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.

Thanks, Hayden. Q3 2025 was an exceptional quarter for Upwork, as we reported GSV and revenue growth and record profit margins. We are executing with tremendous velocity, and we are seeing very strong growth potential across multiple strategies. As a result, we have resumed GSV growth two quarters earlier than planned. Third quarter GSV of 1.02 billion grew 2% year over year. This growth was driven by both our marketplace and enterprise businesses. Average GSB proactive client continued to grow, rising 5% year-over-year and remaining over $5,000. This underscores our success in attracting and retaining high-value relationships on the marketplace. Once again, GSB proactive client grew year-over-year in every major client segment. We continue to invest in features and functionality to attract larger clients and more complex works. and our investments are showing real traction. Overall spend per contract grew for the fourth consecutive quarter, increasing 12% year over year in Q3, and once again represented our highest ever average spend per contract over any 12-month period. Hours per contract in Q3 surpassed Q2 as our highest ever. On the client side, we ended the quarter with 794,000 active clients. Our strategy of focusing on quality over quantity is working. resulting in GSV per new client growth of 7% year over year. Q2 marked a trough in our year over year active client growth as both new client acquisition and churn rate improved. Our churn rate declined over 70 basis points quarter over quarter, marking our lowest Q3 churn rate in years. This, along with the enhanced AI-powered customer experience improvements that we have been building over the past few quarters, contributed to Q3 marketplace revenue growth of 4% year-over-year. As Hayden mentioned, the development of our new enterprise subsidiary, Lyfted, is progressing well. In the third quarter, enterprise revenue increased 3% year-over-year, with a minor contribution from the acquisitions of Bubty NSN by Lyfted. We continue to expect these acquisitions to contribute to top-line growth as they ramp in the back half of 2026, while being somewhat margin-dilutive throughout the year as we absorb the cost structures and invest in integration and launch. We expect Lyft to be meaningfully accretive to GSV revenue and adjusted EBITDA in 2027. Our marketplace take rate was 18.9% in Q3, compared to 18.3% in the third quarter of 2024, as we saw benefit from multiple strategies, including dynamic pricing and business plus. Our marketplace take rate has high potential for ongoing growth. Ongoing product testing has helped us to identify several strategies which we expect will drive both volume and value in the future. While successful new strategies have led to strength in total take rate this year, we expect a lower total take rate in the fourth quarter due to lower seasonal volumes for managed services customers. Growth margin was 77.3% in Q3, as we continue to execute disciplined cost management across every part of our business. Non-GAAP operating expense was $101 million in the third quarter, or 50% of revenue compared to 57% of revenue in the third quarter of 2024. Adjusted EBITDA was 59.6 million in the third quarter, and once again, we produced a record quarterly adjusted EBITDA margin of 29.6%. We reported gap net income of 29.3 million for the third quarter, a 6% increase over Q3 2024. Free cash flow for the third quarter was also a record at 69.4 million. In the quarter, we used $31 million in cash to buy back 2.1 million shares as part of our commitment to driving long-term shareholder value. Cash, cash equivalents, and marketable securities were approximately $643 million at the end of the third quarter. Now, turning to guidance. For the fourth quarter of 2025, we expect to generate revenue in the range of $193 to $198 million. For adjusted EBITDA in the fourth quarter, We are guiding to a range of $49 to $52 million, which represents an adjusted EBITDA margin in the range of 25 to 26%. Included in this guidance are incremental costs related to the acquisitions of both Ascend and Bubty by Lyfted, as well as temporary integration costs to support the new Lyfted subsidiary. We are pleased with the step-up of our adjusted EBITDA margin outlook for this year, even as we absorb incremental costs related to our M&A execution. We are reiterating our long-term adjusted EBITDA margin target of 35%. As a result of our strong execution and encouraging early impact from our numerous platform enhancements, we are increasing our full-year revenue guide to be in the range of $782 to $787 million. The vast majority of the revenue guidance raised is due to the ongoing strength of our marketplace business. We are also increasing our full-year adjusted EBITDA guidance to be in the range of 222 to 225 million, or 28 adjusted EBITDA margin at the midpoint. This represents a more than six-point margin expansion versus 2024. We expect full-year 2025 non-GAAP diluted EPS to be between $1.35 and $1.37, an increase of 30% at the midpoint from 2024 non-GAAP EPS. We have built a solid foundation for accelerated multi-year growth as reflected in our increased 2025 guidance ranges. In closing, Q3 2025 was a pivotal quarter for Upwork, marking our return to growth mode on a highly profitable foundation. We achieved record revenue and profitability, exceeded guidance on all financial metrics, and reached a critical inflection point by returning to GSV growth. Our strategy, centered on AI, winning with SMBs, and enterprise expansion is delivering results ahead of schedule. We are executing with discipline and speed, positioning Upwork for accelerated multi-year growth starting in 2026. We remain focused on driving operational excellence and increasing long-term shareholder value. And I look forward to seeing you all at our investor day in a couple of weeks. With that, we'd be happy to take your questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you limit your questions to one question and one follow-up. Please stand by while we compile the Q&A roster. And our first question comes from Eric Sheridan of Goldman Sachs. Your line is open.

