UPWK Upwork Inc

Upwork Inc. (Nasdaq: UPWK), the world’s largest work marketplace that connects businesses with independent talent from across the globe, today announced its financial results for the third quarter of 2024.

“Upwork continues to seize the tremendous market opportunity and execute our strategy to deliver durable, profitable growth, with 10% year-over-year revenue growth and our highest-ever net income in the third quarter,” said Hayden Brown, president and CEO, Upwork. “We are building long-term shareholder value by serving clients with work outcomes on demand, produced by the world’s most skilled freelance professionals working hand-in-hand with cutting-edge AI tools. This quarter, our AI-powered innovation accelerated, with new capabilities for Uma™, Upwork’s Mindful AI, that streamline key steps in matching with and hiring talent as well as delivering outcomes in both our Marketplace and Managed Services offerings.”

“As we raise our full-year 2024 revenue and adjusted EBITDA guidance, the resilient performance of our business and our continued market share gains in the face of a challenging macro environment are remarkable. Underscoring our confidence in our strategy, our Board of Directors has authorized another $100 million share repurchase, positioning Upwork to build on our track record of returning meaningful capital to shareholders,” said Erica Gessert, CFO, Upwork. “Through our disciplined execution, we accomplished a record-high adjusted EBITDA margin of 22% in the third quarter. We are wholly committed to growing profitability, and have made great progress towards achieving our 35% adjusted EBITDA margin target in the next five years.”

Third Quarter Financial Highlights

• Revenue grew 10% year-over-year to $193.8 million in the third quarter of 2024
• Active clients grew 2% year-over-year to 855,000
• Net income reached an all-time high of $27.8 million in the third quarter of 2024, up 70% compared to net income of $16.3 million in the third quarter of 2023
• Diluted earnings per share was $0.20 in the third quarter of 2024, up 67% compared to diluted earnings per share of $0.12 in the third quarter of 2023
• Adjusted EBITDA1 was $43.2 million in the third quarter of 2024, up 38% compared to adjusted EBITDA of $31.2 million in the third quarter of 2023
• Cash provided by operating activities was $102.1 million in the third quarter of 2024, compared to cash provided by operating activities of $37.0 million in the third quarter of 2023
• Free cash flow1 was $98.0 million in the third quarter of 2024, compared to free cash flow of $33.4 million in the third quarter of 20232

Third Quarter Operational Highlights

Artificial Intelligence

• Launched enhancements for Uma™, Upwork’s Mindful AI, to create tailored proposal drafts for freelancers and evaluate candidates for clients based on how closely professionals’ skills and experience fit a job post.
• Premiered Uma™-powered Managed Services to more efficiently scope projects, evaluate skills, and design optimal teams of experts to deliver work outcomes.
• Uma™-enabled Job Post Generator helped clients complete job posts 73% faster than job posts in the quarter not leveraging Job Post Generator.
• GSV from AI-related work grew 36% year-over-year in the third quarter.
• Number of clients engaging in AI-related projects grew 30% year-over-year in the third quarter.
• Freelance professionals working on AI-related work earned 41% more per hour than freelancers working on non-AI-related work in the third quarter.
• Announced agreement to acquire Objective AI, Inc.3, an AI-native search-as-a-service company, to further enhance Upwork’s core search and match performance, strengthen Upwork’s AI and machine learning team, and continue upleveling multi-modal capabilities for Uma™ to assist customers with images, videos, and audio content.

Enterprise

• Continued success with a modified Enterprise offering, resulting in increased sales team win rates and 42 total new Enterprise clients, including Hunter Douglas, Bill.com, Berlitz, and Guess.
• Grew Managed Services revenue 5% year-over-year in the third quarter, reflecting increasing demand for delivery of work outcomes and strong pipeline of new Managed Services clients.

Ads & Monetization

• Continued strength in ads & monetization, with revenues increasing 35% year-over-year in the third quarter.
• Freelancer Plus subscription revenue increased 48% year-over-year in the third quarter.

Partnerships

• Partnered with emergent tech providers including Lettuce, Ocoya, TheWordsmith and Builderall to offer fully-managed projects delivered by Upwork embedded directly within partners’ customer experiences, expanding access to Upwork services and skilled talent beyond Upwork’s platform.
• Welcomed Webflow, Smartsheet, Bubble, General Assembly and more to Upwork Partner Experts program, providing clients access to pre-vetted specialist talent on Upwork.

