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Item 5. Market for Registrant’s Common Equity

2022-02-15 compared with 2021-02-24 · 4 added, 115 removed, 27 unchanged (82% of the section changed)

17 unchanged sentences

The graph assumes $100 was invested at the market close on October 3, 2018 in the common stock of Upwork Inc.

Such returns are based on historical results and are not intended to suggest future performance.

Such returns are

based on historical results and are not intended to suggest future performance.

The NASDAQ Composite Index and the NASDAQ 100 Technology Index assume reinvestment of any dividends.

Recent Sales of Unregistered Securities

In October 2020, we issued 49,971 shares of our common stock upon the cashless exercise of a warrant to purchase up to an aggregate of 500,000 shares of common stock.

In November 2021, we issued 49,989 shares of our common stock upon the cashless exercise of a warrant to purchase up to an aggregate of 500,000 shares of common stock.

The warrant was exercised as to all 50,000 then-vested and exercisable shares.

3 unchanged sentences

The recipient of the securities was an accredited or sophisticated person and had adequate access, through business or other relationships, to information about us.

See “Note 8—Preferred and Common Stock” of the notes to our consolidated financial statements included elsewhere in this Annual Report for additional information on the common stock warrant.

Use of Proceeds

Issuer Purchases of Equity Securities

Selected Consolidated Financial Data.

The following tables present selected historical consolidated financial and other data for our business.

We derived the selected consolidated statements of operations data for the years ended December 31, 2020, 2019, and 2018 and the consolidated balance sheet data as of December 31, 2020 and 2019 from our audited consolidated financial statements that are included elsewhere in this Annual Report.

We derived the selected consolidated statements of operations data for the years ended December 31, 2017 and 2016 and the selected consolidated balance sheet data as of December 31, 2018, 2017, and 2016 from our audited consolidated financial statements not included in this Annual Report.

Our historical results are not necessarily indicative of the results that may be expected for any other period in the future.

On December 31, 2019, we adopted Topic 606 effective as of January 1, 2019 using the modified retrospective method.

Financial results for the years ended December 31, 2020 and 2019 are presented in accordance with this new revenue recognition standard.

Historical financial results for reporting periods prior to 2019 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard, Topic 605.

The following historical selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this Annual Report.

You should read this information in conjunction with the sections titled “Business” and “Risk Factors” included elsewhere in this Annual Report.

Year Ended December 31,

2020 2019 2018 2017 2016

Consolidated Statements of Operations Data:

(in thousands, except per share data and percentages)

Marketplace $ 338,152 $ 268,284 $ 223,831 $ 178,046 $ 138,484

Managed services 35,476 32,278 29,523 24,506 25,961

Total revenue 373,628 300,562 253,354 202,552 164,445

Cost of revenue (1)

65,443 62,578

Gross profit 269,361 212,418 171,896 137,109 101,867

Operating expenses

Research and development (1)

83,471 64,027 55,488 45,604 37,902

Sales and marketing (1)

133,225 95,891 72,963 53,044 37,437

General and administrative (1)

71,518 67,327 49,336 37,334 35,446

Provision for transaction losses 3,555 3,905 5,821 4,250 5,550

Total operating expenses 291,769 231,150 183,608 140,232 116,335

Loss from operations (22,408) (18,732) (11,712) (3,123) (14,468)

Interest expense 778 1,306 2,038 960 858

Other (income) expense, net (469) (3,407) 6,142 62 908

Loss before income taxes (22,717) (16,631) (19,892) (4,145) (16,234)

Income tax benefit (provision) (150) (28) (15) 22 1

Net loss (22,867) (16,659) (19,907) (4,123) (16,233)

Premium on repurchase of redeemable convertible preferred stock — — — (6,506) —

Net loss attributable to common stockholders $ (22,867) $ (16,659) $ (19,907) $ (10,629) $ (16,233)

Net loss per share attributable to common stockholders, basic and diluted (2)

$ (0.19) $ (0.15) $ (0.38) $ (0.32) $ (0.51)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

118,699 109,815 52,328 32,945 32,072

Other Financial and Operating Data:

Core clients (4)

145.4 124.4 105.5 86.4 76.5

$ 2,523,649 $ 2,087,055 $ 1,756,289 $ 1,373,161 $ 1,148,363

Client spend retention (6)

102 % 102 % 108 % 99 % 85 %

Marketplace take rate (7)

