Upwork Inc.

Good day and thank you for standing by. Welcome to the Upwork fourth quarter and full year 2024 earnings conference call. At this time, all participants are in 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 101 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 hand the conference over to your speaker today, Samuel Meham, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to Upwork's discussion of its fourth quarter and full year 2024 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, 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 websites 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 year ended December 31, 2024, when filed. 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. Comparisons of the fourth quarter of 2024 are to the fourth quarter of 2023, and comparisons of the full year 2024 are to the full year 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.

Good afternoon, and welcome to Upwork's fourth quarter and full-year 2024 earnings call. Upwork had a record year in 2024 with all-time highs for full-year revenue, adjusted EBITDA, and adjusted EBITDA margin. The strategic foundation for Upwork has never been stronger nor more timely. As the AI work tide builds, Organizations of all sizes are seeking out more flexible talent models that match their needs for new and emerging skills with partners who integrate cutting edge AI technology and valued human workers seamlessly and at scale to rapidly deliver on their priorities. At the same time, professionals across geographies, specialties, and industries want digitally powered ways of working that give them easy access to more autonomy, flexibility, and earning power. Upwork is uniquely positioned to capitalize on these massive work trends. We are delivering new and exciting ways for businesses to access the expert global talent and work outcomes they need, and for highly skilled professionals to find lucrative work opportunities and grow their independent careers. Last year was a year of transformation for Upwork. We achieved record performance in the face of a challenging macroeconomic environment. We optimized the organization to increase efficiency and execution velocity, creating a leaner, more agile company that is moving faster and operating more profitably than ever before. We gained market share and substantially outperformed the incumbent staffing industry, a testament to the inherent advantages of our business model, the resilience of our platform, and Upwork's industry-leading innovation and scale. We grew revenue 12% year over year in 2024, compared to an estimated 9% year over year decline in the broader staffing industry. This was the sixth consecutive year of double digit growth outperformance for Upwork compared to the staffing industry. And we expect the strategic moves we made in 2024 to fuel our continued industry outperformance this year. 2025 will be a year of accelerated execution around our focused portfolio of growth catalysts, AI, enterprise, and ads and monetization. I'll discuss each of these catalysts and how they load the spring for 2026, setting us up for long-term success. First, AI. We've rapidly unlocked demand for AI-related work on our platform. GSV from AI-related work grew 60% year over year in 2024, lifted by subsets of AI work like prompt engineering, which was up 93% year over year in the fourth quarter. AI-related work is substantially higher paying, with freelancers working on AI-related projects earning 44% more per hour than those working on non-AI-related projects across the platform in 2024. And the number of Upwork clients engaging in AI-related projects grew 42% year over year in 2024, an encouraging signal about the ability of our model and the talent on Upwork to continuously address critical skill gaps and business needs at the most advanced technology frontiers. We're also leveraging AI on our platform to underpin the evolution of predictive and delightful conversational customer experiences. In 2024, we improved customer productivity, engagement, and work outcomes with UMA, Upwork's mindful AI. For example, more than 70% of new clients are opting into using our UMA-powered job post generator, and its use is increasing job post activity, job post quality, and job fill rates. For example, our high-value jobs from new clients are filling at an 8% higher rate since the introduction of UMA. We added additional capabilities to UMA over the course of 2024, such as proposal writing for talent, which lifted bid volumes by 2.5%. Our fourth quarter acquisition of Objective AI and AI Native Search as a Service Company is already enhancing our search and match results, helping us end the year with all-time high fill rates. As we accelerate execution of our AI roadmap in 2025, Uma and our other AI innovations will continue to drive our flywheel with even better matching experiences, more productivity for customers, and higher quality work outcomes. Second, enterprise. In Q4, we outperformed our enterprise targets, which was one of the main reasons for our overperformance in the quarter compared to our overall revenue guidance. We saw increased engagement from retained customers in the quarter with GSV per active enterprise account growing year over year for the first time in recent quarters. Managed services revenue also grew 12% year over year in 2024. reflecting increasing demand for delivery of fully managed work outcomes among some of our largest clients. Overall, enterprise was a $107 million business for us in 2024, growing 4% year over year against an incredibly challenging macroeconomic environment in which enterprise companies were trimming budgets across the board. We have taken further steps to capture the enterprise opportunity with the announcement of Upwork Business Plus in October. Business Plus is a premium plan that provides a smoother glide path for larger clients and is closing the gap between our current marketplace and enterprise offerings. The launch of Business Plus is unlocking a higher velocity approach to the enterprise market with both sales and self-service channels working in tandem to activate and retain high-value clients. We acquired over 1,000 active users of Business Plus since launch and are seeing higher conversion rates of clients using Business Plus moving from registration to job post and registration to project start when compared to our overall marketplace clients. Business Plus is just one of multiple expansion opportunities underway for us to take increased wallet share in enterprise, including ongoing product work and integrations with several partners as we pursue new growth opportunities. Finally, our ads and monetization business continue to provide a substantive revenue tailwind while enhancing marketplace quality, efficiency, and take rate. Ads and monetization revenue grew 51% year over year in 2024, with Freelancer Plus revenue increasing 58% year over year as we further augmented the value of that subscription package for talent. We continue to introduce new ads and monetization products and capabilities, and make our existing options more effective for customers. We expect ads and monetization to drive continued take rate increases in 2025, albeit at a more modest pace as we let changes made in 2024 continue to settle and optimize current ads and monetization products. 2024 was a transformational year for Upwork as we injected further discipline and agility into the business. 2025 will be marked by accelerated execution as we build on last year's progress. executing with the speed of a startup and the scale of a market leader to deliver record profitability now and durable growth in the years ahead. This year, we intend to gain further market share from traditional staffing firms, leveraging our competitive edge as a source for the most in-demand talent, including those with AI skills, and notching bigger wins for our enterprise business. We are investing in AI innovation to rapidly reimagine the way our business operates every corner of our platform experience and how our customers achieve outcomes with our continued advances of UMA as an always on work agent and integration of objective AI's AI first search technology serving as prime examples. These accelerated priorities combined with the inherent size scale and yield advantages of our business. will allow us to continue to lead our category. As we build the future of human and AI-powered work, we are excited about the strategic plan we are rapidly executing to deliver a powerful combination of growth, profitability, and shareholder value in the quarters and years ahead. With that, I'll turn the call over to our CFO, Erica Gesser.