Financial Guidance & Outlook

Upwork announced the authorization of a new $100 million share repurchase program, following the completion of a previous $100 million authorization earlier this year.

Upwork’s guidance for revenue, adjusted EBITDA, diluted weighted-average shares outstanding, and non-GAAP diluted EPS for the fourth quarter of 2024 is:

• Revenue: $178 million to $183 million
• Adjusted EBITDA: $38 million to $42 million4
• Diluted weighted-average shares outstanding: 140 million to 142 million
• Non-GAAP diluted EPS: $0.24 to $0.26

Upwork’s guidance for revenue, adjusted EBITDA, diluted weighted-average shares outstanding, non-GAAP diluted EPS, and stock-based compensation expense for full year 2024 is:

• Revenue: $756 million to $761 million
• Adjusted EBITDA: $155 million to $159 million
• Diluted weighted-average shares outstanding: 139 million to 141 million
• Non-GAAP diluted EPS: $1.00 to $1.02
• Stock-based compensation expense is expected to be lower than previous guidance of $20 million per quarter in 2024

______________________1 An explanation of non-GAAP financial measures and reconciliations to their most directly comparable GAAP financial measures can be found in the “Non-GAAP Financial Measures" section and the subsequent tables at the end of this press release.2 Free cash flow benefited from the weekly timing of customer payments in the quarter due to Q2 ending on a Sunday.3 The transaction is expected to close in the fourth quarter of 2024, subject to the satisfaction of customary closing conditions.4 Adjusted EBITDA guidance does not include one-time restructuring charges related to the organizational changes announced on October 23, 2024.

UPWORK INC.Key Financial and Operational Metrics(In thousands, except percentages and basis points)(Unaudited)
	Three Months EndedSeptember 30,											Nine Months EndedSeptember 30,
		2024				2023			Change				2024				2023			Change
GSV(1)	$	998,268			$	1,030,321			(3.1)%			$	3,015,331			$	3,070,174			(1.8)%
Marketplace revenue(1)(2)	$	167,337			$	149,625			12	%		$	498,453			$	428,609			16	%
Enterprise revenue(1)(2)	$	26,439			$	26,108			1	%		$	79,389			$	76,593			4	%
Gross profit	$	150,368			$	132,460			14	%		$	446,389			$	380,620			17	%
Gross profit margin		78	%			75	%		222 bps				77	%			75	%		191 bps
Operating expenses	$	129,575			$	120,994			7	%		$	394,766			$	400,308			(1)%
Net income	$	27,758			$	16,337			70	%		$	68,420			$	29,513			132	%
Adjusted EBITDA(1)(3)	$	43,227			$	31,228			38	%		$	117,387			$	42,664			175	%
Profit margin		14	%			9	%		503 bps				12	%			6	%		600 bps
Adjusted EBITDA margin(3)		22	%			18	%		454 bps				20	%			8	%		1,187 bps
Cash provided by operating activities	$	102,128			$	36,952			176	%		$	145,074			$	32,560			346	%
Free cash flow(1)(3)	$	97,961			$	33,422			193	%		$	134,495			$	22,823			489	%

	As of September 30,
(In thousands)	2024		2023		% Change
Active clients(1)	855		836		2	%

	Three Months Ended September 30,		Nine Months Ended September 30,
	2024		2024
New enterprise clients(1)	42		116

(1) See Key Definitions in our third quarter 2024 earnings presentation.

(2) In order to conform to the current period presentation as of September 30, 2024, we present revenue from Enterprise Solutions and Managed Services together as Enterprise revenue in prior periods and no longer report revenue from our Enterprise Solutions offering, previously referred to as Upwork Enterprise, in Marketplace revenue.

(3) An explanation of non-GAAP financial measures and reconciliations to their most directly comparable GAAP financial measures can be found in the “Non-GAAP Financial Measures" section and the subsequent tables at the end of this press release.

Third Quarter 2024 Financial Results Conference Call and WebcastUpwork will host a conference call today at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss the company’s third quarter 2024 financial results. An audio webcast archive will be available following the live event for approximately one year at investors.upwork.com. Please visit the Upwork Investor Relations website at investors.upwork.com/financial-information/quarterly-results to view Upwork’s third quarter 2024 earnings presentation.

Disclosure InformationWe use our Investor Relations website (investors.upwork.com), our Blog (upwork.com/blog), our X handle (twitter.com/Upwork), Hayden Brown’s X handle (twitter.com/hydnbrwn) and LinkedIn profile (linkedin.com/in/haydenlbrown), and Erica Gessert’s LinkedIn profile (linkedin.com/in/erica-gessert) as 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 means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD.

