Upwork, Inc 10-K for FY2022

Upwork, Inc (UPWK)

10-K 2023-02-16 For: 2022-12-31

Added on April 09, 2026

About this 10-K

Upwork, Inc filed this 10-K on February 16, 2023, covering the fiscal year ended December 31, 2022 (FY2022).

Headline figures

Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $618.32M; up 23.0% from $502.8M a year earlier
Net loss: $89.89M; compared with a net loss of $56.24M a year earlier
Diluted EPS: -$0.69; compared with -$0.44 a year earlier

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Delaware		46-4337682
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
475 Brannan Street, Suite 430
San Francisco,	California	94107
(Address of principal executive offices)		(Zip Code)


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share	UPWK	The Nasdaq Stock Market LLC


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page
Special Note Regarding Forward-Looking Statements		1

PART I
Item 1.	Business	2
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	45
Item 2.	Properties	45
Item 3.	Legal Proceedings	45
Item 4.	Mine Safety Disclosures	45

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46
Item 6.	[Reserved]	47
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 8.	Financial Statements and Supplementary Data	65
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	101
Item 9A.	Controls and Procedures	101
Item 9B.	Other Information	101
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	101

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	101
Item 11.	Executive Compensation	101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	102
Item 13.	Certain Relationships and Related Transactions, and Director Independence	102
Item 14.	Principal Accountant Fees and Services	102

PART IV
Item 15.	Exhibits and Financial Statement Schedules	103
Item 16.	Form 10-K Summary	105
Signatures		106


	As of or for the Year Ended December 31,
(In thousands, except GSV per active client and percentages )	2022			% Change		2021			% Change		2020			% Change

GSV	$	4,104,891		16	%	$	3,546,774		41	%	$	2,523,649		21	%
Marketplace revenue	$	566,623		23	%	$	462,340		37	%	$	338,152		26	%
Marketplace take rate	14.0		%	0.8	%	13.2		%	(0.4)	%	13.6		%	0.5	%
Net loss	$	(89,885)		(60)	%	$	(56,240)		(146)	%	$	(22,867)		(37)	%
Adjusted EBITDA(1)	$	(4,029)		(121)	%	$	19,127		36	%	$	14,022		89	%
Active clients	814			6	%	771			22	%	633			17	%
GSV per active client	$	5,045		10	%	$	4,599		15	%	$	3,989		3	%


(In thousands)	2022		2021		2020
Revenue:
Marketplace	$	566,623	$	462,340	$	338,152
Managed services	51,695		40,457		35,476
Total revenue	618,318		502,797		373,628
Cost of revenue(1)	160,402		135,508		104,267
Gross profit	457,916		367,289		269,361
Operating expenses
Research and development(1)	154,553		119,083		83,471
Sales and marketing(1)	246,882		183,294		133,225
General and administrative(1)	123,952		113,081		71,518
Provision for transaction losses	25,153		6,048		3,555
Total operating expenses	550,540		421,506		291,769
Loss from operations	(92,624)		(54,217)		(22,408)
Interest expense	4,483		2,180		778
Other income, net	(7,758)		(279)		(469)
Loss before income taxes	(89,349)		(56,118)		(22,717)
Income tax provision	(536)		(122)		(150)
Net loss	$	(89,885)	$	(56,240)	$	(22,867)

(1) Includes stock-based compensation expense as follows:

Cost of revenue	$	1,356	$	794	$	779
Research and development	26,881		16,232		9,783
Sales and marketing	11,511		5,923		4,440
General and administrative	35,753		30,643		10,506
Total	$	75,501	$	53,592	$	25,508


	Year Ended December 31,						Change
(In thousands, except percentages)	2022			2021			$		%
Marketplace	$	566,623		$	462,340		104,283		23	%
Percentage of total revenue	92		%	92		%
Managed services	$	51,695		$	40,457		11,238		28	%
Percentage of total revenue	8		%	8		%
Total revenue	$	618,318		$	502,797		$	115,521	23	%


Report of Independent Registered Public Accounting Firm—PCAOB ID: 238			66
Consolidated Balance Sheets as of December 31, 2022 and 2021			69
Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2022, 2021, and 2020			70
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021, and 2020			71
Consolidated Statements of Cash Flows for the Years ended December 31, 2022, 2021, and 2020			72
Notes to Consolidated Financial Statements			73


(In thousands, except share and per share data)	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	129,384	$	187,205
Marketable securities	557,230		497,566
Funds held in escrow, including funds in transit	161,457		160,813
Trade and client receivables – net of allowance of $12,464 and $3,410 as of December 31, 2022 and 2021, respectively	64,888		66,826
Prepaid expenses and other current assets	17,947		17,243
Total current assets	930,906		929,653
Property and equipment, net	22,063		21,329
Goodwill	118,219		118,219

