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Upwork (UPWK) Q4 Earnings & Revenues Increase Y/Y, Shares Up

Upwork UPWK reported fourth-quarter 2020 non-GAAP earnings of 6 cents per share, compared with earnings of 3 cents per share reported in the year-ago quarter. The Zacks Consensus Estimate was pegged at a loss of 7 cents.

Revenues of $106.2 million increased 32% on a year-over-year basis. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $97.6 million.

Following the announcement of fourth-quarter results, shares are up 18.11% in the pre-market trading on Feb 24.  In the past year, the company’s stock has rallied 519.8% compared with the industry’s return of 46.7%.

Upwork Inc. Price, Consensus and EPS Surprise

 

Upwork Inc. price-consensus-eps-surprise-chart | Upwork Inc. Quote

 

Quarter in Details

Marketplace revenues increased 34% year over year to $96.9 million, while managed services revenues increased 14.7% to $9.29 million.

In the reported quarter, marketplace take rate came in at 13.5% compared with 13.3% reported in the fourth quarter of 2019.

For the fourth quarter of 2020, gross services volume or GSV was $727.7 million, up 33% on a year-over-year basis.

Total core clients came in at 145,400 up 17% on a year-over-year basis. On a year-over-year basis, gross new core clients rose 36%, while net additions of core clients increased 64%.  

Client spend retention in the fourth quarter stood at 102% compared with 100% reported in the third quarter of 2020.

Upwork’s overall take rate was 14.6%, flat on a year-over-year basis but down 20 basis points (bps) from 14.8% reported in the prior quarter. The downside was due to higher revenues generated by the low pricing tiers.

In the fourth quarter, the company extended Direct Contracts offering to freelancers. The offering will aid freelancers to invoice and bill their clients for hourly work as well as utilize Escrow protections for fixed-price jobs.

Upwork also collaborated with Zoom Video to combine the latter’s video and voice communication tools with its platform. This will enable it to provide clients with seamless and secure communication experience for candidate interview and project co-operation.

Margins

Upwork’s non-GAAP gross margin in the quarter was up 100 bps year over year to 73% in the fourth quarter of 2020.

Meanwhile, total non-GAAP operating expenses, as a percentage of revenue contracted 300 bps to 66% in fourth quarter of 2020.

The company’s non-GAAP operating margin expanded 500 bps to 7% in the quarter under review.  

Fourth quarter non-GAAP adjusted EBITDA came in at $9.6 million, up 174.3% year over year.

Balance Sheet & Cash Flow

As of Dec 31, 2020, Upwork’s total cash, cash equivalents, and restricted cash came in at $232.5 million compared with $219.7 million as of Sep 30, 2020.

In the fourth quarter, net cash provided by operating activities came in at $8.95 million compared with $6.75 million reported in the third quarter of 2020.

2020 Numbers in Details

Upwork reported revenues of $373.6 million in 2020, up 24% over 2019 tally. The Zacks Consensus Estimate is pegged at $364.99 million.

The company’s GSV improved 21% year over year to $2.5 billion in 2020.

Non-GAAP earnings per share were 5 cents unchanged from the figure reported in 2019.

For 2020, Upwork’s adjusted EBITDA came in at $14 million, up 89.2% from 2019.

In 2020, Upwork generated cash flow from operations of $22.4 million compared with $1.1 million in the previous year.

Guidance

Upwork expects first-quarter 2021 revenues in the range of $107-$109 million. The Zacks Consensus Estimate is pegged at $102.2 million.

Further, adjusted EBITDA for the first quarter is projected in the range of $2-$3 million.

For 2021, revenues are expected in the range of $460-$470 million. The Zacks Consensus Estimate is pegged at $437.5 million.

Adjusted EBITDA is expected in the range of $12-$16 million for the year. 

Zacks Rank & Stock to Consider

Upwork currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are HP Inc HPQ, CrowdStrike CRWD and Workday WDAY. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

HP Inc and Workday are scheduled to release earnings on Feb 25, while CrowdStrike is slated to announce results on Mar 16.

Long-term earnings growth rate for HP, CrowdStrike and Workday are currently pegged at 5.4%, 25%, and 25.4%, respectively.

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