Upwork Inc.

Thank you for standing by, and welcome to the Upwork first quarter 2022 financial results. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during that 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 Evan Barbosa, Vice President of Investor Relations. The floor is yours.

Thank you. Welcome to Upwork's discussion of its first quarter 2022 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 Russia's invasion of Ukraine and our decision to suspend business operations in Russia and Belarus and the COVID-19 pandemic on our business and current and future impact of actions we have taken in response to Russia's invasion of Ukraine in 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 the 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 quarterly report on Form 10-Q for the quarter ended March 31, 2022, 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, unless otherwise noted, reported figures are rounded, and comparisons of the first quarter of 2022 are to the first quarter of 2021. 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 first quarter 2022 earnings call. The first quarter presented no shortage of global uncertainty and conflict, and it also demonstrated the strength of Upwork's business as we continue to execute on our strategy to innovate, evangelize, and scale the world's work marketplace. In the first quarter of 2022, GSV grew 27% year over year to over $1 billion, and revenue grew 24% year over year to $141.3 million. This is the first time our quarterly GSV has hit $1 billion, marking an important landmark in our growth. As we continue to build recognition of Upwork in our offerings, we are also thrilled to be recognized on the Time 100 Most Influential Companies list. Our continued momentum was marked by milestones spanning product, marketing, and sales. Our product innovation and scaling continued. with the launch of project catalog consultations, the rollout of boosted proposals and availability badges to all talent, and the announcement of the simplification of our pricing and packaging for non-enterprise clients. We also launched improvements to in-contract messaging between clients and talent, furthering their ability to build long-lasting relationships on our work marketplace. On the marketing side, we continue to be laser focused on raising awareness of Upwork with customers and prospects and are encouraged by early signals we are seeing from our brand marketing investments. This includes a 20% increase in overall website traffic and 24% increase in client registration from the levels in the third quarter of 2021 prior to our brand marketing investments ramping. On the sales front, we delivered another strong quarter with new enterprise client deals up 33% year over year and enterprise revenue going 57% year over year. We operate a global business in more than 180 countries, and the Russian invasion of Ukraine on February 24th impacted our team, our customers, and our business. Approximately 10% of our 2021 revenue stemmed from work where either the talent or client was located in Ukraine, Russia, or Belarus. And approximately 10% of our own team members were located in these three countries. While this quarter has put us to the test, this test has highlighted three truths about Upwork. First, that our team and customer relationships are strengthened by our shared purpose and values. Second, that our business is robust and resilient. And third, that the Upwork business has attributes that are increasingly relevant and distinctive in our evolving world. The first truth from this crisis has been the power of our shared purpose and values in aligning our internal team and our global community. We moved thoughtfully but decisively in making the decision to suspend operations in Russia and Belarus. It was clear from a values and an operational perspective that this was the right choice. for Upwork and our global customer base. We operate a people-centric business with trust-based relationships at its core, so we took extreme care with every step of the decision to suspend new business initiation with customers in Russia and Belarus beginning on March 7th and to end all active contracts between talent and clients in those countries on May 1st. Our implementation of these changes and related efforts has been undertaken to strengthen our team and our customer relationships, deliver on our brand promise, and reinforce our community ties, even during a difficult time. To support talent in Ukraine, we reoriented our product roadmap to quickly launch features to support and protect their livelihoods, including a way to donate directly to talent via project catalog with no talent fees, no intermediaries, and no expectations for the work to be completed. Waiving any potential negative impact on talent's job success scores was also important, so they can preserve their hard-won Upwork reputations, even if they are currently unable to work. We provided faster access to funds through expedited payments and launched a feature for freelancers to easily and quickly let clients know about their safety and work status. Upwork has a long legacy in Ukraine, with deep roots going back to the founding days of our company. and we have thousands of talent, clients, and our own team members who call Ukraine home. To ensure we were honoring that history and supporting our people, we donated $1 million to Direct Relief International and established a $100,000 matching program for donations from our own team to provide humanitarian support to the Ukrainian population. The second truth highlighted by the crisis has been the resilience of the talent on Upwork and our work marketplace model in the face of disruption. We have seen relatively muted impacts from the crisis on our business in the first quarter, estimating that revenue loss directly attributed to the war was approximately $1 million. We have all been in awe of the resilience of the Ukrainian people over the past two months, and we have seen a microcosm of this resilience on the Upwork platform. Even as offices may be shuttered and people forced to move from place to place, the fact that talent can take their Upwork work with them anywhere is never more valuable than right now. Ukrainian professionals are logging onto Upwork to work and support their families at the highest levels we have seen. Talent registrations in Ukraine reach record numbers, and the number of Ukraine-based talent earning for the first time on Upwork jumped to more than two times pre-invasion levels. Additionally, the unique scale and heterogeneity of our platform offers its own type of resilience from disruption. An ecosystem containing over 90 categories of work and over 10,000 skills and a globally distributed talent pool engaging in over 3 million jobs annually are each a testament to the strength of the Upwork Work Marketplace. We are pleased with the business continuity we have been able to deliver through this crisis for talent and clients alike. Our metrics across the business remain strong. For example, we've seen no noticeable impact to our job fill rates since the start of the crisis. The third truth emerging from the crisis has been the increased relevance of competitive advantages of our business around trust, safety, and security, which has been made even more relevant as the world changes and business priorities evolve. This difficult and heartbreaking war has crystallized our client's need for a partner and trusted advisor with a shared set of values that can fulfill their remote talent needs through a diversified, highly skilled global talent pool able to withstand volatility in a dynamic world. We've heard from customers during this crisis that they trust Upwork as a destination for high-quality remote knowledge workers in an increasingly low trust fragmented global economy. They require peace of mind knowing Upwork offers solutions, safeguards, and talent they can trust. They rely on us for comprehensive solutions that enhance their own flexibility, stability, business continuity, and resiliency. This is a unique attribute of our market category leadership in which we will continue to invest. Organizations demand for a solution that powers their talent access, growth, digital transformation, cost savings, and agility has not abated. Whether clients want to hire in their country, globally, in a specific time zone, near or far, they need a powerful, secure digital platform that matches and delivers talent they can trust with the exact skills to get the job done. Meanwhile, Talent across the globe continue to demand the freedom and flexibility to work on their terms and in ways that fulfill their needs, from small to large projects and from freelance to full-time work, along with assurances that they will get expediently paid for the great work they deliver. In sum, this quarter has illuminated and reinforced a number of Upwork's longstanding strengths and most formidable attributes, including established trust, a people-centric mentality and action, responsible stewardship for small and large customers alike, steadfast decision-making, and unparalleled resilience. These strengths propelled customers to spend a billion dollars in GSV on Upwork in the first quarter of this year. They will also continue to serve as anchors of our offering and promise to customers They will uniquely equip us to successfully innovate, evangelize, and scale the world's work marketplace. They will underpin our ability to deliver profitable growth, and they will permeate our leadership in the global movement to reimagine work. Thank you for joining us on this journey. We will now open the call to your questions.