Operating lease asset	7,603		10,682
Other assets, noncurrent	1,454		1,178
Total assets	$	1,080,245	$	1,081,061

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	7,549	$	4,996
Escrow funds payable	161,457		160,813

Accrued expenses and other current liabilities	53,611		45,742
Deferred revenue	25,075		22,083
Total current liabilities	247,692		233,634
Debt, noncurrent	564,261		561,299
Operating lease liability, noncurrent	11,177		16,753
Other liabilities, noncurrent	8,236		9,858
Total liabilities	831,366		821,544
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, $0.0001 par value; 490,000,000 shares authorized as of December 31, 2022 and 2021; 132,368,265 and 129,130,478 shares issued and outstanding as of December 31, 2022 and 2021, respectively	13		13
Additional paid-in capital	592,900		511,096
Accumulated other comprehensive loss	(3,085)		(528)
Accumulated deficit	(340,949)		(251,064)
Total stockholders’ equity	248,879		259,517
Total liabilities and stockholders’ equity	$	1,080,245	$	1,081,061


(In thousands, except per share data)	2022		2021		2020
Revenue	$	618,318	$	502,797	$	373,628
Cost of revenue	160,402		135,508		104,267
Gross profit	457,916		367,289		269,361
Operating expenses
Research and development	154,553		119,083		83,471
Sales and marketing	246,882		183,294		133,225
General and administrative	123,952		113,081		71,518
Provision for transaction losses	25,153		6,048		3,555
Total operating expenses	550,540		421,506		291,769
Loss from operations	(92,624)		(54,217)		(22,408)
Interest expense	4,483		2,180		778
Other income, net	(7,758)		(279)		(469)
Loss before income taxes	(89,349)		(56,118)		(22,717)
Income tax provision	(536)		(122)		(150)
Net loss	$	(89,885)	$	(56,240)	$	(22,867)



Net loss per share, basic and diluted	$	(0.69)	$	(0.44)	$	(0.19)
Weighted-average shares used to compute net loss per share, basic and diluted	130,518		127,164		118,699

Other comprehensive loss, net of tax:
Net unrealized holding loss on marketable securities, net	$	(2,557)	$	(547)	$	(18)
Total comprehensive loss	$	(92,442)	$	(56,787)	$	(22,885)


	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
(In thousands, except share amounts)	Shares	Amount
Balances as of December 31, 2019	113,604,398	$	11	$	431,333			$	37	$	(171,957)	$	259,424
Issuance of common stock upon exercise of stock options and common stock warrants	9,115,947	1		31,027				—		—		31,028
Stock-based compensation expense	—	—		25,677				—		—		25,677
Issuance of common stock for settlement of RSUs	1,590,225	—		—				—		—		—
Tides Foundation common stock warrant expense and other	—	—		1,153				—		—		1,153
Issuance of common stock in connection with employee stock purchase plan	484,652	—		4,913				—		—		4,913

Unrealized loss on marketable securities	—	—		—				(18)		—		(18)
Net loss	—	—		—				—		(22,867)		(22,867)
Balances as of December 31, 2020	124,795,222	12		494,103				19		(194,824)		299,310
Issuance of common stock upon exercise of stock options and common stock warrants	2,085,698	1		7,176				—		—		7,177
Stock-based compensation expense	—	—		53,671				—		—		53,671
Issuance of common stock for settlement of RSUs	1,865,444	—		1				—		—		1
Tides Foundation common stock warrant expense and other	—	—		749				—		—		749
Issuance of common stock in connection with employee stock purchase plan	384,114	—		4,789				—		—		4,789
Purchase of capped calls related to convertible senior notes	—	—		(49,393)				—		—		(49,393)
Unrealized loss on marketable securities	—			—				(547)		—		(547)
Net loss	—	—		—				—		(56,240)		(56,240)
Balances as of December 31, 2021	129,130,478	13		511,096				(528)		(251,064)		259,517
Issuance of common stock upon exercise of stock options	412,171	—		1,642				—		—		1,642
Stock-based compensation expense	—	—		75,618				—		—		75,618
Issuance of common stock for settlement of RSUs	2,553,300	—		—				—		—		—
Tides Foundation common stock warrant expense and other	—	—		750				—		—		750
Issuance of common stock in connection with employee stock purchase plan	272,316	—		3,794				—		—		3,794
Unrealized loss on marketable securities	—	—		—				(2,557)		—		(2,557)
Net loss	—	—		—				—		(89,885)		(89,885)
Balances as of December 31, 2022	132,368,265	$	13	$	592,900	$	—	$	(3,085)	$	(340,949)	$	248,879


