Delaware | 001-38678 | 46-4337682 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
441 Logue Avenue Mountain View, California | 94043 | |
(Address of Principal Executive Offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, $0.0001 par value per share | UPWK | The Nasdaq Stock Market LLC |
Exhibit Number | Description | |
99.1 |
UPWORK INC. | ||
Date: May 8, 2019 | By: | /s/ Brian Kinion |
Brian Kinion | ||
Chief Financial Officer |
• | Gross services volume (GSV) increased by 21% year-over-year to $487 million for the first quarter of 2019 |
• | Revenue increased by 16% year-over-year to $68.9 million for the first quarter of 2019 |
• | Core clients grew 22% year-over-year to approximately 111,000 as of March 31, 2019 |
• | Client spend retention increased to 107% as of March 31, 2019, up from 103% as of March 31, 2018 |
• | Revenue: Total revenue increased by 16% to $68.9 million compared to the first quarter of 2018, and marketplace revenue increased by 17% to $60.9 million compared to the first quarter of 2018 and represented 88% of total revenue for the first quarter of 2019. |
• | Take Rate: Take rate, which we define as total revenue divided by GSV, was 14.2%, compared to 14.3% in the fourth quarter of 2018 and 14.7% in the first quarter of 2018. |
• | Gross Profit/Gross Margin: Gross profit increased by 21% to $47.8 million compared to the first quarter of 2018, and gross margin was 69%, up from 67% in the first quarter of 2018. |
• | Net Loss: Net loss was $(4.7) million, or $(0.04) per share, compared to a net loss of $(6.8) million, or $(0.20) per share, in the first quarter of 2018. Non-GAAP net income was $0.5 million, or break-even per share, compared to a non-GAAP net loss of $(3.9) million, or $(0.11) per share, in the first quarter of 2018. |
• | Adjusted EBITDA: Adjusted EBITDA was $1.2 million compared to $(3.1) million in the first quarter of 2018. |
• | Launch of Upwork Plus and Upwork Business: Expanded from two to four marketplace products in order to better address the needs of small and mid-market businesses. |
• | Announcement of Updated Connects: Changes in Connects are aimed at helping skilled professionals win more projects, and ensuring clients get only highly relevant proposals. |
• | Specialized and Visual Profiles: For freelancers marketing multiple skills and more visual skills, improvements have been made in the way profiles are showcased. One account can now house multiple profiles for varied skills, and portfolios are now more prominent and searchable. |
• | Revenue in the range of $72.5 million to $73.5 million |
• | Adjusted EBITDA in the range of break-even to 1% of revenue |
• | Revenue in the range of $299 million to $304 million |
• | Adjusted EBITDA in the range of break-even to 1% of revenue |
• | Stock-based compensation expense: We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides |
• | Depreciation and amortization: We exclude depreciation and amortization, which are non-cash expenses. |
• | Change in fair value of redeemable preferred stock warrant liability: We exclude the change in fair value of redeemable preferred stock warrant liability, which is a non-cash charge that will not recur in the periods following the fourth quarter of 2018. |
• | Change in fair value of our Tides Foundation common stock warrant: We exclude the change in fair value of this common stock warrant, which is a non-cash expense included in general and administrative expenses. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenue | |||||||
Marketplace | $ | 60,903 | $ | 51,959 | |||
Managed services | 8,021 | 7,259 | |||||
Total revenue | 68,924 | 59,218 | |||||
Cost of revenue | 21,125 | 19,617 | |||||
Gross profit | 47,799 | 39,601 | |||||
Operating expenses | |||||||
Research and development | 15,800 | 13,491 | |||||
Sales and marketing | 20,518 | 19,673 | |||||
General and administrative | 15,677 | 11,176 | |||||
Provision for transaction losses | 637 | 1,270 | |||||
Total operating expenses | 52,632 | 45,610 | |||||
Loss from operations | (4,833 | ) | (6,009 | ) | |||
Interest expense | 373 | 529 | |||||
Other (income) expense, net | (479 | ) | 249 | ||||
Loss before income taxes | (4,727 | ) | (6,787 | ) | |||
Income tax benefit (provision) | (1 | ) | 3 | ||||
Net loss | $ | (4,728 | ) | $ | (6,784 | ) | |
Net loss per share, basic and diluted | $ | (0.04 | ) | $ | (0.20 | ) | |
Weighted-average shares used to compute net loss per share, basic and diluted | 106,639 | 34,193 |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 49,220 | $ | 129,128 | |||
Marketable securities | 71,999 | — | |||||
Funds held in escrow, including funds in transit | 120,085 | 98,186 | |||||
Trade and client receivables, net | 48,265 | 22,315 | |||||
Prepaid expenses and other current assets | 6,681 | 6,253 | |||||
Total current assets | 296,250 | 255,882 | |||||
Property and equipment, net | 12,604 | 10,815 | |||||
Goodwill | 118,219 | 118,219 | |||||
Intangible assets, net | 5,337 | 6,004 | |||||
Other assets, noncurrent | 1,389 | 653 | |||||
Total assets | $ | 433,799 | $ | 391,573 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 1,542 | $ | 2,073 | |||
Escrow funds payable | 120,085 | 98,186 | |||||
Debt, current | 32,569 | 5,671 | |||||
Accrued expenses and other current liabilities | 15,606 | 20,948 | |||||
Deferred revenue | 891 | 722 | |||||
Total current liabilities | 170,693 | 127,600 | |||||
Debt, noncurrent | 16,354 | 18,239 | |||||
Other liabilities, noncurrent | 2,780 | 1,989 | |||||
Total liabilities | 189,827 | 147,828 | |||||
Stockholders’ equity | |||||||
Common stock | 11 | 11 | |||||
Additional paid-in capital | 392,188 | 387,233 | |||||
Accumulated deficit | (148,227 | ) | (143,499 | ) | |||
Total stockholders' equity | 243,972 | 243,745 | |||||
Total liabilities and stockholders' equity | $ | 433,799 | $ | 391,573 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (4,728 | ) | $ | (6,784 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Provision for transaction losses | 415 | 1,270 | |||||
Depreciation and amortization | 1,532 | 1,064 | |||||
Amortization of debt issuance costs | 13 | 39 | |||||
Amortization of discount on purchases of marketable securities | (283 | ) | — | ||||
Change in fair value of redeemable convertible preferred stock warrant liability | — | 318 | |||||
Change in fair value of Tides Foundation common stock warrant | 252 | — | |||||
Stock-based compensation expense | 4,295 | 1,888 | |||||
Loss on disposal of fixed assets | — | 29 | |||||
Changes in operating assets and liabilities: | |||||||
Trade and client receivables | (26,431 | ) | (7,660 | ) | |||
Prepaid expenses and other assets | (991 | ) | (1,111 | ) | |||
Accounts payable | (596 | ) | 51 | ||||
Accrued expenses and other liabilities | (3,042 | ) | 15,805 | ||||
Deferred revenue | 169 | 91 | |||||
Net cash provided by (used in) operating activities | (29,395 | ) | 5,000 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of marketable securities | (71,713 | ) | — | ||||
Decrease (increase) in restricted cash | 250 | (101 | ) | ||||
Purchases of property and equipment | (3,604 | ) | (462 | ) | |||
Internal-use software and platform development costs | (1,210 | ) | (626 | ) | |||
Net cash used in investing activities | (76,277 | ) | (1,189 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Changes in funds held in escrow, including funds in transit | (21,899 | ) | 5,654 | ||||
Changes in escrow funds payable | 21,899 | (5,654 | ) | ||||
Proceeds from exercises of stock options and common stock warrants | 764 | 1,218 | |||||
Proceeds from borrowings on debt | 25,000 | — | |||||