13.6 % 13.1 % 13.0 % 13.2 % 12.3 %

Adjusted EBITDA (8)

$ 14,022 $ 7,438 $ 3,824 $ 7,909 $ 1,260

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

Cost of revenue $ 779 $ 456 $ 282 $ 290 $ 193

Research and development 9,783 6,471 3,258 1,797 1,820

Sales and marketing 4,440 2,609 1,637 1,299 1,052

General and administrative 10,506 9,262 5,184 3,460 4,201

Total $ 25,508 $ 18,798 $ 10,361 $ 6,846 $ 7,266

(2) See “Note 2 —Basis of Presentation and Summary of Significant Accounting Policies” and “Note 12 —Net Loss per Share” of the notes to our consolidated financial statements included elsewhere in this Annual Report for an explanation of the calculations of our net loss per share, basic and diluted.

(3) For a discussion of limitations in the measurement of core clients, GSV, client spend retention, and marketplace take rate, see the section titled “Risk Factors—We track certain performance metrics with internal tools and do not independently

verify such metrics.

Certain of our performance metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.”

(4) For the definition of core clients, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operational Metrics.”

(5) For the definition of GSV, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operational Metrics.”

(6) For the definition of client spend retention, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operational Metrics.”

(7) For the definition of marketplace take rate, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operational Metrics.”

(8) For the definition of adjusted EBITDA, a non-GAAP financial measure, and a reconciliation of net loss to adjusted EBITDA, see the section below titled “—Non-GAAP Financial Measures.”

As of December 31,

2020 2019 2018 2017 2016

Consolidated Balance Sheet Data:

(in thousands)

Cash and cash equivalents $ 94,081 $ 48,392 $ 129,128 $ 21,595 $ 27,326

Marketable securities 75,570 85,481 — — —

Working capital 162,054 131,537 128,282 29,483 31,205

Total assets 529,227 446,380 391,573 275,189 249,600

Debt, current and noncurrent 10,723 18,283 23,910 33,833 16,962

Redeemable convertible preferred stock — — — 166,486 178,785

Total stockholders’ equity (deficit) 299,310 259,424 243,745 (31,367) (30,131)

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S.

GAAP, adjusted EBITDA is a non-GAAP measure that we believe is useful in evaluating our operating performance.

We define adjusted EBITDA as net income (loss) adjusted for stock-based compensation expense, depreciation and amortization, interest expense, other (income) expense, net, income tax (benefit) provision, and, if applicable, other non-cash transactions.

Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with U.S.

The following table presents a reconciliation of net loss, the most directly comparable financial measure prepared in accordance with U.S.

GAAP, to adjusted EBITDA for each of the periods indicated:

Year Ended December 31,

2020 2019 2018 2017 2016

(in thousands)

Net loss $ (22,867) $ (16,659) $ (19,907) $ (4,123) $ (16,233)

Add back (deduct):

Stock-based compensation expense 25,508 18,798 10,361 6,846 7,266

Depreciation and amortization 10,172 6,661 4,949 4,186 8,462

Interest expense 778 1,306 2,038 960 858

Other (income) expense, net (469) (3,407) 6,142 62 908

Income tax (benefit) provision 150 28 15 (22) (1)

Tides Foundation common stock warrant expense 750 711 226 — —

Adjusted EBITDA $ 14,022 $ 7,438 $ 3,824 $ 7,909 $ 1,260

We use adjusted EBITDA as a measure of operational efficiency.

We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:

• adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as stock-based compensation expense, depreciation and amortization, interest expense, other (income) expense, net, income tax (benefit) provision, and, if applicable, other non-cash transactions that can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired;

• our management uses adjusted EBITDA in conjunction with financial measures prepared in accordance with U.S.

GAAP for planning purposes, including the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance;

• adjusted EBITDA provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our core operating results, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their U.S.

GAAP results.

Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S.

Some of these limitations are as follows:

• adjusted EBITDA excludes stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;

• although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

• adjusted EBITDA does not reflect:

(a) changes in, or cash requirements for, our working capital needs;

(b) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us;

or (c) tax payments that may represent a reduction in cash available to us;

• other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of this measure for comparative purposes.

Because of these and other limitations, you should consider adjusted EBITDA along with other financial performance measures, including net loss and our other financial results prepared in accordance with U.S.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity