Upwork Reports Second Quarter 2023 Financial Results with 7% YoY Increase in Revenue
SAN FRANCISCO, Aug. 02, 2023 — Upwork Inc. (Nasdaq: UPWK), the world’s largest work marketplace that connects businesses with independent talent from across the globe, announced its financial results for the second quarter of 2023.
Q2’23 Financial Results
Gross Services Volume (GSV)
GSV increased 3% quarter-over-quarter and was down slightly by approximately (1)% year-over-year. The year-over-year decline was primarily driven by the lapping of strong growth in the previous two years, as well as client marketplace pricing changes implemented in April 2022.
Active Clients
Active Clients increased 2% year-over-year as of June 30, 2023 to approximately 822,000. Active Client growth was driven by relatively flat new client acquisition, offset by a year-over-year increase in retained clients.
GSV per Active Client
GSV per Active Client increased 2% year-over-year to $4,987 as of June 30, 2023. Upwork continues to see higher average spend growth from retained clients when compared to growth in spend from more newly acquired clients.
Take Rate
Total take rate in the second quarter of 2023 was 16.3%, up from 16.0% in the previous quarter and from 15.0% in the second quarter of 2022. Marketplace take rate for the second quarter of 2023 was 15.3%, up from 14.9% in the previous quarter and from 14.0% in the second quarter of 2022. The increase was largely due to the simplification of its freelancer pricing structure implemented in May 2023, as well as other Connects monetization strategies implemented in the marketplace.
Revenue
Revenue grew 7% year-over-year to $168.6 million in the second quarter of 2023. Marketplace revenue for the second quarter of 2023 was $156.6 million, reflecting a year-over-year increase of 9%. In the second quarter of 2023, total revenue growth was primarily driven by client fee changes related to the shift to its Client Marketplace offering in April 2022, as well as other monetization efforts implemented on its platform. Managed services revenue declined (5)% year-over-year in the second quarter to $12.0 million. The decrease in managed services revenue for the past two quarters was due to reduction in average spend by its managed services clients.
Enterprise Revenue
Enterprise Revenue grew 16% year-over-year to $14.3 million in the second quarter of 2023. Enterprise Revenue growth was due to both the growth of its Enterprise client base and existing Enterprise Clients shifting spend to enterprise offerings that have a higher take rate.
Gross Profit and Margin
GAAP gross profit was $127.7 million for the second quarter of 2023, or 76% of revenue, compared with 74% of revenue in the prior year period. Non-GAAP gross profit was $128.2 million, or 76% of revenue, in the second quarter of 2023, compared with 74% in the second quarter of 2022. The increase in gross margin is primarily due to pricing changes and other platform monetization strategies it has implemented over the past 12 months.
OPEX
GAAP operating expenses for the second quarter of 2023 were $133.8 million, representing 79% of revenue, compared to 89% in the prior year period, with R&D expense increasing 21% year-over-year, while sales and marketing, G&A, and provision for transaction losses were all down significantly year-over-year. Non-GAAP operating expenses for the second quarter of 2023 were $115.7 million, representing 69% of revenue, compared to 77% in the prior year period, with R&D expense increasing 24% year-over-year, while sales and marketing, G&A, and provision for transaction losses were all down significantly year-over-year. The strong improvements in operating costs were the result of aggressive management action to focus on efficiency and profitable growth. It will continue to identify ways to improve efficiency while investing in new innovations to grow our business.
Net Income (Loss)
GAAP net loss was $(4.0) million in the second quarterof 2023 compared to GAAP net loss of $(23.8) million in the second quarter of 2022. GAAP net loss per basic and diluted share was $(0.03) in the second quarter of 2023 as compared to GAAP net loss per basic and diluted share of $(0.18) in the second quarter of 2022. Non-GAAP net income was $13.5 million in the second quarter of 2023 compared to non-GAAP net loss of $(4.7) million in the second quarter of 2022. Its non-GAAP net income per basic and diluted share was $0.10 in the second quarter of 2023 as compared to non-GAAP net loss per basic and diluted share of $(0.04) in the second quarter of 2022.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA was $14.4 million in the second quarter of 2023, compared to $(1.9) million in the second quarter of 2022. Adjusted EBITDA margin was 9% in the second quarter of 2023, compared to adjusted EBITDA margin of (1)% in the second quarter of 2022. Second-quarter 2023 adjusted EBITDA includes approximately $2.5 million of non-recurring severance-related costs. Its strong Adjusted EBITDA results are due to the rapid execution of our strategy to focus on durable, profitable growth.
Cash Flow and Balance Sheet
Cash, cash equivalents, and marketable securities were approximately $516.7 million at the end of the second quarter of 2023.
About Upwork
Upwork is the world’s largest work marketplace that connects businesses with independent talent from across the globe. It serves everyone from one-person startups to large, Fortune 100 enterprises with a powerful, trust-driven platform that enables companies and talent to work together in new ways that unlock their potential. Its talent community earned over $3.8 billion on Upwork in 2022 across more than 10,000 skills in categories including website & app development, creative & design, customer support, finance & accounting, consulting, and operations.
SOURCE Upwork
