What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-05 · 110 added, 87 removed, 279 unchanged (41% of the section changed)

4 unchanged sentences

Independent talent is an increasingly sought-after, critical, and expanding segment of the global workforce.

We operate the world’s largest work marketplace that connects businesses with independent talent from across the globe, as measured by gross services volume, which we refer to as GSV.

We operate the world’s largest human and AI-powered work marketplace that connects businesses with independent talent from across the globe, as measured by gross services volume, which we refer to as GSV.

GSV represents the total amount that clients spend on our offerings as well as additional fees we charge to talent and clients for other services.

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Over the past several years, we have implemented a number of strategic initiatives intended to drive long-term growth, enhance monetization, and improve operational efficiency.

These initiatives include (i) increasing the number of Connects (which are virtual tokens that are required for talent to bid on projects and purchase ads products on our work marketplace) needed by talent to bid on projects, (ii) expanding our ads and monetization products on the work marketplace, (iii) executing operational efficiency initiatives aimed at improving profitability, (iv) retiring the tiered service fee structure for talent working with clients on our Marketplace offering in favor of a flat fee, (v) implementing a new Enterprise strategy, including expanded offerings to serve broader client segments, and (vi) continuing to invest in generative AI capabilities and premium offerings.

While evolving macroeconomic conditions and broader economic headwinds continue to weigh on customer demand and spending behavior, these strategic initiatives contributed to Marketplace take rate expansion and revenue growth in the three months ended March 31, 2025.

Marketplace revenue slightly increased by 1% to $166.3 million for the three months ended March 31, 2025, compared to $164.3 million in the same period in 2024.

Marketplace take rate increased to 18.3% for the three months ended March 31, 2025, compared to 17.7% in the same period in 2024, reflecting the growing contributions from ads and monetization products.

These initiatives include (i) introducing dynamic pricing for job proposals, designed to optimize talent distribution across categories by adjusting the number of Connects required per proposal based on talent supply and demand, (ii) expanding our ads and monetization products on the work marketplace, (iii) executing operational efficiency initiatives aimed at improving profitability, (iv) retiring the tiered service fee structure for talent working with clients on our Marketplace offering in favor of a flat fee, (v) implementing a new Enterprise strategy, including expanded offerings to serve broader client segments, and (vi) continuing to invest in generative AI capabilities and premium offerings.

While evolving macroeconomic conditions continue to weigh on customer demand, these strategic initiatives contributed to Marketplace take rate expansion and revenue growth in the three and six months ended June 30, 2025.

Marketplace revenue increased by 2% to $170.7 million and $337.0 million for the three and six months ended June 30, 2025, respectively, as compared to $166.8 million and $331.1 million in the same periods in 2024, respectively.

Marketplace take rate increased to 18.5% and 18.4% for the three and six months ended June 30, 2025, respectively, as compared to 18.0% and 17.9% in the same periods in 2024, respectively, reflecting the growing contributions from ads and monetization products.

We expect Marketplace take rate to remain relatively constant throughout the remainder of 2025.

During the three months ended March 31, 2025, we generated net income of $37.7 million and adjusted EBITDA of $56.0 million, compared to net income of $18.4 million and adjusted EBITDA of $33.3 million during the same period in 2024.

These changes are primarily due to the cost-saving measures implemented in recent years, including reduced investments in brand marketing and vendor spend.

We expect these cost-saving measures will continue to positively impact net income and adjusted EBITDA throughout the remainder of 2025, as compared to 2024.

During the three months ended June 30, 2025, we generated net income of $32.7 million and adjusted EBITDA of $57.1 million, compared to net income of $22.2 million and adjusted EBITDA of $40.8 million during the same period in 2024.

During the six months ended June 30, 2025, we generated net income of $70.5 million and adjusted EBITDA of $113.1 million, as compared to net income of $40.7 million and adjusted EBITDA of $74.2 million during the same period in 2024.

These changes are primarily due to the cost-saving measures implemented in recent years, including reduced investments in brand marketing and vendor spend and workforce reductions.

