to achieve their goals. Thank you for joining us on this journey. We will now open the call to your questions.

At this time, as a reminder to ask a question, you need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Maria Rips from Canaccord. Maybe again.

Hi, thanks so much for taking my questions. I just wanted to ask about sort of your customer count in the quarter here. Any update you can share with us on roughly what portion of new customers on the platform are now sort of being driven by Project Catalog? And I know you previously said it was 10%, but anything you can share with that? And then sort of now with this product, sort of now that this product has been around for some time, what portion of customers who sort of came in via Project Catalog are now engaging with the platform sort of more deeply? And then I have a quick follow-up.

Sure. Thanks, Maria.

We are seeing really great progress with Project Catalog. Definitely every quarter we've seen increases in the number of customers coming in through Catalog. And the bigger picture for us here is this product is really designed as a new way to capture the imaginations of customers who may not know how to engage with freelance talent on our work marketplace. Give them a way to get started with this one-click model. And then, of course, be able to cross out to them other ways of working with talent. And for sure, to your question, we have seen that hypothesis validated. We're seeing a significant number of these customers actually going further than just catalog and using the talent marketplace or talent scout or other ones of our offerings. And similarly, our existing talent marketplace and other customers have been crossing over and using catalog as well. So we're seeing really great validation that customers do have these needs that span different types of products, different types of use cases, and that adoption has been really supporting the whole thesis that the work marketplace is what's required to meet the needs of all customers.

Got it. And then maybe a bigger picture question sort of. As many companies are struggling with labor shortages here, are there any categories or verticals on the platform where you perhaps sort of seen an acceleration of growth as a result of that? And maybe related to that, are there any verticals where you feel like the platform maybe would benefit from sort of a deeper pool of talent?

Sure. We're really seeing tremendous strength across the board in all of our categories right now. I mean, we've seen acceleration in In some of our biggest categories, we've seen some smaller categories like accounting and consulting, which grew at 72% year over year in the past quarter. So in this market, we're actually not seeing negatives. We're seeing this war for talent happening in the world at large. And despite that, the value proposition of what's available on Upwork is actually increasing with talent. uh sign ups from new talent and active engagement from existing talent at or near record levels continually and i think that really speaks to the broader story of the work awakening and the fact that talent are now looking for a different value proposition in the world at large and what we have to offer really meets that value proposition so well so there's a ton of health there and we're excited about what that means both for now and the future got it thank you very much appreciate the call

And our next question will come from Eric Sheridan from Goldman Sachs. You may begin.

Thank you so much for taking the questions. Maybe two-part question if I can. In terms of the marketing investments you're calling out that would put some margin pressure on in 22. Just give us a little bit of looking back and what you've seen in the business where now is the right time to lean in on those marketing investments and try to scale the platform and get the opportunities that you see. And then looking further out than just 22, how should we be thinking about elements of wanting to capture leverage in the model as you grow and scale versus continuing those investments on a multi-year view? Thank you so much.

Eric, our view is that timing does really matter around this investment. And specifically, this is such a favorable environment for us to be making the investment in. We see that this is a unique moment because of the work awakening. Businesses have never been more in need of our product. And on the other side, professionals are really rethinking their priorities and are really drawn into the model that we have. We know at the same time that our unaided brand awareness amongst our target clients is in the single digits. And we imagine how much bigger our business can be if we are able to double or triple that awareness. And to your point about looking backwards, This investment is absolutely a continuation of our strategy that we initiated in 2021. You know, we've been preparing for this as we launched the work marketplace category in May of last year. And then the back half of last year began increasing that brand investment, seeing the signals early as it was that this was working. And then in January brought on Melissa Waters as our CMO to further set us up to really be building a world-class brand. that shapes the category, that shapes customer behavior in our category, and really sets us up to be making this investment with a lot of confidence this year. Let me hand it off to Jeff to talk a little more about the rest of your question.

Thanks, Hayden. Yeah, our investment philosophy with respect to brand marketing is exactly the same as it's been with sales and performance marketing. Our goal is to invest as much as we possibly can wherever we can get returns that we think are comfortably above our weighted average cost of capital. And with respect to brand marketing, just like sales and performance marketing, we're focused on driving real business outcomes. And what that means for us is we're trying to drive more clients and increase spend from our existing clients. And so we want to see, we have a hypothesis that as we increase our unaided brand awareness, that that will convert into real business outcomes. Now, we bring patients to this. We know that it's going to take time to move our brand awareness and to test and learn into this to understand what is the optimal mix of creative and channel and geo and reach and frequency and whatnot. So we bring that patience to it. That being said, we also bring an urgency, like all of you, to try to understand how is the spend converting in the interim. And so we're looking at top of signal metrics, traffic, client registrations, freelancer registrations, branded search queries, We also look at the proxy metrics. How are we moving brand consideration? How are we moving brand awareness? How are we moving brand relevance, et cetera? But ultimately, the goal is to absolutely move, you know, convert the investment into real business outcomes. And in terms of the impact on long-term margins, we absolutely believe this is a business that can deliver 30% to 35% long-term EBITDA margins. We are actively driving leverage in cost of revenue, G&A, But we also see this as a great opportunity to focus on our top priority, which is growing the business by investing in those areas that are returning attractive dollars, whether that's sales, performance marketing, brand marketing, whatnot. And the early results we're seeing at the top of the funnel with respect to brand marketing are encouraging. So we're excited to be pushing on this front.

Great. Thank you for all the comments.

Sorry about that. Our next question comes from Bernie McTernan from Needham. Your line is open.

