Upwork, Inc Q2 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to the Upwork Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Evan Barbosa, VP of Investor Relations. Please go ahead sir.

Thank you. Welcome to Upwork's discussion of its second quarter 2022 financial results. Leading the discussion today are Hayden Brown, Upwork's President and Chief Executive Officer; and Jeff McCombs, Upwork's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I'll review the Safe Harbor statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance but rather are subject to a variety of risks, uncertainties and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. In addition, any statements regarding the current and future impacts of Russia's invasion of Ukraine and our decision to suspend business operations in Russia and Belarus and the COVID-19 pandemic on our business and current and future impacts of actions we have taken in response to Russia's invasion of Ukraine and the COVID-19 pandemic are forward-looking statements and related to matters that are beyond our control and changing rapidly. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's shareholder letter. Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended June 30, 2022 when filed. In addition, reference will be made to non-GAAP financial measures. Information regarding a reconciliation of non-GAAP to GAAP measures can be found in the shareholder letter that was issued this afternoon on our Investor Relations website at investors.upwork.com. As always, unless otherwise noted, reported figures are rounded in comparisons of the second quarter of 2022 or to the second quarter of 2021. All measures are GAAP unless cited as non-GAAP. Now, I'll turn the call over to Hayden.

Thanks, Evan. And thank you all for joining us today for our second quarter 2022 earnings call. Building on the momentum of strong results from the first quarter, Upwork forged ahead on innovating, evangelizing, and scaling the world's work marketplace, growing revenue 26% year-over-year to $156.9 million in the second quarter. We continue to focus on product innovation and saw outstanding results in the form of higher customer satisfaction scores, faster time to hire, and strong client reengagement rates from our latest innovative feature in the Project Catalog area called Consultations. Consultations is a one-click option for clients to book time with talent for both general getting started advice and guidance on important project decisions. Its early success is leading us to expand the pilot from four categories to all 90 plus categories in the third quarter. Product enhancements in the quarter also included the introduction of Project Tiers, which enables talent to structure their services in a way that helps clients more easily understand and match their needs to preset project scopes. Finally, we also advanced the Virtual Talent Bench or VTB experience to enhance the ways clients can find, organize, and mobilize the expertise they need. Our continued success with larger customers and our focus on building brand awareness across the market was evident in our sales and marketing performance in the second quarter. Enterprise revenue increased 45% year-over-year to $12.3 million. And the number of clients that spent $1 million or more in the trailing 12 months increased significantly year-over-year. Our sales team achieved their deals per rep productivity targets. And we've maintained our hiring pace to stay on track to double the land team by the end of this year. We continue to focus on building Upwork into a household name in our space, investing with discipline, and a focus on measurability and brand awareness. Many large recognizable companies, such as Asurion, Fanatics, Newsweek, Payoneer, Pearson, and ServiceNow signed on as new enterprise plan customers in the second quarter, turning to Upwork as a high trust, high quality destination for remote work and specialized talent at scale. In an increasingly low trust, fragmented, volatile world, we help clients like these respond to and prepare for economic headwinds, ensuring that their growth, digital transformation, and talent innovation initiatives can progress undeterred. The success of our new client marketplace plan, launched too late in the first quarter, was also on display with its implementation in the second quarter. This plan gives all self-service clients more features for a flat service fee while simplifying their experience, reducing friction, and providing them more value. Many clients have already derived additional benefits from the new plan via access to premium talent, advanced talent searches, utilization of activity codes, and more robust reporting capabilities. Our vibrant inclusive online community is a critical component of what makes Upwork distinctive. We're committed to ensuring our community has the full range of resources to enable talent and clients to innovate in their careers and their work to unlock their full potential. In service of this, we launched Upwork Academy alongside improvements to our community to support the hundreds of thousands of actively earning talent on the platform. We've seen high levels of engagement on both Upwork Academy and community pages, with over 1,200 course completions on Academy in the first month, and community page views almost 50% higher than the previous month. Upwork's values are a key attraction point for our customers on both sides of our work marketplace. This is exemplified by our role as a trusted adviser in helping clients achieve their objectives, with new talent from other regions following our decision to suspend operations in Russia and Belarus, where we announced that contracts with talent or clients in those countries would be required to wind down by May 1, 2022. Since then, we've seen many global customers working with Russia and Belarus based talent who have relocated outside of the region, as well as alternative talent they have found through our work marketplace. With respect to business activity in Ukraine, we continue to see strong performance during the second quarter. GSV was above 90% of pre-invasion levels, once again demonstrating the resilience of professionals from Ukraine, as well as the key strengths of our platform. Overall, we estimate that the loss of revenue directly attributable to the war was approximately $4 million in the second quarter, and we expect the impacts to revenue in each subsequent quarter of 2022 to be slightly less than the impact seen in the second quarter. As we look to the future, Upwork, alongside our customers, partners, and investors faces macroeconomic conditions that are difficult to predict. While there are risks that a slowing economy puts downward pressure on some parts of our business, we also see this as a catalytic moment for leaders to reevaluate the old ways of working and operating, as well as to widen their consideration of more innovative solutions for Upwork to capture a greater share of the market. Our business model remains durable, and we are confident that our value proposition of delivering highly skilled, diverse talent from over 180 countries more effectively, affordably and quickly than alternatives, as well as enabling clients to have greater flexibility with their cost structure will continue to resonate even in a recessionary environment. The opportunity ahead of Upwork is massive, regardless of near-term economic conditions. In fact, business continuity, talent transformation, a flexible cost base, and cost savings will likely become even more critical in the quarters ahead. We remain focused on delivering enduring growth fueled by investments and initiatives with strong economic in every aspect of our business, from core product innovation to building our sales muscle to brand and performance marketing. Upwork is the leading digital platform that clients trust to deliver the talent they need, with the exact skills to get work done, and is the home that talent trust to champion them in innovating their careers while bringing them exceptional work opportunities. There is vast potential to unlock on both sides of the world's work marketplace, and we've only just begun. Thank you for joining us on this journey. We will now open the call to your questions.

Thank you. Our first question comes from Matthew Farrell, Piper Sandler. Your line is open.

Thanks, guys. Congratulations on the really strong execution and managing through all the moving pieces. I wanted to zero in on the $10 million to $15 million impact from the softening of the global environment. Should we think about that, including some further deterioration in the macro from here? And then as I think about that from an upward perspective, how does utilizing the freelance workforce benefit you from a cost perspective as you look to balance costs here as we move forward in an unpredictable environment?

Thanks, Matt. I'll take the first part of that. So with respect to the $10 million to $15 million impact, our guidance reflects some of the softening that we saw happen in Q2, with respect to client acquisition and client retention, particularly, as we noted, in Europe and in SMB. And obviously, this is, you know, things are difficult to predict in terms of how they will play out. But it's our best guess, based upon the trends that we're seeing at this point, what that impact could be. Clearly things could be better; things could be worse. But that's how we really box to what we thought the impact could be. With respect to the second question, which was cost savings on the platform. Hayden, did you want to address that?

Sure. I'd say, Matt, we're seeing in the broader market. Customers are really kind of resonating with as you're talking to them. The value proposition we have around saving more through programs using talent on Upwork. On average, they save 50% or more using Upwork talent versus alternatives. Other things that are really resonating are around flexibility and speed. And so while macro is obviously front and center for so many businesses right now, we're not losing sight of the fact that they still need to get work done. And they are really trying to figure out how they can do that cost effectively. And that's where our value proposition is resonating. Hence, we are realigning a lot of our marketing and sales talk track to really shine a light on that part of our value proposition. And we're getting a good receptivity around that. So we want to make sure that we are positioning the business to take full advantage of that opportunity, which I think is going to be significant over the coming quarters.

Thanks. I wanted to highlight the strong momentum we've seen in Q2 across all metrics. Can you elaborate on how discussions with potential clients have evolved as we transition from a COVID world to an economic slowdown? Also, could we anticipate faster trends in the marketplace due to the advantages it offers enterprise customers in the upcoming quarters?

What we've observed so far is that the team continues to execute strongly, and against the backdrop of recent discussions, there has been an increase in customer focus in the first and second quarters on cost savings. Many customers might be facing layoffs or budget reductions, but they are looking to us as a cost-effective talent solution. This has contributed to our success. We experienced a 24% year-over-year growth in new deals and our overall enterprise revenue rose by 45% year-over-year in the second quarter. While there is some influence from these factors, I wouldn't say there has been a significant change for us. Our success has been primarily driven by excellent execution by our teams along with hiring and executing our planned initiatives. While there are some underlying factors, there hasn't been a major shift at this time; companies remain focused on three key areas where we provide assistance: addressing critical skill gaps, enhancing agility, and supporting digital transformation efforts. Additionally, our ability to offer cost savings has become more prominent in conversations.

Awesome. Congrats again.

Thanks.

Thank you. One moment for the next question. Our next question comes from Maria Ripps of Canaccord Genuity. Your line is open.

Great. Thanks so much for taking my questions. And congrats on strong results. So it seems like this last couple of quarters, you had a bit higher contribution to growth from spend per client versus the number of clients. Can you maybe just talk about whether this has been consistent with your set of internal expectations? And how should we think about this dynamic going forward, especially given sort of continued focus on sales force and expansion and brand investments?

Sure. Thanks, Maria. So there's a number of factors that are: One, we're really pleased with the quality of the clients that are on the platform and the growth that we're seeing from them, right. There are overall spend across the approximately 800,000 clients we have on the platform is up 16% year-over-year; those spending over 100,000 are up 38%, and million-dollar spenders are growing significantly as well. So we're really pleased to see that. We've mentioned historically that that's been driven significantly by expansion in hours per project on the platform, which we think is a great signal that clients are getting more and more value from the platform. As we mentioned, we have seen some softening in the client acquisition levels, once again, primarily related to SMB and in Europe. So that's putting a little bit of pressure in terms of the overall growth of active clients. But it's great to see that the clients that are on the platform are continuing to grow their spend. And it highlights additionally the importance of us continuing to invest in our brand marketing so that more and more clients can be aware of the value proposition that we have, particularly as they're facing the dynamics on the horizon.

Got it. Thanks, Jeff. And maybe it's sort of related to this. Does the current macro backdrop change your priorities or approach to sales force expansion and brand investments?

Maria, maybe I can jump in on that one. I think on the macro side, a couple of thoughts. First of all, we definitely don't have perfect visibility into how things are going to play out. And while it's an imperfect analog, we do look to the 2020 environment where we saw initial softening in our overall marketplace that’s contracted for some businesses. And then things improved. As we leaned into the specific opportunity that we saw for Upwork around some of the work and some of the other secular trends that were happening and economic aspects. We also see a couple dynamics playing out as we look ahead. So one is spend will likely contract in the next couple of quarters. And as Jeff mentioned, we've ring-fenced that as a $10 million to $15 million downside, which is baked into our annual guidance. Additionally, we really haven't lost sight of the fact that secular trends around remote work and digital transformation continue to be mega trends for our business right now, even as the economic force is going to be what it is for a lot of different businesses. And so for these reasons, and due to the additional Upwork specific value propositions around cost savings, flexibility, speed, we noticed the time when we can drive category growth and shear shift to Upwork. And that's why we are continuing to bet on brands, to your question, against this backdrop to really drive awareness, consideration and ultimately purchasing by customers who, frankly, today may not even be aware of Upwork solution at all. So with that in mind, we want to come out of this catalyzing the business to be even stronger than ever before, which is going to be critical going forward as more customers become aware of and adopt the solution through the coming quarters.

Got it. That's very helpful. Thank you very much for the call.

Absolutely.

Thank you. And again, one moment for the next question. Our next question shall come from Andrew Boone of JMP Securities. Your line is open.

Good afternoon and thanks so much for the questions. Given the 90 basis points step up in take rates quarter-over-quarter. Can you help us understand the momentum in take rates and whether that content can continue from here? And then just given a greater success in terms of monetization, how do you feel about taking price as a growth lever from here?

Thanks, Andrew. Yes, great to see the nice increase in take rates, which is primarily driven by the pricing and packaging structure changes that we made in Q2. When we look at the longer-term horizon, where take rates would go, we do expect that they likely will deliver additional value and drive increases in take rates for a variety of factors. One, as enterprise, which has a higher take rate than non-enterprise, continues to grow faster than the rest of the business, that will have an upward momentum. Project Catalog and take rate also have higher take rates. And so as they grow faster, the same sort of dynamic now they're a smaller portion of the business. So there'll be a little bit longer. There's also additional opportunities to drive take rate through our paid promotional products and potentially value-added services. So we do think that over the medium to longer-term mark, they will continue to rise. As we flagged at the beginning of the year, we expected nice improvements throughout 2022; we do have the additional dynamic that was really the driver of our take rates decreasing in 2021 as clients continue to find more and more value on the platform, more of their spend is at the lower end of the pricing tiers. And so that dynamic will continue as we continue to see that spend back to clients continue to grow.

That makes sense. Thanks. And then as you guys laid out kind of a path towards margin expansion over a multi-year period, can you just help us understand the key points of leverage across the various expense line items and how you guys envision it? Thanks so much.

Yes, thanks, Andrew. So we actually think there's good leverage that we can have across the board. So whether that is from cost of revenue, including payments, where the majority of our cost of revenue actually comes from our payments costs, and the enterprise portion of the business, which once again is growing faster, doesn't have those payments costs. So simply that mix shift of that growing faster will provide some leverage within cost revenue. Also, we'll be able to drive efficiencies within other areas of cost revenue, including hosting or customer support. But we also think that, over that medium to long-term mark, there will be benefits along all of the OpEx lines. So G&A, R&D, and ultimately, sales and marketing, although we're obviously investing aggressively in those areas right now, as we look over the next several years, we continue to believe that there's good opportunities to drive that; we've mentioned that we're providing the target for 2023 of achieving EBITDA profitability. And that will continue to expand that EBITDA margin by several hundred, or a few hundred basis points each year thereafter.

Great. Thank you.

Thank you. And one moment please for the next question. Our next question comes from Mr. Bernie McTernan of Needham & Company. Your line is open.

Great, thanks for taking the questions. Just a follow-up on the macro. So the expected year-over-year growth rate in active clients to decline in the $10 million to $15 million impact. In the release, it seems like that's really isolated weakness in Europe. But does that contemplate any weakness in the U.S. as well?

Yes, as we, I think phrasing was some soft trends, particularly in Europe and SMB, in general, as we look at it, we would imagine that some of the trends that we're seeing more pointedly in Europe would play out in the U.S. And when we came up with the estimates for our guidance, we've taken all that into consideration, once again, flagging that, it's very hard to predict exactly when or how much that will play out. But we have made some assumptions on that.

Understood. And then most of the times we're talking about the macro, we're thinking from the client perspective, but just interested in terms of what's happened in the past in terms of from a talent perspective, is this also a catalyst for higher quality talent to join the platform as well?

I think it definitely is not going to be a negative for us. We have such a strong talent base as it is and we've seen continued growth in that through the last years and quarters and certainly there's been a mindset shift, I think where in prior recessions going back to 2008, perhaps people might have seen freelancing as a risky place to be during an economic downturn. In fact, today what we've seen in the last two years is that professionals on our platform actually feel more insulated from economic downturns being freelancers, because they feel like they're not exposed to a single employer who can lay them off. And so to your point, I think today's professionals are looking at freelancing as a highly desirable place to be; they want to have more options in terms of multiple eggs in their basket where they're not exposed to this. So we're certainly going to be positioning ourselves to welcome new talents on the platform in the coming quarters, as we always do, and place them into great opportunities.

Understood. And then just lastly for me, if we just dive into Upwork Academy, we'd love to know some of the most popular types of education that talent are seeking out, and ultimately, is this a way for to really match the right clients with the right talent as a way to almost screen and to be able to show clients that, hey, this person passed a certain class, so they should be better equipped to do this job?

Yes, Bernie, this is just the beginning, I think, of what we can do here. So with the early courses that we're offering and where people are getting a lot of value is a lot about freelancing online one-on-one, and how do I get started building a profile and reputation on Upwork? How do I win my first job? So that's a lot of the initial coursework that we've launched and where talent is engaging the most. There's also some coursework on the client side around how to operate in the way of working that we offer. But this is, again, the beginning of I think a lot of what we can unpack for talent and clients around, ways of working online around both hard and soft skills required to be successful on the platform, around remote ways of working. Our community has tons of ideas, and frankly, is always doing their own work kind of informally sharing best practices that relate to all of the things that they're doing every day to be successful working in our ecosystem. So, we'll be continuing to evolve the course catalog based on the wisdom of our community, and then also we have partners who potentially we can bring in to continue to up the game there as well. And ultimately, the goal here is, as we raise the bar with our community on the talent quality at the client quality and kind of the work experience for everyone in our ecosystem, that's a win for everybody who's participating.

Great. Understood, thank you so much for taking the questions.

Sure.

Thank you. One moment please for the next question. Our next question will come from Eric Sheridan of Goldman Sachs. Your line is open.

Thanks, maybe just one question from me. As you've seen the broader macro environment become a little bit more volatile, I know it's early days and sort of the big market opportunity of the next couple of years. But have you seen anything different in terms of competitive intensity across the industry or elements of dynamic in terms of engaging with existing clients or prospective clients on the competition side? Thanks so much.

Sure, Eric. We haven't seen anything materially different in terms of competition. I think in conditions like these, quite often, it's harder for the smaller kind of ankle-biters in our space to stay competitive, just because it gets to be a harder landscape for them. But where we're focused is just continuing to offer our outstanding value proposition to clients and talent and forge ahead with our innovations, which I think are really meeting the needs of the market and staying ahead there. So nothing really materially to report at this time.

Thank you. One moment for our next question. Our next question comes from Nat Schindler of Bank of America. Your line is open.

Yes, hi, guys. Just wanted to focus in on how the brand campaign is going and how you are evaluating at this point now some call it eight months into it and whether or not it's been successful at expanding the business.

Thanks, Matt. The focus of this has always been durable growth with strong economics which is our top priority in every investment area we make including brand and I'd say to bolster the discipline and the measurability that we have and even enhance the ROI in the brand area. We did launch two partnerships in Q2 with Ipsos and Universal McCann, which we're excited about as kind of key milestones here. Secondly, we always knew and to your point about the eight months, we committed and communicated that this would be a multi-quarter journey. And so additional milestones that we were excited about in this quarter as we've been on this journey were the Mother's Day Campaign, which really provided us important learnings about how the Upwork brand can resonate with customers in key cultural moments and across critical channels like social. We've been wrapping those learnings into our brand and marketing programs going forward. The third thing I'd say about this is we're really finding already that the value proposition that we have does really resonate, given the broader secular trends around remote work and digital transformation, as well as Upwork's specific benefits around cost savings and workforce flexibility, which are so top of mind for executives in these very moments. This is all informing our brand and marketing programs right now, as we're going into the back half of the year at this critical time when we are really aware that we can drive share shift and catapult out of this period even stronger. As we look to the future, because of our disciplined approach, we feel good about our ability to continue to achieve both our brand goals and achieve EBITDA profitability in 2023, and further expand our margins thereafter.

Great, thanks. And then just a separate question to totally hammer in on all this macro talk. But I figured that's what everybody's going to talk about with everybody for the next couple of quarters. Can you just speculate or anything you have on history of how does the contracting business, your style of contracting business get affected in recessions? How do enterprises respond usually in this side of the business? And is there any sort of learnings on kind of timing of where they contract and expand coming into cycles? That'd be great if you could help.

