Upwork: Conferences/BOFA

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On June 6, 2023, Upwork CEO Hayden Brown and CFO Ericca Gersert participated in Bank of America 2023 Global Technology Conference. Below is a summary of what was discussed;

AI (minute 0:20-5:00)

Upwork executives were asked whether it is true that AI will replace work done by freelancers in the platform. Hayden Brown responded that;

• The saying, "AI won't replace your work but someone using AI will" sums up their belief on AI.
• She believes that AI is a huge opportunity as it creates new jobs. She noted that the platform has seen 1,000% increase in AI related jobs and 1,300% increase in AI related searches in the last three months.
• AI will make Upwork freelancers more competitive compared to in-house employees as they are considered fast in upskilling.
• She noted that talent is so sharp in applying AI.

Hayden was also asked what clients want when they are searching for AI-related talent. She said that talent is needed to;

• Build AI models.
• Check the AI models already being used by clients.
• To integrate AI models.

Macro weakness(minute 5:00-15:36)

Hayden Brown was asked to describe the macro weakness they saw and how they expect it to play out. Below is a summary of her response.

• Macro weakness was most noticeable in enterprise clients. That was responsible for 50% change in the 2023 guidance.
• SMBs were resilient. The number of clients and hours is growing but hourly rate increases is slowing.
• 80% of GSV comes from SMBs while 20% comes from enterprise clients.
• Softness in Q1 was more on hourly rate growth.
• Most corporate clients come from tech.
• Larger SMBs are cautious in spend while smaller SMBs are spending at the same level.
• Some clients are downgrading to marketplace plan which is less expensive while others are pausing hiring.
• The reason why they reduce enterprise trend was due to inability to land clients and the trends they are seeing in the marketplace.

Brand Awareness (minute 21:50-24:11)

They were asked why they pulled on brand campaign. Their response was;

• The reason why they started brand awareness was because they believed that if they grow from single-digit awareness to double digit awareness it will be explossive to the business.

• Ericca said that brand awareness was very effective. It grew 40%.
• Investement is less productive. That's, they are quiting it because client spending manner in a minimal time frame is lower in this environment.
• They will revisit it in future but they are persuing it in other channels.

New Pricing (minute 15:36-20:40)

The executives were asked why they raised pricing or simplified it and whether that will affect demand. They responded that;

• They actually lowered pricing for talent by 50%.
• The new pricing will make the platform cheap; hence improving demand.
• On the back end, they do monetize more hence raising take rate.

They were also asked whether inflationary pressure has affected pricing in the platform. Hayden responded that;

• Every year, prices increases by a steady amount but they have not seen it this time round.
• The reason for no step up in prices is probably due to macro weakness that results in more work but no increase in hourly rate as well as huge supply of freelancers.

Return to Office (minute 20:40-21:50)

Ericca and Hayden were asked whether the return to office will impact the businsess. Hayden said that;

• There is a massive circular trend not impacted by return to office policy.
• They saw explosive demand for talent before covid and after covid.
• They have tonnes of clients who are in office but engaging with freelancers.

Profitability (minute 24:11-28:00)

They were asked whether margins will go back in 2024 after recession.

• Ericca said that they are very focused in profitable growth and that will be ongoing even after 2023.
• They are still investing in R&D.
• Ericca added that they will revisit brand spend in 2024 but they will not walk away on profitability.
• Ericca believes that they can keep investing while achieving profitability.
• She noted that the rule of 40% profit margin is their target.

Competition( minute 28:00-30:00)

• Hayden said full-suit of solutions will box-out competitors that offer one-point solutions.
• Hayden added that they don't see any need to do any acquisitions to execute on their strategy.
• Ericca noted that they have a lot of partnership opportunities but they will consider low growth point solutions acquisitions in future.