Great. Thanks for taking the questions. Maybe just to zero in on the revenue guidance or long-term revenue guidance, moving the billion dollars of revenue up by a year only about six months after the guide, what's been primarily outperforming expectations? And then on enterprise expecting $300 million, should we be assuming that you guys keep bringing on more land account reps or is that maybe a different thought process and maybe how steep the curve can get and how businesses are spending? You provide some interesting data in terms of how big some of these businesses are and the GSV on the platform.

Excellent. Thank you much for the questions. In terms of the billion dollar goal, really the way we thought about this is we saw two key themes happening in the business. First off, super excited about the results of our enterprise efforts. The team did a great job in 2021 hitting the unit economic productivity targets that we had. We know that those are attractive investments to make, so that's why we're doubling the sales force in 2022. And that caused us to be comfortable with a long-term target of $300 million in 2025. And the second dynamic is that we saw really strong performance in our spend per client. So whether that is the 15% year-over-year improvement in the 771,000 clients that we have on the platform or those that are spending over $100,000 per year that increase by 51% or $1 million spenders that increase by 61% year-over-year in terms of the number of those. So those two dimensions, caused us to be comfortable with a target of $300 million of enterprise revenue in 2025, which then gave us comfort that we can bring in our $1 billion revenue target from 2025 to 2024. And with respect to how we're going to get to that $300 million in enterprise revenue, we don't need any productivity improvements per rep from what we're seeing from the team right now, which is great. Now, that being said, we'll continue to focus on making sure that we're as effective and productive as we possibly can and continue investing to hire additional reps. As we indicated, we're going to double those in 2022. We absolutely do need to continue investing in those reps, which is a great investment for the company. And the rep growth will probably roughly mirror the growth of the revenue between now and 2025. Thanks for the question.

Great. Thanks, Jeff.

Thank you. Our next question will come from Marvin Fong from BTIG. You may begin.

Great. Thanks for taking my questions. A couple of them have already been answered. But maybe we could start on take rate. I think a bit larger decrease quarter over quarter than we've seen in the last few quarters. And I know you mentioned more uptake of longer-term relationships. Just looking forward in terms of sort of the cadence on how that might evolve in 2022, I know you mentioned it should be up very slightly. Maybe you could just give us a little more breakdown between your first quarter guidance, what does take rate look there quarter over quarter, and then for the balance of the year. And then I have another follow-up.

Sure. Thanks, Marvin. So you're right in that our take rates and our spend per client seem to be inversely correlated. So given the pricing model that we have, whereas clients and freelancers find more success on the platform and end up spending more within those existing relationships, the average take rate progresses. I guess the price that they're charged goes from 20% to 10% to 5%, and therefore the average take rate feels a little pressure. So the strength that we saw in the average spend per client going up 15% year over year was reflected in a little bit of take rate pressure quarter over quarter. And as we look out into 2022, we do expect that on average for the year, the take rate will be higher than we're exiting 2021. That's going to be driven by a number of dynamics, a few initiatives that we're working on, including growth in Project Catalog or TalentScout, Enterprise, which all three of those have higher take rates than the rest of the business. So we would expect those dynamics to be lifting take rate a bit throughout the year, kind of more in Q2 and beyond than in Q1. But we're excited to see you lift there. Thanks, Mark. Great.

And a follow-up, if I may, just I think you did highlight how spending per client is up, you know, no matter how you cut it. Maybe you could just kind of drill down. I mean, are they, you know, doing more projects? Are the value of the projects going up? You know, I'm sure there's some interplay between the two, but maybe just kind of talk about that and then how you're, modeling those two as you give us these longer-term targets. You know, where will the GSV growth come from? More from spend per client or new clients? Any color there would be great.

Yeah, so with respect to the spend per client, we've seen a lot of success in the longer-term projects on our platform. So hourly projects have been growing at a faster rate than fixed-price projects. and the number of hours within those projects has been increasing over time. We've also seen increases in hourly rates, but surprisingly that's been relatively consistent over the last several years. So it's really clients and freelancers finding more value in the platform and extending the duration with which they're using the platform. In terms of growth going forward, where would we expect growth to come from? We really do expect it to come from both. We obviously were pleased that our average spend per client is up 15%. That being said, it's still in the $4,000 range. We think there's significant opportunity to continue increasing that for many years to come. And also understand that we served 771,000 customers on the client side this past year. We do think there's lots more room over the long term to continue growing that And that goes directly to the brand marketing efforts that Hayden touched upon. We believe that if we can increase awareness of our offering, that we have the opportunity to meaningfully move those business metrics, and new clients is absolutely one of the key ones there.

That's great. Thanks so much, Jeff. Appreciate it. Sure.

Our next question is from Matt Farrell from Piper Sandler.

You may begin.

Thanks, guys. Congrats on the really strong results in the pulling in of the $1 billion target. I just wanted to dive a little bit deeper into the enterprise opportunity. What really remains the biggest overhang with potential customers in that space today? And, you know, how do you overcome that overhang to kind of drive to your $300 million target that you laid out today?

Thanks, Matt. There's really not a big barrier to hitting the $300 million target other than executing really well against that goal. I think we have a lot of confidence that we're on that path. And we see the proof points with the performance we've delivered around things like the 78% year-over-year growth in the new deals on the land side, Q4 enterprise revenue up 65% year-over-year, and our million-dollar spenders up 61% year-over-year. So the momentum we're seeing in that part of the business has been great in the execution there. is is really strong and we think we can continue that execution and that's what's going to take us to that 300 million dollar goal i think however there's such a big market opportunity there that we're trying to unlock that's where um really awareness is one of the big um efforts where we think so many of these customers and we know from the brand awareness data don't know about us haven't heard about us and because they do um sometimes they're hearing you know, negative talk tracks from our competitors in the market, mainly legacy staffing firms who may be already working with those customers around what we can offer. And so that's really the bigger unlock in terms of how else we're trying to accelerate that space is just getting our name out there, getting the story out there that will further amplify, I think, all of our efforts in the business, both on the sales side of the house, performance marketing, halo effects and efficiency improvements, hopefully over time, those types of things. Now, clearly, it's early days with this investment. And Jeff talked about some of the goals and the ways we're really being disciplined about measuring that. But I think one of the biggest challenges is these firms haven't heard about us. And so our sales teams are going in and educating them. But we think there's more we can do to make that job even easier for them.

