We have sold our Core Position in Upwork (NAS:UPWK)—we are up 66% in the name since initiation. We believe Upwork is trading close to fair value and are taking profits.
Upwork released full-year 2024 earnings yesterday after market close. Below are the earnings highlights. The stock reaction was slightly positive (+3%).
Revenue & Growth
- Total Revenue: $769M for full-year 2024 (+12% YoY)
- Active Clients: 832K (-2% YoY)
- GSV per Active Client: $4,815 (+1% QoQ)
- GSV: $992M (-1% QoQ)
Cash Flow & Profits
- Adj. EBITDA: $168M for full-year 2024 (+129% YoY)
- Free Cash Flow: $122M (+212% YoY)
- Gross Margin: 78% (vs. 75% YoY)
Guidance
- Revenue: $740M to $760M
- Adj. EBITDA: $180M to $190M
Why We Are Selling
From our Initiation Report (9/1/2024):
“We expect Upwork’s GSV volumes to consolidate in the next 12-24 months before resuming mid-single-digit growth. With Upwork’s scalable cost structure, economies of scale, and monetization opportunities, we foresee revenue growth rates of 10-14% in the intermediate term and substantial growth in free cash flow. We project gross margins to expand to 77% by FY 2028E, with operating efficiencies leading to improved profitability.”
Our thesis had two parts:
- Undermonetization & Revenue Levers – We believed Upwork had multiple revenue levers the market was overlooking, allowing it to generate additional revenue without directly increasing the platform take rate. These monetization initiatives would significantly improve cash flow. This part of our thesis was correct, and it has now largely played out.
- GSV Growth Outlook – We expected GSV to consolidate before resuming growth within 24 months. This was overly optimistic—GSV is taking longer to stabilize, and management has acknowledged this by guiding for flat revenue growth in 2025.
To be clear, we are not bearish on Upwork. We believe it is trading close to fair value, but we would need greater confidence in GSV growth to continue holding. Given this, we see this as an opportunity to take profits and reallocate capital to more attractive opportunities.
INVESTMENT DISCLAIMERS & INVESTMENT RISKS
Past performance is not necessarily indicative of future results. All investments carry significant risk, and it’s important to note that we are not in the business of providing investment advice. All investment decisions of an individual remain the specific responsibility of that individual. There is no guarantee that our research, analysis, and forward-looking price targets will result in profits or that they will not result in a full loss or losses. All investors are advised to fully understand all risks associated with any kind of investing they choose to do.