About UpworkUpwork is the world’s largest work marketplace that connects businesses with independent talent from across the globe. We serve 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. Our talent community earned over $3.8 billion on Upwork in 2023 across more than 10,000 skills in categories including website & app development, creative & design, data science & analytics, customer support, finance & accounting, consulting, and operations. Learn more at upwork.com and join us on LinkedIn, Facebook, Instagram, TikTok, and X.

Contact:Investor Relationsinvestor@upwork.com

Safe Harbor:This press release of Upwork Inc. (the “Company,” “we,” “us,” or “our”) contains "forward-looking" statements within the meaning of the federal securities laws. Forward-looking statements include all statements other than statements of historical fact, including any statements regarding our future operating results and financial position, including expected financial results for the fourth quarter and full year 2024, information or predictions concerning the future of our business or strategy, anticipated events and trends, potential growth or growth prospects, competitive position, technological and market trends, including artificial intelligence, industry environment, the economy, our plans with respect to share repurchases, the expected impact of cost-saving initiatives, our planned acquisition of Objective AI, Inc., and other future conditions.

We have based these forward-looking statements largely on our current expectations and projections as of the date hereof about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. As such, they are subject to inherent uncertainties, known and unknown risks, and changes in circumstances that are difficult to predict and in many cases outside our control, and you should not rely on such forward-looking statements as predictions of future events. We make no representation that the projected results will be achieved or that future events and circumstances will occur, and actual results may differ materially and adversely from our expectations. The forward-looking statements are made as of the date hereof, and we do not undertake, and expressly disclaim, any obligation to update or revise any forward-looking statements, to conform these statements to actual results, or to make changes in our expectations, except as required by law. Additional information regarding the risks and uncertainties that could cause actual results to differ materially from our expectations is included under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the three months ended June 30, 2024, filed with the SEC on August 7, 2024, and in our other SEC filings, which are available on our Investor Relations website at investors.upwork.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the three months ended September 30, 2024, when filed.

All third-party trademarks, including names, logos, and brands, referenced in this press release are property of their respective owners. All references to third-party trademarks are for identification purposes only and shall be considered nominative fair use under trademark law.

UPWORK INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except for per share data) (Unaudited)
	Three Months EndedSeptember 30,								Nine Months EndedSeptember 30,
		2024				2023				2024				2023
Revenue
Marketplace (1)	$	167,337			$	149,625			$	498,453			$	428,609
Enterprise (1)		26,439				26,108				79,389				76,593
Total revenue		193,776				175,733				577,842				505,202
Cost of revenue		43,408				43,273				131,453				124,582
Gross profit		150,368				132,460				446,389				380,620
Operating expenses
Research and development		50,411				43,419				155,792				131,146
Sales and marketing		46,093				47,308				141,277				171,377
General and administrative		31,276				28,652				93,201				86,922
Provision for transaction losses		1,795				1,615				4,496				10,863
Total operating expenses		129,575				120,994				394,766				400,308
Income (loss) from operations		20,793				11,466				51,623				(19,688	)
Other income, net		8,091				5,766				20,433				52,748
Income before income taxes		28,884				17,232				72,056				33,060
Income tax provision		(1,126	)			(895	)			(3,636	)			(3,547	)
Net income	$	27,758			$	16,337			$	68,420			$	29,513
Net income (loss) per share:
Basic	$	0.21			$	0.12			$	0.51			$	0.22
Diluted	$	0.20			$	0.12			$	0.50			$	(0.06	)
Weighted-average shares used to compute net income (loss) per share
Basic		132,603				135,450				133,404				134,152
Diluted		139,294				137,291				140,552				135,184

(1) In 2023, we changed the name of our Upwork Enterprise offering to Enterprise Solutions. Concurrently, to align with customer needs and internal decision-making, we combined Enterprise Solutions and Managed Services into a suite of Enterprise offerings. In order to conform to the current period presentation as of September 30, 2024, we present revenue from Enterprise Solutions and Managed Services together as Enterprise revenue in prior periods and no longer report revenue from our Enterprise Solutions offering, previously referred to as Upwork Enterprise, in Marketplace revenue.