We expect these

cost-saving measures will continue to positively impact net income and adjusted EBITDA throughout the remainder of 2025, as compared to 2024.

Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with generally accepted accounting principles in the United States, which we refer to as U.S.

See “Key Financial and Operational Metrics—Non-GAAP Financial Measures” below for a definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a

reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared under U.S.

See “Key Financial and Operational Metrics—Non-GAAP Financial Measures” below for a definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared under U.S.

Key Financial and Operational Metrics

We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

As of and for the three months ended March 31, 2025 and 2024, our key financial and operating metrics were as follows:

As of and for the three and six months ended June 30, 2025 and 2024, our key financial and operating metrics were as follows:

Three Months Ended

March 31, Change

June 30, Change

Six Months Ended

June 30, Change

(In thousands, except percentages and basis points)

2025 2024 2025 2024

GSV $ 1,002,650 $ 1,008,267 (1) % $ 1,990,363 $ 2,017,063 (1) %

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Marketplace take rate

18.3 % 17.7 % 60 bps

18.5 % 18.0 % 54 bps 18.4 % 17.9 % 54 bps

$ 32,726 $ 22,220 47 % $ 70,456 $ 40,662 73 %

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See “—Non-GAAP Financial Measures” below for the definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared under U.S.

As of March 31,

As of June 30,

(Active clients are in thousands) 2025 2024

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Gross Services Volume (GSV)

GSV represents the amount of business transacted through our work marketplace.

GSV represents the total amount that clients spend on our offerings as well as additional fees we charge to talent and clients for other services.

The primary component of GSV is client spend, which we define as the total amount that clients spend on our offerings.

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Marketplace revenue is the primary driver of our business, and we believe it provides comparability to other online marketplaces.

Marketplace revenue represents the majority of our revenue and is derived

from our Marketplace offerings, which include all offerings other than our Enterprise offerings—Enterprise Solutions and Managed Services.

Marketplace revenue represents the majority of our revenue and is derived from our Marketplace offerings, which include all offerings other than our Enterprise offerings—Enterprise Solutions and Managed Services.

We generate Marketplace revenue from both talent and clients.

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Three Months Ended

June 30, Six Months Ended

(In thousands) 2025 2024 2025 2024

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Income tax provision 5,717 1,181 12,994 2,510

2,640 187 2,828 375

Adjusted EBITDA $ 57,061 $ 40,835 $ 113,072 $ 74,160

(1) During the three months ended March 31, 2025 and 2024, we incurred $0.2 million of expense related to the warrant to purchase 500,000 shares of our common stock at an exercise price of $0.01 per share issued to the Tides Foundation in 2018.

(1) For the three and six months ended June 30, 2025 and 2024, we incurred $0.2 million and $0.4 million, respectively, of expense related to the warrant to purchase 500,000 shares of our common stock at an exercise price of $0.01 per share issued to the Tides Foundation in 2018.

(2) For each of the three and six months ended June 30, 2025, we incurred acquisition-related costs of $2.5 million in connection with business combinations.

These costs primarily consist of legal, accounting, and other professional fees, and are recorded in general and administrative expenses in the condensed consolidated statements of operations.

Beginning in the second quarter of 2025, we included acquisition-related costs as an add-back to net income in the reconciliation to adjusted EBITDA.

Acquisition-related costs incurred in prior periods were deemed immaterial and therefore not included as an add-back to adjusted EBITDA.

We use adjusted EBITDA as a measure of operational efficiency.

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Marketplace revenue is primarily generated from talent service fees, and to a lesser extent, client marketplace fees.

We maintain a flat talent service fee of 10% for talent working with clients on our Marketplace offerings.

Effective May 2025, we introduced a variable pricing structure for talent service fees for new contracts.

Under this variable pricing structure, talent are charged a fixed fee for each contract ranging from 0% to 15% of their earnings, depending on platform-specific supply and demand factors, such as project type, job availability, and client demand.

The applicable fee is disclosed at contract inception and remains fixed for the duration of the contract.

