Independent platform Preparatory work (UPWK 1.32%) released its third quarter 2024 financial results on November 6, highlighting a period of substantial revenue growth supported by strategic initiatives. The company reported revenue of $193.8 million, beating its own estimates for the quarter. This represents a commendable improvement from the $175.7 million recorded in the third quarter of the previous year. Upwork noted record GAAP net income of $27.8 million and a notable increase in diluted earnings per share of 67% to $0.20. This strong earnings report was contrary to expectations, despite a slight decline in gross service volume (GSV) and slow growth in active customer acquisition. Overall, the quarter reflected robust performance and an encouraging outlook.

Source: Expectations based on management guidance as provided in the 08/07/2024 earnings report.

Upwork’s Core Business and Current Focus

Upwork is a leading player in the freelance and remote work space, operating a comprehensive job marketplace connecting freelancers and clients around the world. The platform facilitates a range of projects, from simple tasks to sophisticated efforts. Upwork’s revenue depends largely on the service fees charged to freelancers and clients on its platform.

Recently, Upwork has focused on onboarding artificial intelligence (AI) in its operations to improve the connection between clients and freelancers. The company has also focused on expanding its reach in the corporate world through enterprise solutions. These moves are key to its strategy to expand its revenue base while mitigating sluggish customer growth.

Quarterly achievements and financial overview

During the third quarter of 2024, Upwork reported a 12% increase in market revenue compared to the same period last year, suggesting strong customer engagement despite some challenges with active customer growth. The company has effectively improved its pricing structures while maintaining its services to ensure continued usage by existing customers. However, its GSV fell 3.1% year-over-year to around $998 million, perhaps reflecting macroeconomic challenges affecting customers’ spending habits.

Notably, the company added 42 new enterprise customers during the quarter, demonstrating its success in penetrating the larger enterprise segment. Enterprise solutions drove revenue growth of 1%, highlighting a strategic pivot. Upwork’s focus on expanding the enterprise customer base aligns with its goal of diversifying revenue streams and reducing reliance on small transactions.

From a profitability perspective, the third quarter of 2024 reflected significant growth with record GAAP net income of $27.8 million, increasing its net income from the previous year. Upwork also reported peak adjusted EBITDA of $43.2 million, up more than 38% from the same period last year. This expansion demonstrates operational efficiency and robust profitability.

Another key development includes a new $100 million share repurchase program, highlighting strong free cash flow and financial stability, demonstrated by $98 million of free cash flow generated during the quarter. The program reflects Upwork’s confidence in its growth trajectory and commitment to returning value to shareholders.

Looking ahead: Q4 2024 and beyond

Upwork provided positive guidance for the fourth quarter of 2024. The company is targeting revenue between $178 million and $183 million and adjusted EBITDA between $38 million and $42 million. Non-GAAP EPS is expected to be between $0.24 and $0.26, reflecting optimism about continued profitability supported by sustained demand for its services.

Despite strong numbers and a high level of confidence, areas such as customer acquisition and GSV remain potential concerns for observers. The market environment continues to present competitive pressures and Upwork’s ability to innovate remains crucial. Keeping a close eye on customer growth metrics and strategic AI advancements will be critical for potential observers and stakeholders to shape the company’s future trajectory.