UPWORK INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)
	September 30, 2024				December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	288,464			$	79,641
Marketable securities		312,719				470,457
Funds held in escrow, including funds in transit		214,302				212,387
Trade and client receivables, net		69,447				103,061
Prepaid expenses and other current assets		19,359				17,825
Total current assets		904,291				883,371
Property and equipment, net		29,875				27,140
Goodwill		118,219				118,219
Intangible assets, net		1,859				3,048
Operating lease asset		6,441				4,333
Other assets, noncurrent		1,974				1,430
Total assets	$	1,062,659			$	1,037,541
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,601			$	5,063
Escrow funds payable		214,302				212,387
Accrued expenses and other current liabilities		55,754				58,192
Deferred revenue		8,782				17,361
Total current liabilities		284,439				293,003
Debt, noncurrent		357,468				356,087
Operating lease liability, noncurrent		9,220				6,088
Other liabilities, noncurrent		361				1,288
Total liabilities		651,488				656,466
Stockholders’ equity
Common stock		13				14
Additional paid-in capital		635,578				674,918
Accumulated other comprehensive income		1,222				205
Accumulated deficit		(225,642	)			(294,062	)
Total stockholders’ equity		411,171				381,075
Total liabilities and stockholders’ equity	$	1,062,659			$	1,037,541

UPWORK INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)
	Three Months EndedSeptember 30,								Nine Months EndedSeptember 30,
		2024				2023				2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	27,758			$	16,337			$	68,420			$	29,513
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for transaction losses		1,100				1,364				3,533				6,806
Depreciation and amortization		3,668				1,763				10,443				5,641
Amortization of debt issuance costs		460				460				1,381				1,637
Accretion of discount on purchases of marketable securities, net		(2,272	)			(3,678	)			(10,431	)			(9,832	)
Amortization of operating lease asset		722				824				2,428				2,435
Tides Foundation common stock warrant expense		188				188				563				563
Stock-based compensation expense		18,578				17,811				54,758				56,148
Gain on early extinguishment of convertible senior notes		—				—				—				(38,945	)
Changes in operating assets and liabilities:
Trade and client receivables		46,015				4,319				29,857				(2,638	)
Prepaid expenses and other assets		2,665				2,951				(2,468	)			1,487
Operating lease liability		(1,086	)			(1,509	)			(4,215	)			(4,375	)
Accounts payable		(160	)			(2,431	)			541				(5,802	)
Accrued expenses and other liabilities		6,480				4,064				(367	)			(1,077	)
Deferred revenue		(1,988	)			(5,511	)			(9,369	)			(9,001	)
Net cash provided by operating activities		102,128				36,952				145,074				32,560
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities		(40,205	)			(195,061	)			(234,504	)			(449,180	)
Proceeds from maturities of marketable securities		43,423				143,637				365,269				451,047
Proceeds from sale of marketable securities		3,027				9,716				38,421				159,575
Purchases of property and equipment		(1,204	)			(423	)			(1,979	)			(558	)
Internal-use software and platform development costs		(2,963	)			(3,107	)			(8,600	)			(9,179	)
Net cash provided by (used in) investing activities		2,078				(45,238	)			158,607				151,705
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in escrow funds payable		(4,354	)			316				1,915				16,513
Proceeds from exercises of stock options		1,165				1,006				1,935				1,941
Proceeds from employee stock purchase plan		—				—				2,917				2,564
Repurchase of common stock		—				—				(100,000	)			—
Net cash paid for early extinguishment of convertible senior notes		—				—				—				(171,327	)
Net cash provided by (used in) financing activities		(3,189	)			1,322				(93,233	)			(150,309	)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		101,017				(6,964	)			210,448				33,956
Cash, cash equivalents, and restricted cash—beginning of period		405,849				336,151				296,418				295,231
Cash, cash equivalents, and restricted cash—end of period	$	506,866			$	329,187			$	506,866			$	329,187

The following 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 the following (in thousands):

	September 30, 2024			December 31, 2023
Cash and cash equivalents	$	288,464		$	79,641
Restricted cash		4,100			4,390
Funds held in escrow, including funds in transit		214,302			212,387
Total cash, cash equivalents, and restricted cash as shown in the condensed consolidated statement of cash flows	$	506,866		$	296,418

Non-GAAP Financial MeasuresTo supplement our condensed consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), we present certain non-GAAP financial measures in this press release, including adjusted EBITDA, adjusted EBITDA margin, and free cash flow.

We define adjusted EBITDA as net income adjusted for stock-based compensation expense; depreciation and amortization; other income (expense), net, which includes interest expense; income tax benefit (provision); and, if applicable, certain other gains, losses, benefits, or charges that are non-cash or are significant and the result of isolated events or transactions that have not occurred frequently in the past and are not expected to occur regularly in the future. Free cash flow is defined as cash provided by (used in) operations less purchases of property, plant and equipment and cash outflows from internally developed software.

