Upwork saw strong adoption of its new paid client subscription plans, made changes to the virtual tokens used by freelancers when submitting proposals and increased its client fee for basic as well as plus, and reported a take rate of 14.6 percent for the fourth quarter that marked an increase from 14.3 percent the prior year under accounting standard codification (ASC) 606. The company also reported that gross services volume (GSV) rose by 16 percent year-over-year to $549 million under ASC 606.
President and CEO Hayden Brown said the freelancing platform had “a strong fourth quarter” with revenue of $80.7 million that came out ahead of its guidance of $79 million to $79.5 million, which had been provided in the past. He also noted that the company’s client spend retention rate was 102 percent as of Dec. 31 and was lower than its record 108 percent of Dec. 31, 2018.
Brown said, “We have found that the 108 percent retention rate was driven by the launch of our domestic marketplace in 2017, which led to an increase in hourly rates on the site that was most pronounced in 2018 and started to normalize in 2019.” He also noted that, for spend from newly acquired customers, “2019 largely met our goals with respect to spend per client.”
“Some of this is a byproduct of our emphasis on the addition of larger client companies and the expansion of our footprint within existing accounts, where we believe we have significant headroom,” Brown said. In November, it was reported that it intended to focus more on larger companies in the months to come, as the firm looked to increase its market share in the fast-growing world of matching freelance labor with employers through the help of technology. The company also changed the cost of the virtual tokens — called Connects — that freelancers use to submit work proposals as well as the number needed to submit proposals. The moves were made to improve proposal quality, he said.
The company reported that revenue for the fourth quarter under ASC 606 increased 19 percent year-over-year to $80.3 million, while marketplace revenue for the fourth quarter under ASC 606 increased 21 percent year-over-year to $72.2 million. Net loss under ASC 606, on the other hand, was $5.5 million, or five cents per share, compared to a net loss of $5.4 million or five cents per share Q4 2018.
For the full year 2019, Upwork reported that gross services volume (GSV) increased by 19 percent year-over-year to $2.087 billion. Revenue under ASC 606, on the other hand, increased 19 percent to $300.6 million. Marketplace revenue under ASC 606 rose 20 percent year-over-year to $268.3 million.