According to a recent report by Payoneer, earnings for freelancers in the US grew by 78% in 2018, making it the fastest growing freelance market in the world. The growth of freelancers is attributed to organizations wanting to employ contractual employees to avoid fixed costs and the increasing supply of professionals who treat freelancing as a lifestyle option. Freelance services platform Upwork (Nasdaq: UPWK) recently reported its results that surpassed market expectations.
Revenues for the third quarter of the year grew 23% to $78.8 million, ahead of the market’s expectations of $77.68 million. The company continued to report losses as it invested in sales and marketing and R&D efforts. Net loss was $2.8 million, or $0.03 per share, compared to a net loss of $7.3 million, or $0.20 per share a year ago. Non GAAP loss was $0.03 per share, compared with a net loss of $0.04 per share a year ago and the market’s forecast of a loss of $0.05 per share.
By segment, marketplace revenues increased 25% to $70.7 million and accounted for 90% of total revenue for the quarter. Revenues from managed services grew 10% to $8.1 million.
Among operating metrics, the company’s take rate which is defined as the total revenue divided by gross services volume came in at 14.7%, compared to 14.3% last quarter and last year. Core clients grew 19% over the year to more than 120,500 and client spend retention came in at 104%.
Upwork expects to end the fourth quarter with revenues of $79-$79.5 million and the year with revenues of $301-$301.5 million. Analysts expect Upwork to deliver $82.26 million in revenues with a loss of $0.04 per share in Q4 and revenues of $303.13 million and a loss of $0.15 per share for the full year.
Upwork’s Enterprise Focus
Upwork has been focusing its efforts on the enterprise segment. For the third quarter, enterprise sales were on track to deliver 20% of incremental revenue in the year. Client spend retention from clients on the Upwork Business and Enterprise segment was 125%. To continue to drive this focus, recently Upwork announced a partnership with the workforce management company Workforce Logiq, a leader in workforce management intelligence and technology capabilities. It helps organizations acquire talent they need to grow. It has clients in more than 50 countries and provides access to a real-time analytics technologies such as Recruitment Process Outsourcing solutions.
Through the partnership, Workforce Logiq’s clients will have access to search for freelancers from Upwork’s portfolio. They will be able to discover, source, and deploy freelance talent through Logiq’s Managed Service Provider program and Employer of Record payroll option to avoid worker misclassification risk.
Upwork’s results surpassed market expectations, but its outlook failed to deliver. It is currently trading at $10.52 with a market capitalization of $1.2 billion. It touched a 52-week high of $25 in February this year. The stock had fallen to a 52-week low of $9.35 earlier this month.
Upwork had listed last October at $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.