Awesome. And then as I think about 2022, is there a sense of seasonality that returns to the business hopefully as we come out of COVID here this year? Or are we still in a place where just the market dynamics and the growth that you're highlighting that, you know, seasonality really doesn't exist given the broader opportunity ahead?

Yeah, it's a great question. Obviously, you know, COVID is incredibly hard to predict, and we've probably given up trying to exactly understand how that behaves. But really, our numbers have followed kind of a week-to-week and month-to-month level of seasonality since, I don't know, maybe mid-ish 2021. Now, clearly, certain business dynamics do – overrun that seasonality. So with respect to our enterprise offering, if you just looked at those numbers, there's not a whole lot of seasonality that comes into play in terms of the overall revenue growth there because it's driven much more by new account execs that we have, how many accounts they're bringing in, and new account managers and all those sorts of dynamics. But we do see that there is a you know, obviously the, the dynamics that were driven or the, the week to week metrics that were driven throughout COVID look different now. And our goal would be to obviously, you know, bend those curves as much as we can to make sure that our growth drivers are the primary things that they're driving the business forward. And you're seeing that absolutely play out on the enterprise side. You're seeing that play out in the spend per account. And then we hope that with brand marketing, we're able to do that same thing. That's absolutely the intention with those investments.

Awesome. Thank you so much. Congrats again. Thank you.

Our next question comes from Andrew Boone from J&P Security. You may begin.

Hi, guys. Thanks for taking my questions. Two, please. So first, with wage inflation across the board, Can you just talk about how that impacts your market? What are the dynamics that we should be thinking about from the outside? And then the second question is, 2021 was a major year for product launches. As we think about your enterprise goal in the $300 million, what else are enterprises asking for, right? I think, Hayden, you mentioned your prepared comments that there was a fluidity between freelancers and full-time workers. Is there anything else that we can expect for 2022? Thank you so much.

Sure. So on the wage inflation side, I can definitely characterize, you know, we talked a little bit earlier on the call about the talent dynamics, you know, not slowing down. If anything, they're faster than ever in terms of talent really being interested in this model. We see talent set their own wages on our platform, and they're doing that in a really healthy way today. You know, wages are strong. We also see that clients in a tight labor market are really see our value proposition resonating more strongly than ever. Globally, they're looking at different wages and wage arbitrage becomes more of an issue. They also start to see even more sharply that we have a competitive edge over traditional talent businesses like staffing agencies who have these really steep markups compared to our directed talent model and therefore are even more hard-pressed than even in normal times to compete on an economic basis, never mind the fact that our talent quality is so much more superior to theirs. So in all of that, we are in a really strong position in a tight labor market. However, we still face the reality that so many of these companies just haven't heard of us, so they don't even know that these advantages exist on our platform. To your second question around what are enterprises asking for, a lot of it is building off of the solutions we've already been giving them, things like bring your own talent, compliance offerings, where they are trying to build these hybrid teams of workers, make it even easier for their workforce to have a single login, a single place to go to source talent, break down the barriers between what a freelance worker is doing, an employee is doing, because oftentimes That matter is not consequential. That difference is not consequential anymore. And so we're really helping them build these things out programmatically. And so when we look at our product roadmap for enterprises, a lot of the solutioning is around giving them more of the access to those different talent pools in a much more seamless way. and making it just easy for customers to do that without having to worry about things like, how is this person going to be classified? Do I need to think about all of the back office things to do in order to get started with this person, whether they are a full-time worker or a freelance worker? We're really leaning into the reality that that is how the customers are thinking about these things today. Those distinctions are no longer nearly as important as they once were, and building the single destination on our work marketplace for these enterprise customers to come in and use our solution that way, even more than they've been able to do so in the past.

Thank you.

Our next question will come from Rohit Kulkarni from MKM Partners.

Hey, thanks, and a very nice quarter and very optimistic guidance. I guess on the brand marketing, can you recap in terms of about $47 million spent last year, $80 million this year? Across the quarters, where did that spend come from, and what were the learnings that made you more bullish on spending or doubling down on more brand marketing in terms of quantifiable facts that we can learn from outside?

Yeah, I think I'll touch on a few things there with respect to the $47 million in 2021. As we mentioned, we really started investing more aggressively in the second half and we launched the work marketplace in May of last year, spent a bit around that in Q2 of last year. And then from Q3 to Q4, we increased the brand spend from $8 to $17 million. We mentioned that for 2022, our current target is $80 million with a little bit more front-end loaded than at the Q4 of this year, but roughly in line with the levels that we saw in Q4 of 2021. You know, we are – With all that being said, we've been at this for several quarters of trying to lay the foundation to be able to go aggressively against this opportunity. And we know that it's going to take time. We are absolutely taking a test and learn approach. We want to understand what works best across reach and frequency by geo, by channel, all of those different intersections. And as we get those learnings, we're going to move the dollars to the areas that are performing well and move them away from the areas where we're not getting the target performance. And so that really is the mentality that we're approaching this. And we believe that there's a significant opportunity that if we can absolutely convert or meaningfully lift our unaided awareness, we have the opportunity to turn that into real business outcomes. But there's a lot of work to do ahead of us to get there.

