Upwork Inc.

Good day, and thank you for standing by. Welcome to the Upwork quarter and full year 2023 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. If you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to David Newman, Vice President of Investment Relations. Please go ahead. Thank you.

Welcome to Upwork's discussion of its fourth quarter 2023 financial results. Joining me today are Hayden Brown, Upwork's President and Chief Executive Officer, and Erica Gessert, Upwork's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I'll review the State Harbor Statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. Forward-looking statements include all statements other than statements of historical fact. 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. 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 also on our Investor Relations website, as well as the risks and other important factors discussed in today's earnings press release. Additional information will also be set forth in our annual report on Form 10-K for the three months ended December 31, 2023. In addition, reference will be made to certain non-GAAP financial measures. Information regarding the 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. Unless otherwise noted, reported figures are rounded in comparison to the fourth quarter of 2023 or to the fourth quarter of 2022. All financial measures are GAAP unless cited as non-GAAP. Now, I'll turn the call over to Hayden.

Welcome everyone to Upwork's fourth quarter and full year 2023 earnings call. I'm excited to review our accomplishments for the year and speak to our plans for the future. We gained further momentum in the fourth quarter. Fourth quarter revenue of $183.9 million grew 13.9% year over year, reflecting accelerating growth over the past three quarters. Full year revenue grew 11.5% year over year, to $689.1 million. We continued to demonstrate strong profitability with GAAP net income of $46.9 million and adjusted EBITDA of $73.1 million for the full year, which is the highest adjusted EBITDA result in our company's history. This success was made possible by our dedicated Upwork team, and I want to thank them for their disciplined efforts. 2023 was a significant year for the world of work. As the world's largest work marketplace, Upwork played a critical role in helping the more than 850,000 clients and millions of independent professionals we serve adapt to new realities and modernize how they work. There are three key areas of focus that we saw pay dividends in 2023, AI investments, partnerships, and ads and monetization. We built innovative new AI-powered features and platform experiences across every category of work. In the fourth quarter, we opened up the waitlist for Upwork Chat Pro, a work tool powered by OpenAI GPT-4 and embedded into the Upwork experience to help customers solve challenging tasks, boost productivity, and do their best work faster. We've already received over 150,000 signups, and the waitlist is growing every day. Our AI-powered job post generator tool has also proven to be a major boost for clients, significantly increasing task completion speed and improving results. And lastly, findings from the first version of our proposal tips tool showed that freelancers using it secured work at a higher rate than those not using it. Despite only being available for a short time, these AI-powered tools are already having a strong positive impact. and we are committed to further developing this exciting technology for the benefit of our customers. We also forged constructive partnerships in 2023 with specific objectives in mind. The first objective involved establishing Upwork as a go-to destination for experts in different types of work. This included launching our third quarter partnership with OpenAI. Since signing OpenAI, we have signed a dozen additional partners through a similar model with more on the horizon. The second objective was establishing partnerships with companies such as Adobe, Amazon, Miro, Jasper, and ClickUp aimed at increasing the speed and quality of work delivered on Upwork. While this strategy is in its early stages, customer feedback has been extremely positive. Finally, on ads and monetization, we made a strong push to enable talent on our platform through a number of offerings that empower them to stand out from the crowd and highlight their unique skills. Our suite of ads and monetization products was the fastest growing revenue stream for Upwork in 2023, and the efficacy of these tools is being proven out in real time. Using these products, talent can signal to prospective clients that they are ready to start a project immediately, boost proposals to secure work, and promote their profiles at the top of a client's search results when a client is searching for talent. When clients send invitations to collaborate with freelancers using an availability badge, those invitations are accepted 77% more often. A successfully boosted proposal increases a freelancer's chance of getting hired by approximately 20%. And finally, thanks to ongoing enhancements to our Freelancer Plus subscription offering for talent, We saw enrollments increase 76% year over year. We're excited to grow this suite of products and support our customers in the year ahead. Turning to enterprise, we continue to be well positioned to capture share and drive value. In December, we announced an initiative to make it easier for enterprise customers to use Upwork within their existing workforce management systems. We launched partnerships with major vendor management system, or VMS, platforms, SAP Fieldglass, and FlexTrack within our enterprise suite. We plan to drive further enterprise growth through these integrations and by expanding these arrangements to additional VMS partners to be announced this year. The differentiation of our enterprise suite is what attracted 31 leading organizations like Instacart, Checkout.com, and New York University to become a new enterprise client in the fourth quarter, innovating how they work at scale. We are proud of the foundation of efficiency and pace of acquisition we built for the enterprise business in 2023 and are confident in our plans to re-accelerate this business in 2024. Of course, one trend dominated the discourse more than any other last year, the rise of artificial intelligence. Last summer, when we unveiled the first set of AI innovations in our ecosystem, we said what we believed AI would be a game changer for work, deliver major wins for professionals and companies alike, and be an avenue for the world to work smarter. We saw that AI tools held tremendous promise to enhance work experiences and enable professionals to be more productive and fulfill their potential. While still early in the journey, my conviction in that vision is stronger than ever. We have made significant progress toward our goal of making Upwork the preeminent destination for AI-related talent and work. We are also continuing to expand our range of AI-based solutions that supercharge our customers' ability to get work done. In Q4, we acquired AI startup Headroom and welcomed Headroom's founder, Andrew Rabinovich, as our head of AI and machine learning. Andrew is one of the world's leading scientists in deep learning and computer vision. He worked for years in leadership positions at Google Brain and Magic Leap, and his background and expertise will enable us to accelerate our work to reimagine how we serve customer needs using human-centered AI as the new building block for innovation. This year, with our expanded internal AI team, we are fundamentally re-envisioning the full Upwork experience. We look forward to sharing more on our exciting progress and vision in the coming year. As we look to the year ahead, we're focused on three strategies that guide our investments. These strategies are, first, win key customer and work segments via specialization. Upwork is already known for the breadth and diversity of our marketplace. This year, we are executing on the opportunity to layer in greater category specialization to enable high value customer and work offerings to thrive more readily in our ecosystems. You've seen us take early steps in this direction with our focus on the AI talent vertical last year. We help clients more easily connect with top tier AI talent via targeted partnerships with organizations like OpenAI, feature launches like consultations for AI work, and a dedicated talent storefront with our AI services hub. These efforts led to 70% growth in GSV in the AI and machine learning subcategory on Upwork and are the makings of a playbook for continued specialization approaches in this and other categories across our marketplace. Our second strategy is to build the world's most innovative work platform. We are pursuing bold innovations that use the newest technologies to remove friction and enhance delight among our customers as evidenced by our already launched features and plans to leverage AI to reimagine the Upwork experience. In addition to our own internally developed apps and features, we're leveraging partners both to distribute talent on Upwork into third-party ecosystems and to empower talent on our marketplace with access to cutting edge tools. This year, we will further expand our partner ecosystem for customers. Our third strategy is to build a foundation for ongoing profitability growth over multiple years. We are in the early chapters of our ads and monetization journey and will continue building on the strong foundations we have established to unlock more value for customers and shareholders over time. In 2023, we were successful in our shift to profitability delivering a 16.6% adjusted EBITDA margin in Q4, and we remain committed to an enduring focus on expanding margin this year and in years to come. These are the pillars that will guide Upwork in 2024. I look forward to providing updates as we progress through the year. With that, I will turn it over to Erica to review our financials.