• Upwork Reports Fourth Quarter and Full Year 2020 Financial Results

    Source: Nasdaq GlobeNewswire / 23 Feb 2021 15:05:01   America/Chicago

    • Fourth quarter 2020 revenue grew 32% year-over-year to $106.2 million
      • Marketplace revenue grew 34% to $96.9 million
    • Full year 2020 revenue grew 24% year-over-year to $373.6 million
      • Marketplace revenue grew 26% to $338.2 million
    • Gross margin expanded two percentage points year-over-year to 73% in the fourth quarter and one percentage point to 72% for full year 2020

    SANTA CLARA, Calif., Feb. 23, 2021 (GLOBE NEWSWIRE) -- Upwork Inc. (Nasdaq: UPWK), the world’s largest work marketplace that connects businesses with independent talent, as measured by gross services volume (“GSV”), today announced its fourth quarter and full year 2020 financial results.

    “2020 was a watershed year for Upwork. In the fourth quarter, we achieved our highest year-over-year growth since going public,” said Hayden Brown, President and Chief Executive Officer of Upwork. “Nearly a year into the pandemic, organizations are embracing remote work to unleash the potential of a global workforce of independent talent that gives them the agility, skills and efficiency they need. Our results demonstrate that we are optimally positioned to capture the exciting opportunity ahead by serving customers as the world’s work marketplace.”

    Fourth Quarter 2020 Financial Results

    • GSV increased by 33% year-over-year to $727.7 million
    • Revenue grew 32% year-over-year to $106.2 million
    • Marketplace revenue grew 34% year-over-year to $96.9 million
    • Marketplace take rate was 13.5%, up from 13.3% a year ago
    • Gross margin expanded two percentage points year-over-year to 73%
    • Net income was $0.9 million, or $0.01 per share, compared to a net loss of $5.5 million, or $(0.05) per share, in the fourth quarter of 2019
    • Non-GAAP net income was $7.8 million, or $0.06 per share, compared to non-GAAP net income of $3.4 million, or $0.03 per share, in the fourth quarter of 2019
    • Adjusted EBITDA, a non-GAAP financial measure, was $9.6 million compared to $3.5 million in the fourth quarter of 2019

    Full Year 2020 Financial Results

    • GSV increased by 21% year-over-year to $2.5 billion
    • Revenue grew 24% to $373.6 million
    • Marketplace revenue grew 26% to $338.2 million
    • Marketplace take rate was 13.6%, up from 13.1% a year ago
    • Gross margin expanded one percentage point year-over-year to 72%
    • Net loss was $22.9 million, or $(0.19) per share, compared to a net loss of $16.7 million, or $(0.15) per share, in the prior year
    • Non-GAAP net income was $6.1 million, or $0.05 per share, compared to non-GAAP net income of $5.5 million, or $0.05 per share, for full year 2019
    • Adjusted EBITDA was $14.0 million compared to $7.4 million in the prior year

    Note: Reported figures are rounded; unless otherwise noted, comparisons of the fourth quarter of 2020 are to the fourth quarter of 2019 and comparisons for the full year 2020 are to the full year 2019. All financial measures are GAAP unless cited as non-GAAP. Certain operating metrics used here, including “GSV” and “marketplace take rate,” are defined in our most recently filed Quarterly Report on Form 10-Q and will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 when filed.

    A reconciliation of GAAP to non-GAAP financial measures has been provided at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

    Guidance

    The guidance we are providing today factors in the expected impacts of the COVID-19 pandemic that are available to us as of today.

    As of February 23, 2021, Upwork is providing the following guidance for its first quarter and full year 2021:

    For the first quarter of 2021, Upwork expects to report:

    • Revenue in the range of $107 million to $109 million
    • Adjusted EBITDA in the range of $2 million to $3 million
    • Weighted average shares outstanding in the range of 126 million to 128 million

    For the full year 2021, Upwork expects to report:

    • Revenue in the range of $460 million to $470 million
    • Adjusted EBITDA in the range of $12 million to $16 million
    • Weighted average shares outstanding in the range of 130 million to 134 million

    Fourth Quarter and Full Year 2020 Financial Results Conference Call and Webcast

    Upwork will host a conference call today at 2 p.m. Pacific Time/5 p.m. Eastern Time to discuss the company’s fourth quarter and full year 2020 financial results. An audio webcast archive will be available following the live event for approximately one year at investors.upwork.com. The prepared remarks corresponding to the information reviewed on today’s conference call will also be available on our Investor Relations website, once the call has concluded.

