EPS Forecast
Revenue Forecast
EX-99.1
2
exhibit991pressrelease.htm
EX-99.1
Document
Exhibit 99.1
Upwork Reports Fourth Quarter and Full Year 2019 Financial Results
Full Year 2019 ASC 606 Revenue of $300.6 Million
Full Year 2019 ASC 605 Revenue of $302.6 Million Increased 19% Year-Over-Year
Santa Clara, CA – February 26, 2020 – Upwork Inc. (Nasdaq: UPWK), the largest online talent solution, as measured by gross services volume (“GSV”), today announced its fourth quarter and full year 2019 financial results.
“We had a solid fourth quarter and exceeded our revenue and adjusted EBITDA guidance. Not only do we have a tremendous market opportunity, but we are uniquely positioned to solve the greatest challenge any company can face: how to find the skills and talent they need to thrive,” said Hayden Brown, President and CEO of Upwork. “We’ve set the right strategic priorities and are making the necessary investments to take Upwork into the next phase of growth, and I am confident that we are oriented for success.”
Upwork adopted the new revenue recognition accounting standard, Accounting Standards Codification Topic 606 (“ASC 606”), as of January 1, 2019 on a modified retrospective basis. Financial results for the reporting periods during 2019 are presented in accordance with the new revenue recognition standard. This press release includes additional information to reconcile the impact of the adoption of ASC 606 on our financial results for the reporting periods during 2019. Please refer to the financial tables at the end of this press release for results reported under Accounting Standards Codification Topic 605 (“ASC 605”). Additionally, we have posted a presentation on the investor section of our website at investors.upwork.com with details regarding the impact of the ASC 606 adoption on our reported financial results.
Fourth Quarter 2019 Financial Results
•Gross services volume (GSV) increased by 16% year-over-year to $549 million
•Revenue (under ASC 606) grew 19% year-over-year to $80.3 million; Revenue (under ASC 605) grew 20% year-over-year to $80.7 million
•Marketplace revenue (under ASC 606) grew 21% year-over-year to $72.2 million; Marketplace revenue (under ASC 605) grew 22% year-over-year to $72.6 million
•Take rate (under ASC 606) was 14.6%, up from 14.3% a year ago; Take rate (under ASC 605) was 14.7%, up from 14.3% a year ago
•Gross margin (under ASC 606) expanded approximately two percentage points year-over-year to 71%; Gross margin (under ASC 605) expanded three percentage points year-over-year to 72%
•Net loss (under ASC 606) was $5.5 million, or $(0.05) per share, compared to a net loss of $5.4 million, or $(0.05) per share, in the fourth quarter of 2018; Net loss (under ASC 605) was $5.2 million, or $(0.05) per share, compared to a net loss of $5.4 million, or $(0.05) per share, in the fourth quarter of 2018
•Non-GAAP net income (under ASC 606) was $3.4 million, or $0.03 per share, compared to non-GAAP net income of $2.7 million, or $0.03 per share, in the fourth quarter of 2018; Non-GAAP net income (under ASC 605) was $3.7 million, or $0.03 per share, compared to non-GAAP net income of $2.7 million, or $0.03 per share, in the fourth quarter of 2018
•Adjusted EBITDA (under ASC 606), a non-GAAP financial measure, was $3.5 million compared to $3.6 million in the fourth quarter of 2018; Adjusted EBITDA (under ASC 605), a non-GAAP financial measure, was $3.8 million compared to $3.6 million in the fourth quarter of 2018
Full Year 2019 Financial Results
•Gross services volume (GSV) increased by 19% year-over-year to $2.087 billion
•Revenue (under ASC 606) grew 19% to $300.6 million; Revenue (under ASC 605) grew 19% to $302.6 million
•Marketplace revenue (under ASC 606) grew 20% to $268.3 million; Marketplace revenue (under ASC 605) grew 21% to $270.4 million
•Take Rate (under ASC 606) remained unchanged from a year ago at 14.4%; Take rate (under ASC 605) was 14.5%, up from 14.4% a year ago
•Gross margin (under ASC 606) expanded approximately two percentage points year-over-year to 71%; Gross margin (under ASC 605) expanded three percentage points year-over-year to 71%
•Core clients grew 18% year-over-year to approximately 124,000
•Net loss (under ASC 606) was $16.7 million, or $(0.15) per share, compared to a net loss of $19.9 million, or $(0.38) per share, for full year 2018; Net loss (under ASC 605) was $14.7 million, or $(0.13) per share, compared to a net loss of $19.9 million, or $(0.38) per share, for full year 2018
•Non-GAAP net income (under ASC 606) was $5.5 million, or $0.05 per share, compared to non-GAAP net loss of $0.6 million, or $(0.01) per share, for full year 2018; Non-GAAP net income (under ASC 605) was $7.4 million, or $0.07 per share, compared to non-GAAP net loss of $0.6 million, or $(0.01) per share, for full year 2018
•Adjusted EBITDA (under ASC 606) was $7.4 million compared to $3.8 million in the prior year; Adjusted EBITDA (under ASC 605) was $9.4 million compared to $3.8 million in the prior year
Note: Reported figures are rounded; unless otherwise noted, comparisons of the fourth quarter of 2019 are to the fourth quarter of 2018 and comparisons for the full year 2019 are to the full year 2018. All financial measures are GAAP unless cited as non-GAAP.