Payments of costs related to the initial public offering | — | (163 | ) | ||||
Net cash provided by financing activities | 25,764 | 1,055 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (79,908 | ) | 4,866 | ||||
Cash and cash equivalents, beginning of period | 129,128 | 21,595 | |||||
Cash and cash equivalents, end of period | $ | 49,220 | $ | 26,461 |
Three Months Ended March 31, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
Cost of revenue | $ | 21,125 | $ | 19,617 | $ | 1,508 | 8 | % | ||||||
Components of cost of revenue: | ||||||||||||||
Cost of freelancer services to deliver managed services | 6,763 | 5,996 | 767 | 13 | % | |||||||||
Other components of cost of revenue | 14,362 | 13,621 | 741 | 5 | % | |||||||||
Total gross margin | 69 | % | 67 | % |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
GAAP Net Loss | $ | (4,728 | ) | $ | (6,784 | ) | |
Add back (deduct): | |||||||
Stock-based compensation expense | 4,295 | 1,888 | |||||
Depreciation and amortization | 1,532 | 1,064 | |||||
Interest expense | 373 | 529 | |||||
Other (income) expense, net | (479 | ) | 249 | ||||
Income tax (benefit) provision | 1 | (3 | ) | ||||
Change in fair value of Tides Foundation common stock warrant | 252 | — | |||||
Non-GAAP Adjusted EBITDA | $ | 1,246 | $ | (3,057 | ) | ||
Cost of Revenue Reconciliation: | |||||||
Cost of revenue, GAAP | $ | 21,125 | $ | 19,617 | |||
Stock-based compensation | (144 | ) | (52 | ) | |||
Cost of revenue, Non-GAAP | $ | 20,981 | $ | 19,565 | |||
% of revenue, Non-GAAP | 30 | % | 33 | % | |||
Gross Profit and Gross Margin Reconciliation: | |||||||
Gross profit, GAAP | $ | 47,799 | $ | 39,601 | |||
Stock-based compensation | 144 | 52 | |||||
Gross margin, Non-GAAP | $ | 47,943 | $ | 39,653 | |||
% of revenue, Non-GAAP | 70 | % | 67 | % | |||
Operating Expenses Reconciliation: | |||||||
Research and development, GAAP | $ | 15,800 | $ | 13,491 | |||
Stock-based compensation | (1,380 | ) | (550 | ) | |||
Research and development, Non-GAAP | $ | 14,420 | $ | 12,941 | |||
% of revenue, Non-GAAP | 21 | % | 22 | % | |||
Sales and marketing, GAAP | $ | 20,518 | $ | 19,673 | |||
Stock-based compensation | (642 | ) | (340 | ) | |||
Sales and marketing, Non-GAAP | $ | 19,876 | $ | 19,333 | |||
% of revenue, Non-GAAP | 29 | % | 33 | % | |||
General and administrative, GAAP | $ | 15,677 | $ | 11,176 | |||
Stock-based compensation | (2,129 | ) | (946 | ) | |||
Amortization of intangible assets | (667 | ) | (667 | ) | |||
Change in fair value of Tides Foundation common stock warrant | (252 | ) | — | ||||
General and administrative, Non-GAAP | $ | 12,629 | $ | 9,563 | |||
% of revenue, Non-GAAP | 18 | % | 16 | % | |||
Loss from Operations Reconciliation: | |||||||
Loss from operations, GAAP | $ | (4,833 | ) | $ | (6,009 | ) | |
Stock-based compensation | 4,295 | 1,888 | |||||
Amortization of intangible assets | 667 | 667 | |||||
Change in fair value of Tides Foundation common stock warrant | 252 | — | |||||
Income (loss) from operations, Non-GAAP | $ | 381 | $ | (3,454 | ) | ||
% of revenue, Non-GAAP | 1 | % | -6 | % |
Net Loss Reconciliation: | |||||||
Net loss, GAAP | $ | (4,728 | ) | $ | (6,784 | ) | |
Stock-based compensation | 4,295 | 1,888 | |||||
Amortization of intangible assets | 667 | 667 | |||||
Change in fair value of Tides Foundation common stock warrant | 252 | — | |||||
Change in fair value of redeemable convertible preferred stock warrant liability | — | 318 | |||||
Net income (loss), Non-GAAP | $ | 486 | $ | (3,911 | ) | ||
% of revenue, Non-GAAP | 1 | % | -7 | % | |||
Net Loss per Share Reconciliation: | |||||||
Weighted-average shares outstanding | 106,639 | 34,193 | |||||
Net loss per share, GAAP | $ | (0.04 | ) | $ | (0.20 | ) | |
Net income (loss) per share, Non-GAAP | $ | — | $ | (0.11 | ) |