    We use our investor relations website (investors.upwork.com), our Twitter handle (twitter.com/Upwork) and Hayden Brown’s Twitter handle (twitter.com/hydnbrwn) and LinkedIn profile (linkedin.com/in/haydenlbrown) as a means of disseminating or providing notification of, among other things, news or announcements regarding our business or financial performance, investor events, press releases and earnings releases and as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The content of our websites and information that we may post on or provide to online and social media channels, including those mentioned above, and information that can be accessed through our websites or these online and social media channels are not incorporated by reference into this press release or in any report or document we file with the SEC, and any references to our websites or these online and social media channels are intended to be inactive textual references only.

    Safe Harbor Statement

    This press release includes forward-looking statements, which are statements other than statements of historical facts, and statements in the future tense. These statements include, but are not limited to, statements regarding the future performance of Upwork and its market opportunity, including expected financial results for the first quarter and full year of 2021, expectations regarding the impact of the COVID-19 pandemic on our business and industry, and expectations for capturing market share and regarding the changing landscape of work, as well as statements regarding our planned investments to support growth. Accordingly, actual results could differ materially or such uncertainties could cause adverse effects on our results. Forward-looking statements are based upon various estimates and assumptions, as well as information known to Upwork as of the date of this press release, and are subject to risks and uncertainties, including but not limited to: the impact and duration of the COVID-19 pandemic on our business and global economic conditions; the impact, severity and duration of safety measures put in place to mitigate the impact of the COVID-19 pandemic; our ability to attract and retain a community of freelancers and clients; our limited operating history under our current business strategy and pricing model; our focus on the long-term and our investments in sustainable, profitable growth; our ability to develop and release new products and services, and develop and release successful enhancements, features, and modifications to our existing products and services; the impact of new and existing laws and regulations; our ability to generate revenue from our marketplace offerings and the effects of fluctuations in our level of client spend retention; our ability to develop, maintain, and enhance our brand and reputation cost-effectively; competition; challenges to contractor classification or employment status of freelancers on our work marketplace; the possibility that the market for freelancers and the services they offer will develop more slowly than we expect; user circumvention of our work marketplace; our ability to sell to large enterprise, global account, and mid-market clients; the success of our investments in our enterprise sales organization and our related marketing efforts, and expectations for the ability for enterprise sales to drive incremental revenue and GSV growth; changes in the amount and mix of services facilitated through our work marketplace from period to period; changes in our level of investment in sales and marketing, research and development, and general and administrative expenses, and our hiring plans for sales personnel; the market for information technology; future changes to our pricing model; payment and fraud risks; security breaches; privacy; litigation and related costs; changes in management; and other general market, political, economic, and business conditions. Actual results could differ materially from those predicted or implied, and reported results should not be considered as an indication of future performance. Additionally, these forward-looking statements, particularly our guidance, involve risks, uncertainties and assumptions, including those related to the impacts of the COVID-19 pandemic on our clients’ spending decisions. Significant variation from the assumptions underlying our forward-looking statements could cause our actual results to vary, and the impact could be significant.

    Additional risks and uncertainties that could affect our financial results are included under the caption “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, which are available on the Investor Relations page of our website at investors.upwork.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 when filed. All forward-looking statements contained herein are based on information available to us as of the date hereof, and we do not assume any obligation to update these statements as a result of new information or future events.

    Undue reliance should not be placed on the forward-looking statements in this press release. These statements are based on information available to Upwork on the date hereof, and Upwork assumes no obligation to update such statements.

    Non-GAAP Financial Measures

    To supplement our condensed consolidated financial statements, which are prepared in accordance with GAAP, we present non-GAAP cost of revenue (and as a percentage of revenue), non-GAAP gross profit (and as a percentage of revenue), non-GAAP operating expenses (total and each line item, and total and each non-GAAP operating expense item as a percentage of revenue), non-GAAP income (loss) from operations (and as a percentage of revenue), non-GAAP net income (loss) (and as a percentage of revenue and on a per share basis), and adjusted EBITDA in this press release. Our use of non-GAAP financial measures has limitations as an analytical tool, and these measures should not be considered in isolation or as a substitute for analysis of financial results as reported under GAAP.