A reconciliation of GAAP to non-GAAP financial measures has been provided at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Guidance (ASC 606 basis)
As of February 26, 2020, Upwork is initiating revenue guidance for its first quarter and full year 2020 as follows:
For the first quarter of 2020, Upwork expects to report:
•Revenue in the range of $81.5 million to $82.5 million1
•Weighted average shares outstanding in the range of 114 million to 116 million
For the full year 2020, Upwork expects to report:
•Revenue in the range of $340 million to $345 million2
•Weighted average shares outstanding in the range of 117 million to 121 million
Fourth Quarter and Full Year 2019 Financial Results Conference Call and Webcast
Upwork will host a conference call today at 2 p.m. Pacific Time/5 p.m. Eastern Time to discuss the company’s fourth quarter and full year 2019 financial results. An audio webcast archive will be available following the live event for approximately one year at investors.upwork.com. The prepared remarks corresponding to the information reviewed on today’s conference call will also be available on our Investor Relations website, once the call has concluded.
We use our investor relations website (investors.upwork.com/), our Twitter handle (twitter.com/Upwork) and Hayden Brown’s Twitter handle (twitter.com/hydnbrwn) and LinkedIn profile (linkedin.com/in/haydenlbrown) as a 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 a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The content of our websites and information that we may post on or provide to online and social media channels, including those mentioned above, and information that can be accessed through our websites or these online and social media channels are not incorporated by reference into this press release or in any report or document we file with the SEC, and any references to our websites or these online and social media channels are intended to be inactive textual references only.
_____________________________
1 Under ASC 605, the estimated range for revenue guidance for the first quarter 2020 represents a year-over-year growth rate of between 20% to 22%
2 Under ASC 605, the estimated range for revenue guidance for the full year 2020 represents a year-over-year growth rate of between 14% and 16%.
Safe Harbor Statement
This press release includes forward-looking statements, which are statements other than statements of historical facts, and statements in the future tense. These statements include, but are not limited to, statements regarding the future performance of Upwork and its market opportunity, including expected financial results for the first quarter of 2020 and full year 2020, and expectations for capturing market share and regarding the changing landscape of work, as well as statements regarding our planned investments to support growth. Forward-looking statements are based upon various estimates and assumptions, as well as information known to Upwork as of the date of this press release, and are subject to risks and uncertainties. Accordingly, actual results could differ materially or such uncertainties could cause adverse effects on our results, including: our ability to attract and retain a community of freelancers and clients; our limited operating history under our current business strategy and pricing model; our focus on the long-term and our investments in sustainable, profitable growth; our ability to develop and release new products and services, and develop and release successful enhancements, features, and modifications to our existing products and services; the impact of new and existing laws and regulations; our ability to generate revenue from our marketplace offerings and the effects of fluctuations in our level of client spend retention; our ability to develop, maintain, and enhance our brand and reputation cost-effectively; competition; challenges to contractor classification or employment status of freelancers on our platform; the possibility that the market for freelancers and the services they offer will develop more slowly than we expect; user circumvention of our platform; our ability to sell to mid-market, large enterprise, and global account clients; the success of our investments in our enterprise sales organization and our related marketing efforts, and expectations for the ability for enterprise sales to drive incremental revenue and GSV growth; changes in the amount and mix of services facilitated through our platform in a period; changes in our level of investment in sales and marketing, research and development, and general and administrative expenses, and our hiring plans for sales personnel; the market for information technology; future changes to our pricing model; payment and fraud risks; security breaches; privacy; litigation and related costs; and other general market, political, economic, and business conditions. Actual results could differ materially from those predicted or implied, and reported results should not be considered as an indication of future performance.
Additional risks and uncertainties that could affect our financial results are included under the caption “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on November 6, 2019 and our other SEC filings, which are available on the Investor Relations page of our website at investors.upwork.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 when filed. All forward-looking statements contained herein are based on information available to us as of the date hereof, and we do not assume any obligation to update these statements as a result of new information or future events.
Undue reliance should not be placed on the forward-looking statements in this press release. These statements are based on information available to Upwork on the date hereof, and Upwork assumes no obligation to update such statements.
Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared in accordance with GAAP, we present under ASC 606 and under ASC 605, non-GAAP cost of revenue (and as percentage of revenue), non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (total and each line item, and total and each non-GAAP operating expense item as a percentage of revenue), non-GAAP income from operations (and as percentage of revenue), non-GAAP net income (loss) (and as a percentage of revenue and on a per share basis), and adjusted EBITDA in this press release. Our use of non-GAAP financial measures has limitations as an analytical tool, and these measures should not be considered in isolation or as a substitute for analysis of financial results as reported under GAAP.
We use these non-GAAP financial measures in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including in 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 measures provide consistency and comparability with past financial performance, facilitate period-to-period comparisons of 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. We exclude the following items from one or more of our non-GAAP financial measures: stock-based compensation expense (non-cash expense calculated by companies using a variety of valuation methodologies and subjective assumptions), depreciation and amortization (non-cash expense), interest expense, other (income) expense, net, income tax (benefit) provision, change in fair value of redeemable preferred stock warrant liability (a non-cash charge that will not recur in the periods following the fourth quarter of 2018) and expense from our Tides Foundation common stock warrant (non-cash expense included in general and administrative expense).
Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, (1) stock-based compensation expense 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 being depreciated and amortized 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; (c) tax payments that may represent a reduction in cash available to us; or (d) expense from our common stock warrant issued to the Tides Foundation, which is recurring and will be reflected in our financial results for the foreseeable future. The non-GAAP measures we use may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures. A reconciliation of these non-GAAP measures has been provided in the financial statement tables included in this press release and investors are encouraged to review the reconciliation.
About Upwork
Upwork is the largest online talent solution, as measured by GSV, that enables businesses to find and work with highly-skilled independent professionals. We empower businesses with more flexible access to quality talent, on demand. Through Upwork’s matching technology and services, companies have access to a global pool of proven professionals so they can scale their teams dynamically to meet business needs. Upwork also provides skilled professionals and agencies access to more opportunities.
Upwork’s mission is to create economic opportunities so people have better lives. The community of independent professionals working via Upwork spans many categories including software development, creative & design, finance & accounting, consulting, operations and customer support—over 8,000 skills are represented.
More than thirty percent of the Fortune 500 use Upwork. Clients include Airbnb, Automattic, BISSELL, GE, and Microsoft.
Upwork is headquartered in Santa Clara, Calif., with offices in Chicago and San Francisco, as well as distributed team members around the world. For more information, visit Upwork’s website at www.upwork.com, or its Investor Relations website at https://investors.upwork.com, or join Upwork on Twitter, Facebook, and LinkedIn.
Upwork is a registered trademark of Upwork Inc. All other product and brand names may be trademarks or registered trademarks of their respective owners.
UPWORK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||
| Marketplace | $ | 72,189 | $ | 59,652 | $ | 268,284 | $ | 223,831 | |||||||||||||||||||||||||||
| Managed services | 8,099 | 7,690 | 32,278 | 29,523 | |||||||||||||||||||||||||||||||
| Total revenue | 80,288 | 67,342 | 300,562 | 253,354 | |||||||||||||||||||||||||||||||
| Cost of revenue | 22,937 | 20,880 | 88,144 | 81,458 | |||||||||||||||||||||||||||||||
| Gross profit | 57,351 | 46,462 | 212,418 | 171,896 | |||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||
| Research and development | 16,322 | 14,808 | 64,027 | 55,488 | |||||||||||||||||||||||||||||||
