Upwork’s Most Recent Financial Report

[wlyonsatl]

I see Upwork has filed its quarterly financial report with the Securities and Exchange Commission (www.sec.gov) for the three months ended March 31, 2024.

Net income rose 7.4% compared to the same period last year, a much slower increase then the 18.7% increase in Revenues..

Reported net income benefited significantly from an 86% drop in the company’s provision for transaction losses (due to fraud, etc.). No explanation was provided as to why this provision was down so much compared to the nearly 19% increase in revenue other than “We continue to enhance our trust and safety measures to reduce bad debt losses, instances of fraud, and chargeback losses. As a result, for the three months ended March 31, 2024, provision for transaction losses decreased, as compared to the same period in 2023. We continue to closely monitor these activities and maintain a number of measures designed to mitigate transaction losses going forward.” No longer contributing to the cost of arbitration was part of this. What else? The company does give specifics, but they must be incredibly effective to cause an 86% decrease in what used to be an important cost of doing business for Upwork.

“Over the past several quarters, we implemented a number of initiatives that positively impacted Marketplace revenue and Marketplace take rate, including (i) retiring the tiered service fee structure for talent working with clients on our Marketplace offering in favor of a flat fee, (ii) increasing the number of virtual tokens, which we refer to as Connects, needed by talent to bid on projects, and (iii) deploying ads products on our work marketplace. These initiatives, along with others, resulted in an increase in Marketplace revenue of $27.7 million, or 20%, for the three months ended March 31, 2024, as compared to the same period in 2023, and drove Marketplace take rate to increase to 17.7% for the three months ended March 31, 2024, as compared to 14.7% in the same period in 2023.”

Clearly, the increased revenue from the increase in connects needed to submit proposals has been a big contributor to Upwork’s financial turnaround, but no information is provided to identify what this has been in dollar terms. But the Company’s GSV was up only 1% year on year, accounted for a very small portion of the quarterly increase in revenue and earnings.

“For the three months ended March 31, 2024, Marketplace revenue increased, as compared to the same period in 2023, due to a number of initiatives that we implemented over the past several quarters, including modifying existing offerings and other services and features. Specifically, we retired the tiered service fee structure for talent working with clients on our Marketplace offering—ranging from 5% to 20%—in favor of a flat fee of 10%, increased the number of Connects needed by talent to bid on projects, deployed ads products on our work marketplace, and introduced a contract initiation fee for clients on our Marketplace offering.”

GSV per active client was down 4% in the quarter; the number of active clients increased 5% (to 872,000). It appears likely that getting substantially more income from freelancers was an important change.

The Company has completed its $100 million share repurchase plan.

You can listen to yesterday’s quarterly call here: Upwork Q1 2024 Earnings Conference Call | Upwork Inc. I haven’t listened to it yet.

[48f850a0]

Has never been in doubt how Upwork started to make steady profits, it's all down to the new business model of milking freelancers. Though this business model is bringing in the funds, it's fragile because the freelancers can easily cripple the business should they stop applying to jobs or using the platform, Upwork's goal isn't getting quality work to Clients anymore, it's bringing in high spending boosters and desperate freelancers to keep the system rolling.   This has been clear since late 2022

[fred-derf]

freelancers can easily cripple the business should they stop applying to jobs or using the platform, Upwork's goal isn't getting quality work to Clients anymore,

That would be effective though the reality is, the experienced and talented freelancers might stop but those newbies, low quality hobbyists will contine to throw away connects with 50-plus bids. In many instances, no one gets hired anyway.

Upwork is advertising this:

Upwork TV Spot

Some truth in this one. Paid actor; not a real company. Heh. How many job proposals are from non-real companies? How many proposals [both ways] are from actors and actresses?

"More than 30% of Fortune 500 companies use Upwork..."

Really? Do these companies truly have so many of the "About the Client" history of an average $11.16/hr.? Or how about "payment not verified"?

Nice to mention late 2022. 

For some two years 2021-mid '23 I was extremely busy with clients. Three from Upwork and some from other contacts. As the year 2023 headed to the end my jobs became fewer. This is normal in freelancing. For the past seven months I have been trying to fill in the gaps with Upwork proposals. Don't have an accurate count but I would say over 150!