    We use these non-GAAP financial measures in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including in the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. These measures provide consistency and comparability with past financial performance, facilitate period-to-period comparisons of core operating results, and also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. In addition, adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance. We exclude the following items from one or more of our non-GAAP financial measures: stock-based compensation expense (non-cash expense calculated by companies using a variety of valuation methodologies and subjective assumptions), depreciation and amortization (non-cash expense), interest expense, other (income) expense, net, income tax (benefit) provision, and, if applicable, other non-cash transactions.

    Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, (1) stock-based compensation expense has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy, (2) although depreciation and amortization expense are non-cash charges, the assets subject to depreciation and amortization may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements, and (3) adjusted EBITDA does not reflect: (a) changes in, or cash requirements for, our working capital needs; (b) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; (c) tax payments that may represent a reduction in cash available to us; or (d) expense from our common stock warrant issued to the Tides Foundation, which is recurring and will be reflected in our financial results for the foreseeable future. The non-GAAP measures we use may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures. A reconciliation of these non-GAAP measures has been provided in the financial statement tables included in this press release and investors are encouraged to review the reconciliation.

    About Upwork

    Upwork is the world’s largest work marketplace that connects businesses with independent talent, as measured by GSV. We serve everyone from one-person startups to 30% of the Fortune 100 with a powerful, trust-driven platform that enables companies and freelancers to work together in new ways that unlock their potential. Our talent community earned over $2.3 billion on Upwork in 2020 across more than 10,000 skills, including website & app development, creative & design, customer support, finance & accounting, consulting, and operations. Learn more at www.upwork.com and join us on LinkedIn, Twitter, and Facebook.

    Upwork is a registered trademark of Upwork Inc. All other product and brand names may be trademarks or registered trademarks of their respective owners.

    UPWORK INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except for per share data)
    (Unaudited)

     Three Months Ended 
    December 31,    		 Twelve Months Ended 
    December 31,
     2020 2019 2020 2019
    Revenue       
    Marketplace$96,866   $72,189   $338,152   $268,284  
    Managed services9,287   8,099   35,476   32,278  
    Total revenue106,153   80,288   373,628   300,562  
    Cost of revenue28,778   22,937   104,267   88,144  
    Gross profit77,375   57,351   269,361   212,418  
    Operating expenses       
    Research and development22,743   16,322   83,471   64,027  
    Sales and marketing34,530   25,572   133,225   95,891  
    General and administrative18,545   21,134   71,518   67,327  
    Provision for transaction losses901   1,199   3,555   3,905  
    Total operating expenses76,719   64,227   291,769   231,150  
    Income (loss) from operations656   (6,876)  (22,408)  (18,732) 
    Interest expense138   259   778   1,306  
    Other income, net(500)  (1,634)  (469)  (3,407) 
    Income (loss) before income taxes1,018   (5,501)  (22,717)  (16,631) 
    Income tax provision(93)  —   (150)  (28) 
    Net income (loss)$925   $(5,501)  $(22,867)  $(16,659) 
            
    Net income (loss) per share, basic and diluted$0.01   $(0.05)  $(0.19)  $(0.15) 
    Weighted-average shares used to compute net income (loss) per share, basic and diluted123,398   112,690   118,699   109,815  

    UPWORK INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands)
    (Unaudited)

     As of December 31,
     2020 2019
    ASSETS   
    Current assets:   
    Cash and cash equivalents$94,081   $48,392  
    Marketable securities75,570   85,481  
    Funds held in escrow, including funds in transit135,042   108,721  
    Trade and client receivables, net47,018   30,156  
    Prepaid expenses and other current assets9,090   7,885  
    Total current assets360,801   280,635  
    Property and equipment, net28,139   21,454  
    Goodwill118,219   118,219  
    Intangible assets, net667   3,335  
    Operating lease asset19,729   21,908  
    Other assets, noncurrent1,672   829  
    Total assets$529,227   $446,380  
        
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Accounts payable$6,455   $652  
    Escrow funds payable135,042   108,721  
    Debt, current7,581   7,584  
    Accrued expenses and other current liabilities32,868   18,342  
    Deferred revenue16,801   13,799  
    Total current liabilities198,747   149,098  
    Debt, noncurrent3,142   10,699  
    Operating lease liability, noncurrent20,506   21,186  
    Other liabilities, noncurrent7,522   5,973  
    Total liabilities229,917   186,956  
        