| Sales and marketing | 25,572 | 17,909 | 95,891 | 72,963 | |||||||||||||||||||||||||||||||
| General and administrative | 21,134 | 15,234 | 67,327 | 49,336 | |||||||||||||||||||||||||||||||
| Provision for transaction losses | 1,199 | 1,209 | 3,905 | 5,821 | |||||||||||||||||||||||||||||||
| Total operating expenses | 64,227 | 49,160 | 231,150 | 183,608 | |||||||||||||||||||||||||||||||
| Loss from operations | (6,876) | (2,698) | (18,732) | (11,712) | |||||||||||||||||||||||||||||||
| Interest expense | 259 | 364 | 1,306 | 2,038 | |||||||||||||||||||||||||||||||
| Other (income) expense, net | (1,634) | 2,297 | (3,407) | 6,142 | |||||||||||||||||||||||||||||||
| Loss before income taxes | (5,501) | (5,359) | (16,631) | (19,892) | |||||||||||||||||||||||||||||||
| Income tax provision | — | (6) | (28) | (15) | |||||||||||||||||||||||||||||||
| Net loss | $ | (5,501) | $ | (5,365) | $ | (16,659) | $ | (19,907) | |||||||||||||||||||||||||||
| Net loss per share, basic and diluted | $ | (0.05) | $ | (0.05) | $ | (0.15) | $ | (0.38) | |||||||||||||||||||||||||||
| Weighted-average shares used to compute net loss per share, basic and diluted | 112,690 | 103,362 | 109,815 | 52,328 | |||||||||||||||||||||||||||||||
UPWORK INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| As of December 31, | |||||||||||||||||
| 2019 | 2018 | ||||||||||||||||
| ASSETS | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | $ | 48,392 | $ | 129,128 | |||||||||||||
| Marketable securities | 85,481 | — | |||||||||||||||
| Funds held in escrow, including funds in transit | 108,721 | 98,186 | |||||||||||||||
| Trade and client receivables, net | 30,156 | 22,315 | |||||||||||||||
| Prepaid expenses and other current assets | 7,885 | 6,253 | |||||||||||||||
| Total current assets | 280,635 | 255,882 | |||||||||||||||
| Property and equipment, net | 21,454 | 10,815 | |||||||||||||||
| Goodwill | 118,219 | 118,219 | |||||||||||||||
| Intangible assets, net | 3,335 | 6,004 | |||||||||||||||
| Operating lease asset | 21,908 | — | |||||||||||||||
| Other assets, noncurrent | 829 | 653 | |||||||||||||||
| Total assets | $ | 446,380 | $ | 391,573 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable | $ | 652 | $ | 2,073 | |||||||||||||
| Escrow funds payable | 108,721 | 98,186 | |||||||||||||||
| Debt, current | 7,584 | 5,671 | |||||||||||||||
| Accrued expenses and other current liabilities | 18,342 | 20,948 | |||||||||||||||
| Deferred revenue | 13,799 | 722 | |||||||||||||||
| Total current liabilities | 149,098 | 127,600 | |||||||||||||||
| Debt, noncurrent | 10,699 | 18,239 | |||||||||||||||
| Operating lease liability, noncurrent | 21,186 | — | |||||||||||||||
| Other liabilities, noncurrent | 5,973 | 1,989 | |||||||||||||||
| Total liabilities | 186,956 | 147,828 | |||||||||||||||
| Stockholders’ equity: | |||||||||||||||||
| Common stock | 11 | 11 | |||||||||||||||
| Additional paid-in capital | 431,370 | 387,233 | |||||||||||||||
| Accumulated deficit | (171,957) | (143,499) | |||||||||||||||
| Total stockholders’ equity | 259,424 | 243,745 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 446,380 | $ | 391,573 | |||||||||||||
UPWORK INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||||||||||||||||||
| Net loss | $ | (5,501) | $ | (5,365) | $ | (16,659) | $ | (19,907) | |||||||||||||||||||||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||||||||||||||||||||||
| Provision for transaction losses | 1,040 | 498 | 3,118 | 5,110 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 2,163 | 1,407 | 6,661 | 4,949 | |||||||||||||||||||||||||||||||
| Amortization of debt issuance costs | 13 | 13 | 52 | 77 | |||||||||||||||||||||||||||||||
| Amortization of discount on purchases of marketable securities | (210) | — | (1,158) | — | |||||||||||||||||||||||||||||||
| Change in fair value of redeemable convertible preferred stock warrant liability | — | 2,446 | — | 6,056 | |||||||||||||||||||||||||||||||
| Amortization of operating lease asset | 886 | — | 3,945 | — | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Loss on disposal of fixed assets | 14 | 58 | 14 | 91 | |||||||||||||||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||||||||||||||
| Trade and client receivables | (3,815) | 18,643 | (10,918) | 3,506 | |||||||||||||||||||||||||||||||
| Prepaid expenses and other assets | (662) | (634) | (2,069) | (1,292) | |||||||||||||||||||||||||||||||
| Operating lease liability | (473) | — | (1,453) | — | |||||||||||||||||||||||||||||||