Okay, thank you. I know in the last few months you have started to experiment with advertising and more subscriptions to both sellers and buyers. Any update as to where you are with both these two new initiatives?

I'd say it's definitely early days, but we're very excited about the paid ad products that we have launched, Rohit. They are a new way for us to do basically two things. One is create new high-quality signals in our work marketplace around things like intent, and availability and who's really interested in what and why. And so those signaling factors have been really valuable in terms of increasing things like match quality on the platform. And then secondarily, they also create opportunities for further monetization. And that is also an exciting piece of the puzzle. So it's early days on both of the products we've launched, boosted proposals, availability badges, things like that. But I think these do represent a really nice new opportunity for us to be both improving the product experience and match quality while also monetizing the business in new ways.

And the availability value just moved out of beta into GA last week or so. So we're looking forward to seeing how those perform more broadly.

Okay. If I could ask one kind of competitive dynamic question. Are you seeing any changes in new players emerge? Any comments on Microsoft, LinkedIn launching their services marketplace? How do you see them if you see them in the broader ecosystem as such?

I mean, the space is dynamic. It hasn't really changed quarter over quarter, and we don't really hear anything about those types of competitors in the market from customers. So we're just staying focused on our business, our strategy. It's working. It's unlocking the space. And I think that's the story for us. We're not hearing a lot of noise about anybody else.

Okay. Thank you very much.

Thank you. And our last question will be from the line of Brenton Hill. Sorry, Brent Thill from Jefferies. You may begin.

Hi, thank you. This is a champion for Brent Thill. Just a couple of, I guess, maybe housekeeping and smaller topics. Just wondering if you had seen any impact or benefits from Omicron late in Q4 or so far in Q1. And then second, on the OPEX line items, I mean, Q4 is a percentage of revenue, you know, pretty much all of the OPEX lines moved up. Is that the sort of trend we should expect through the rest of 2022, or is it really more concentrated in marketing? Thank you.

Sure. Thank you. So with respect to Omicron, as far as we can tell, the dynamics and trends in the business weren't meaningfully driven by the surge in Omicron. We did see nice strength in the business post-Thanksgiving and a bit stronger than we had expected. But any attempt to kind of correlate that with Omicron, either geographic or from a timeframe perspective, didn't result in us having a strong conviction that it came from Omicron. With respect to OpEx, as we said, our overall approach is we want to invest as aggressively as we possibly can wherever we're seeing the return. So in sales and marketing, you're going to see healthy growth in that line item driven by both brand marketing and our sales efforts as well as performance marketing. In R&D, we are aggressively moving to build out the work marketplace beyond where we currently have it. And so you'll see that grow as well. And then we're trying to drive leverage in G&A and cost of revenue, obviously all in pursuit of delivering that long-term 30% to 35% EBITDA margins. Thank you. Thanks, Sean.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call over to Evan for any closing remarks.

On behalf of the entire Upwork team, thank you for joining us today, and thank you for your interest in Upwork. If you need any clarifications or have any follow-up questions, please do not hesitate to reach out to me at investor at Upwork.com. This concludes our call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day. Music Thank you. Thank you.

Thank you. you

Thank you for standing by. Welcome to the Upwork fourth quarter 2021 earnings conference call. At this time, all participants are on a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star zero. I would like to hand the conference over to our speaker today, Evan Barbosa. Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Upwork's discussion of its fourth quarter and full year 2021 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 our 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 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 shareholder letter. Additional information will be set forth in our annual report on Form 10-K, for the year ended December 31, 2021, when filed. In addition, reference will be made to non-GAAP financial measures. Information regarding a reconciliation of non-GAAP to GAAP measures can be found in the shareholder letter 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 2021 are to the fourth quarter of 2020. and comparisons to the full year of 2021 are to the full year of 2020. All measures are GAAP unless cited as non-GAAP. Now I'll turn the call over to Hayden.

