Upwork: Conferences/UBS Global

Here is a summary of what was said at the conference

CFO Erica Gesert was asked to differentiate between demand that came from COVID-19 and seasonal demand, but she didn't have an answer.
She only said Covid changed how businesses work. That there were more freelancers and work.

Gesert was asked what's going to drive demand moving forward. She said that there are 33 million businesses in U.S and that last quarter they served 836,000; hence there is a tremendous amount of potential demand.
She said their average GSV per client is $5,000.
Gesert pointed out that a hike in interest rates is working and businesses aren't spending as much money as they used to.
She said that new businesses tend to ramp up over time but in the past couple of quarters they aren't ramping up as quickly as in the past.
She said they have seen hours per contract grow y/y but the wage increase hasn't grown as in the past.

Gesert said enterprise business is not at the level they want it to be.
They have no significant share of wallet from enterprise business.
She pointed out that there is a lot of growth opportunity in enterprise business.
They will invest in it and differentiate it from the core product in order to achieve that growth opportunity.
She pointed out that enterprise business demand is now across the board unlike in the past when they were mostly from tech.
Gesert noted that they have an enterprise client whose total spend in the alternative workforce is equal to their overall GSV.

Gesert expects to benefit from macro improvements. She said that as the pendulum swings back, the speed of hiring talent will be higher than the speed of hiring full-time employees.

Gesert said one of the main reasons freelancers like Upwork is the presence of diverse work unlike in traditional freelance companies.

What they have seen is a lack of wage growth not a decline.
Gesert was asked how much of wage decline/lack of growth was due to a change in take rate from 20% to 10%. She said that there was an immediate impact on pricing, but the impact wasn't huge.
She was also asked whether freelancers would increase their pricing once the take rate moves from 5% to 10%. She responded that the force of supply and demand should even out but these things do have an effect on GSV. However, freelancers in this category are the most attractive and have long-term contracts; hence there should be some room there to price that change.

Gesert said they have seen good performance since they implemented the price change (20% to 10%) and in fact the churn rate is less than they had modelled.
She expects improvement in take rate in 2024 and 2025. She said ads and subcription products are their fastest revenue growth areas and they expect overall take rate to grow to 20%-24%.

They are very focuses on EBITDA margin accretion and top growth and intend to produce both.
EBITDA margin of 30-35% was published in 2021 and they are due to refresh it next year.
They are thinking of managing the business in the room of 40 basis.
They have healthy growth margin in the marketing side (75%)
Salesforce is focused on the enterprise side.

Gesert said their past TAM projection was a thrillion dollar.
She pointed out that latest numbers indicate the gig economy is about 4 trillion dollars but indepencent contractors that have no employees have a TAM of 1.9 trillion dollars.

Haven't define capital allocation strategy but they intend to use the freecashflow to buy back stock.
She thinks they have inorganic growth opportunities for the business, particularly as valuations come down but they sit at crossroad across so many areas regarding M&A.

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