Upwork Inc ((UPWK)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In a recent earnings call, Upwork Inc. demonstrated a robust financial performance, achieving record revenue and profitability. The company’s success was largely driven by significant growth in AI-related work and the enterprise segment. However, the discussion also reflected awareness of macroeconomic challenges that could impact future growth, with a cautious outlook expressed for 2025.
Record-Breaking Revenue and Growth
Upwork reported substantial revenue achievements for the year 2024, with total revenue reaching $769.3 million, marking a 12% increase from the previous year. The company also saw record highs in adjusted EBITDA and EBITDA margins, underscoring its strong financial footing.
AI-Related Work Surge
A notable highlight was the surge in AI-related work, with gross services volume (GSV) in this area increasing by 60% year-over-year. Prompt engineering, a critical component, grew by 93% in the fourth quarter alone. This sector is especially lucrative, with freelancers in AI-related fields earning 44% more per hour compared to other areas.
Enterprise Segment Performance
The enterprise segment also showed positive momentum, with revenue up by 4% to $107 million in 2024. There was improved engagement from retained customers, and managed services revenue saw a 12% growth, indicating a strengthening of this business line.
Ads & Monetization Growth
Ads and monetization efforts bore fruit, with related revenue expanding by 51% year-over-year. Notably, Freelancer Plus revenue surged by 58%, showcasing the effectiveness of Upwork’s monetization strategies.
Cost Efficiency and Profitability
Cost efficiency was a standout feature, as evidenced by an all-time high adjusted EBITDA margin of 26.2% in Q4 and 21.8% for the entire year. The company also generated a free cash flow of $139.1 million, reinforcing its profitability.
Macroeconomic Challenges
Despite these successes, Upwork acknowledged facing a challenging macroeconomic environment. These headwinds affected the top-of-funnel metrics, leading to a more conservative outlook for 2025.
GSV Decline
Gross services volume (GSV) experienced a slight decline of 3.6% year-over-year in the fourth quarter. This was attributed to macroeconomic pressures and fewer Sundays in Q4 2024 compared to 2023, affecting overall transaction volumes.
Stock-Based Compensation
The company reported stock-based compensation expenses totaling $68.4 million in 2024, highlighting its ongoing efforts to manage and reduce these costs.
Revenue Guidance and Outlook
Looking ahead, Upwork provided a cautious revenue guidance for 2025, forecasting between $740 million and $760 million. Despite macroeconomic uncertainties, the company remains optimistic about its growth catalysts, including AI, enterprise, and monetization efforts, with an expected adjusted EBITDA margin of 25%.
In summary, Upwork’s earnings call conveyed a strong performance in 2024, driven by strategic growth in AI and enterprise sectors. While the company is navigating macroeconomic challenges, it remains focused on maintaining its growth trajectory and profitability into 2025.