Thanks so much for taking the question. Given that you now have some period of time with integrating the assets you acquired on the enterprise side, can you talk a little bit about the key early learnings of integrating those assets and how investors should be thinking about your enterprise offering in total mixture of both organic and inorganic growth developing as you look out to 2026 and beyond? Thank you.

Thanks, Eric. So, yeah, we're really pleased with the progress with these acquisitions. And, you know, one thing that's important to note is as we look at our enterprise revenue for Q3 and Q4, that's really a function of our former product. And, you know, we stopped selling that product early in the year. So we're really focused on some of these, you know, milestones out ahead of us as we integrate the platforms and move customers over to Lifted, which is going to happen in early 2026. So that's the next big milestone. But in the meantime, we're really seeing leading indicators for this business that are incredibly strong. We're seeing stronger than expected top of funnel interest. That's from both new and existing customers. We're also being invited for large multimillion dollar RFPs that we were not in contention for in the past. And all of these conversations with customers are really progressing very well. We know that it will take a few quarters to close these types of much bigger multimillion dollar deals. So we're expecting significant GSV growth impact from the strategy starting to accelerate in the back half of next year and really continuing into 2027.

Yeah, Eric, I just add, you know, both our enterprise and our core marketplace business grew both revenue and GSV in Q3, and we expect that dynamic to continue and accelerate into in 2026. I think You know, while there will be some inorganic contribution next year, the outsized opportunity for this new lifted business is really in the synergies between the two acquisitions and our legacy business. And so, you know, the outsized opportunity, as Hayden just articulated, will start at the back half of 2026, and then we really expect an acceleration in 2027. Great.

Thank you.

Thank you.

And our next question comes from Brent Phil of Jefferies. Your line is open.

Hi, this is John for Brentdale. There's two questions. Great city acceleration on the AI-related GSV. I'm wondering if you could drill down into what some of the drivers are. Is it just a broader market tailwind, or is awareness improving any specific initiatives there? And then, is there any way also to quantify the contribution from the two acquisitions in the Q3 or the updated guidance? Thank you.

So the biggest driver of that $100 million incremental GSV that we talked about was really from rebuilding our search and recommendation stack this year and leveraging the tech and talent we gained through the acquisitions of AI companies headroom and objective to do so. We're also seeing a lot of other features performing for us. That includes boosted profiles as an example, which was a feature we ramped up and was particularly impactful in Q3. And that's all in the area of GSC coming from, you know, our features and functionality in the platform on AI. There's another category of benefit that we're having as a tailwind, which is really the AI-related category, you know, growing at 53% overall in the quarter, and we think there's just a ton of run room there. So lots of goodness coming from both sides of our AI strategy.