For contracts formed prior to May 2025, we maintain a flat talent service fee of 10% for talent working with clients through our Marketplace offerings.

Revenue for a majority of our talent service fees is recognized on the Sunday of each week, as this is the day we have the contractual right to bill talent for the service fees.

We charge a client marketplace fee of 5% on each transaction—or 3% if paid via ACH for eligible clients.

We also offer a Business Plus plan that includes premium features targeted at larger customers, which is subject to a client marketplace fee of 10% on each transaction—or 8% if paid via ACH for eligible clients.

We also generate revenue through ads and monetization products, including purchases of Connects, talent memberships, and other services, such as foreign currency exchange when clients choose to pay in currencies other than the U.S.

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The talent providing services in connection with our Managed Services offering include independent talent and agencies of varying sizes.

GAAP, we are deemed to be the principal in these Managed Services arrangements and therefore recognize the entire GSV of Managed Services projects as Managed Services revenue, as compared to recognizing only the percentage of the client spend that we receive, as we do with our Marketplace and Enterprise Solutions offerings.

GAAP, we are deemed to be the principal in these Managed Services arrangements and therefore recognize the entire GSV of Managed Services projects as

Managed Services revenue, as compared to recognizing only the percentage of the client spend that we receive, as we do with our Marketplace and Enterprise Solutions offerings.

Cost of Revenue, Gross Profit, and Gross Margin

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Our gross profit and gross margin may fluctuate from period to period.

Such fluctuations may be influenced by our revenue, the mix of payment methods that our clients choose,

the timing and amount of investments to expand hosting capacity, our continued investments in our services and support teams, the timing and amounts paid to talent in connection with our Managed Services offering, and the amortization expense associated with capitalized internal-use software and platform development costs.

Such fluctuations may be influenced by our revenue, the mix of payment methods that our clients choose, the timing and amount of investments to expand hosting capacity, our continued investments in our services and support teams, the timing and amounts paid to talent in connection with our Managed Services offering, and the amortization expense associated with capitalized internal-use software and platform development costs.

In addition, gross margin will be impacted by fluctuations in our revenue mix between Marketplace revenue and Enterprise revenue.

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Three Months Ended

June 30, Six Months Ended

(In thousands) 2025 2024 2025 2024

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Three Months Ended

June 30, Six Months Ended

(In thousands) 2025 2024 2025 2024

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Total stock-based compensation $ 15,977 $ 19,238 $ 28,249 $ 36,180

Comparison of the Three Months Ended March 31, 2025 and 2024

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

$ 170,660 $ 166,786 $ 3,874 2 % $ 336,953 $ 331,116 $ 5,837 2 %

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Total revenue $ 194,939 $ 193,129 $ 1,810 1 % $ 387,645 $ 384,066 $ 3,579 1 %

During the three months ended March 31, 2025, macroeconomic conditions adversely impacted GSV, which declined 2%, compared to the same period in 2024.

The number of active clients decreased 7% as of March 31, 2025, compared to March 31, 2024, driven by slower growth in acquisition of new clients.

GSV per active client increased 3% as of March 31, 2025, compared to March 31, 2024.

During the three and six months ended June 30, 2025, macroeconomic conditions impacted GSV, which declined 1%, respectively, compared to the same periods in 2024.

The number of active clients decreased 8% as of June 30, 2025, compared to June 30, 2024, driven by slower growth in acquisition of new clients.

By contrast, GSV per active client increased 5% as of June 30, 2025, compared to June 30, 2024, reflecting increased client engagement.

We expect no material improvement to macroeconomic conditions throughout the remainder of 2025.

For the three months ended March 31, 2025, total revenue was $192.7 million, representing an increase of $1.8 million, or 1%, compared to the same period in 2024.

Marketplace revenue increased by $2.0 million, or 1%, compared to the same period in 2024, primarily driven by higher revenue from ads and monetization products.

This increase was partially offset by a decrease in talent service fees, attributable to lower recognition of deferred revenue, resulting from our 2023 transition from a tiered service fee structure to a flat fee model.