We use non-GAAP financial measures in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including 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 non-GAAP financial measures provide consistency and comparability with past financial performance, facilitate period-to-period comparisons of our 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 without regard to certain items that can vary substantially from company to company, and free cash flow allows investors to evaluate the cash generated from our underlying operations across periods.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as analytical tools, and investors should not consider them in isolation or as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. In particular, (1) adjusted EBITDA excludes stock-based compensation expense, which 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; or (c) tax payments that may represent a reduction in cash available to us. In addition, the non-GAAP measures we use may be different from non-GAAP financial measures used by other companies, including companies in our industry, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP items excluded from the non-GAAP financial measures that we present. Reconciliations of the non-GAAP financial measures presented in this press release to their most directly comparable GAAP financial measures have been provided below, and investors are encouraged to review the reconciliations and not rely on any single financial measure to evaluate our business.

We have not reconciled our adjusted EBITDA guidance to GAAP net income or non-GAAP diluted EPS guidance to GAAP diluted EPS because certain items that impact GAAP net income and GAAP diluted EPS are uncertain or out of our control and cannot be reasonably predicted. In particular, stock-based compensation expense is impacted by the future fair market value of our common stock and other factors, all of which are difficult to predict, subject to frequent change, or not within our control. The actual amount of these expenses during the fourth quarter of 2024 and fiscal year 2024 will have a significant impact on our future GAAP financial results. Accordingly, a reconciliation of adjusted EBITDA guidance to GAAP net income and non-GAAP diluted EPS guidance to GAAP diluted EPS is not available without unreasonable effort.

UPWORK INC.RECONCILIATION OF GAAP TO NON-GAAP RESULTS(In thousands, except for percentages and share data)(Unaudited)
	Three Months EndedSeptember 30,								Nine Months EndedSeptember 30,
		2024				2023				2024				2023
Net income	$	27,758			$	16,337			$	68,420			$	29,513
Add back (deduct):
Stock-based compensation expense		18,578				17,811				54,758				56,148
Depreciation and amortization		3,668				1,763				10,443				5,641
Other income, net (1)		(8,091	)			(5,766	)			(20,433	)			(52,748	)
Income tax provision		1,126				895				3,636				3,547
Other(2)		188				188				563				563
Adjusted EBITDA	$	43,227			$	31,228			$	117,387			$	42,664
Profit margin		14	%			9	%			12	%			6	%
Adjusted EBITDA margin		22	%			18	%			20	%			8	%
Cost of revenue, GAAP	$	43,408			$	43,273			$	131,453			$	124,582
Stock-based compensation expense		(361	)			(499	)			(1,324	)			(1,409	)
Cost of revenue, Non-GAAP		43,047				42,774				130,129				123,173
As a percentage of total revenue, GAAP		22	%			25	%			23	%			25	%
As a percentage of total revenue, Non-GAAP		22	%			24	%			23	%			24	%
Gross profit, GAAP	$	150,368			$	132,460			$	446,389			$	380,620
Stock-based compensation expense		361				499				1,324				1,409
Gross profit, Non-GAAP		150,729				132,959				447,713				382,029
Gross margin, GAAP		78	%			75	%			77	%			75	%
Gross margin, Non-GAAP		78	%			76	%			77	%			76	%
Research and development, GAAP	$	50,411			$	43,419			$	155,792			$	131,146
Stock-based compensation expense		(8,053	)			(6,902	)			(23,529	)			(21,434	)
Intangible amortization		(398	)			—				(1,196	)			—
Research and development, Non-GAAP		41,960				36,517				131,067				109,712
As a percentage of total revenue, GAAP		26	%			25	%			27	%			26	%
As a percentage of total revenue, Non-GAAP		22	%			21	%			23	%			22	%
Sales and marketing, GAAP	$	46,093			$	47,308			$	141,277			$	171,377
Stock-based compensation expense		(3,225	)			(3,106	)			(9,554	)			(9,672	)
Sales and marketing, Non-GAAP		42,868				44,202				131,723				161,705
As a percentage of total revenue, GAAP		24	%			27	%			24	%			34	%
As a percentage of total revenue, Non-GAAP		22	%			25	%			23	%			32	%
General and administrative, GAAP	$	31,276			$	28,652			$	93,201			$	86,922
Stock-based compensation expense		(6,939	)			(7,304	)			(20,351	)			(23,633	)
Other (2)		(188	)			(188	)			(563	)			(563	)
General and administrative, Non-GAAP		24,149				21,160				72,287				62,726
As a percentage of total revenue, GAAP		16	%			16	%			16	%			17	%
As a percentage of total revenue, Non-GAAP		12	%			12	%			13	%			12	%
Total operating expenses, GAAP	$	129,575			$	120,994			$	394,766			$	400,308
Stock-based compensation expense		(18,217	)			(17,312	)			(53,434	)			(54,739	)
Intangible amortization		(398	)			—				(1,196	)			—
Other (2)		(188	)			(188	)			(563	)			(563	)
Total operating expenses, Non-GAAP		110,772				103,494				339,573				345,006
As a percentage of total revenue, GAAP		67	%			69	%			68	%			79	%
As a percentage of total revenue, Non-GAAP		57	%			59	%			59	%			68	%
Income (loss) from operations, GAAP	$	20,793			$	11,466			$	51,623			$	(19,688	)
Stock-based compensation expense		18,578				17,811				54,758				56,148
Intangible amortization		398				—				1,196				—
Other (2)		188				188				563				563
Income from operations, Non-GAAP		39,957				29,465				108,140				37,023
Net income, GAAP	$	27,758			$	16,337			$	68,420			$	29,513
Stock-based compensation expense		18,578				17,811				54,758				56,148
Gain on early extinguishment of convertible senior notes (1)		—				—				—				(38,945	)
Intangible amortization		398				—				1,196				—
Tax effect of non-GAAP adjustments		(7,762	)			(5,447	)			(20,150	)			(5,602	)
Other (2)		188				188				563				563
Net income, Non-GAAP		39,160				28,889				104,787				41,677
Weighted-average shares outstanding used in computing earnings (loss) per share, GAAP
Basic (in millions)		132.6				135.4				133.4				134.2
Diluted (in millions)		139.3				137.3				140.6				135.2
Basic earnings per share, GAAP	$	0.21			$	0.12			$	0.51			$	0.22
Diluted earnings (loss) per share, GAAP	$	0.20			$	0.12			$	0.50			$	(0.06	)
Weighted-average shares outstanding used in computing earnings per share, Non-GAAP
Basic (in millions)		132.6				135.4				133.4				134.2
Diluted (in millions)		139.3				142.8				140.6				135.9
Basic earnings per share, Non-GAAP	$	0.30			$	0.21			$	0.79			$	0.31
Diluted earnings per share, Non-GAAP	$	0.29			$	0.21			$	0.76			$	0.31

(1) During the nine months ended September 30, 2023, we recognized a gain of $38.9 million on the early extinguishment of a portion of our 0.25% convertible senior notes due 2026, which is included in other income, net.

(2) During the three and nine months ended September 30, 2024 and 2023, we incurred $0.2 million and $0.6 million, respectively, of expense related to our Tides Foundation warrant.

UPWORK INC.RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED EBITDA(In thousands)(Unaudited)
	Three Months Ended
	September 30, 2024				June 30, 2024				March 31, 2024				December 31, 2023				September 30, 2023				June 30, 2023
Net income (loss)	$	27,758			$	22,220			$	18,442			$	17,374			$	16,337			$	(3,991	)
Add back (deduct):
Stock-based compensation expense		18,578				19,238				16,942				18,047				17,811				18,437
Depreciation and amortization		3,668				3,629				3,146				3,808				1,763				1,854
Other income, net		(8,091	)			(5,620	)			(6,722	)			(7,389	)			(5,766	)			(3,982	)
Income tax (benefit) provision		1,126				1,181				1,329				(1,557	)			895				1,857
Other (1)		188				187				188				187				188				187
Adjusted EBITDA	$	43,227			$	40,835			$	33,325			$	30,470			$	31,228			$	14,362

(1) For all periods presented, we incurred $0.2 million of expense related to our Tides Foundation warrant.

UPWORK INC.RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW(In thousands)(Unaudited)
		Three Months EndedSeptember 30,								Nine Months EndedSeptember 30,
			2024				2023				2024				2023
Cash provided by operating activities		$	102,128			$	36,952			$	145,074			$	32,560
Less: purchases of property, plant & equipment and cash outflows from internally developed software			(4,167	)			(3,530	)			(10,579	)			(9,737	)
Free cash flow		$	97,961			$	33,422			$	134,495			$	22,823