Upwork Inc ((UPWK)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Upwork Inc. has kicked off 2025 on a high note, as evidenced by their recent earnings call. The company reported record revenue and adjusted EBITDA, fueled by their strategic investments in AI and increased customer engagement. Despite facing some macroeconomic challenges, Upwork’s outlook remains optimistic, bolstered by their focus on AI initiatives and enterprise solutions.
Record Revenue and Adjusted EBITDA
Upwork reported a record first quarter revenue of $192.7 million, surpassing the high end of their guidance range. The company also achieved an all-time high in adjusted EBITDA, reaching $56 million with a margin of 29%. This financial performance underscores Upwork’s strong market position and effective strategic execution.
AI Initiatives and Engagement
The company has made significant strides in AI, with 80,000 AI specialists on their platform. AI-related work has grown by 25% year-over-year, and engagement with Uma, Upwork’s AI feature, increased by 52% quarter-over-quarter. These developments highlight Upwork’s commitment to leveraging AI to enhance their service offerings.
Increase in Business Plus and Enterprise Clients
Upwork’s Business Plus clients more than doubled quarter over quarter, with 40% of active clients being new customers. This indicates a strong adoption of the Business Plus offering and reflects Upwork’s ability to attract and retain high-value clients.
Strong Margin and Cash Flow Performance
The company reported a non-GAAP gross margin of 78.3%, a record high, and a GAAP net income increase of 105% year-over-year. Free cash flow was $30.8 million, demonstrating Upwork’s robust financial health and operational efficiency.
Slight Macro Headwinds
Upwork faced some macroeconomic headwinds that impacted customer activity, particularly at the top of the funnel. This was due to cumulative demand pressures over the past year, which the company is actively addressing.
Flat Enterprise Revenue
Enterprise revenue remained relatively flat year-over-year at $26.4 million as Upwork shifts its sales focus. This strategic pivot is part of the company’s broader efforts to optimize their service offerings and target growth areas.
Pressure on Active Client Count
The company experienced pressure on the total volume of active clients due to top of funnel demand pressure, resulting in a year-over-year decline in active client volume. Upwork is working to mitigate these challenges through targeted strategies.
Forward-Looking Guidance
Upwork has reiterated its full-year revenue guidance of $740 to $760 million and increased its full-year adjusted EBITDA guidance to a range of $190 million to $200 million. The company emphasized the significant role of AI in their operations, with AI-related GSV growing 25% year-over-year, contributing to a 63% lift in engagement with their AI-powered features.
In summary, Upwork’s earnings call painted a picture of a company that is navigating challenges with strategic acumen and innovation. The record revenue and adjusted EBITDA, coupled with a strong focus on AI and enterprise solutions, position Upwork well for continued growth. Despite some macroeconomic headwinds, the company’s confident outlook and robust financial performance underscore its resilience and potential for future success.