| Accounts payable | (2,154) | (3,397) | (1,457) | 1,609 | |||||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | (4,016) | 3,339 | (2,957) | 2,849 | |||||||||||||||||||||||||||||||
| Deferred revenue | 3,560 | 6 | 4,430 | 109 | |||||||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | (943) | 21,934 | 1,058 | 13,744 | |||||||||||||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||||||||||||||||||||
| Purchases of marketable securities | (36,836) | — | (168,786) | — | |||||||||||||||||||||||||||||||
| Proceeds from maturities of marketable securities | 12,000 | — | 84,500 | — | |||||||||||||||||||||||||||||||
| Purchases of property and equipment | (522) | (1,404) | (10,752) | (3,002) | |||||||||||||||||||||||||||||||
| Internal-use software and platform development costs | (1,832) | (1,169) | (5,886) | (3,839) | |||||||||||||||||||||||||||||||
| Net cash used in investing activities | (27,190) | (2,573) | (100,924) | (6,841) | |||||||||||||||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||||||||||||||||||
| Changes in escrow funds payable | (5,872) | (9,292) | 10,535 | 10,991 | |||||||||||||||||||||||||||||||
| Proceeds from exercises of stock options and common stock warrant | 4,181 | 1,149 | 18,155 | 8,160 | |||||||||||||||||||||||||||||||
| Taxes paid related to net share settlement of restricted stock units | — | (247) | — | (247) | |||||||||||||||||||||||||||||||
| Proceeds from borrowings on debt | — | — | 50,000 | 15,000 | |||||||||||||||||||||||||||||||
| Repayment of debt | (1,893) | (25,000) | (55,679) | (25,000) | |||||||||||||||||||||||||||||||
| Proceeds from employee stock purchase plan | 2,814 | — | 6,391 | — | |||||||||||||||||||||||||||||||
| Proceeds from the initial public offering, net of discounts and commissions | — | 109,381 | — | 109,381 | |||||||||||||||||||||||||||||||
| Payments of costs related to the initial public offering | — | (2,221) | — | (6,220) | |||||||||||||||||||||||||||||||
| Net cash provided by (used in) financing activities | (770) | 73,770 | 29,402 | 112,065 | |||||||||||||||||||||||||||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (28,903) | 93,131 | (70,464) | 118,968 | |||||||||||||||||||||||||||||||
| Cash, cash equivalents, and restricted cash—beginning of period | 188,506 | 136,936 | 230,067 | 111,099 | |||||||||||||||||||||||||||||||
| Cash, cash equivalents, and restricted cash—end of period | $ | 159,603 | $ | 230,067 | $ | 159,603 | $ | 230,067 | |||||||||||||||||||||||||||
The below 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 December 31, 2019 and 2018 (in thousands):
| As of December 31, | |||||||||||||||||
| 2019 | 2018 | ||||||||||||||||
| Cash and cash equivalents | $ | 48,392 | $ | 129,128 | |||||||||||||
| Restricted cash | 2,490 | 2,753 | |||||||||||||||
| Funds held in escrow, including funds in transit | 108,721 | 98,186 | |||||||||||||||
| Total cash, cash equivalents, and restricted cash as shown in the consolidated statement of cash flows | $ | 159,603 | $ | 230,067 | |||||||||||||
UPWORK INC.
COST OF REVENUE AND GROSS MARGIN
(In thousands)
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | 22,937 | $ | 20,880 | $ | 2,057 | 10% | $ | 88,144 | $ | 81,458 | $ | 6,686 | 8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components of cost of revenue: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Costs of freelancer services to deliver managed services | 6,620 | 6,318 | 302 | 5% | 26,763 | 24,490 | 2,273 | 9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other components of cost of revenue | 16,317 | 14,562 | 1,755 | 12% | 61,381 | 56,968 | 4,413 | 8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total gross margin | 71 | % | 69 | % | 71 | % | 68 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UPWORK INC
RECONCILIATION OF GAAP TO NON-GAAP RESULTS - ASC 606
(In thousands, except for per share data)
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||
| GAAP Net Loss | $ | (5,501) | $ | (5,365) | $ | (16,659) | $ | (19,907) | |||||||||||||||||||||||||||
| Add back (deduct): | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 2,163 | 1,407 | 6,661 | 4,949 | |||||||||||||||||||||||||||||||
| Interest expense | 259 | 364 | 1,306 | 2,038 | |||||||||||||||||||||||||||||||
| Other (income) expense, net | (1,634) | 2,297 | (3,407) | 6,142 | |||||||||||||||||||||||||||||||
| Provision for income tax | — | 6 | 28 | 15 | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 3,499 | $ | 3,629 | $ | 7,438 | $ | 3,824 | |||||||||||||||||||||||||||
| Cost of Revenue Reconciliation: | |||||||||||||||||||||||||||||||||||
