Upwork Inc.

Good day and thank you for standing by. Welcome to the Upwork third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead.

Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President of Investor Relations. Please go ahead. Samuel Meehan, Vice President Following management's prepared remarks, they 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. 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 a 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 earnings press release. Additional information will be set forth in our quarterly report on Form 10-Q for the three months ended September 30, 2024. In addition, reference will be made to certain non-GAAP financial measures. Information regarding non-GAAP financial measures, including reconciliations to their most directly comparable GAAP financial 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, and comparisons of the third quarter of 2024 are to the third quarter of 2023. Adjusted EBITDA, adjusted EBITDA margin, and free cash flow are non-GAAP financial measures, and all other financial measures are GAAP unless cited as non-GAAP. Now, I'll turn the call over to Hayden.

Welcome, everyone, to Upwork's third quarter 2024 earnings call. Upwork continues to deliver durable, profitable growth as we execute our long-term strategy to drive revenue and margin expansion, even amid a challenging and dynamic macro environment. Third quarter revenue grew 10% year-over-year to $193.8 million as we saw slight top-of-funnel improvements, momentum in managed services, an all-time high intake rate, and continued growth from our ads and monetization products. Our third quarter net income of $27.8 million and adjusted EBITDA of 43.2 million, both record highs, demonstrate our steadfast commitment to enhancing profitability. Simultaneously, we are rapidly innovating, especially in AI, and activating our levers to catalyze GSV and revenue growth. Together, all of these initiatives ultimately deliver greater shareholder value. The organizational changes announced on October 23rd are part of our ongoing efficiency efforts. allowing us to execute more effectively while generating an expected 60 million in annualized cost savings. These changes enable us to continue leaning into our strengths, moving more nimbly, and further innovate to deliver for our customers. We're assembling smaller, more streamlined teams that can move faster towards our goals. We're focused on a narrower portfolio of high ROI and high potential R&D investments. And we're implementing more automation and third-party vendor solutions across the business so our own teams can put all of their energy into excelling at what we do best. In enterprise, we used learnings from the last few quarters to sharpen our strategy. We've positioned a leaner, more effective sales and support team against our largest, highest ROI clients, immediately improving profitability in this business unit while still enabling our smaller enterprise clients to succeed with a lighter touch approach. The launch of Upwork Business Plus on October 16th lets us serve larger clients with a plan that meets their needs by being more fully featured than our marketplace offering, but with a higher take rate. At the same time, acquisition costs and cost to serve are significantly lower than with our enterprise offering. Business Plus enables clients to grow and expand share of wallet with Upwork through a smoother glide path that further closes the gap between our current marketplace and enterprise offerings. We're already achieving solid traction via Business Plus with hundreds of clients organically enrolling in the new plan since its launch. In the third quarter, we signed 42 enterprise deals for a combination of our traditional enterprise plans and a continuation of the testing from last quarter. We welcomed Hunter Douglas, Bill.com, Berlitz, and guests as new enterprise clients. Based on the success of our testing, we recently shifted our land sales team's focus to selling business plus and managed services. We are confident that this refreshed go-to-market strategy and our right-sized investment to deliver higher ROI for customers and shareholders will allow us to more effectively capitalize on the enterprise opportunity. We are steadfast in our commitment to serving the enterprise market and believe Upwork has the right model to unlock the very large enterprise camp. Our account management teams will continue to support our existing installed base of hundreds of enterprise customers whose selection of Upwork is a result of our unique value proposition, and product offerings. Execution of this strategy is being overseen by Ernesto Lamaina, our GM of enterprise. Ernesto has already logged major successes over his past year at Upwork and brings deep experience building enterprise products and leading digitally enabled businesses within traditional staffing providers. These operational changes support our strategic plan to create shareholder value alongside our execution on key GSV and revenue growth levers that include One, making Upwork the preeminent destination for AI talent and work. Two, improving customer productivity and accelerating work outcomes with AI-powered features and experiences built on UMA, Upwork's mindful AI. Three, continued expansion into our