Mountain View-based Upwork (UPWK), the largest online marketplace that enables businesses to find and work with highly-skilled freelancers, has been making several changes to revive its growth rate and improve monetization.

Upwork’s Financials

Upwork’s fourth quarter revenue was up 19% to $80.3 million, beating analyst estimate of $79.42 million. Net loss was $5.5 million, or $0.05 per share; compared to a net loss of $5.4 million, or $0.05 per share a year ago. Non-GAAP net income was $3.4 million, or $0.3 per share, compared to a non-GAAP net income of $2.7 million, or $0.03 per share a year ago.

Marketplace revenue grew 21% to $72.2 million, and accounted for 90% of total revenue. Managed services revenue increased 5.3% to $8.1 million.

Gross services volume (GSV) increased by 16% year-over-year to $549 million. Take rate, defined as total revenue divided by GSV, was 14.6%, compared to 14.3% a year ago. Core clients grew 18% to approximately 124,000.

Full year 2019 revenue grew 19% to $300.6 million. GSV grew 19% to $2.1 billion. Net loss narrowed to $16.7 million from $19.9 million a year ago. Non-GAAP net income improved to $5.5 million, compared to net loss of $0.6 million a year ago.

For the first quarter, Upwork expects revenue in the range of $81.5 to $82.5 million. For the full year 2020, it expects revenue in the range of $340-$345 million, at a growth rate of 13%-15%. Revenue increased 25% to $253.4 million in fiscal 2018, and 19% in 2019.

Changes at Upwork

Upwork made several changes last year. It introduced new paid client subscription plans, which have higher monetization characteristics, both in the subscription fee and take rate. It also changed both the cost of Connects and the number of Connects required to submit a proposal.

Lastly, it increased its client payment fee for Upwork Basic and Plus from 2.75% to 3%. As a result of these changes, its monetization has improved. Overall take rate improved in Q4 to 14.6%, from 14.3% a year ago. Its marketplace take rate improved to 13.4% in Q4, compared to 12.8% a year ago.

Another important change is that Upwork has a new CEO, Hayden Brown, who took over the reins from January 1st of this year. Hayden was previously the Chief Marketing and Product Officer of Upwork. To revive the company growth to 20%, she is following a three-pronged strategy: attract more, bigger clients; enable more spend per client; and make more high-quality matches, particularly in its technical categories of web, mobile, and software development.

During the earnings call, she clarified the misconception that Upwork is a site for hiring freelancers for small gigs. In reality, over 85% of its more than $2 billion GSV in 2019 was derived from large engagements and complex projects, not small gig work. About 40% of projects are for technical mobile development and software development, and 30% of its clients are Fortune 500 companies.

Last month, Upwork launched a new brand campaign, which targets professional staffing buyers and showcases Upwork platform’s strengths for longer term, high quality work with rated, reviewed talent. To ensure that it is attracting and converting the right clients, Upwork is optimizing its lead funnel for sales, as well as innovating its self-service client on-boarding experience.

Focusing on large enterprise clients is good, but another potential growth area is tech startups that use virtual teams excessively to keep costs down. In an earlier post, I had suggested that Upwork should focus on this virtual trend and build an accelerator for startups on its platform that have a high potential for fast growth. 

Its stock is currently trading at $7.4 with a market capitalization of $843.1 million. It touched a 52-week high of $20.9 in May, last year. The stock hit a 52-week low of $5.14 earlier this month.

Upwork had listed in October 2018 at a list price of $15, and a valuation of $1.5 billion. Prior to the listing, Upwork had raised $170 million in funding from investors including Kleiner Perkins Caufield & Byers, New Enterprise Associates, Stripes Group, Pequot Capital, Citigroup, Focus Ventures, T. Rowe Price, Sigma Partners, Benchmark, Globespan Capital Partners, DAG Ventures, and SV Angel.