We expect Marketplace revenue to decline for the remainder of 2025 compared to the same periods in 2024, reflecting the anticipated impact of broader macroeconomic conditions.

For the three months ended March 31, 2025, Enterprise revenue decreased by 1% compared to the same period in 2024.

During the first quarter of 2025, we focused on supporting existing Enterprise clients, which contributed to stable active account trends despite a challenging macro environment, and improving year-over-year trends in spend per active enterprise client.

For the three and six months ended June 30, 2025, total revenue was $194.9 million and $387.6 million, representing a 1% increase compared to the same periods in 2024, respectively.

For the three and six months ended June 30, 2025, Marketplace revenue increased by $3.9 million and $5.8 million, respectively, or 2% in each period, compared to the same periods in 2024, primarily due to higher revenue from ads and monetization products and client marketplace fees.

This increase was partially offset by a decrease in talent service fees resulting from our 2023 transition from a tiered service fee structure to a flat fee model.

We expect Marketplace revenue to increase for the remainder of 2025 compared to the same periods in 2024, driven by a number of strategic initiatives intended to improve monetization and support long-term growth.

For the three months ended June 30, 2025, Enterprise revenue decreased by $2.1 million, or 8%, compared to the same period in 2024.

For the six months ended June 30, 2025, Enterprise revenue decreased by $2.3 million, or 4% compared to the same period in 2024.

These decreases were primarily driven by lower revenue from our Managed Services offering as a result of a reduction in client spend.

Additionally, during the first half of 2025, we focused on supporting existing Enterprise clients, which contributed to stable active account trends despite a challenging macro environment, and improving year-over-year trends in spend per active enterprise client.

As we continue refining our Enterprise strategy, we expect Enterprise revenue to decline for the remainder of the year compared to the same periods in 2024.

Cost of Revenue and Gross Margin

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

Cost of revenue $ 43,432 $ 43,852 $ (420) (1) % $ 85,238 $ 88,045 $ (2,807) (3) %

Total gross margin 78 % 77 % 78 % 77 %

For the three months ended March 31, 2025, cost of revenue decreased by $2.4 million, or 5%, compared to the same period in 2024.

This decrease was primarily driven by a $1.9 million reduction in data center and customer support costs and a $1.1 million decrease in costs associated with our Upwork Professional offering, reflecting ongoing hosting optimization efforts and workforce reductions, as well as a $0.4 million reduction in payment processing fees.

These decreases were partially offset by a $0.5 million increase in the cost of talent services to deliver Managed Services revenue and $0.6 million in amortization expense related to internal-use software and platform development costs.

For the three months ended March 31, 2025, gross margin increased to 78% compared to 77% in the same period in 2024, primarily due to lower cost of revenue driven by cost-optimization efforts implemented in prior year, including workforce reductions and other cost-saving measures.

We expect cost of revenue to decrease in absolute dollars in future periods, reflecting both the impact of cost optimization efforts and an expected decrease in revenue on our work marketplace.

For the three and six months ended June 30, 2025, cost of revenue decreased by $0.4 million, or 1%, and $2.8 million, or 3%, respectively, compared to the same periods in 2024.

The decreases were primarily due to reductions in data center and customer support costs of $1.1 million and $3.0 million, respectively, and lower costs associated with our Upwork Professional offering of $0.9 million and $2.0 million,

respectively, reflecting hosting optimization efforts and workforce reductions.

These decreases were partially offset by increases in cost to deliver our Managed Services offering of $0.8 million and $1.2 million, respectively, primarily due to contract termination costs triggered by a reduction in work volume under a client contract.

In addition, amortization expense related to internal-use software and platform development increased by $0.8 million and $1.4 million, respectively.

For each of the three and six months ended June 30, 2025, gross margin increased to 78% compared to 77% in the same periods in 2024, primarily due to lower cost of revenue driven by cost-optimization efforts implemented in prior year, including workforce reductions and other cost-saving measures.

We expect cost of revenue to remain relatively consistent in the third and fourth quarters of 2025 compared to the same periods in 2024, reflecting cost optimization efforts, partially offset by higher amortization of capitalized internal-use software resulting from continued investment in platform enhancements.