| Cost of revenue, GAAP | $ | 22,937 | $ | 20,880 | $ | 88,144 | $ | 81,458 | |||||||||||||||||||||||||||
| Stock-based compensation | (130) | (118) | (456) | (282) | |||||||||||||||||||||||||||||||
| Cost of revenue, Non-GAAP | $ | 22,807 | $ | 20,762 | $ | 87,688 | $ | 81,176 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 29 | % | 31 | % | 29 | % | 32 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 28 | % | 31 | % | 29 | % | 32 | % | |||||||||||||||||||||||||||
| Gross Profit Reconciliation: | |||||||||||||||||||||||||||||||||||
| Gross profit, GAAP | $ | 57,351 | $ | 46,462 | $ | 212,418 | $ | 171,896 | |||||||||||||||||||||||||||
| Stock-based compensation | 130 | 118 | 456 | 282 | |||||||||||||||||||||||||||||||
| Gross profit, Non-GAAP | $ | 57,481 | $ | 46,580 | $ | 212,874 | $ | 172,178 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 71 | % | 69 | % | 71 | % | 68 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 72 | % | 69 | % | 71 | % | 68 | % | |||||||||||||||||||||||||||
| Operating Expenses Reconciliation: | |||||||||||||||||||||||||||||||||||
| Research and development, GAAP | $ | 16,322 | $ | 14,808 | $ | 64,027 | $ | 55,488 | |||||||||||||||||||||||||||
| Stock-based compensation | (1,902) | (1,547) | (6,471) | (3,258) | |||||||||||||||||||||||||||||||
| Research and development, Non-GAAP | $ | 14,420 | $ | 13,261 | $ | 57,556 | $ | 52,230 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 20 | % | 22 | % | 21 | % | 22 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 18 | % | 20 | % | 19 | % | 21 | % | |||||||||||||||||||||||||||
| Sales and marketing, GAAP | $ | 25,572 | $ | 17,909 | $ | 95,891 | $ | 72,963 | |||||||||||||||||||||||||||
| Stock-based compensation | (749) | (611) | (2,609) | (1,637) | |||||||||||||||||||||||||||||||
| Sales and marketing, Non-GAAP | $ | 24,823 | $ | 17,298 | $ | 93,282 | $ | 71,326 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 32 | % | 27 | % | 32 | % | 29 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 31 | % | 26 | % | 31 | % | 28 | % | |||||||||||||||||||||||||||
| General and administrative, GAAP | $ | 21,134 | $ | 15,234 | $ | 67,327 | $ | 49,336 | |||||||||||||||||||||||||||
| Stock-based compensation | (5,159) | (2,418) | (9,262) | (5,184) | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | (667) | (667) | (2,668) | (2,668) | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | (272) | (226) | (711) | (226) | |||||||||||||||||||||||||||||||
| General and administrative, Non-GAAP | $ | 15,036 | $ | 11,923 | $ | 54,686 | $ | 41,258 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 26 | % | 23 | % | 22 | % | 19 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 19 | % | 18 | % | 18 | % | 16 | % | |||||||||||||||||||||||||||
| Loss from Operations Reconciliation: | |||||||||||||||||||||||||||||||||||
| Loss from operations, GAAP | $ | (6,876) | $ | (2,698) | $ | (18,732) | $ | (11,712) | |||||||||||||||||||||||||||
| Stock-based compensation | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 667 | 667 | 2,668 | 2,668 | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Income from operations, Non-GAAP | $ | 2,003 | $ | 2,889 | $ | 3,445 | $ | 1,543 | |||||||||||||||||||||||||||
| % of revenue, GAAP | -9 | % | -4 | % | -6 | % | -5 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 2 | % | 4 | % | 1 | % | 1 | % | |||||||||||||||||||||||||||
| Net Loss Reconciliation: | |||||||||||||||||||||||||||||||||||
| Net loss, GAAP | $ | (5,501) | $ | (5,365) | $ | (16,659) | (19,907) | ||||||||||||||||||||||||||||
| Stock-based compensation | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 667 | 667 | 2,668 | 2,668 | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Change in fair value of redeemable convertible preferred stock warrant liability | — | 2,446 | — | 6,056 | |||||||||||||||||||||||||||||||
| Net income (loss), Non-GAAP | $ | 3,378 | $ | 2,668 | $ | 5,518 | $ | (596) | |||||||||||||||||||||||||||
| % of revenue, GAAP | -7 | % | -8 | % | -6 | % | -8 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 4 | % | 4 | % | 2 | % | — | % | |||||||||||||||||||||||||||
| Net Loss per Share Reconciliation: | |||||||||||||||||||||||||||||||||||
| Weighted-average shares outstanding | 112,690 | 103,362 | 109,815 | 52,328 | |||||||||||||||||||||||||||||||
| Net loss per share, GAAP | $ | (0.05) | $ | (0.05) | $ | (0.15) | $ | (0.38) | |||||||||||||||||||||||||||
| Net income (loss) per share, Non-GAAP | $ | 0.03 | $ | 0.03 | $ | 0.05 | $ | (0.01) | |||||||||||||||||||||||||||