enterprise TAM, which we've already touched on today. Four, acquiring new clients cost-effectively and at scale through partnerships. Five, continuing to drive marketplace quality, efficiency, and take rate expansion via our ads and monetization efforts. Progress on these levers was notable in Q3, as showcased in our semi-annual Upwork Updates product release on October 16th. First, AI continues to be a tailwind for our business, with GSV from AI-related work growing 36% year over year in the third quarter, even as we lap quarters of very pronounced growth in this type of work. In parallel, The number of clients engaging in AI-related projects on the Upwork platform grew 30% year-over-year in the quarter. Second, we are continuing to make rapid progress along our AI roadmap by infusing Ooma, our mindful AI, with advanced features that improve our customers' productivity. We unveiled new capabilities for Ooma as a powerful work companion that helps customers brainstorm work ideas and solutions, analyze problems, write content, code for projects, and more, all enhanced by rich historical signals from the Upwork platform. To improve speed and quality of matching between clients and talent, Buma can now create tailored proposal drafts for freelancers and evaluate candidates for clients based on how closely professional skills and experience fit their job post. These features are gaining popularity with customers and will amplify our matching performance with our corresponding metrics like fill rate already being at an all-time high. Additionally, to expedite our progress in delivering on-demand work outcomes to larger clients, our managed services teams are now utilizing UMA as a competitive advantage. A key accelerant to our AI strategy has been our successful acquisition and integration of Headroom, which enabled us to deepen our AI talent bench and increase velocity of our AI roadmap, including the launch and advancement of UMA. Today, we are thrilled to announce the next step on that AI roadmap as you've entered a definitive agreement to acquire Objective, an AI-native search-as-a-service company. Objective's multimodal search technology will be another accelerant to our core search and match performance, as well as Ooma's capabilities associated with images, videos, and audio content. The objective team will provide further depth for the Upwork AI and machine learning group. These small, focused acquisitions are aimed at advancing our AI strategy, and we have a strong track record of integrating them to elevate our AI offerings and talent density. We anticipate the transaction will close in the coming weeks and are eager to welcome the objective team to Upwork. Next, we've continued pursuing our strategy to acquire new clients cost-effectively and at scale through partnerships. We've introduced the ability for third party tech providers to offer fully managed projects delivered by Upwork embedded directly within their own checkout or platform experiences. In early proof of concept partnerships, emergent tech providers like Lettuce and Akoya are now offering project outcomes within their own customer workflows delivered through AI powered Upwork managed services supported by proven talent from our platform. We also expanded our Upwork Partner Experts program so that clients can find the exact expertise they need more easily on Upwork, now partnering with Webflow, Smartsheet, Bubble, and others to supply pre-vetted experts in their technologies. Finally, we continue to drive marketplace quality, efficiency, and take rate expansion via our ads and monetization products, which continue to be one of our fastest growing revenue streams, increasing 35% year-over-year during the quarter. In Q3, we introduced a new ad product, featured jobs, that are likely to be seen by more candidates and connect clients with the talent they need more efficiently. Other ads and monetization enhancements included expanding boosted profiles to appear more prominently in search results, giving high intent freelancers a better likelihood of getting selected by clients for a project. Our organizational changes for proactive cost discipline and our pace of innovation that fuels our GSD and revenue growth levers continue to fortify Upwork, illustrated by our ongoing market share gains and outperformance of industry peers. Thanks to our customers and team, even against the backdrop of undeniably challenging market conditions impacting small and large businesses alike, we grew revenue 17% year over year during the first half of 2024, whereas revenue declined an average of 8% year over year across the broader staffing industry. We've made strong, steady progress along a clear path to durable, profitable growth and driven unrivaled scale while continuing to invest in a focused and impactful innovation agenda. As ever, we remain relentlessly committed to delivering for our customers and delivering shareholder value through increasing profitability and free cash flow alongside strategic capital allocation. The resiliency of this business and its enduring potential for value creation are proven. We look forward to continuing to unlock the immense potential of Upwork over the short, medium, and long term for all of our stakeholders. With that, I will turn it over to Erica to review our financials.