On a full-year basis, we expect total cost of revenue to be lower for the full year 2025 as compared to 2024.

Amounts paid to talent in connection with our Managed Services offering are tied to the volume of managed services used by our clients.

The level and timing of these items could fluctuate and affect our cost of revenue in the future.

We expect gross margin to remain consistent throughout the remainder of 2025, compared to 2024.

We expect gross margin to remain consistent throughout the remainder of 2025.

Research and Development

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

Research and development $ 44,843 $ 52,465 $ (7,622) (15) % $ 90,995 $ 105,381 $ (14,386) (14) %

Percentage of total revenue 23 % 27 % 23 % 27 %

For the three months ended March 31, 2025, research and development expense decreased by $6.8 million, or 13%, compared to the same period in 2024.

The decrease was primarily driven by a $4.5 million reduction in personnel-related costs, attributable to workforce reduction and other cost-saving measures implemented in 2024, as well as $2.2 million in incremental internal-use software and platform development costs that we capitalized during the three months ended March 31, 2025.

These costs were partially offset by a $0.9 million increase in amortization of intangible assets compared to the same period in 2024.

For the three and six months ended June 30, 2025, research and development expense decreased by $7.6 million, or 15% and $14.4 million, or 14%, respectively, compared to the same periods in 2024.

The decreases were primarily driven by reductions in personnel-related costs of $7.3 million and $12.8 million, respectively, reflecting workforce reductions and other cost-saving measures implemented in 2024.

In addition, we capitalized $1.1 million and $2.2 million of incremental internal-use software and platform development costs during the three and six months ended June 30, 2025, respectively.

These costs were partially offset by increases in amortization of intangible assets of $0.9 million and $1.8 million, respectively, compared to the same periods in 2024.

While we remain committed to ongoing innovation to further enhance our platform, building new features, with a focus on generative AI, we expect total research and development expenses to decrease throughout the remainder of 2025, compared to 2024.

Sales and Marketing

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

Sales and marketing $ 36,671 $ 47,333 $ (10,662) (23) % $ 72,422 $ 95,184 $ (22,762) (24) %

Percentage of total revenue 19 % 25 % 19 % 25 %

For the three months ended March 31, 2025, sales and marketing expense decreased by $12.1 million, or 25%, compared to the same period in 2024.

The decrease was primarily due to cost-optimization efforts implemented in the prior year, including the realignment and streamlining of our sales and marketing workforce.

As a result, personnel-related costs decreased by $9.4 million and marketing and advertising expense decreased by $1.9 million compared to the same period in 2024.

For the three and six months ended June 30, 2025, sales and marketing expense decreased by $10.7 million, or 23% and $22.8 million, or 24%, respectively, compared to the same periods in 2024.

The decreases were primarily driven by cost-optimization efforts implemented in the prior year, including the realignment and streamlining of our sales and marketing workforce.

As a result, personnel-related costs decreased by $7.3 million and $16.7 million, respectively, and marketing and advertising expense decreased by $2.9 million and $4.8 million, respectively, compared to the same periods in 2024.

We expect sales and marketing expense to continue to decrease throughout the remainder of 2025 compared to 2024, primarily due to the ongoing impact of workforce-related changes and other cost-saving initiatives implemented in 2024.

General and Administrative

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

General and administrative $ 35,659 $ 29,924 $ 5,735 19 % $ 63,707 $ 61,925 $ 1,782 3 %

Percentage of total revenue 18 % 15 % 16 % 16 %

For the three months ended March 31, 2025, general and administrative expense decreased by $4.0 million, or 12%, compared to the same period in 2024.

The decrease was primarily driven by a $2.6 million reduction in personnel-related costs, largely due to lower stock-based compensation expense.

While general and administrative expenses are expected to increase modestly in the second and third quarters of 2025, primarily due to the timing of certain operational initiatives, we expect fourth quarter and full-year general and administrative expenses to be lower compared to 2024.