UPWORK INC
RECONCILIATION OF GAAP TO NON-GAAP RESULTS - ASC 605
(In thousands, except for per share data)
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||
| GAAP Net Loss | $ | (5,158) | $ | (5,365) | $ | (14,740) | $ | (19,907) | |||||||||||||||||||||||||||
| Add back (deduct): | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 2,163 | 1,407 | 6,661 | 4,949 | |||||||||||||||||||||||||||||||
| Interest expense | 259 | 364 | 1,306 | 2,038 | |||||||||||||||||||||||||||||||
| Other (income) expense, net | (1,634) | 2,297 | (3,407) | 6,142 | |||||||||||||||||||||||||||||||
| Provision for income tax | — | 6 | 28 | 15 | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 3,842 | $ | 3,629 | $ | 9,357 | $ | 3,824 | |||||||||||||||||||||||||||
| Cost of Revenue Reconciliation: | |||||||||||||||||||||||||||||||||||
| Cost of revenue, GAAP | $ | 22,937 | $ | 20,880 | $ | 88,144 | $ | 81,458 | |||||||||||||||||||||||||||
| Stock-based compensation | (130) | (118) | (456) | (282) | |||||||||||||||||||||||||||||||
| Cost of revenue, Non-GAAP | $ | 22,807 | $ | 20,762 | $ | 87,688 | $ | 81,176 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 28 | % | 31 | % | 29 | % | 32 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 28 | % | 31 | % | 29 | % | 32 | % | |||||||||||||||||||||||||||
| Gross Profit Reconciliation: | |||||||||||||||||||||||||||||||||||
| Gross profit, GAAP | $ | 57,744 | $ | 46,462 | $ | 214,503 | $ | 171,896 | |||||||||||||||||||||||||||
| Stock-based compensation | 130 | 118 | 456 | 282 | |||||||||||||||||||||||||||||||
| Gross profit, Non-GAAP | $ | 57,874 | $ | 46,580 | $ | 214,959 | $ | 172,178 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 72 | % | 69 | % | 71 | % | 68 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 72 | % | 69 | % | 71 | % | 68 | % | |||||||||||||||||||||||||||
| Operating Expenses Reconciliation: | |||||||||||||||||||||||||||||||||||
| Research and development, GAAP | $ | 16,322 | $ | 14,808 | $ | 64,027 | $ | 55,488 | |||||||||||||||||||||||||||
| Stock-based compensation | (1,902) | (1,547) | (6,471) | (3,258) | |||||||||||||||||||||||||||||||
| Research and development, Non-GAAP | $ | 14,420 | $ | 13,261 | $ | 57,556 | $ | 52,230 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 20 | % | 22 | % | 21 | % | 22 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 18 | % | 20 | % | 19 | % | 21 | % | |||||||||||||||||||||||||||
| Sales and marketing, GAAP | $ | 25,572 | $ | 17,909 | $ | 95,891 | $ | 72,963 | |||||||||||||||||||||||||||
| Stock-based compensation | (749) | (611) | (2,609) | (1,637) | |||||||||||||||||||||||||||||||
| Sales and marketing, Non-GAAP | $ | 24,823 | $ | 17,298 | $ | 93,282 | $ | 71,326 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 32 | % | 27 | % | 32 | % | 29 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 31 | % | 26 | % | 31 | % | 28 | % | |||||||||||||||||||||||||||
| General and administrative, GAAP | $ | 21,184 | $ | 15,234 | $ | 67,493 | $ | 49,336 | |||||||||||||||||||||||||||
| Stock-based compensation | (5,159) | (2,418) | (9,262) | (5,184) | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | (667) | (667) | (2,668) | (2,668) | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | (272) | (226) | (711) | (226) | |||||||||||||||||||||||||||||||
| General and administrative, Non-GAAP | $ | 15,086 | $ | 11,923 | $ | 54,852 | $ | 41,258 | |||||||||||||||||||||||||||
| % of revenue, GAAP | 26 | % | 23 | % | 22 | % | 19 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 19 | % | 18 | % | 18 | % | 16 | % | |||||||||||||||||||||||||||
| Loss from Operations Reconciliation: | |||||||||||||||||||||||||||||||||||
| Loss from operations, GAAP | $ | (6,533) | $ | (2,698) | $ | (16,813) | $ | (11,712) | |||||||||||||||||||||||||||
| Stock-based compensation | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 667 | 667 | 2,668 | 2,668 | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Income from operations, Non-GAAP | $ | 2,346 | $ | 2,889 | $ | 5,364 | $ | 1,543 | |||||||||||||||||||||||||||
| % of revenue, GAAP | -8 | % | -4 | % | -6 | % | -5 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 3 | % | 4 | % | 2 | % | 1 | % | |||||||||||||||||||||||||||
| Net Loss Reconciliation: | |||||||||||||||||||||||||||||||||||
| Net loss, GAAP | $ | (5,158) | $ | (5,365) | $ | (14,740) | (19,907) | ||||||||||||||||||||||||||||
| Stock-based compensation | 7,940 | 4,694 | 18,798 | 10,361 | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 667 | 667 | 2,668 | 2,668 | |||||||||||||||||||||||||||||||