Sure, I think there's a couple of things to say about that. We've looked at a few analogs for our specific business, which I think is unique and different from even traditional staffing and others. So we've looked at our business, we've looked at what happened in 2008. And we grew really healthily through that period. Of course, that was 14 years ago, and the business has changed a lot since then; certainly a lot bigger and have more aspects to it. We looked at 2020 and what happened with the pandemic economy at that time, and what we saw there was an initial slowdown in kind of the March-April period, as businesses were overall just contracting their own spend, and many businesses were struggling or going under. Then, of course, we grew really nicely out of that. And I think, one of the takeaways that I have from looking at those two analogs is for us, the economy and the health of the economy is certainly a factor that impacts our results. And that's why we have put in this $10 million to $15 million impact in the annual guidance for this year. But I think the other big impact, and perhaps even bigger impact for us is things like these major secular trends around remote work, around digital transformation, around access to critical talent and skills which are evergreen topics for executives that have become huge and impactful for almost every business and certainly huge for our business and core to our value proposition at this time. So I think those things together, we're focused on the macro, for sure, but we're also as much more focused on these critical things that are secular trends driving our businesses, so many businesses and the crosshairs of the value proposition that we're selling into right now.

Great, thanks.

Sure.

Thank you. One moment for the next question. Our next question will come from Rohit Kulkarni of MKM Partners. Your line is open.

Hey, thanks. Nice quarter guys. One question on the pricing plan. Wondering if you have any feedback in terms of the pricing plan affect any client additions, gross additions? And just broadly speaking, how have gross additions trended as you kind of laugh to all the tougher competitors for active clients as such?

Thanks, Rohit. Yes, as we look at the impact of the pricing change, we paid attention to a number of different things. One, what was the level of adoption of the features that were previously behind the subscription paywall? And how are those going in? We've been really pleased to see that increase materially, and that was one of the fundamental premises of the change was to make sure those valuable tools were available to many broader folks. Second was to monitor how was the overall package impacting retention? And clearly, the price was going up in some key areas. And we haven't seen anything noticeable. We did a holdout test compared to our pension perspective. So we're very pleased to see that. And then from a financial impact on it, we achieved our highest gross margin as a public company. And our marketplace takeaway was the highest marketplace takeaways seems to be in a public company as well. So we're really pleased with how with the value that we're delivering to customers and the reception of the changes.

Okay, thanks. Thanks, Jeff. And question on Project Catalog. It's been a while since you disclosed metrics contributions from catalog in terms of client additions, or GSV. Wondering if you have any more details to share, or anything that we can look from the outside in terms of how successful you've been with the rollout of project catalog?

If I can jump in on that one, Rohit. I think the catalog experience is the way we're seeing it now is really, it's wrapped into the overall work marketplace. Because the point of that product was never about just catalog by itself, it was about bringing customers into the broader Upwork work marketplace. And where we are now is incredibly pleased with the progress we've made, not just with catalog, but with the innovations on top of that, such as consultations, which we launched in the last quarter and now are going to be rolling out from four categories to all of our categories, presently, because we're really seeing that catalog and consultations are excellent inroads for customers to get started, either with something small and bite-sized, or becoming with, for example, consultations. A great way to get into a conversation with a talent that more often than not leads to follow-on work. And so with consultations, for example, we're seeing clients are averaging a much faster time to hire than we had in the talent marketplace. So it's 50% lower with just 1.5 days to get started. And they're also returning to do follow-on work, which often is in the talent marketplace at a much higher rate, 50% higher than we've seen with talent marketplace jobs historically. This is a nice kind of like in-between offering that is really graduating clients really nicely from some version of catalog kind of into the broader marketplace. This is really validating yet again, our whole thesis around catalog talent marketplace, consultations, as being part of this broader work marketplace ecosystem that is just adept at getting customers in the door and getting started with any variety of our products.

Okay, great. Thanks, Hayden. Thanks, Jeff.

Thanks.