Yeah, and then, Donna, just in terms of the inorganic contribution, You know, obviously, are really contributing on the enterprise side of our business. Like I said, Q3, we saw GSB and revenue growth on both sides of the business marketplace and enterprise. Now, that said, the contribution from the assets is very consistent with what I articulated in Q2. It's going to be about $5 million to revenue in the back half of this year. And so our outlook really remains the same there. But from an organic point of view, our marketplace also grew 1% GSV in Q3, 4% revenue, and so we expect that organic marketplace growth also to accelerate from here.

Thank you.

Thank you. And our next question comes from Matt Condon of Citizens. Your line is open.

Thank you so much for taking my questions. My first one is just on the broader macro backdrop. Can we just get an update just on what you're seeing as far as freelancer demand and how that progressed throughout the quarter? And then my second one is just on AI driving meaningful improvements to the liquidity of the marketplace. Just is there an upper limit to how far that can go? How much further do you think that these AI improvements can further drive GSV growth as we think about the rest of this year and in 2026? Thank you so much.

In terms of the macro, I'd say things have been relatively stable in the course of Q3 with no real change since Q2. And so it's important to emphasize that against that backdrop, our GSP growth really has been driven by initiatives that we've executed, the success of AI, SMB. And maybe that is a good segue to your second part of the question around what's the run room on those. I mean, we feel there's a lot more opportunity here. We have integrated UMA into some of the workflows across the product, but not all of them. We're doing some bigger updates in 2026 that really bring together and harness the full power of what UMA can do end-to-end across our customer journey, including in the project management side of our offering, which we've done a little bit there, but there's a lot more. So we are very pleased that the early wins that we've had are really delivering, and there's still a lot more we can do, which really bolsters our confidence on GSV growing from here, including having acceleration in GSV in 2026.

Thank you so much.

Thank you. And our next question comes from Bernie McTernan of Niedermann Company. Your line is open.

great thank you so much for the question the press release from press release mentions using sorry she's using agent account sourcing for business plus is there is it available for the rest of the marketplace or is that something that we should be expecting to be coming later and then second for Erica Just wondering if we could get some directional commentary, just given the investment enlisted in 26. Should we still expect margins to be up year over year? Acknowledging that we'll probably get more of this at the investor day in a couple weeks.

So on the first question, Bernie, the agentic sourcing that we have available, there's really a key feature in the Business Plus plan called UMA Recruiter or AI Recruiting. And that is a business plus only feature where our AI agent sources talent on behalf of clients by sending invitations to targeted talent within our ecosystem. It reviews that talent and provides a shortlist to customers recommending of potentially hundreds or thousands of potential matches, which three are the strongest. And so that's the specific feature you're referencing from the press release. You know, we are looking at that and whether there are opportunities to provide, you know, different versions of that benefit to our basic customers. But what we've seen is the features we've rolled out for the basic plan are also performing well from an AI perspective. And that's things like AI related job posting, AI overviews of talent that is in the mix for jobs. And so there's kind of different levels of offering between basic and plus. And we feel good about the benefits we're seeing actually for both sets of customers based on these features.

Yeah, Bernie, and then just on your question on kind of the margin dilution next year from the lifted strategy and kind of our overall margin journey. Like I said, look, we've reiterated our commitment to the 35% margin target, but we will slow down the margin journey next year because we see so many multiple very strong organic growth drivers in our business to invest in. You know, the investment I lifted specifically, we expect to be about two percentage points of dilution next year, but we will not take a step back on margins next year at the same time, even while we're absorbing those costs. I think we've shown, you know, just even in Q3 and in our outlook for Q4, we're able to very well kind of absorb these integration costs and other costs and still show very strong margins and even increase our outlook. So we feel really good about the balance between investment and growth and our ability to produce very strong profitability going forward.

Got it. Makes a lot of sense. Thank you both.

Thank you. One moment for our next question. Our next question comes from the line of Marvin Fong from BTIG.

Great. Good evening. Thanks for taking my questions here. You know, Erica and Hayden, I'd love to just understand better the drivers. I mean, four quarters in a row are hours. Could you just kind of... share with us your thoughts on what's driving that. And in particular, I'm interested, you know, you would think that AI would be sort of an efficiency driver and could actually be like a headwind to LSO contact. Are you seeing at all any kind of differential between AI-related growth and non-AI-related growth as far as, you know, impact on the LSO contact and that trend?

You know, Marvin, I'm so sorry. We had a little trouble hearing you. You were a little bit garbled. Do you mind... So Sarge, could you repeat the question?

Yeah, sure. It was just about the hours per contract. Hopefully you can hear me now. Yeah, it was up very strong and ended up for four quarters. And I was just curious what you think is driving that on such a sustained basis. And then in particular, is there any difference you're seeing in AI-related work and the hours there and how that's trending, thinking that perhaps AI would actually be sort of a headwind considering it should make freelancers more efficient?

Okay, yeah, I heard you perfectly that time. Yeah, so you're right. Hours per contract continues to grow, and there are multiple growth drivers here. This is really, I think, just a proof point to the fact that our focus on quality over quantity in general, and also on really kind of driving up the value chain and attracting the larger end of SMB customers with our Business Plus plan, and then also actually the AI category of work. These are parts of our business that are attracting customers that are you know, engaging us for very long, you know, much more complex projects. Within the AI category of work, customers, clients who, you know, engage us for AI work spend actually more than 3.5x what our typical kind of platform spend is. Similarly, on the Business Plus side, it's about 3x. So there are multiple strategies kind of driving these trends, but we see a continuation from here. And in fact, like I said, AI work is actually a growth driver of hours per contract, not a suppressor.

And just adding to that, Marvin, because I think there is this myth out there that the growth of AI is a headwind for us. It is actually a tailwind for another reason that we haven't talked a lot about. But even though there is substitution of work happening and changes to work happening across the labor market broadly due to AI, within the contingent work ecosystem, which is our space, Substitution is only happening on smaller projects. And that includes for us, you know, our business is only about 5% of our GSV coming from sub $300 tasks or small projects. And that's probably where we have the greatest exposure to AI kind of changing, you know, value in a negative direction for us. And overall, we've seen the levels of substitution and AI impacted categories, even in categories you've talked about, you know, like writing and translation plateau in the last couple quarters. So the bigger impact for us from AI is actually that AI is causing the fractionalization of traditional full-time work, meaning new opportunities are emerging where businesses no longer need a full-time person because AI is doing part of the work, but they do need someone to help augment that work. And that's driving more value and more demand into the contingent work ecosystem and Upwork specifically. So this is actually a key reason why this quarter is We saw the GSV from AI-related work accelerate to 53% year-over-year growth compared to even 30% year-over-year growth in Q2. And this is also why we see these trends as AI truly being a tailwind for us going forward as more work is fractionalized and more of that demand comes to Upwork.

That's super helpful. And then my follow-up, I think you mentioned being invited to a very large evaluation for the lifted business. Could you just help us understand, in these bids, who are you competing against? Is it the staffing companies? and what are the key criteria that you're emphasizing to differentiate listed versus the traditional competitive?

Sure. So what's really exciting here is we are being invited to participate in RFPs and bids for work across different types of contingent work. Previously, we were really just eligible to serve independent contracting and agency of record engagements. Now we're being considered for employment of record, temp staffing, the full suite of contingent work, which is 90% of enterprise spend versus the 10% that goes to independent contracting. So that's a big change, and that's happened just since we made the announcement of Lifted. We don't even have customers live on that product yet, but already the demand from new and existing customers is coming in, and people are eager to work with us on this. In terms of the change to our competitive environment, I'd say who we compete with in the enterprise space has not changed. But now our ability to compete and win, as well as be a valuable partner within the ecosystem, is much greater. So we've changed our value prop now that it's full stack and we can have this end-to-end solution for enterprises. We've been, again, competing in this space for a long time, but we were not as well equipped to win a bunch of different types of work that now we're winning. And when we look at the landscape, other players tend to be focused on very specific niches like temp staff only or EOR services only, or maybe they only have talent in specific geos. They don't have a fully global liquid talent pool like we do, or they've been serving SMBs and are trying to retrofit their SMB offering for enterprise. We don't have any of those issues. We literally can ask our clients to have no compromises, no trade-offs, and have this winning solution that really does it all for them. It's also making us a great partner because it's digital and modular. We can work with others in the ecosystem to fill the gaps that they have with their own offerings. So we're excited about this setup. It's going to take some time to unlock because these contracting processes are multi-quarters in length, but we have so much confidence that in 2026, we'll see that acceleration towards the end of the year and into 2027.

Okay, that's perfect. Thank you so much.

Thank you. And our next question comes from Josh Chan of UBS. Your line is open.

Hi, good afternoon, Hayden and Erica. Thanks for taking my questions. On your kind of future GSV type of comments, I guess, you know, in terms of 2026, what's backing your confidence behind even an accelerating level of GSV growth compared to what we're seeing today? And then also maybe a little bit nearer term in Q4, I guess, depending on what assumptions you make around the guidance. It seems like it may not assume that much GSV growth. I mean, is that accurate? And what's the thinking behind that? Thank you.

Yeah, sure, Josh. So, look, on the future GSV comments, you know, we have multiple growth drivers in our business that are seeing a great deal of success right now. Just to name a few, Hayden talked about the acceleration of the AI category of work, which continues to actually increase in acceleration quarter by quarter. Business Plus is still relatively low penetration in our base, and we've just launched our first marketing campaign just last week, as well as really increasing the features and functionality there. So there's just a lot more runway to go, and we're seeing excellent uptake even before we started to market it to name just a few areas where we really have a lot of optimism for GSV growth on the marketplace side of the business. And Q4 is a little bit unique for a couple of reasons. You know, on the top line, look, this is regular seasonality in our business, both on the enterprise and on the marketplace side. I think, as you know, what we usually see in Q4 is that we see clients kind of wrapping up projects well before kind of the end of December because of the holiday season. And so it's just a lighter overall GSB quarter for us, as well as the fact that on the enterprise side, I think we are expecting some seasonal slowdown, regular seasonal slowdown on the managed services side. And as you know, we did stop selling our legacy enterprise solution at the beginning of this year. you know, the regular kind of coverage on, you know, kind of GSB and revenue that we would see on the top line from new accounts is absent this year. But that said, we're very optimistic, as we've talked about, about the, you know, the growth of the lifted strategy and expect that to really start to impact the late 2026.

Great. Thank you for that, Erika. And then maybe switching to free cash flow, which has been a really good story here. Is the current level of free cash flow generation you know, sustainable, any kind of unusual items kind of impacting this year? And then, you know, you've also been using a portion of the free cash flow every quarter to buy back stock. So is this approach one that will kind of be carried on forward as you routinely buy back a steady amount of stock going forward? Thanks for the comment.

Yeah, sure. Just so on free cash flow, look, I mean, there's a little bit of modulation quarter by quarter with kind of working capital movement. But overall, I think you can think about our free cash flow as, you know, kind of a run rate of around 85% kind of, you know, conversion from EBITDA. So, you know, we anticipate very strong ongoing free cash flow generation. In terms of, you know, kind of our stock buyback, yeah, look, we've been very consistent with our capital allocation priorities in general. We're very focused on increasing shareholder value on multiple fronts. Obviously, investing in organic growth, we're seeing, like I said, a lot of green shoots there, but we are maintaining our 35% margin target and expect to invest in growth, but also continue to show margin accretion over the next several years. You know, second is the, you know, returning capital to shareholders. We announced our second $100 million share repurchase this year in September, and we repurchased another $31 million worth of stock in Q3. And in current levels, you know, we expect to continue to be buyers. So in 2025, we already surpassed our commitment to offset dilution from stock-based compensation with share buybacks. And then lastly, you know, we've had a lot of success with M&A, which has enabled us to return to GSV growth early. And so we'll continue to look for some inorganic opportunities to accelerate our roadmap and accelerate the growth opportunities we see for this business.

Congrats on the quarter and the GSB positive.

Thank you so much. Thank you. And our next question comes from Ron Josie of Citi. Your line is open.

Great. Thanks for taking the question. I want to ask a little bit more about the variable freelance fee testing. I know it's been an order or two going live. Are there any categories in this approach that works better and thoughts here into 2026? And then another question just on the UMA proposal, Ryder, the 15% uplift in generating proposals. Just talk about the .

We lost you on that last one. Ron, you asked about UMA Proposal Writer. Can you just repeat that question?

Sorry, hopefully you can hear me now. I'm just talking about conversion rates with the UMA Proposal Writer, just given the 15% uplift.

Okay, I'll take the dynamic pricing question and maybe Hayden can take the Proposal Writer. So from dynamic pricing, you know, actually the take rate contribution from the variable freelancer fee was actually relatively minimal in Q3. We're still very early in this strategy. We've experimented with just a few categories on the platform in changing the fees, as I think people know, based on supply and demand dynamics. We do vary the application of this strategy by category. And so I wouldn't say it's going to be a static strategy. So I won't go into kind of like which categories are you know, kind of having the biggest yield right now because we'll continue to experiment there. But we're seeing a lot of success, you know, in a very early way, driving some incremental revenue. And we do expect, as we go into 2026, that we'll launch more broadly into more categories. And we expect this to be very crucially both a revenue and a GSV driver because we modulate the feed both on the upside to drive take rate, but also on the downside to help stimulate demand in certain categories. So we see it really kind of influencing both areas.

On the UMA Proposal Writer topic, what we find exciting here is that UMA is really impacting both sides of the marketplace as well as kind of the compounding of both of them getting better. So with the conversion rates that you mentioned and kind of the overall ability of the UMA Proposal Writer, the new version that we launched to help clients really submit high-quality proposals, that is then translating into better matching experiences more hiring. And overall, we see that UMA itself is being adopted on the client side as an all-time high in Q3 and that UMA is increasing the likelihood that clients spend as well as increasing how much they spend. So it's kind of all of these types of UMA-related interventions that are really accelerating our flywheel in the marketplace. They're contributing to that $100 million in incremental GSV that we see for this year. And we can kind of envision, based on their success, how they will perform next year, and how new features that we are going to be adding to UMA's skill set will also continue to expand impact, again, both for talent and clients.

Thank you, Hayden. Thank you, Erica.

Thank you. Thanks, Ron. And our next question comes from Brad Erickson of RBC Capital Markets.

Hey guys, thanks for taking the question. Starting off with just sales and marketing, continuing to get a lot of leverage there coming down as a percentage of revenue. Talk about how you think about balancing the margin expansion along with the product improvement. It would seem like you guys are really sort of hitting the ground running in 26 and could make sense to maybe lean into some spend there, just how you balance that philosophically. And then second, just would be great to get your latest views on ChatGPT and the other chatbots as a customer acquisition channel. What are you seeing as you start to get a little traffic off of those? What's the strategy as you think about having, I would imagine, hoping to have a strong presence on those channels in the future? Thanks.

Yeah, Brad. On the sales and marketing leverage question, look, You're right. I mean, we are seeing multiple, you know, very good green shoots from a growth point of view from some of the, you know, kind of new products and services that we've launched on the platform. So, you know, I started to talk about this last quarter, but, you know, we will, you know, I would say moderate our margin expansion as we go into 2026 because, you know, we just have a lot of opportunity for organic growth and we want to, you know, we've built an incredibly profitable base. We do over time expect that we will continue to find additional cost optimization opportunities, but we are going to balance that with organic growth opportunity.

Regarding the ChatGPT and chatbot question, what we've already done is change our marketing and customer acquisition approaches to really optimize how and where we show up in LLM answers and so-called search results, both organically and even have done some testing where there are integrated advertising opportunities I'd say that from this point, the LLM channel is still pretty small relative to our other channels, but we do see a lot of promise there. It converts at a higher rate than other channels, and the intent signal we see from customers coming through those referrals is really high. So it feels like it's still early days, but we're definitely leaned in on testing different approaches, which do make us optimistic about our ability to capture ongoing and growing demand from these new channels as customer preferences evolve. Got it. Thanks.

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