| Tides Foundation common stock warrant expense | 272 | 226 | 711 | 226 | |||||||||||||||||||||||||||||||
| Change in fair value of redeemable convertible preferred stock warrant liability | — | 2,446 | — | 6,056 | |||||||||||||||||||||||||||||||
| Net income (loss), Non-GAAP | $ | 3,721 | $ | 2,668 | $ | 7,437 | $ | (596) | |||||||||||||||||||||||||||
| % of revenue, GAAP | -6 | % | -8 | % | -5 | % | -8 | % | |||||||||||||||||||||||||||
| % of revenue, Non-GAAP | 5 | % | 4 | % | 2 | % | — | % | |||||||||||||||||||||||||||
| Net Loss per Share Reconciliation: | |||||||||||||||||||||||||||||||||||
| Weighted-average shares outstanding | 112,690 | 103,362 | 109,815 | 52,328 | |||||||||||||||||||||||||||||||
| Net loss per share, GAAP | $ | (0.05) | $ | (0.05) | $ | (0.13) | $ | (0.38) | |||||||||||||||||||||||||||
| Net income (loss) per share, Non-GAAP | $ | 0.03 | $ | 0.03 | $ | 0.07 | $ | (0.01) | |||||||||||||||||||||||||||
The following table summarizes the impacts of adopting ASC 606 and ASC 842 on our condensed consolidated financial statements as of and for the year ended December 31, 2019 (in thousands):
| December 31, 2019 | |||||||||||||||||||||||
| Balances, without Adoption of Topics 606 and 842 | Adjustments due to Topic 606 | Adjustments due to Topic 842 (1) | Balances, as Reported | ||||||||||||||||||||
| Condensed Consolidated Balance Sheet | |||||||||||||||||||||||
| Current assets—Trade and client receivables, net | $ | 36,487 | $ | (6,331) | $ | — | $ | 30,156 | |||||||||||||||
| Noncurrent assets | |||||||||||||||||||||||
| Operating lease asset | — | — | 21,908 | 21,908 | |||||||||||||||||||
| Other assets, noncurrent | 904 | — | (75) | 829 | |||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||
| Accrued expenses and other current liabilities | 21,027 | (5,817) | 3,132 | 18,342 | |||||||||||||||||||
| Deferred revenue | 2,280 | 11,519 | — | 13,799 | |||||||||||||||||||
| Noncurrent liabilities | |||||||||||||||||||||||
| Operating lease liability, noncurrent | — | — | 21,186 | 21,186 | |||||||||||||||||||
| Other liabilities, noncurrent | 6,740 | 1,850 | (2,617) | 5,973 | |||||||||||||||||||
| Total stockholders’ equity | 273,141 | (13,883) | 166 | 259,424 | |||||||||||||||||||
| Condensed Consolidated Statement of Operations | |||||||||||||||||||||||
| Revenue | $ | 302,647 | $ | (2,085) | $ | — | $ | 300,562 | |||||||||||||||
| Operating expense—General and administrative | 67,493 | — | (166) | 67,327 | |||||||||||||||||||
| Net loss attributable to common stockholders | (14,740) | (2,085) | 166 | (16,659) | |||||||||||||||||||
| Net loss per share attributable to common stockholders, basic and diluted | (0.13) | (0.02) | — | (0.15) | |||||||||||||||||||
(1) Amounts include other adjustments made in conjunction with the adoption of Topic 842.
The following table summarizes the impact of adopting ASC 606 on our condensed consolidated statements of operations for the periods indicated. The impact of adopting ASC 842 on our condensed consolidated statements of operations for the periods indicated was immaterial.
| Three Months Ended | Twelve Months Ended December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As reported: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketplace | $ | 60,455 | $ | 65,728 | $ | 69,912 | $ | 72,189 | $ | 268,284 | ||||||||||||||||||||||||||||||||||||||||||||||
| Managed services | 8,021 | 8,055 | 8,103 | 8,099 | 32,278 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | 68,476 | 73,783 | 78,015 | 80,288 | 300,562 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | 21,125 | 21,588 | 22,494 | 22,937 | 88,144 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 47,351 | 52,195 | 55,521 | 57,351 | 212,418 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment due to ASC 606 | 448 | 473 | 771 | 393 | 2,085 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Without Adoption of ASC 606: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketplace | $ | 60,903 | $ | 66,201 | $ | 70,683 | $ | 72,582 | $ | 270,369 | ||||||||||||||||||||||||||||||||||||||||||||||
| Managed services | 8,021 | 8,055 | 8,103 | 8,099 | 32,278 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | 68,924 | 74,256 | 78,786 | 80,681 | 302,647 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | 21,125 | 21,588 | 22,494 | 22,937 | 88,144 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 47,799 | 52,668 | 56,292 | 57,744 | 214,503 | |||||||||||||||||||||||||||||||||||||||||||||||||||