Thanks, Evan, and thank you all for joining us today for our fourth quarter and full year 2021 earnings call. 2021 was a remarkable year for Upwork, not only in how far we pushed our business forward, but also in how clearly it has set our path for continued performance in 2022 and beyond. GSV grew 41% year over year to reach 3.5 billion, and revenue grew 35% year over year to reach 503 million for the full year 2021. Additionally, during the fourth quarter, we surpassed $15 billion in lifetime talent earnings on Upwork. This achievement highlights the magnitude of impact we have had and signaled how we are leading the global movement to reimagine work. Last year, we launched a host of powerful products and features, including Project Catalog, Talent Scout, and Virtual Talent Bench, as well as valuable partnerships with technology and benefits providers, such as Loom and Catch. We had successful, high-profile collaborations with leading brands, including Budweiser and Kristin Kitsch, launched the Perfect Fit brand campaign, to raise awareness of Upwork to customers and prospects. And in the third quarter, as a result of our confidence in the long-term value creation opportunity in enterprise sales, we announced our intentions to double the number of account executives on our sales team by the end of 2022. And we are just getting started. We believe timing matters and timeframe matters. In terms of timing, the time continues to be now for investing in our business to win customer market share at a time when customer needs for our offering are accelerating and our brand awareness is low. We will do this with conviction in the year ahead as planned because we are building a powerful and sustainable business with leading share, economics, and growth rates for the long term. In terms of timeframe, 2021 was the first year executing our three-part strategy to innovate, evangelize, and scale our work marketplace. We have always known this strategy will take multiple years to fully deliver, and we are pleased with our progress to date. Due to this progress and our confidence in our execution, we are accelerating our target of achieving a billion dollars in revenue by one year to 2024, up from our previous timeline of 2025, with a compound annual growth rate of approximately 25% over the next three years. We're also excited to announce that we are setting an enterprise revenue target of $300 million by 2025, almost 10 times what we delivered in 2021, which represents a compound annual growth rate over the next four years of more than 70%. Our innovation ambitions are bigger than ever. Amidst the backdrop of the work awakening, a time in which people are reevaluating what they want in work and life and realigning their priorities accordingly, we have embraced an expanded vision for Upwork as the world's work marketplace. We build for companies to flex into the new operating models of the new world, and we build for talent to flex into new ways of working. We anticipate that the businesses who embrace this work awakening will be poised to out-innovate companies who do not. 2022 is the year that Upwork takes the next steps in evolving from being the largest global freelance marketplace as measured by GSV to broadening our horizon as the world's work marketplace. Our focus has evolved because the world has evolved. The old binary notion of freelance versus full-time employee work are being revisited in a world where remote work is rampant, where career and work innovation is happening all around us, and where talent and clients are searching for new solutions to both new and old challenges they're struggling with. Many professionals are seeking to unbundle aspects of traditional full-time work to get benefits in new ways, while others are seeking new benefits without shackling themselves to a full-time job. We are poised to innovate these solutions with and for our customers, and our strong foundations help us do just that. We have distinctive know-how in building and delivering relationship-centered, flexible solutions for knowledge workers. We have products in the market that already empower workers to seamlessly transition from freelance to full-time work and back. And we have teams that already design and deliver modern work models at scale for our enterprise clients. This year, we will build on our existing foundations with a lineup of new offerings that will continue to make the transition from freelance to full-time and vice versa, and the integration of both working models seamless for all our customers. We at Upwork are focused on accelerating the work awakening, empowering professionals by building their online home for work that grows and flexes with them across their career and as their needs change, and for businesses delivering a singular destination that gives them access to the freelance and full-time professionals they need on the work marketplace that makes these powerful relationships and the tools to manage them a foregone conclusion. We have always seen ourselves as the pacesetters of innovation in work and in a time when the speed and creativity with which people are constructing their careers is accelerating and companies are rethinking their workforces. Upwork will be the work marketplace that empowers them to achieve their goals. Thank you for joining us on this journey. We will now open the call to your questions.

At this time, as a reminder to ask a question, you need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Maria Rips from Canaccord. Maybe again.

Hi, thanks so much for taking my questions. I just wanted to ask about sort of your customer count in the quarter here. Any update you can share with us on roughly what portion of new customers on the platform are now sort of being driven by Project Catalog? And I know you previously said it was 10%, but anything you can share with that? And then sort of now with this product, sort of now that this product has been around for some time, what portion of customers who sort of came in via Project Catalog are now engaging with the platform sort of more deeply? And then I have a quick follow-up.

Sure. Thanks, Maria.

We are seeing really great progress with Project Catalog. Definitely every quarter we've seen increases in the number of customers coming in through Catalog. And the bigger picture for us here is this product is really designed as a new way to capture the imaginations of customers who may not know how to engage with freelance talent on our work marketplace. Give them a way to get started with this one-click model. And then, of course, be able to cross out to them other ways of working with talent. And for sure, to your question, we have seen that hypothesis validated. We're seeing a significant number of these customers actually going further than just catalog and using the talent marketplace or talent scout or other ones of our offerings. And similarly, our existing talent marketplace and other customers have been crossing over and using catalog as well. So we're seeing really great validation that customers do have these needs that span different types of products, different types of use cases, and that adoption has been really supporting the whole thesis that the work marketplace is what's required to meet the needs of all customers.

Got it. And then maybe a bigger picture question sort of. As many companies are struggling with labor shortages here, are there any categories of verticals on the platform where you perhaps sort of seen an acceleration of growth as a result of that? And maybe related to that, are there any verticals where you feel like the platform maybe would benefit from sort of a deeper pool of talent?

Sure. We're really seeing tremendous strength across the board in all of our categories right now. I mean, we've seen acceleration in in some of our biggest categories, we've seen some smaller categories like accounting consulting, which grew at 72% year over year in the past quarter. So in this market, we're actually not seeing negatives, we're seeing this war for talent happening in the world at large. And despite that, the value proposition of what's available on Upwork is actually increasing with talent, you know, we see signups from new talent and active engagement from existing talent at or near record levels continually. And I think that really speaks to the broader story of the work awakening and the fact that talent are now looking for a different value proposition in the world at large and what we have to offer really meets that value proposition so well. So there's a ton of health there and we're excited about what that means both for now and the future.

Got it. Thank you very much. Appreciate the call.

And our next question will come from Eric Sheridan from Goldman Sachs. You may begin.

Thank you so much for taking the questions. Maybe two-part question if I can. In terms of the marketing investments you're calling out that would put some margin pressure on in 22. Just give us a little bit of looking back and what you've seen in the business where now is the right time to lean in on those marketing investments and try to scale the platform and get the opportunities that you see. And then looking further out than just 22, how should we be thinking about elements of wanting to capture leverage in the model as you grow and scale versus continuing those investments on a multi-year view? Thank you so much.