(In thousands) December 31, 2022	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value		Cash and Cash Equivalents		Marketable Securities
Cash	$	27,528	$	—	$	—	$	27,528	$	27,528	$	—
Level I
Money market funds	85,302		—		—		85,302		85,302		—
Treasury bills	172,500		13		(131)		172,382		5,096		167,286
U.S. government securities	106,167		—		(2,025)		104,142		—		104,142
Total Level I	363,969		13		(2,156)		361,826		90,398		271,428
Level II
Commercial paper	120,360		—		—		120,360		8,038		112,322
Corporate bonds	85,639		3		(639)		85,003		3,420		81,583
Commercial deposits	28,945		—		—		28,945		—		28,945
Asset-backed securities	33,261		31		(306)		32,986		—		32,986
Yankee bonds	5,176		—		(8)		5,168		—		5,168
Agency bonds	12,989		7		(23)		12,973		—		12,973
Agency discount bonds	8,796		31		—		8,827		—		8,827
Supranational bonds	3,000		—		(2)		2,998		—		2,998
Total Level II	298,166		72		(978)		297,260		11,458		285,802
Total	$	689,663	$	85	$	(3,134)	$	686,614	$	129,384	$	557,230


(In thousands) December 31, 2021	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value		Cash and Cash Equivalents		Marketable Securities
Cash	$	16,596	$	—	$	—	$	16,596	$	16,596	$	—
Level I
Money market funds	108,204		—		—		108,204		108,204		—
Treasury bills	89,992		1		—		89,993		15,000		74,993
U.S. government securities	94,839		—		(285)		94,554		—		94,554
Total Level I	293,035		1		(285)		292,751		123,204		169,547
Level II
Commercial paper	171,918		—		—		171,918		29,544		142,374
Corporate bonds	183,303		1		(217)		183,087		17,861		165,226
Asset-backed securities	13,749		—		(11)		13,738		—		13,738
Yankee bonds	6,693		—		(12)		6,681		—		6,681
Total Level II	375,663		1		(240)		375,424		47,405		328,019
Total	$	685,294	$	2	$	(525)	$	684,771	$	187,205	$	497,566


(In thousands)	Less Than 12 Months				12 Months or Longer				Total
Duration of unrealized losses	Fair Value		Unrealized loss		Fair Value		Unrealized loss		Fair Value		Unrealized loss


Treasury bills	132,995		(131)		—		—		132,995		(131)
U.S. government securities	21,214		(63)		82,927		(1,963)		104,141		(2,026)
Corporate bonds	18,274		(120)		58,235		(519)		76,509		(639)
Asset-backed securities	23,515		(285)		1,707		(20)		25,222		(305)
Yankee bonds	2,578		(6)		2,591		(2)		5,169		(8)

Agency bonds	9,478		(23)		—		—		9,478		(23)

Supranational bonds	2,998		(2)		—		—		2,998		(2)
Total	$	211,052	$	(630)	$	145,460	$	(2,504)	$	356,512	$	(3,134)


(In thousands)
Balance Sheet and Cash Flow Classification		2022		2021
Assets
Operating—noncurrent	Operating lease asset	$	7,603	$	10,682
Liabilities
Operating—current	Accrued expenses and other current liabilities	6,502		6,315
Operating—noncurrent	Operating lease liability, noncurrent	11,177		16,753
Total lease liabilities		$	17,679	$	23,068


(In thousands)	2022		2021		2020
Net cash provided by operating activities	$	6,559	$	10,836	$	22,365
Net cash used in investing activities	(69,468)		(428,980)		(4,146)
Net cash provided by financing activities	6,082		537,739		54,641
Net change in cash, cash equivalents, and restricted cash(1)	$	(56,827)	$	119,595	$	72,860
(1) Includes increases in funds held in escrow, including funds in transit of $0.6 million, $25.8 million, and $26.3 million during the years ended December 31, 2022, 2021, and 2020, respectively.


(In thousands)	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(89,885)	$	(56,240)	$	(22,867)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for transaction losses	23,306		5,178		2,919
Depreciation and amortization	8,057		10,261		10,172
Amortization of debt issuance costs	2,961		1,182		61
Amortization of premium (accretion of discount) of purchases of marketable securities, net	(1,486)		298		(320)
Amortization of operating lease asset	3,079		3,545		3,860
Tides Foundation common stock warrant expense	750		750		750
Stock-based compensation expense	75,501		53,592		25,508
Impairment expense	—		8,741		—
Loss on disposal of fixed assets	—		—		44
Changes in operating assets and liabilities:
Trade and client receivables	(20,230)		(24,610)		(20,000)
Prepaid expenses and other assets	(630)		(6,960)		(1,198)
Operating lease liability	(5,389)		(1,163)		(1,851)
Accounts payable	2,579		(1,445)		5,822
Accrued expenses and other liabilities	3,689		10,253		15,438
Deferred revenue	4,257		7,454		4,027
Net cash provided by operating activities	6,559		10,836		22,365
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities	(581,887)		(525,343)		(107,281)
Proceeds from maturities of marketable securities	521,152		102,500		117,500
Purchases of property and equipment	(1,248)		(1,027)		(6,320)
Internal-use software and platform development costs	(7,485)		(5,110)		(8,045)
Net cash used in investing activities	(69,468)		(428,980)		(4,146)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in escrow funds payable	645		25,771		26,321
Proceeds from exercises of stock options and common stock warrant	1,643		7,177		31,028
Proceeds from employee stock purchase plan	3,794		4,789		4,913
Proceeds from borrowings on debt	—		—		18,000
Repayment of debt	—		(10,750)		(25,621)
Proceeds from issuance of convertible senior notes	—		575,000		—
Payment of debt issuance costs	—		(14,855)		—
Purchases of capped calls related to convertible senior notes	—		(49,393)		—
Net cash provided by financing activities	6,082		537,739		54,641
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(56,827)		119,595		72,860
Cash, cash equivalents, and restricted cash—beginning of year	352,058		232,463		159,603


(In thousands)	2022		2021		2020
Allowance for expected credit losses, beginning balance	$	3,410	$	1,661	$	2,215
Provision for expected credit losses	22,167		4,803		3,143
Amounts written off	(13,113)		(3,054)		(3,697)
Allowance for expected credit losses, ending balance	$	12,464	$	3,410	$	1,661


(In thousands)	2022		2021
Computer equipment and software	$	6,514	$	5,493
Internal-use software and platform development costs	33,273		25,738
Leasehold improvements	11,644		11,644
Office furniture and fixtures	3,475		3,365
Total property and equipment	54,906		46,240
Less: accumulated depreciation	(32,843)		(24,911)
Property and equipment, net	$	22,063	$	21,329


(In thousands)
Year Ended December 31,	Leases
2023	$	6,776
2024	5,843
2025	2,356
2026	1,729
2027	1,781
Thereafter	1,427

Total lease payments	19,912
Adjustment for discount to present value	(2,233)
Total	$	17,679


	2022	2021
Options issued and outstanding	3,851,647	4,264,068
RSUs and PSUs issued and outstanding	7,913,985	4,583,823

Warrant to purchase common stock	350,000	350,000


Remaining shares reserved for future issuances under 2018 Equity Incentive Plan	22,823,608	22,250,297
Remaining shares reserved for future issuances under 2018 Employee Stock Purchase Plan	3,794,128	3,033,401
Common stock issuable in connection with convertible senior notes	8,701,935	8,701,935
Total	47,435,303	43,183,524


	Number of Shares Underlying Outstanding Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balances at December 31, 2021	4,264,068	$	16.29	6.37	$	76,025

Exercised	(412,171)	3.99
Forfeited and canceled	(250)	8.18
Balances at December 31, 2022	3,851,647	17.58		5.51	15,037
Vested and exercisable as of December 31, 2022	2,347,914	4.04		3.86	15,016
Vested and expected to vest as of December 31, 2022	3,851,647	17.58		5.51	15,037


Stock Price						Number of Shares Vested
$60						100,000
$70						200,000
$80						300,000
$90						400,000
$100						500,000


Dividend yield	—	%
Risk-free interest rates	1.7	%
Expected volatility	65	%


	Number Outstanding	Weighted-Average Grant Date Fair Value
Unvested balance - January 1, 2022	4,583,823	$	26.86
Granted	8,130,375	20.18
Vested	(2,553,300)	23.68
Forfeited/canceled	(2,246,913)	25.14
Unvested balance - December 31, 2022	7,913,985	$	21.73


(In thousands) Year Ended December 31,	Balance at Beginning of Year		Additions Charged to Costs & Expenses		Additions Charged to Other Accounts		Deductions		Balance at End of Year

2022	$	132,162	$	24,489	$	702	$	—	$	157,353
2021	92,390		39,772		—		—		132,162
2020	63,542		28,848		—		—		92,390


	Upwork Inc.

Date: February 16, 2023	By:	/s/ Hayden Brown
		Hayden Brown
		President and Chief Executive Officer


Name of Subsidiary						Jurisdiction
Elance, Inc.						Delaware

Upwork Global Inc.						California

Upwork Talent Group Inc.						Delaware

Upwork Escrow Inc.						Delaware

Elance Limited						Ireland

UPW Holdco, Inc.						Delaware

Upwork Payments Inc.						Delaware




Date:	February 16, 2023

		/s/ Hayden Brown
		Hayden Brown
		Chief Executive Officer
		(Principal Executive Officer and Interim Principal Financial Officer)