Thank you. One moment for the next question. Our next question comes from Logan Reich of RBC Capital Markets. Your line is open.

Hey, thanks for taking the question. Logan on for Brett Erickson. Question on enterprise. So you guys had a strong client growth this quarter. Just curious what you think is the driver of that; why are you seeing increased adoption of people signing up for enterprise now? And how much would you attribute that to the larger sales force?

Sure, thanks, Logan. A part of it is simply the fact that we are executing against our plan, where we identified the opportunity to invest more aggressively in building out our sales motion here. We start adding reps in Q4 of 2021. Those reps are starting to ramp and really have an impact, really starting in Q2 of this quarter. So we delivered the 36 new accounts. That was up, I think, 24% year-over-year. So we're really pleased to see that. And then as Hayden mentioned earlier, obviously our value proposition resonates very strongly for accounts of all sizes, which haven't yet started to see those accounts shift exactly what they're interested in to cost-saving, dynamics is a result of any recessionary dynamics, but we are actively engaged with them on those topics. So we're really pleased by what we're seeing both on the land side as well as the expand side, and continue to be pleased with the opportunity ahead of us.

Great, thanks. And then just any sort of divergence you guys might have noticed in the behavior from companies that might be cutting costs or laying off full-time employees. Are you noticing any difference in behavior from those clients relative to your overall client base?

We're really not seeing this yet. I'd say the average customer is looking just like it was over the past couple quarters. And the success stories are very similar. We have customers like Emirates and NBDs, that's one of the largest banks in the Middle East in North Africa, and they came to us looking for new flexible talent that can drive innovation in their marketing team; this is typical for us. We're not really seeing an influx of customers who are coming to us just because they're doing a big layoff or even our existing customers who maybe are trimming headcount coming back and saying, okay, now we need to overhaul the program. So as Jeff mentioned, as we look ahead, maybe as the economy worsens or other things, there may be more of those types of things. But certainly, as we looked at Q2, it was really more of, kind of, I hate to call it same old, same old, but these value propositions that we've always had really driving customer activity in really great ways.

Great. Thanks for the color. I appreciate it.

Sure.

Thank you. One moment for the next question. Our last question will come from Brent Thill of Jefferies. Your line is open.

Thank you. I have a couple of macro questions. You mentioned client acquisition in Europe for small and medium-sized businesses. Could you provide more insight into their behavior? Are there trends toward smaller projects or greater use of the project catalog compared to hourly work? I'm curious if this varies by geography, industry, or customer size. Additionally, shifting focus to the enterprise segment, have there been any signs of increased activity on your platform?

Sure, thanks, John. I'll start. In terms of activity that we're seeing in from a geographic perspective, I can't say that there's any notable trends or more details that can provide. We just saw a little bit greater softening in the Europe market overall. But nothing in particular to call out about specific customer segment behaviors. And then, with respect to enterprise, is your question what sort of impact we're seeing in the enterprise, or can you clarify the question?

Yes, I mean, in terms of overall level of activity, or chronic acquisition and so on. I mean, is there any softness at all among the larger customers?

Yes, what we're seeing in enterprise is, starting at the very top, we're having good success hiring our land reps against our plan there. They're continuing to execute well against their productivity targets. We're beating and achieving that. The new reps that we're hiring are onboarding well; it's early, we're just basically, I guess, seven or eight months out of the first kind of reps that we started hiring in Q4 last year. Conversations with those accounts are going very well. Nothing, no material impasses noticeable from a sales cycle perspective. And engagement with our existing accounts also continues to go well, and you can see that in the overall revenue per account or revenue growth from the enterprise segment. So nothing to call out there.

Great. Thank you.

Sure, thanks.

Thank you. And with our last question, I would now like to turn the conference back to Mr. Evan Barbosa for closing remarks.

Thanks. On behalf of the entire Upwork team, thank you for joining us today and thank you for your interest in Upwork. If you need any clarifications or have any follow-up questions, please do not hesitate to reach out to me at investor@upwork.com This concludes our call.

This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.