Upwork Inc.

2025 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, Tyler Stahl, Senior Corporate and Securities Counsel. Please go ahead.

Thank you and welcome to Upwork's discussion of its third quarter of 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 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 also be set forth in our quarterly report on Form 10-Q for the quarter ended September 30, 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 of the third quarter of 2025 are to the third quarter of 2024. Adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating expense, 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 third quarter 2025 earnings call. Q3 marked a turning point for our company. The work we've done over the last 18 months to rewire our business for the AI era came to fruition in the form of GSV growth. After five quarters of GSV growth headwinds, the payoffs of our strategy are now visible. In Q3, we delivered 2% year-over-year growth in GSV and expect to see continued positive GSV growth from this point forward, including acceleration in this metric in 2026. Our record-breaking performance on both revenue and profitability against a still sluggish labor market offers tangible proof points that Upwork is a structural beneficiary in the AI era of work. We exceeded $200 million in quarterly revenue for the first time in company history, with 201.7 million in revenue and GAAP net income of 29.3 million in Q3. We delivered all-time highs in adjusted EBITDA at 59.6 million and adjusted EBITDA margin, which came in at 29.6%. Our strong performance is enabling us to increase our revenue and adjusted EBITDA outlook for the full year. At this time, companies of all sizes are wrestling with the question, How can AI benefit my business? A recent MIT study found that 95% of Gen AI pilots fail, and 63% of employers still cite skills gaps as a major hurdle to business transformation, according to the World Economic Forum. Upwork demonstrates how embracing AI technology can positively impact both top line and bottom line performance, and our solutions are increasingly essential for other companies looking to realize this potential. As evidence of this, significant contributors to our GSV and revenue growth were targeted AI customer experience and product innovations, AI category growth on our marketplace, and robust adoption of Upwork Business+. Let me take a moment to unpack each of these. First, in Q3, we continued our investment in transforming the Upwork marketplace into an AI-native platform. Product enhancements to UMA, Upwork's mindful AI, enabled it to become more embedded across multiple workflows, unlocking the tremendous power of our data for customers. We added highly requested capabilities to UMA's toolkit, including sourcing and interviewing talent on clients' behalf, drafting end-to-end talent proposals, and assisting both clients and talent with project management tasks like proposing project milestones and deliverables. UMA is eliminating manual work for clients and talent across our experience. UMA Recruiter drives higher quality matches, doubling the acceptance rate from talent invited to submit proposals, and our upgraded UMA proposal writing feature saw a 15% increase in UMA-generated proposals, saving talent significant time. While each of these wins is valuable in isolation, we're now starting to see the compounding effects of these enhancements working together as we continue to launch and iterate on UMA-powered features. Beyond improving the customer experience, they've delivered significant business impact with search and recommendation improvements largely driven by AI expected to contribute a total of $100 million in incremental GSV in 2025. As companies struggle to get AI work done, and invest more in AI products and applications, we saw a notable expansion of AI projects and jobs on our platform in Q3. Businesses of all sizes continue to come to Upwork to find the critical, skilled talent they need to integrate this technology and derive more immediate ROI. The number of clients engaging in AI-related projects was up 45% year-over-year in Q3, and as a result, GSV from AI-related work increased 53% year-over-year during the same period, up significantly from 30% year-over-year growth in Q2. The AI-enabled talent base on Upwork is expanding to meet the moment with 41% more professionals engaging in AI projects versus a year ago. Next, let's turn to our strategy to deepen our reach with SMBs, a segment that is also performing ahead of our plans. In Q3, we enhanced our tailored SMB product, Upwork Business Plus, with additional premium features that streamline the talent sourcing and evaluation process, as well as offering more collaborative hiring capabilities for teams. As SMBs try to navigate what AI means for their businesses, they're increasingly relying on Upwork as an AI equalizer, the powerful platform that helps them scale their AI initiatives. As a result, Business Plus adoption from both new and existing clients outperformed our expectations in Q3, with active clients on Business Plus growing 36% quarter over quarter. Turning to our enterprise business, this quarter we achieved a major milestone in our journey to unlock the $650 billion contingent work market with the launch of our new subsidiary, Lifted. While we have always been best in class in offering enterprise clients talent through the independent contractor model. Through Lyfted, we are now able to provide talent sourcing, contracting, and workforce management across every type of contingent work. Not only is this a unique value proposition in the industry, but we are the only player in the market with a comprehensive, digitally native solution that's purpose-built for enterprises and integrates seamlessly into their existing systems. We are thrilled with the customer reception of Lyfted and are already seeing stronger than expected demand for this offering from both new and existing clients. Our team is working at lightning speed towards our next milestone of onboarding our first customers onto the Lyfted platform by early 2026. Anticipation for Lyfted's new suite of products is high. While the sales cycle for very large multi-million dollar enterprise agreements can take up to a year or more, Early signals make us optimistic about the growth potential of this strategy. With our return to GSV growth and the launch of Lyfted, Q3 was a historic quarter for Upwork. Our AI native platform, AI category growth, and tailored offerings for SMBs are delivering tangible results. The momentum is palpable as we write this next exciting growth chapter for Upwork. With that, I'll turn it over to Erica.