    Stockholders’ equity:   
    Common stock12   11  
    Additional paid-in capital494,122   431,370  
    Accumulated deficit(194,824)  (171,957) 
    Total stockholders’ equity299,310   259,424  
    Total liabilities and stockholders’ equity$529,227   $446,380  

    UPWORK INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)

     Three Months Ended 
    December 31,    		 Twelve Months Ended 
    December 31,
     2020 2019 2020 2019
    CASH FLOWS FROM OPERATING ACTIVITIES:       
    Net income (loss)$925   $(5,501)  $(22,867)  $(16,659) 
    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:       
    Provision for transaction losses265   1,040   2,919   3,118  
    Depreciation and amortization2,728   2,163   10,172   6,661  
    Amortization of debt issuance costs18   13   61   52  
    Amortization of discount on purchases of marketable securities(9)  (210)  (320)  (1,158) 
    Amortization of operating lease asset933   886   3,860   3,945  
    Tides Foundation common stock warrant expense186   272   750   711  
    Stock-based compensation expense5,981   7,940   25,508   18,798  
    Loss on disposal of fixed assets44   14   44   14  
    Changes in operating assets and liabilities:       
    Trade and client receivables(7,510)  (3,815)  (20,000)  (10,918) 
    Prepaid expenses and other assets(914)  (662)  (1,198)  (2,069) 
    Operating lease liability(431)  (473)  (1,851)  (1,453) 
    Accounts payable735   (2,154)  5,822   (1,457) 
    Accrued expenses and other liabilities4,990   (4,016)  15,438   (2,957) 
    Deferred revenue1,012   3,560   4,027   4,430  
    Net cash provided by (used in) operating activities8,953   (943)  22,365   1,058  
    CASH FLOWS FROM INVESTING ACTIVITIES:       
    Purchases of marketable securities(37,066)  (36,836)  (107,281)  (168,786) 
    Proceeds from maturities of marketable securities28,500   12,000   117,500   84,500  
    Purchases of property and equipment(110)  (522)  (6,320)  (10,752) 
    Internal-use software and platform development costs(2,478)  (1,832)  (8,045)  (5,886) 
    Net cash used in investing activities(11,154)  (27,190)  (4,146)  (100,924) 
    CASH FLOWS FROM FINANCING ACTIVITIES:       
    Changes in escrow funds payable6,912   (5,872)  26,321   10,535  
    Proceeds from exercises of stock options and common stock warrant7,685   4,181   31,028   18,155  
    Proceeds from borrowings on debt—   —   18,000   50,000  
    Repayment of debt(1,892)  (1,893)  (25,621)  (55,679) 
    Proceeds from employee stock purchase plan2,252   2,814   4,913   6,391  
    Net cash provided by (used in) financing activities14,957   (770)  54,641   29,402  
    NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH12,756   (28,903)  72,860   (70,464) 
    Cash, cash equivalents, and restricted cash—beginning of period219,707   188,506   159,603   230,067  
    Cash, cash equivalents, and restricted cash—end of period$232,463   $159,603   $232,463   $159,603  

    The below table reconciles cash, cash equivalents, and restricted cash as reported in the condensed consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows as of December 31, 2020 and 2019 (in thousands):

     As of December 31,
     2020 2019
    Cash and cash equivalents$94,081   $48,392  
    Restricted cash3,340   2,490  
    Funds held in escrow, including funds in transit135,042   108,721  
    Total cash, cash equivalents, and restricted cash as shown in the consolidated statement of cash flows$232,463   $159,603  

    UPWORK INC.
    COST OF REVENUE AND GROSS MARGIN
    (In thousands)
    (Unaudited)

     Three Months Ended December 31, Twelve Months Ended December 31,
     2020 2019 Change 2020 2019 Change
    Cost of revenue$28,778  $22,937  $5,841 25% $104,267  $88,144  $16,123 18%
    Components of cost of revenue:             
    Costs of freelancer services to deliver managed services7,377  6,620  757 11% 28,703  26,763  1,940 7%
    Other components of cost of revenue21,401  16,317  5,084 31% 75,564  61,381  14,183 23%
    Total gross margin73% 71%    72% 71%   

    UPWORK INC.
    RECONCILIATION OF GAAP TO NON-GAAP RESULTS
    (In thousands, except for per share data)
    (Unaudited)

