How Upwork Can Leverage The Virtual Company Trend

For the first quarter, Upwork’s revenue was up 16% to $68.9 million, missing analyst estimate of $69.15 million. Non-GAAP net income was $0.5 million, or break-even per share, compared to a non-GAAP net loss of $(3.9) million, or $(0.11) per share a year ago. Gross profit increased by 21% to $47.8 million and gross margin was 69%, up from 67% a year ago.

Marketplace revenue increased by 17% to $60.9 million and accounted for 88% of total revenue. Managed services revenue increased 10.5% to $8.02 million.

Gross services volume (GSV) increased by 21% year-over-year to $487 million. Take rate, defined as total revenue divided by GSV, was 14.2%, compared to 14.3% in Q4 2018 and 14.7% in Q1 2018.

Core clients grew 22% year-over-year to approximately 111,000 as of March 31, 2019. Core client is defined as a client that has spent at least $5,000 on the platform and has had spend activity in the past twelve months. Client spend retention increased to 107%, up from 103% a year ago.

Upwork expects revenue in the range of $72.5 to $73.5 million for Q2 2019 and $299 to $304 million for the full year 2019. Revenue increased 25% to $253.4 million in fiscal 2018. For 2019, it expects a growth rate of about 19%.

How Can Upwork Up Its Growth Further?

Upwork has over 111k core clients that spend $5k+ a year on the platform.

These belong to three primary categories: large enterprises, agencies, and small businesses, including startups. My conservative estimate is that 25% of these are technology and technology-enabled services startups trying to operate as virtual companies, a key trend in the industry. I am particularly familiar with this segment because 1Mby1M, my global virtual accelerator, is full of such companies.

Through our work with 1Mby1M, we know that bootstrapped startups use virtual teams extensively, to keep overheads down and flexibly scale their businesses. We encourage this mode of company building.

Hiring trustworthy people is a key challenge for startups, and today, even in Silicon Valley, the virtual company trend is rising because of extreme talent war and cost of living pressure. Lending Club, a long-time San Francisco company, has just announced that it will move 350 employees to Utah. Small companies go the virtual company route instead of moving entire operations to one place.

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