Here are the results: A response but disappeared; one hire for "long term" which lasted two days-client disappeared too. One interest...still waiting...and waiting...and waiting.

I have to add one quick reply. It was from a local customer I had who still owes me over $2000. I could not tell by his proposal who it was but he responded in a way that was needling me...har har har.

What a difference. In those days when I was not on Upwork much I was getting scads of invites - my "availability" indicator was turned off! Recently I tried for two months paying to have it "on"...to no avail. [anyone surprised??}

Yes, I still send proposals, with great selectivity. 

Too bad Upwork cannot have a screening system for both the clients and freelancers. Yeh, comments have been removed due to some "guidelines" in a matter of minutes but my repeated flagging of repetitous postings continue each day, yet they remain which causes the cash barrel to overflow at Upwork's CEO mansion.

[celgins]

GSV per active client was down 4% in the quarter; the number of active clients increased 5% (to 872,000). It appears likely that getting substantially more income from freelancers was an important change.

I read through the quarterly reports this morning and this stat is the most interesting to me. The number of active clients increased, but GSV per active client was down 4%. Since growth in the number of active clients and GSV per active client are the primary drivers of GSV, and client-spend is the main component of GSV, I think the decline is due to decreasing budgets. We are seeing many more low-paying jobs than in years past, and that is likely due to the growing number of low-skilled freelancers willing to accept low-paying jobs.

So... more active clients are here, but they are getting cheaper.

I'm speculating based on Upwork's numbers and data; there may be a few more unknown factors contributing to that 4% decline.

[krishujoshi4077]

It seems you're referring to a hypothetical scenario with Upwork's financial report since my knowledge only lasts until early 2023, and I don't have updates beyond that time. However, discussing the details you provided:

1. Decrease in Provision for Transaction Losses: An 86% drop is substantial and suggests that Upwork’s enhancements in trust and safety measures are paying off. The most significant factors contributing to such a decrease could involve advanced fraud detection algorithms, stricter verification processes, or improved user education on safe practices.

2. Flat Fee Structure: Transitioning from a tiered service fee to a flat fee could streamline billing which may be more attractive to some users, potentially leading to more consistent usage and revenue.

3. Increase in Connects Required: This change indicates that Upwork is capitalizing on the demand for job bids. If more connects are required, it would encourage freelancers to purchase more, which could be a source of revenue increase.

4. Ads Products: The deployment of ad products offers another revenue stream for Upwork, as it can monetize the traffic on its marketplace by providing paid promotions.

Regarding GSV and active clients:

1. GSV (Gross Services Volume) Increase: The 1% year-over-year increase suggests there is growth, albeit minimal. This could indicate a saturation in the market or a shift in how clients and freelancers are using the platform.

2. Decrease in GSV Per Active Client: This figure could imply that while the number of clients is growing, the amount each client spends is decreasing. This suggests a possible shift towards smaller-scale projects or increased competition among freelancers lowering project costs.

3. Increase in Active Clients: A 5% increase in active clients is a positive sign of growth for the platform and could indicate effective marketing and customer acquisition strategies.

In terms of share repurchase plans:

• Share Repurchase Plan Completion: The completion of a share repurchase plan often indicates a company's confidence in its financial stability and future growth prospects. It can also improve earnings per share by reducing the number of shares outstanding.

[eldarh78]

They reported $18.4 million quarterly net income, the highest ever for the company. This means the management will likely press on with the tough love approach to freelancers and the fiverrization of the platform. But how sustainable are such aggressive revenue-focused spurts in the long-term? 

[wlyonsatl]

Some of what has been done is a temporary improvement. Once year-on-year comparisons become apples-to-apples then these "increases" will become flat or barely rising, then Upwork's going to have to find new ways to increase revenue.

Increasing the cost of proposals is probably not yet at its highest point. I wouldn't be surprised if freelancers don't soon lose the perk of paying no connects when replying to client direct requests for proposals.

[motoyen]

Agree. Look for more ways Upwork tries to fleece freelancers until all the good quality ones are gone and Upwork is left with low quality agencies in third world counteries. 

[0931aa3e]

I'm curious to see how this will end and what the documentary's name will be.