     Three Months Ended 
    December 31,    		 Twelve Months Ended 
    December 31,
     2020 2019 2020 2019
    GAAP Net Income (Loss)$925   $(5,501)  $(22,867)  $(16,659) 
    Add back (deduct):       
    Stock-based compensation5,981   7,940   25,508   18,798  
    Depreciation and amortization2,728   2,163   10,172   6,661  
    Interest expense138   259   778   1,306  
    Other income, net(500)  (1,634)  (469)  (3,407) 
    Provision for income tax93   —   150   28  
    Tides Foundation common stock warrant expense186   272   750   711  
    Non-GAAP Adjusted EBITDA$9,551   $3,499   $14,022   $7,438  
            
    Cost of Revenue Reconciliation:       
    Cost of revenue, GAAP$28,778   $22,937   $104,267   $88,144  
    Stock-based compensation(200)  (130)  (779)  (456) 
    Cost of revenue, Non-GAAP$28,578   $22,807   $103,488   $87,688  
    % of revenue, GAAP27 % 29 % 28 % 29 %
    % of revenue, Non-GAAP27 % 28 % 28 % 29 %
            
    Gross Profit Reconciliation:       
    Gross profit, GAAP$77,375   $57,351   $269,361   $212,418  
    Stock-based compensation200   130   779   456  
    Gross profit, Non-GAAP$77,575   $57,481   $270,140   $212,874  
    % of revenue, GAAP73 % 71 % 72 % 71 %
    % of revenue, Non-GAAP73 % 72 % 72 % 71 %
            
    Operating Expenses Reconciliation:       
    Research and development, GAAP$22,743   $16,322   $83,471   $64,027  
    Stock-based compensation(2,497)  (1,902)  (9,783)  (6,471) 
    Research and development, Non-GAAP$20,246   $14,420   $73,688   $57,556  
    % of revenue, GAAP21 % 20 % 22 % 21 %
    % of revenue, Non-GAAP19 % 18 % 20 % 19 %
            
    Sales and marketing, GAAP$34,530   $25,572   $133,225   $95,891  
    Stock-based compensation(988)  (749)  (4,440)  (2,609) 
    Sales and marketing, Non-GAAP$33,542   $24,823   $128,785   $93,282  
    % of revenue, GAAP33 % 32 % 36 % 32 %
    % of revenue, Non-GAAP32 % 31 % 34 % 31 %
            
    General and administrative, GAAP$18,545   $21,134   $71,518   $67,327  
    Stock-based compensation(2,296)  (5,159)  (10,506)  (9,262) 
    Amortization of intangible assets(667)  (667)  (2,668)  (2,668) 
    Tides Foundation common stock warrant expense(186)  (272)  (750)  (711) 
    General and administrative, Non-GAAP$15,396   $15,036   $57,594   $54,686  
    % of revenue, GAAP17 % 26 % 19 % 22 %
    % of revenue, Non-GAAP15 % 19 % 15 % 18 %
            
    Income (Loss) from Operations Reconciliation:       
    Income (loss) from operations, GAAP$656   $(6,876)  $(22,408)  $(18,732) 
    Stock-based compensation5,981   7,940   25,508   18,798  
    Amortization of intangible assets667   667   2,668   2,668  
    Tides Foundation common stock warrant expense186   272   750   711  
    Income from operations, Non-GAAP$7,490   $2,003   $6,518   $3,445  
    % of revenue, GAAP1 % -9 % -6 % -6 %
    % of revenue, Non-GAAP7 % 2 % 2 % 1 %
            
    Net Income (Loss) Reconciliation:       
    Net income (loss), GAAP$925   $(5,501)  $(22,867)  $(16,659) 
    Stock-based compensation5,981   7,940   25,508   18,798  
    Amortization of intangible assets667   667   2,668   2,668  
    Tides Foundation common stock warrant expense186   272   750   711  
    Net income, Non-GAAP$7,759   $3,378   $6,059   $5,518  
    % of revenue, GAAP1 % -7 % -6 % -6 %
    % of revenue, Non-GAAP7 % 4 % 2 % 2 %
            
    Net Income (Loss) per Share Reconciliation:       
    Weighted-average shares outstanding123,398   112,690   118,699   109,815  
    Net income (loss) per share, GAAP$0.01   $(0.05)  $(0.19)  $(0.15) 
    Net income per share, Non-GAAP$0.06   $0.03   $0.05   $0.05  



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    Investor Relations
    Investor@Upwork.com


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