Upwork Inc.

Good day and thank you for standing by. Welcome to Upwork's first quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll 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 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.

Thank you, and welcome to Upwork's discussion of its first quarter 2025 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 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 quarter ended March 31st, 2025 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 for the first quarter of 2025 are to the first quarter of 2024. 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 first quarter 2025 earnings call. Upwork had a strong start to the year as our first quarter results beat our plan on both the top and bottom lines. Revenue of $192.7 million exceeded the high end of our guidance range. Combined with consistent cost discipline that led to record high adjusted EBITDA of $56 million and adjusted EBITDA margin of 29%, we have proven quarter after quarter that we can execute well and lead our industry in any market environment. Our business is extraordinarily resilient, and our strategy and execution have resulted in industry-leading performance over multiple years despite the uncertain operating environment. Additionally, Upwork is not directly exposed to announced tariffs, nor to ongoing federal cost savings measures. Our core marketplace performed well in Q1, where GSV per active client grew year over year for the first time in six quarters and increased sequentially for a third consecutive quarter. We also drove sizable GSV outperformance in marketplace through several product enhancements to search recommendations and other customer experiences. Upwork has helped businesses reinvent through every work transformation of the last 20 years, enabling them with the highly skilled talent required to deliver cloud solutions, build e-commerce storefronts, and embrace the eras of mobile and social media. With AI being the next and biggest paradigm shift for organizations, Upwork is becoming the critical infrastructure for enabling the combination of humans and AI to work together to achieve business outcomes. While AI is rapidly changing every company from the smallest startups to the largest enterprises, an AI skills gap exists today, with 63% of employers citing a lack of AI skills as the top barrier to transforming their businesses. We are a critical resource to clients as they navigate this tectonic transformation. One of the world's largest social media platforms has engaged highly skilled math experts on Upwork to safeguard the quality of their training data for integral LLMs. Multiple companies, including one of the top pharmaceutical companies in the world, have relied on a South Carolina-based AI and data science agency on Upwork for healthcare-specific low-code apps and AI solutions. A mid-sized law firm in Florida that specializes in representing veterans turned to Upwork freelancers to transform their knowledge management system with AI, building a custom GPT to organize their massive corpus of documents and access key information in an instant. These examples are a testament to how Upwork's talent base constantly evolves to meet new business needs. Today, we have a deep reservoir of 80,000 AI specialists on our platform globally who have already put their expertise to work in designing, developing, and deploying AI systems for clients, and that pool is growing every day. Clients of all sizes are coming to Upwork to find this expert AI talent for complex, long-term projects ranging from model training and tuning to integrating LLMs into new products to building AI-powered workflows across departments. As our customers have been embracing AI, We ourselves have been racing ahead to make Upwork a truly AI-native platform. Our investments in UMA, Upwork's mindful AI, are transforming our customer experience by offloading mundane tasks and making the work journey on Upwork more productive and seamless. This is just the beginning of how, with UMA, we envision providing customers with a fully capable AI work agent that can do everything from informing hiring decisions helping freelancers win work, to end-to-end project management. UMA-powered features we recently launched, like proposal writing and candidate evaluation, experienced strong uptake. We saw 52% more users engaging with UMA overall in Q1 than in Q4 2024, including a 58% lift in engagement with UMA-powered proposal writing as just one example. AI features have already had positive impacts across our platform, driving up volumes of proposals and bids, new client conversion, hiring rates, contract volumes, time to hire, time to start, and freelancer earnings. We are encouraged by the impact of these advancements in making Upwork the leading AI native work marketplace operating at scale. Our significant AI investments are paying off both organically and as we have put capital to work through tech and talent acquisitions that have accelerated our AI roadmap. In Q4, we successfully integrated Objective AI's native search technology and team. As planned, this team is already injecting incremental innovation capacity into our business, contributing new capabilities in search and match that are showing promising effects on GSV. Upwork is well-positioned to lead this AI revolution for our category. with clear advantages in the largest work data set and scaled marketplace, the right talent and tech platform, and ample R&D investment. We have much more in store throughout 2025, including building more personalized AI-powered experiences for acquisition and onboarding that set up customers for immediate success, along with AI matching features that improve hiring efficiency and drive superior hiring outcomes. We made solid progress in Q1 on our strategies to unlock spend from larger clients. Upwork Business Plus, our new premium marketplace offering focused on larger clients, is performing well. Active clients on Business Plus more than doubled quarter over quarter, reflecting both net new additions and upgrades from our standard marketplace plan. Business Plus has become an attractive value proposition for new customers, with approximately 40% of active Business Plus clients being new customers. This is true without any significant paid marketing, a testament to the offering's value proposition meeting a clear client need. Taken together, Business Plus and Enterprise are delivering growth in GSV and revenue from large customers. With the first half of 2025 representing transitional quarters for Enterprise, we are on track with our plan and making steady progress As we mentioned last quarter, our enterprise strategy is evolving as we align our approach to access a greater share of traditional contingent staffing budgets, and we will share more on these developments on the enterprise front in coming quarters. The strength of our business is evident in record first quarter revenue, adjusted EBITDA, and adjusted EBITDA margin. Following our better than expected results in Q1 and our continued accelerated execution, we are reiterating our revenue guidance for the full year, and increasing our adjusted EBITDA guidance range for 2025. We're excited about the massive opportunities ahead of us in AI, enterprise, and ads and monetization, along with the pace at which we are innovating and executing to realize those opportunities. 2025 will be a year where we continue our market share gains while growing profitability, free cash flow, and long-term shareholder value. We are confident we have the right model, talent, investments, and plan to deliver results in 2025 and to continue on the path for more meaningful top-line growth in the future. With that, I'll turn the call over to our CFO, Erica Gessert.