For the three and six months ended June 30, 2025, general and administrative expense increased by $5.7 million, or 19%, and $1.8 million, or 3%, respectively, compared to the same periods in 2024.

The increases were primarily driven by higher personnel-related costs of $3.8 million and $1.2 million, respectively, largely due to increased bonus expense based on 2025 financial performance.

In addition, legal fees increased $1.4 million and $1.1 million, compared to the same periods in 2024, primarily driven by acquisition-related costs.

We expect general and administrative expenses to increase for the remainder of 2025 compared to 2024, primarily due to an increase in stock-based compensation.

Provision for Transaction Losses

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

Provision for transaction losses $ 1,769 $ 1,774 $ (5) — % $ 4,028 $ 2,701 $ 1,327 49 %

Percentage of total revenue 0.9 % 0.9 % 1.0 % 0.7 %

For the three months ended March 31, 2025, provision for transaction losses increased by $1.3 million, compared to the same period in 2024.

The provision for the three months ended March 31, 2024, was lower primarily due to better than expected collections during that period.

We expect provisions for transaction losses to return to normalized levels of between 1% to 2% of revenue for the remainder of 2025.

For the six months ended June 30, 2025, provision for transaction losses increased by $1.3 million, compared to the same period in 2024.

The provision for the six months ended June 30, 2024 was lower primarily due to better than expected collections during that period.

We expect provision for transaction losses to remain at a normalized level of approximately 1% of revenue for the remainder of 2025.

Other Income, Net

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

Other income, net $ 5,878 $ 5,620 $ 258 5 % $ 12,195 $ 12,342 $ (147) (1) %

For the three months ended March 31, 2025, other income, net decreased, compared to the same period in 2024, due to decreases in interest income earned on marketable securities.

Other income, net remained relatively consistent for the three and six months ended June 30, 2025, compared to the same periods in 2024.

Income Tax Provision

Three Months Ended March 31,

(In thousands, except percentages) 2025 2024 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) 2025 2024 Change 2025 2024 Change

Income tax provision $ (5,717) $ (1,181) $ 4,536 384 % $ (12,994) $ (2,510) $ 10,484 418%

Effective tax rate

For the three months ended March 31, 2025, our income tax provision increased by $5.9 million, compared to the same period in 2024.

Our effective tax rate was 16.2% for the three months ended March 31, 2025, compared to 6.7% for the same period in 2024.

The increase in our effective tax rate was primarily driven by the absence of a valuation allowance in the current period, whereas the prior-year rate reflected a lower tax expense due to the impact of a valuation allowance on our U.S.

14.9 % 5.0 % 15.6 % 5.8 %

For the three and six months ended June 30, 2025, our income tax provision increased by $4.5 million and $10.5 million, respectively, compared to the same periods in 2024.

Our effective tax rates were 14.9% and 15.6% for the three and six months ended June 30, 2025, respectively, compared to 5.0% and 5.8% for the same periods in 2024, respectively.

The increase in our effective tax rates for the three and six months ended June 30, 2025, was primarily driven by the absence of a valuation allowance in the current periods, whereas the prior-year rates reflected lower tax expense due to the impact of a valuation allowance on our U.S.

deferred tax assets.

Our income tax provision for the three months ended March 31, 2025, was primarily driven by income in the United States and non-deductible compensation, offset by the generation of research and development tax credits and the benefit from the Foreign-Derived Intangible Income deduction.

Our income tax provision for the three and six months ended June 30, 2025, was primarily driven by income in the United States and non-deductible compensation, partially offset by the generation of research and development tax credits and the benefit from the Foreign-Derived Intangible Income deduction.

Liquidity and Capital Resources

4 unchanged sentences

Since our inception, our business has consisted of the operation of an online work marketplace that connects businesses with independent talent from across the globe, and we do not make investments for trading or speculative purposes.

As of March 31, 2025 and December 31, 2024, we had $304.4 million and $305.8 million in cash and cash equivalents, respectively.

As of March 31, 2025 and December 31, 2024, we had $317.6 million and $316.3 million in marketable securities, respectively.