Eric, our view is that timing does really matter around this investment. And specifically, this is such a favorable environment for us to be making the investment in. We see that this is a unique moment because of the work awakening. Businesses have never been more in need of our product. And on the other side, professionals are really rethinking their priorities and are really drawn into the model that we have. We know at the same time that our unaided brand awareness amongst our target clients is in the single digits. And we imagine how much bigger our business can be if we are able to double or triple that awareness. And to your point about looking backwards, this investment is absolutely a continuation of our strategy that we initiated in 2021. You know, we've been preparing for this as we launched the work marketplace category in May of last year. And then the back half of last year began increasing that brand investment, seeing the signals early as it was that this was working. And then in January brought on Melissa Waters as our CMO to further set us up to really be building a world-class brand. that shapes the category, that shapes customer behavior in our category, and really sets us up to be making this investment with a lot of confidence this year. Let me hand it off to Jeff to talk a little more about the rest of your question.

Thanks, Hayden. Yeah, our investment philosophy with respect to brand marketing is exactly the same as it's been with sales and performance marketing. Our goal is to invest as much as we possibly can wherever we can get returns that we think are comfortably above our weighted average cost of capital. And with respect to brand marketing, just like sales and performance marketing, we're focused on driving real business outcomes. And what that means for us is we're trying to drive more clients and increase spend from our existing clients. And so we want to see, we have a hypothesis that as we increase our unaided brand awareness, that that will convert into real business outcomes. Now, we bring patients to this. We know that it's going to take time to move our brand awareness and to test and learn into this to understand what is the optimal mix of creative and channel and geo and reach and frequency and whatnot. So we bring that patience to it. That being said, we also bring an urgency, like all of you, to try to understand how is the spend converting in the interim. And so we're looking at top of signal metrics, traffic, client registrations, freelancer registrations, branded search queries, We also look at the proxy metrics. How are we moving brand consideration? How are we moving brand awareness? How are we moving brand relevance, et cetera? But ultimately, the goal is to absolutely move, you know, convert the investment into real business outcomes. And in terms of the impact on long-term margins, we absolutely believe this is a business that can deliver 30% to 35% long-term EBITDA margins. We are actively driving leverage in cost of revenue, G&A, But we also see this as a great opportunity to focus on our top priority, which is growing the business by investing in those areas that are returning attractive dollars, whether that's sales, performance marketing, brand marketing, whatnot. And the early results we're seeing at the top of the funnel with respect to brand marketing are encouraging. So we're excited to be pushing on this front.

Great. Thank you for all the comments.

Sorry about that. Our next question comes from Bernie McTernan from Needham. Your line is open.

Great. Thanks for taking the questions. Maybe just to zero in on the revenue guidance or long-term revenue guidance, moving the billion dollars of revenue up by a year only about six months after the guide, what's been primarily outperforming expectations? And then on enterprise expecting $300 million, should we be assuming that you guys keep bringing on more more land account reps or is that maybe a different thought process and maybe how steep the curve can get and how businesses are spending. You provide some interesting data in terms of how big some of these businesses are and the GSV on the platform.

Excellent. Thank you much for the questions. In terms of the billion dollar goal, really the way we thought about this is we saw two key themes happening in the business. First off, Super excited about the results of our enterprise efforts. The team did a great job in 2021 hitting the unit economic productivity targets that we had. We know that those are attractive investments to make, so that's why we're doubling the sales force in 2022. And that caused us to be comfortable with a long-term target of $300 million in 2025. And the second dynamic is that we saw growth really strong performance in our spend per client. So whether that is the 15% year-over-year improvement in the 771,000 clients that we have on the platform or those that are spending over $100,000 per year that increase by 51% or $1 million spenders that increase by 61% year-over-year in terms of the number of those. So those two dimensions, caused us to be comfortable with a target of $300 million of enterprise revenue in 2025, which then gave us comfort that we can bring in our $1 billion revenue target from 2025 to 2024. And with respect to how we're going to get to that $300 million in enterprise revenue, we don't need any productivity improvements per rep from what we're seeing from the team right now, which is great. Now, that being said, we'll continue to focus on making sure that we're as effective and productive as we possibly can and continue investing to hire additional reps. As we indicated, we're going to double those in 2022. We absolutely do need to continue investing in those reps, which is a great investment for the company. And the rep growth will probably roughly mirror the growth of the revenue between now and 2025. Thanks for the question.

Great. Thanks, Jeff.

Thank you. Our next question will come from Marvin Fong from BTIG. You may begin.

Great. Thanks for taking my questions. A couple of them have already been answered. But maybe we could start on take rate. I think a bit larger decrease quarter over quarter than we've seen in the last few quarters. And I know you mentioned, you know, more uptake of longer-term relationships. Just looking forward in terms of sort of the cadence on how that might evolve in 2022, I know you mentioned it should be up very slightly. Maybe you could just give us a little more breakdown between, like, your first quarter guidance, what does take rate look there quarter over quarter, and then for the balance of the year. And then I have another follow-up.

Sure. Thanks, Marvin. So you're right in that our take rates and our spend per clients seem to be inversely correlated. So given the pricing model that we have, whereas clients and freelancers find more success on the platform and end up spending more within those existing relationships, the average take rate progresses. I guess the price that they're charged goes from 20% to 10% to 5%, and therefore the average take rate feels a little pressure. So the strength that we saw in the average spend per client going up 15% year over year was reflected in a little bit of take rate pressure quarter over quarter. And as we look out into 2022, we do expect that on average for the year, the take rate will be higher than we're exiting 2021. That's going to be driven by a number of dynamics, a few initiatives that we're working on, including growth in Project Catalog or Talent Scout, Enterprise, which all three of those have higher take rates than the rest of the business. So we would expect those dynamics to be lifting take rate a bit throughout the year, kind of more in Q2 and beyond than in Q1. But we're excited to see you lift there. Thanks, Mark. Great.

And a follow-up, if I may, just I think you did highlight how spending per client is up, you know, no matter how you cut it. Maybe you could just kind of drill down. I mean, are they, you know, doing more projects? Are the value of the projects going up? You know, I'm sure there's some interplay between the two, but maybe just kind of talk about that and then how you're, modeling those two as you give us these longer-term targets. You know, where will the GSV growth come from? More from spend per client or new clients? Any color there would be great.

Yeah, so with respect to the spend per client, we've seen a lot of success in the longer-term projects on our platform. So hourly projects have been growing at a faster rate than fixed-price projects. and the number of hours within those projects has been increasing over time. We've also seen increases in hourly rates, but surprisingly that's been relatively consistent over the last several years. So it's really clients and freelancers finding more value in the platform and extending the duration with which they're using the platform. In terms of growth going forward, where would we expect growth to come from? We really do expect it to come from both. We obviously were pleased that our average spend per client is up 15%. That being said, it's still in the $4,000 range. We think there's significant opportunity to continue increasing that for many years to come. And also understand that we serve 771,000 customers on the client side this past year. We do think there's lots more room over the long term to continue growing that. And that goes directly to the brand marketing efforts that Hayden touched upon. We believe that if we can increase awareness of our offering, that we have the opportunity to meaningfully move those business metrics, and new clients is absolutely one of the key ones there.

That's great. Thanks so much, Jeff. Appreciate it.

Sure.

Our next question will go to Matt Farrell from Piper Sandler. You may begin.

Thanks, guys. Congrats on the really strong results in the pulling in of the $1 billion target. I just wanted to dive a little bit deeper into the enterprise opportunity. What really remains the biggest overhang with potential customers in that space today? And, you know, how do you overcome that overhang to kind of drive to your $300 million target that you laid out today?

Thanks, Matt. There's really not a big barrier to hitting the $300 million target other than executing really well against that goal. I think we have a lot of confidence that we're on that path. And we see the proof points with the performance we've delivered around things like the 78% year-over-year growth in the new deals on the land side, Q4 enterprise revenue up 65% year-over-year, and our million-dollar spenders up 61% year-over-year. So the momentum we're seeing in that part of the business has been great in the execution there. is is really strong and we think we can continue that execution and that's what's going to take us to that 300 million dollar goal i think however there's such a big market opportunity there that we're trying to unlock that's where um really awareness is one of the big um efforts where we think so many of these customers and we know from the brand awareness data don't know about us haven't heard about us and because they do um sometimes they're hearing you know, negative talk tracks from our competitors in the market, mainly legacy staffing firms who may be already working with those customers around what we can offer. And so that's really the bigger unlock in terms of how else we're trying to accelerate that space is just getting our name out there, getting the story out there that will further amplify, I think, all of our efforts in the business, both on the sales side of the house, performance marketing, halo effects and efficiency improvements, hopefully over time, those types of things. Now, clearly, it's early days with this investment. And Jeff talked about some of the goals and the ways we're really being disciplined about measuring that. But I think one of the biggest challenges is these firms haven't heard about us. And so our sales teams are going in and educating them. But we think there's more we can do to make that job even easier for them.

Awesome. And then as I think about 2022, is there a sense of seasonality that returns to the business hopefully as we come out of COVID here this year? Or are we still in a place where just the market dynamics and the growth that you're highlighting that, you know, seasonality really doesn't exist given the broader opportunity ahead?

Yeah, it's a great question. Obviously, you know, COVID is incredibly hard to predict, and we've probably given up trying to exactly understand how that behaves. But really, our numbers have followed kind of a week-to-week and month-to-month level of seasonality since, I don't know, maybe mid-ish 2021. Now, clearly, certain business dynamics do – overrun that seasonality. So with respect to our enterprise offering, if you just looked at those numbers, there's not a whole lot of seasonality that comes into play in terms of the overall revenue growth there because it's driven much more by new account execs that we have, how many accounts they're bringing in, and new account managers and all those sorts of dynamics. But we do see that there is a you know, obviously the, the dynamics that were driven or the, the week to week metrics that were driven throughout COVID look different now. And our goal would be to obviously, you know, bend those curves as much as we can to make sure that our growth drivers are the primary things that they're driving the business forward. And you're seeing that absolutely play out on the enterprise side. You're seeing that play out in the spend per account. And then we hope that with brand marketing, we're able to do that same thing. That's absolutely the intention with those investments.

Awesome.

Thank you so much. Congrats again. Thank you.

Our next question comes from Andrew Boone from J&P Security. You may begin.

Hi, guys. Thanks for taking my questions. Two, please. So first, with wage inflation across the board, Can you just talk about how that impacts your market? What are the dynamics that we should be thinking about from the outside? And then the second question is, 2021 was a major year for product launches. As we think about your enterprise goal in the $300 million, what else are enterprises asking for, right? I think, Hayden, you mentioned your prepared comments that there was a fluidity between freelancers and full-time workers. Is there anything else that we can expect for 2022? Thank you so much.

Sure. So on the wage inflation side, I can definitely characterize, you know, we talked a little bit earlier on the call about the talent dynamics, you know, not slowing down. If anything, they're faster than ever in terms of talent really being interested in this model. We see talent set their own wages on our platform, and they're doing that in a really healthy way today. You know, wages are strong. We also see that clients in a tight labor market are really see our value proposition resonating more strongly than ever. Globally, they're looking at different wages and wage arbitrage becomes more of an issue. They also start to see even more sharply that we have a competitive edge over traditional talent businesses like staffing agencies who have these really steep markups compared to our directed talent model and therefore are even more hard-pressed than even in normal times to compete on an economic basis, never mind the fact that our talent quality is so much more superior to theirs. So in all of that, we are in a really strong position in a tight labor market. However, we still face the reality that so many of these companies just haven't heard of us, so they don't even know that these advantages exist on our platform. To your second question around what are enterprises asking for, a lot of it is building off of the solutions we've already been giving them, things like bring your own talent, compliance offerings, where they are trying to build these hybrid teams of workers, make it even easier for their workforce to have a single login, a single place to go to source talent, break down the barriers between what a freelance worker is doing, an employee is doing, because oftentimes that matter is not consequential, that difference is not consequential anymore. And so we're really helping them build these things out programmatically. And so when we look at our product roadmap for enterprises, a lot of the solutioning is around giving them more of the access to those different talent pools in a much more seamless way and making it just easy for customers to do that without having to worry about things like, how is this person going to be classified? Do I need to think about all of the back office things to do in order to get started with this person, whether they are a full-time worker or a freelance worker? We're really leaning into the reality that that is how the customers are thinking about these things today. Those distinctions are no longer nearly as important as they once were, and building this single destination on our work marketplace for these enterprise customers to come in and use our solution that way, even more than they've been able to do so in the past.

Thank you.

Our next question will come from Rohit Kulkarni from MKM Partners.

Hey, thanks, and a very nice quarter and very optimistic guidance. I guess on the brand marketing, can you recap in terms of about $47 million spent last year, $80 million this year? Across the quarters, where did that spend come from, and what were the learnings that made you more bullish on spending or doubling down on more brand marketing in terms of quantifiable facts that we can learn from outside?

Yeah, I think I'll put on a few things there with respect to the $47 million in 2021. As we mentioned, we really started investing more aggressively in the second half and we launched the work marketplace in May of last year, spent a bit around that in Q2 of last year. And then from Q3 to Q4, we increased the brand spend from $8 to $17 million. We mentioned that for 2022, our current target is $80 million with a little bit more front-end loaded than at the Q4 of this year, but roughly in line with the levels that we saw in Q4 of 2021. You know, we are – With all that being said, we've been at this for several quarters of trying to lay the foundation to be able to go aggressively against this opportunity. And we know that it's going to take time. We are absolutely taking a test and learn approach. We want to understand what works best across reach and frequency by geo, by channel, all of those different intersections. And as we get those learnings, we're going to move the dollars to the areas that are performing well and move them away from the areas where we're not getting the target performance. And so that really is the mentality that we're approaching this. And we believe that there's a significant opportunity that if we can absolutely convert or meaningfully lift our unaided awareness, we have the opportunity to turn that into real business outcomes. But there's a lot of work to do ahead of us to get there.

Okay, and I know in the last few months you have started to experiment with advertising and more subscriptions to both sellers and buyers. Any update as to where you are with both these two new initiatives?

I'd say it's definitely early days, but we're very excited about the paid ad products that we have launched, Rohit. They are a new way for us to do basically two things. One is create new high-quality signals in our work marketplace around things like intent, and availability and who's really interested in what and why. And so those signaling factors have been really valuable in terms of increasing things like match quality on the platform. And then secondarily, they also create opportunities for further monetization. And that is also an exciting piece of the puzzle. So it's early days on both of the products we've launched, boosted proposals, availability badges, things like that. But I think these do represent a really nice new opportunity for us to be both improving the product experience and match quality while also monetizing the business in new ways.

And the availability value just moved out of beta into GA last week or so. So we're looking forward to seeing how those perform more broadly.

Okay. If I could ask one kind of competitive dynamic question. Are you seeing any changes in new players emerge? Any comments on Microsoft, LinkedIn launching their services marketplace? How do you see them if you see them in the broader ecosystem as such?

I mean, the space is dynamic. It hasn't really changed quarter over quarter, and we don't really hear anything about those types of competitors in the market from customers. So we're just staying focused on our business, our strategy. It's working. It's unlocking the space. And I think that's the story for us. We're not hearing a lot of noise about anybody else.

Okay. Thank you very much.

Thank you. And our last question will be from the line of Brenton Hill. Sorry, Brent Thill from Jefferies. You may begin.

Hi, thank you. This is a champion for Brent Thill. Just a couple of, I guess, maybe housekeeping and smaller topics. Just wondering if you had seen any impact or benefits from Omicron late in Q4 or so far in Q1. And then second, on the OPEX line items, I mean, Q4 is a percentage of revenue, you know, pretty much all of the OPEX lines moved up. Is that the sort of trend we should expect through the rest of 2022, or is it really more concentrated in marketing? Thank you.

Sure. Thank you. So with respect to Omicron, as far as we can tell, the dynamics and trends in the business weren't meaningfully driven by the surge in Omicron. We did see nice strength in the business post-Thanksgiving and a bit stronger than we had expected. But any attempt to kind of correlate that with Omicron, either geographic or from a timeframe perspective, didn't result in us having a strong conviction that it came from Omicron. With respect to OpEx, as we said, our overall approach is we want to invest as aggressively as we possibly can wherever we're seeing the return. So in sales and marketing, you're going to see healthy growth in that line item driven by both brand marketing and our sales efforts as well as performance marketing. In R&D, we are aggressively moving to build out the work marketplace beyond where we currently have it. And so you'll see that grow as well. And then we're trying to drive leverage in G&A and cost of revenue, obviously all in pursuit of delivering that long-term 30% to 35% EBITDA margins. Thank you. Thanks, Sean.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call over to Evan for any closing remarks.

On behalf of the entire Upwork team, thank you for joining us today, and thank you for your interest in Upwork. If you need any clarifications or have any follow-up questions, please do not hesitate to reach out to me at investor at Upwork.com. This concludes our call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.