As of June 30, 2025 and December 31, 2024, we had $291.1 million and $305.8 million in cash and cash equivalents, respectively.

As of June 30, 2025 and December 31, 2024, we had $343.5 million and $316.3 million in marketable securities, respectively.

We believe our existing cash and cash equivalents, marketable securities, and cash flow from operations (in periods in which we generate cash flow from operations) will be sufficient for at least the next 12 months to meet our requirements and plans for cash, including meeting our working capital requirements and capital expenditure requirements.

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In July 2024, we commenced a non-cancellable agreement for cloud infrastructure and other services that contains future purchase commitments of $40.0 million over two years, with $20.0 million in each year.

As of March 31, 2025, we had remaining purchase commitments under this agreement of $23.7 million.

As of June 30, 2025, we had remaining purchase commitments under this agreement of $16.7 million.

Operating Leases for Office Space

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Share Repurchase Program

In October 2024, our board of directors authorized a share repurchase purchase program for the repurchase of up to $100.0 million of shares of our outstanding common stock, which is referred to as the 2024 Share Repurchase Authorization.

In October 2024, our board of directors authorized a share repurchase purchase program for the repurchase of up to $100.0 million of shares of our outstanding common stock, which we refer to as the 2024 Share Repurchase Authorization.

Repurchases of our common stock under the 2024 Share Repurchase Authorization may be made from time to time on the open market (including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act of 1934, as amended, which we refer to as the Exchange Act), in privately negotiated transactions, or by other methods, at our discretion, and in accordance with applicable securities laws and other restrictions.

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The 2024 Share Repurchase Authorization does not obligate us to repurchase any dollar amount or number of shares, and the timing and amount of any repurchases will depend on market and business conditions.

During the three months ended March 31, 2025, we repurchased and subsequently retired 2.3 million shares of our common stock under the 2024 Share Repurchase Authorization for an aggregate amount of $33.1 million at an average price of $14.18 per share, including fees associated with the repurchases and excluding excise tax.

As of March 31, 2025, we had $66.9 million available for repurchases under the 2024 Share Repurchase Authorization.

During the three and six months ended June 30, 2025, we repurchased and subsequently retired 2.9 million and 5.2 million shares of our common stock for an aggregate amount of $37.9 million and $70.9 million at an average price of $13.00 and $13.52 per share, including fees associated with the repurchases and excluding excise tax, respectively.

As of June 30, 2025, we had $29.1 million available for repurchases under the 2024 Share Repurchase Authorization.

We previously repurchased $100.0 million of common stock pursuant to the share repurchase program authorized by our board of directors in November 2023, which is referred to as the 2023 Share Repurchase Authorization.

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Therefore, in order to satisfy escrow funding requirements, every Sunday we match the shortage of cash in trust by restricting our own operating cash and typically collect this cash shortage from clients within the next several days.

As of March 31, 2025 and December 31, 2024, funds held in escrow, including funds in transit, were $215.9 million and $195.7 million, respectively.

As of June 30, 2025 and December 31, 2024, funds held in escrow, including funds in transit, were $212.0 million and $195.7 million, respectively.

We deposit a portion of funds held in escrow in interest-bearing checking accounts.

Convertible Senior Notes Due 2026 and Capped Calls

As of March 31, 2025 and December 31, 2024, $361.0 million aggregate principal amount of the Notes remained outstanding.

As of June 30, 2025 and December 31, 2024, $361.0 million aggregate principal amount of the Notes remained outstanding.

The Notes were issued in August 2021, pursuant to and subject to the terms and conditions of an indenture between us and Computershare Trust Company, National Association (as successor in interest to Wells Fargo Bank, National Association), as trustee.

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The following table summarizes our cash flows for the periods presented:

Three Months Ended

Six Months Ended

(In thousands) 2025 2024

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For additional information, refer to “Note 2—Basis of Presentation and Summary of Significant Accounting Policies” of the notes to our condensed consolidated financial statement included elsewhere in this Quarterly Report.

(1) Includes increases in funds held in escrow, including funds in transit of $19.3 million and $1.4 million during the three months ended March 31, 2025 and 2024, respectively.

(2) Includes an increase in funds held in escrow, including funds in transit of $16.6 million during the six months ended June 30, 2025 and includes a decrease in funds held in escrow, including funds in transit of $4.8 million during the six months ended June 30, 2024.

Operating Activities

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Our primary uses of cash from operating activities are for personnel-related expenditures, payment processing fees, amounts paid to talent to deliver services for clients under our Managed Services offering, and third-party hosting costs.

For the three months ended March 31, 2025, net cash provided by operating activities was $37.0 million, which resulted from net income of $37.7 million, non-cash adjustments of $18.1 million, and net cash outflows of $18.9 million from changes in operating assets and liabilities.

For the three months ended March 31, 2024, net cash provided by operating activities was $14.8 million, which resulted from net income of $18.4 million and non-cash adjustments of $17.5 million, offset by net cash outflows of $21.1 million from changes in operating assets and liabilities.

For the six months ended June 30, 2025, net cash provided by operating activities was $109.5 million, which resulted from net income of $70.5 million, non-cash adjustments of $42.8 million, and net cash outflows of $3.8 million from changes in operating assets and liabilities.

For the six months ended June 30, 2024, net cash provided by operating activities was $54.0 million, which resulted from net income of $40.7 million and non-cash adjustments of $40.2 million, offset by net cash outflows of $26.9 million from changes in operating assets and liabilities.

Investing Activities

For the three months ended March 31, 2025, net cash used in investing activities was $5.2 million, which was primarily a result of investing $50.7 million in various marketable securities, $3.7 million in internal-use software and platform development costs, and $2.5 million for purchases of property and equipment.

For the six months ended June 30, 2025, net cash used in investing activities was $56.7 million, which was primarily a result of investing $259.1 million in various marketable securities, $20.4 million cash paid for the acquisition of Bubty B.V., $8.2 million in internal-use software and platform development costs, and $4.9 million for purchases of property and equipment.

These outflows were partially offset by $232.4 million in proceeds from maturities of marketable securities and $3.5 million in proceeds from the sale of marketable securities.

For the three months ended March 31, 2024, net cash provided by investing activities was $6.1 million, which was primarily a result of proceeds from maturities of marketable securities of $131.8 million and proceeds from the sale of marketable securities of $26.9 million, partially offset by investing $149.9 million in various marketable securities, as well as $2.5 million of internal-use software and platform development costs that we paid during the period.

For the six months ended June 30, 2024, net cash provided by investing activities was $156.5 million, which was primarily a result of proceeds from maturities of marketable securities of $321.8 million and proceeds from the sale of marketable securities of $35.4 million, partially offset by investing $194.3 million in various marketable securities, as well as $5.6 million of internal-use software and platform development costs that we paid during the period.

Financing Activities

For the three months ended March 31, 2025, net cash used in financing activities was $13.1 million, which was driven by $33.1 million cash paid for repurchases under the 2024 Share Repurchase Authorization, partially offset by an increase in escrow funds payable of $19.3 million and cash received from stock option exercises of $0.7 million.

For the three months ended March 31, 2024, net cash used in financing activities was $65.4 million, which was driven by $66.9 million cash paid for repurchases under the 2023 Share Repurchase Authorization, partially offset by an increase in escrow funds payable of $1.4 million.

For the six months ended June 30, 2025, net cash used in financing activities was $51.5 million, which was driven by $70.9 million cash paid for repurchases under the 2024 Share Repurchase Authorization, partially offset by an increase in escrow funds payable of $16.6 million, proceeds received from our 2018 Employee Stock Purchase Plan, which we refer to as the 2018 ESPP, of $2.2 million, and cash received from stock option exercises of $0.7 million.

For the six months ended June 30, 2024, net cash used in financing activities was $101.1 million, which was driven by $100.0 million cash paid for repurchases under the 2023 Share Repurchase Authorization, a decrease in escrow funds payable of $4.8 million, partially offset by proceeds received from our 2018 ESPP of $2.9 million, and cash received from stock option exercises of $0.8 million.

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis