Upwork Inc.

02/13/2026 | Press release | Distributed by Public on 02/13/2026 05:10

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with the sections titled "Business" and "Risk Factors" and the consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as well as assumptions that may never materialize or that may be proven incorrect. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the sections titled "Special Note Regarding Forward-Looking Statements" and "Risk Factors" and in other parts of this Annual Report.
Overview
Upwork Inc., through its complementary, wholly owned subsidiaries, connects businesses with global, AI-enabled talent across every on-demand work type, including freelance, agency, fractional, and payrolled. Our portfolio of platforms and other workforce solutions includes the Upwork Marketplace, the world's human and AI-powered work marketplace that connects businesses with on-demand access to highly skilled independent talent worldwide, and Lifted, our wholly owned subsidiary that provides a purpose-built solution for enterprise organizations to source, contract, manage, and pay talent across the full spectrum of contingent work.
Our customers consist of both talent and clients. We define talent as those who deliver services through the Upwork Marketplace, Lifted, or other Upwork workforce solutions. We define clients as customers that seek and engage with talent through these platforms and other workforce solutions. Talent includes independent professionals and agencies of varying sizes, while clients range from small businesses and entrepreneurs to large enterprises, including Fortune 100 companies.
We measure economic activity across our portfolio of platforms and other workforce solutions using GSV. GSV represents the total dollar value transacted through all Upwork platforms and other workforce solutions, including client spend for talent services. GSV also includes other client and talent value-added services, such as AI-based solutions, purchases of Connects, payment processing, memberships, and currency services. With customers in over 180 countries, our platforms and other workforce solutions enabled $4.0 billion of GSV for the years ended December 31, 2025 and 2024, and $4.1 billion for the year ended December 31, 2023.
As a global business connecting clients and talent worldwide, our GSV is generated across a diverse set of geographies. In 2025, approximately 71% of GSV was generated from U.S. clients, compared to approximately 70% and 69% in 2024 and 2023, respectively, with no other country representing more than 10% of GSV in any such year. While our client base is concentrated in the United States, our talent base is more globally distributed. Approximately 25% of GSV in 2025 and 2024 and approximately 26% in 2023 was generated from U.S. talent, making the United States our largest talent geography in each of 2025, 2024, and 2023. India and the Philippines were our next largest talent geographies in all three years.
We operate our business as one operating and reportable segment. For additional information, see "Note 15-Segment Information" in the notes to our consolidated financial statements included elsewhere in this Annual Report.
Financial Highlights for 2025
Over the past several years, we have continued to execute on our strategic initiatives designed to drive sustainable growth and profitability and improve operational efficiency. These initiatives have centered around four key growth drivers: (i) enhancing monetization and the supply and demand characteristics of the Upwork Marketplace with new ads products and other offerings, enhancing existing offerings, and optimizing our Connects pricing model; (ii) expanding our Enterprise offerings through enhanced solutions and strategic partnerships that enable us to serve a broader range of client segments and deliver end-to-end contingent workforce solutions through Lifted; (iii) expanding our small and medium-sized business, which we refer to as SMB, offerings and support through tailored solutions such as Business Plus; and (iv) advancing our AI capabilities and AI-native experiences, including through Uma, our proprietary AI assistant, and other AI-driven features that enhance productivity for talent and clients across the Upwork Marketplace.
The execution of these initiatives delivered measurable financial benefits across our business and contributed to Marketplace take rate expansion and revenue growth for the year ended December 31, 2025.
Marketplace revenue increased to $682.9 million, or 3%, for the year ended December 31, 2025, as compared to $662.1 million in 2024. Marketplace take rate increased to 18.7% for the year ended December 31, 2025, as compared to 18.0% in 2024, reflecting the growing contributions from ads and monetization products.
Enterprise revenue decreased to $104.9 million, or 2% for the year ended December 31, 2025, as compared to $107.2 million in 2024, largely due to the fact that we paused our efforts to acquire new Enterprise clients as we prioritize the transition to the Lifted platform. Unless otherwise indicated, Enterprise results discussed herein include results of Ascen and Bubty following the date that each was acquired by Lifted.
During the year ended December 31, 2025, we generated net income of $115.4 million, compared to net income of $215.6 million in 2024. The decrease in net income was attributable to $140.3 million non-cash income tax benefit recognized in 2024 related to the release of a valuation allowance on certain deferred tax assets, which did not occur in 2025. Adjusted EBITDA increased to $225.6 million in 2025, from $167.6 million in 2024. The increase in Adjusted EBITDA is primarily due to cost-saving measures implemented in recent years, including reduced investments in brand marketing and vendor spend and workforce reductions.
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. GAAP. 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. GAAP.
Key Financial and Operational Metrics
The key financial and operational metrics that we monitor to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions were as follows as of or for the periods presented:
As of or for the Year Ended December 31,
(In thousands, except GSV per active client and percentages)
2025
Change
2024
Change
2023
Change
GSV $ 4,028,386 1 % $ 4,008,107 (3) % $ 4,142,252 1 %
Marketplace revenue $ 682,883 3 % $ 662,108 13 % $ 586,099 13 %
Marketplace take rate 18.7 % 69 bps 18.0 % 265 bps 15.4 % 155 bps
Net income $ 115,425 (46) % $ 215,586 * $ 46,887 152 %
Adjusted EBITDA (1)
$ 225,556 35 % $ 167,593 129 % $ 73,134 *
Active clients 785 (6) % 832 (2) % 851 5 %
GSV per active client $ 5,129 7 % $ 4,815 (1) % $ 4,867 (4) %
*Not meaningful
(1)Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with U.S. GAAP. 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. GAAP.
We believe these key financial and operational metrics are useful to evaluate period-over-period comparisons of our business and in understanding our operating results, and management uses these metrics to track our performance. We expect our key metrics may fluctuate between periods due to a number of factors, including changing macroeconomic conditions; the number of Sundays (i.e., the day we have the contractual right to bill and recognize revenue for the majority of our talent service fees each week) in any given period; the lapping of significant launches of new lines of business or products, pricing changes, and other monetization efforts; and ongoing efforts to improve processes on the Upwork Marketplace, including project proposals and purchases of Connects, among others. For a discussion of limitations in the measurement of our key financial and operational metrics, see "Risk Factors-We track certain performance metrics with internal tools and do not independently verify such metrics. Certain of our performance metrics may not accurately reflect certain details of our business, are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business" in Part I, Item 1A of this Annual Report.
Gross Services Volume (GSV)
GSV represents the total dollar value transacted through all Upwork platforms and other workforce solutions. The primary component of GSV is client spend, which we define as the total dollar amount that clients spend for talent services through such platforms and other workforce solutions. GSV also includes other client and talent value-added services, such as AI-based services, purchases of Connects, payment processing, memberships, and currency services.
Growth in the number of active clients and GSV per active client are the primary drivers of GSV.
In the third quarter of 2025, we refined our definition of GSV to better align with the continued evolution of our business model and service offerings, including as a result of Lifted's acquisitions of Bubty and Ascen. This change does not impact previously reported GSV amounts or affect the comparability of GSV across periods, and no historical periods have been recast.
For purposes of determining countries where we enable GSV, we include both the countries in which the clients that paid for the applicable services are located, as well as the countries in which talent that provided those services are located.
Marketplace Revenue
Marketplace revenue represents the revenue derived from the Upwork Marketplace and is the primary driver of our business. We believe Marketplace revenue provides comparability to other online marketplaces. We generate Marketplace revenue from both talent and clients. Marketplace revenue is primarily generated from talent service fees paid by talent as a percentage of the total amount talent charges clients for services accessed on the Upwork Marketplace and client marketplace fees. We also generate Marketplace 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. dollar. Additionally, we earn interest on funds held on behalf of customers, which is included in Marketplace revenue.
Marketplace Take Rate
Marketplace take rate measures the correlation between Marketplace revenue and Marketplace GSV and is calculated by dividing Marketplace revenue by Marketplace GSV. We define Marketplace GSV as GSV derived from the Upwork Marketplace. Marketplace take rate is an important metric because it is the key indicator of how well we monetize spend on the Upwork Marketplace.
Active Clients and GSV per Active Client
We define an active client as a client that has had spend activity on any Upwork platform or other workforce solution during the 12 months preceding the date of measurement. GSV per active client is calculated by dividing total GSV during the four quarters ended on the date of measurement by the number of active clients on the date of measurement. We believe that the number of active clients and GSV per active client are indicators of the growth and overall health of our business. The number of active clients is a driver of GSV and, in turn, revenue generated across our platforms and workforce solutions.
Components of Our Results of Operations
Revenue
Marketplace Revenue.Marketplace revenue represents the revenue derived from the Upwork Marketplace and is primarily generated from talent service fees and client marketplace fees. Effective May 2025, we introduced a variable pricing structure for talent service fees for new contracts. Under this variable pricing structure, talent on the Upwork Marketplace 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 on the Upwork Marketplace.
Revenue for a majority of talent service fees on the Upwork Marketplace 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 Marketplace revenue through ads and monetization products, talent memberships, and other services, such as foreign currency exchange when clients choose to pay in currencies other than the U.S. dollar. Additionally, we earn interest on funds held on behalf of customers.
Enterprise Revenue. Enterprise offers two primary lines of service-Enterprise Solutions and Managed Services.
Our Enterprise Solutions offerings includes access to additional product features, premium access to top talent, professional services, custom reporting, and flexible payment terms. Revenue from our Enterprise Solutions offerings includes all client fees, subscriptions, and talent service fees. For our Enterprise Solutions offerings, we charge clients a monthly or annual subscription fee and a service fee calculated as a percentage of the client's spend on talent services, in addition to a 10% service fee paid by talent. Additionally, clients of our Enterprise Solutions offerings can subscribe to a compliance service that includes worker classification services for an additional fee and may also choose to use the Upwork Marketplace to engage talent that were not originally sourced through the Upwork Marketplace for a lower fee percentage.
Through our Managed Services offering, we are responsible for providing services and engaging talent directly or as employees of Ascen and its subsidiaries or third-party staffing providers to perform services for clients on our behalf. The talent providing services in connection with our Managed Services offering include independent talent and agencies of varying sizes. Under U.S. 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
Cost of Revenue.Cost of revenue consists primarily of the cost of payment processing fees, amounts paid to talent to deliver services for clients under our Managed Services offering, personnel-related costs for our services and support personnel, third-party hosting fees for our use of AWS, and the amortization expense associated with capitalized internal-use software and platform development costs. We define personnel-related costs as salaries, bonuses, benefits, travel and entertainment, and stock-based compensation costs for employees and the costs related to other service providers we engage.
Gross Profit and Gross Margin.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. In addition, gross margin will be impacted by fluctuations in our revenue mix between Marketplace revenue and Enterprise revenue.
Operating Expenses
Research and Development.Research and development expense primarily consists of personnel-related costs. Research and development costs are expensed as incurred, except to the extent that such costs are associated with internal-use software and platform development that qualifies for capitalization.
Sales and Marketing.Sales and marketing expense consists primarily of expenses related to advertising and marketing activities, as well as personnel-related costs, including sales commissions, which we expense as they are incurred.
General and Administrative.General and administrative expense consists primarily of personnel-related costs for our executive, finance, legal, human resources, and operations functions, outside consulting, legal, and accounting services, and insurance.
Provision for Transaction Losses.Provision for transaction losses consists primarily of losses resulting from fraud and bad debt expense associated with our Trade and client receivables balance and transaction losses associated with chargebacks. Provisions for these items represent estimates of losses based on our actual historical incurred losses and other factors.
Other Income, Net
Other income, net consists primarily of interest income that we earn from our operating investments, namely our deposits in money market funds and investments in marketable securities, interest expense on our outstanding borrowings, as well as gains and losses from foreign currency exchange transactions.
Income Tax (Provision) Benefit
We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax effects of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the periods in which those amounts are realized or settled. We establish a valuation allowance to reduce deferred tax assets when it is more likely than not that such assets will not be realized based on future taxable income or available tax planning strategies.
The calculation of income tax liabilities requires judgment in the application of complex tax laws and regulations. We evaluate uncertain tax positions in accordance with applicable guidance, which prescribes a two-step process for recognition and measurement. First, we determine whether it is more likely than not that a tax position will be sustained upon examination based on its technical merits. Second, for positions that meet the recognition threshold, we measure the tax benefit as the largest amount that is more likely than not to be realized upon settlement. Liabilities for unrecognized tax benefits are recorded for positions that do not meet the recognition threshold or are not measured at the full amount claimed. Interest and penalties related to unrecognized tax benefits are recorded as income tax expense.
Results of Operations
The following table sets forth our consolidated results of operations for the years ended December 31, 2025, 2024, and 2023:
(In thousands) 2025 2024 2023
Revenue:
Marketplace
$ 682,883 $ 662,108 $ 586,099
Enterprise
104,901 107,217 103,037
Total revenue 787,784 769,325 689,136
Cost of revenue (1)
174,752 174,094 170,450
Gross profit 613,032 595,231 518,686
Operating expenses
Research and development (1)
185,544 209,283 177,363
Sales and marketing (1)
143,412 185,211 220,681
General and administrative (1)
146,629 128,803 118,925
Provision for transaction losses 8,140 6,728 12,977
Total operating expenses 483,725 530,025 529,946
Income (loss) from operations
129,307 65,206 (11,260)
Other income, net 23,869 25,221 60,137
Income before income taxes 153,176 90,427 48,877
Income tax (provision) benefit (37,751) 125,159 (1,990)
Net income $ 115,425 $ 215,586 $ 46,887
(1) Includes stock-based compensation expense as follows:
Cost of revenue $ 760 $ 1,586 $ 1,900
Research and development 23,023 29,923 28,006
Sales and marketing 6,347 11,670 14,030
General and administrative 35,260 25,212 30,259
Total $ 65,390 $ 68,391 $ 74,195
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operation" included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 13, 2025.
Comparison of the Years Ended December 31, 2025 and 2024
Revenue
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Marketplace $ 682,883 $ 662,108 20,775 3 %
Percentage of total revenue 87 % 86 %
Enterprise $ 104,901 $ 107,217 (2,316) (2) %
Percentage of total revenue 13 % 14 %
Total revenue $ 787,784 $ 769,325 $ 18,459 2 %
During the year ended December 31, 2025, GSV increased 1% compared to 2024. The increase in GSV was primarily driven by the expansion of Lifted and customer experience improvements.
The number of active clients decreased 6% as of December 31, 2025, compared to December 31, 2024, driven by slower growth in acquisition of new clients as well as lower retention of existing clients. By contrast, GSV per active
client increased by 7% as of December 31, 2025, compared to December 31, 2024, reflecting increased client engagement.
For the year ended December 31, 2025, total revenue was $787.8 million, increasing 2% compared to 2024.
Marketplace revenue increased by $20.8 million, or 3%, compared to 2024, primarily due to higher revenue from ads and monetization products, client marketplace fees, and payment services, which were 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.
Enterprise revenue decreased by $2.3 million, or 2%, compared to 2024, largely due to reduced efforts to acquire new customers as we prioritized the integration and transition of Enterprise clients to the Lifted platform, as well as lower revenue from our Managed Services offering as a result of a reduction in client spend. During 2025, we focused on supporting existing Enterprise clients while continuing to invest in the development of Lifted, which drove improvements in year-over-year spend per active Enterprise client. Investment in the expansion of Lifted is expected to support growth in Enterprise revenue in 2026, subject to market conditions and execution.
Cost of Revenue and Gross Margin
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Cost of revenue $ 174,752 $ 174,094 $ 658 - %
Total gross margin 78 % 77 %
For the year ended December 31, 2025, cost of revenue increased slightly compared to 2024, primarily due to a $3.8 million increase in amortization expense related to internal-use software and platform development and a $2.9 million increase in cost to deliver our Managed Services offering, largely driven by contract termination costs resulting from a reduction in work volume under a client contract. These increases were partially offset by reductions of $3.6 million in data center and customer support costs and $2.4 million in costs associated with our internal service delivery resources, reflecting hosting optimization efforts and workforce reductions.
We expect cost of revenue to increase in 2026 as compared to 2025, largely driven by the impact of the expansion of Lifted. We expect gross margin to remain consistent in 2026 compared to 2025.
Research and Development
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Research and development $ 185,544 $ 209,283 $ (23,739) (11) %
Percentage of total revenue 24 % 27 %
For the year ended December 31, 2025, research and development expense decreased by $23.7 million, or 11%, compared to 2024. This decrease was primarily driven by reductions in personnel-related costs of $22.1 million, reflecting workforce reductions and other cost-saving measures implemented in 2024. In addition, we capitalized $7.3 million of incremental internal-use software and platform development costs in 2025. These decreases were partially offset by an increase in amortization of intangible assets of $6.3 million.
Sales and Marketing
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Sales and marketing $ 143,412 $ 185,211 $ (41,799) (23) %
Percentage of total revenue 18 % 24 %
For the year ended December 31, 2025, sales and marketing expense decreased by $41.8 million, or 23%, compared to 2024. This decrease was primarily driven by cost-optimization efforts implemented in 2024, including the realignment and streamlining of our sales and marketing workforce. As a result, personnel-related costs decreased by $30.8 million and marketing and advertising expense decreased by $7.6 million.
General and Administrative
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
General and administrative $ 146,629 $ 128,803 $ 17,826 14 %
Percentage of total revenue 19 % 17 %
For the year ended December 31, 2025, general and administrative expense increased by $17.8 million, or 14%, compared to 2024. This increase was primarily driven by higher personnel-related costs of $12.5 million and increased spending on contractors and outside consultants of $4.9 million.
Provision for Transaction Losses
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Provision for transaction losses $ 8,140 $ 6,728 $ 1,412 21 %
Percentage of total revenue 1 % 1 %
For the year ended December 31, 2025, provision for transaction losses increased by $1.4 million, or 21%, compared to 2024. Provision for transaction losses in 2024 was lower than in 2025 primarily due to better than expected collections during that year.
Other Income, Net
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Other income, net $ 23,869 $ 25,221 $ (1,352) (5) %
For the year ended December 31, 2025, other income, net decreased by $1.4 million, compared to 2024. The decrease was primarily due to lower unrealized foreign currency gains due to reduced exposure and lower interest income on cash and investment balances.
Income Tax (Provision) Benefit
Year Ended December 31, Change
(In thousands, except percentages) 2025 2024 $ %
Income tax (provision) benefit
$ (37,751) $ 125,159 $ (162,910) (130) %
Effective tax rate
24.6 % (138.4) %
For the year ended December 31, 2025, we recorded income tax expense of $37.8 million, reflecting, in part, the establishment of a valuation allowance related to certain state deferred tax assets in the fourth quarter of 2025, as compared to an income tax benefit of $125.2 million for the year ended December 31, 2024, which primarily reflected the release of a $140.3 million valuation allowance related to U.S. federal and state deferred tax assets.
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 adjusted for stock-based compensation expense; depreciation and amortization; other income (expense), net, which includes interest expense; income tax benefit (provision); and, if applicable, certain other gains, losses, benefits, or charges that are non-cash or are significant and the result of isolated events or transactions that have not occurred frequently in the past and are not expected to occur regularly in the future. Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with U.S. GAAP.
The following table presents a reconciliation of net income, 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,
(In thousands) 2025 2024 2023
Net income $ 115,425 $ 215,586 $ 46,887
Add back (deduct):
Stock-based compensation expense 65,390 68,391 74,195
Depreciation and amortization 25,710 14,813 9,449
Other income, net (1)
(23,869) (25,221) (60,137)
Income tax (benefit) provision (2)
37,751 (125,159) 1,990
Other (3)(4)(5)
5,149 19,183 750
Adjusted EBITDA $ 225,556 $ 167,593 $ 73,134
(1)During the year ended December 31, 2023, we recognized a gain of $38.9 million on early extinguishment of debt, which is included in "Other income, net" in the consolidated statement of operations and comprehensive income. See "Note 10-Debt" of the notes to our consolidated financial statements included elsewhere in this Annual Report for additional information regarding the Notes.
(2)During the year ended December 31, 2024, we recognized a non-cash tax benefit of $140.3 million from the release of a valuation allowance on certain deferred tax assets, partially offset by approximately $15.0 million of tax expense. See "Note 14-Income Taxes" of the notes to our consolidated financial statements included elsewhere in this Annual Report for additional information.
(3)During the year ended December 31, 2024, we incurred $19.2 million in costs related to the execution of the Restructuring Plan. Of this amount, $18.4 million is included in Other, while the remaining amount is allocated between Stock-based compensation expense and Other income, net.
(4)During each of the years ended December 31, 2025, 2024, and 2023, we incurred $0.8 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.
(5)During the year ended December 31, 2025, we incurred acquisition-related costs of $4.4 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 consolidated statements of operations and comprehensive income. 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. 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; other income (expense), net, which includes interest expense; income tax benefit (provision); and, if applicable, certain other gains, losses, benefits, or charges that are non-cash or are significant and the result of isolated events or transactions that have not occurred frequently in the past and are not expected to occur regularly in the future, all of which 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; and
•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. GAAP. 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; (c) tax payments that may represent a reduction in cash available to us; or (d) material acquisition-related deal costs, and
•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 net income and our other financial performance measures prepared in accordance with U.S. GAAP.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash and cash equivalents and marketable securities. Our cash equivalents and marketable securities primarily consist of money market funds, commercial paper, treasury bills, corporate bonds, U.S. and foreign government securities, asset-backed securities, and other types of fixed income securities. The primary objective of our investment activities from our operating investments is to preserve principal while maximizing income without significantly increasing risk. 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 the provision of additional contingent workforce solutions through Lifted and its subsidiaries. We do not make investments for trading or speculative purposes. As of December 31, 2025 and 2024, we had $294.4 million and $305.8 million in cash and cash equivalents, respectively. As of December 31, 2025 and 2024, we had $378.4 million and $316.3 million in marketable securities, respectively.
We believe our existing cash and cash equivalents, marketable securities, and 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. Further, as of December 31, 2025, the Notes were classified as current liabilities since their August 15, 2026 maturity date falls within 12 months of the balance sheet date, December 31, 2025. We continue to monitor conditions in the debt market and our overall liquidity position to support our capital needs and strategic objectives. As part of this ongoing assessment, we are evaluating refinancing options and other alternatives in advance of upcoming debt maturities.
In the long term, our ability to support our working capital and capital expenditure requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the timing and extent of spending to support research and development efforts, investments to support and scale our Enterprise offerings, including integration costs associated with recent acquisitions, the expansion of sales and marketing activities, the cost to host our platforms and other workforce solutions, the introduction of new lines of business, offerings, and services, the continuing market adoption of our offerings, any acquisitions or investments that we make in complementary businesses, products, and technologies, macroeconomic conditions, any repurchases of shares of our outstanding common stock or the Notes, and our ability to obtain equity or debt financing.
To the extent existing cash and cash equivalents, cash from marketable securities, and cash from operations are insufficient to fund our working capital and capital expenditure requirements, or should we require additional cash for other purposes, we will need to raise additional funds. In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements as we did with the offering of the Notes. If we raise additional funds by issuing equity or equity-linked securities, the ownership and economic interests of our existing stockholders will be diluted. If we raise additional financing by incurring additional indebtedness, we will be subject to additional debt service requirements and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could also be unfavorable to our equity investors. There can be no assurances that we will be able to raise
additional capital on terms we deem acceptable, or at all. The inability to raise additional capital as and when required would have an adverse effect, which could be material, on our results of operations, financial condition, and ability to achieve our business objectives.
Commitments and Contingencies
Our principal commitments consist of the Notes, future purchase commitments for cloud infrastructure and other services, and obligations under our non-cancellable operating leases for office space. During the periods presented, we did not have, nor do we currently have, any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.
Notes
Assuming the outstanding Notes are not converted into our common stock, repurchased, or redeemed prior to maturity on August 15, 2026, (i) annual interest expense relating to the Notes will be $1.8 million for fiscal year 2026 and (ii) principal in the amount of $361.0 million will be payable upon maturity. For additional information about our Notes, see the section below titled "-Convertible Senior Notes Due 2026 and Capped Calls."
Future Purchase Commitments for Cloud Infrastructure
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 December 31, 2025, we had remaining purchase commitments under this agreement of $13.5 million.
Operating Leases for Office Space
As of December 31, 2025, our future lease commitments were $14.0 million (excluding adjustments for discount to present value), including $3.0 million for 2026.
Share Repurchase Program
In October 2024, our board of directors authorized the repurchase of up to $100.0 million of shares of our outstanding common stock under the 2024 Share Repurchase Authorization. In September 2025, our board of directors authorized the repurchase of up to $100.0 million of shares of our outstanding common stock under the 2025 Share Repurchase Authorization.
During the year ended December 31, 2025, we repurchased and subsequently retired 9.3 million shares of our common stock for an aggregate amount of $136.0 million at an average price of $14.61 per share, including fees associated with the repurchases and excluding excise tax, under the Share Repurchase Authorizations. The 2024 Share Repurchase Authorization was fully utilized as of December 31, 2025. As of December 31, 2025, we had $64.0 million available for repurchases under the 2025 Share Repurchase Authorization.
Repurchases of our common stock under the 2025 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), in privately negotiated transactions, or by other methods, at our discretion, and in accordance with applicable securities laws and other restrictions. The 2025 Share Repurchase Authorization does not have an expiration date and will continue until otherwise suspended, terminated, or modified at any time for any reason. The 2025 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.
Escrow Funding Requirements
As a licensed internet escrow agent, we offer escrow services to customers and, as such, we are required to hold our customers' escrowed cash and in-transit cash in trust as an asset and record a corresponding liability for escrow funds held on behalf of talent and clients on our balance sheet. We expect the balances of our funds held in escrow, including funds held in transit, and the related liability to fluctuate based on marketplace activity, and it may vary from period to period. Escrow regulations require us to cover the trust with our operating cash in the event of shortages due to the timing of cash receipts from clients for completed hourly billings. Talent submit their billings for hourly contracts to their clients on a weekly basis every Sunday, and the aggregate amount of such billings is added to escrow funds payable to talent on the same day. As of each Sunday of each week, we have not yet collected funds for hourly billings from clients as these funds are in transit. 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 December 31, 2025 and 2024,
funds held in escrow, including funds in transit, were $180.8 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 December 31, 2025, $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. The Notes are senior, unsecured obligations and bear interest at a rate of 0.25% per year, payable semiannually in arrears, and are due August 15, 2026. Upon conversion, we have an option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock.
As market conditions warrant, we may, from time to time, repurchase outstanding Notes, as we did in the three months ended March 31, 2023, in the open market, in privately negotiated transactions, by tender offer, by exchange transaction, or otherwise. Such repurchases of Notes, if any, will depend on prevailing market conditions, our liquidity, and other factors, and may be commenced or suspended at any time.
In connection with the issuance of the Notes, we entered into capped call transactions, which we refer to as the Capped Calls. The Capped Calls are expected generally to reduce the potential dilution to our common stock upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price.
The initial cap price of the Capped Calls is $92.74 per share of common stock, subject to certain customary adjustments under the terms of the Capped Calls. See "Note 10-Debt" of the notes to our consolidated financial statements included elsewhere in this Annual Report for additional information regarding the Notes and the Capped Calls.
Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2025, 2024, and 2023:
2025 2024 2023
Net cash provided by operating activities
$ 248,259 $ 153,563 $ 52,708
Net cash (used in) provided by investing activities (136,939) 137,568 88,270
Net cash used in financing activities
(138,005) (81,956) (139,791)
Net change in cash, cash equivalents, and restricted cash (1)
$ (26,685) $ 209,175 $ 1,187
(1)Includes decreases in funds held in escrow, including funds in transit, of $15.0 million and $16.7 million during the years ended December 31, 2025 and 2024, respectively, and an increase in funds held in escrow, including funds in transit, of $50.9 million during the year ended December 31, 2023.
Operating Activities
Our largest source of cash from operating activities is Marketplace revenue. 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.
Net cash provided by operating activities during 2025 was $248.3 million, which resulted from net income of $115.4 million, non-cash charges of $111.4 million, and net cash inflows of $21.4 million from changes in operating assets and liabilities.
Net cash provided by operating activities during 2024 was $153.6 million, which resulted from net income of $215.6 million offset by non-cash charges of $47.0 million and net cash outflows of $15.0 million from changes in operating assets and liabilities.
Net cash provided by operating activities during 2023 was $52.7 million, which resulted from net income of $46.9 million and non-cash charges of $45.1 million, offset by net cash outflows of $39.2 million from changes in operating assets and liabilities.
Investing Activities
Net cash used in investing activities during 2025 was $136.9 million, which was primarily a result of investing $485.2 million in various marketable securities, $58.4 million cash paid for the acquisitions of Bubty and Ascen, $19.3 million of internal-use software and platform development costs, and $5.8 million paid for purchases of property and equipment. These outflows were partially offset by $420.4 million in proceeds from maturities of marketable securities and $11.3 million in proceeds from the sale of marketable securities.
Net cash provided by investing activities during 2024 was $137.6 million, which was primarily a result of proceeds from maturities of marketable securities of $486.9 million and proceeds from the sale of marketable securities of $41.8 million, partially offset by investing $362.3 million in various marketable securities, $14.3 million cash paid, net of cash acquired, for the acquisition of Objective AI, Inc., $10.9 million of internal-use software and platform development costs paid during the period, and $3.5 million paid for purchases of property and equipment.
Net cash provided by investing activities during 2023 was $88.3 million, which was primarily a result of proceeds from maturities of marketable securities of $648.8 million and proceeds from the sale of marketable securities of $165.0 million, including $143.7 million to enable the repurchase of a portion of the Notes, partially offset by investing $709.2 million in various marketable securities, as well as $12.7 million of internal-use software and platform development costs paid during the period, and $3.0 million for the purchase of an intangible asset.
Financing Activities
Net cash used in financing activities during 2025 was $138.0 million, which was driven by $136.0 million cash paid for share repurchases under the Share Repurchase Authorizations and a decrease in escrow funds payable of $6.7 million. These outflows were partially offset by proceeds received from our 2018 Employee Stock Purchase Plan, which we refer to as the 2018 ESPP, of $3.9 million and cash received from stock option exercises of $0.8 million.
Net cash used in financing activities during 2024 was $82.0 million, which was driven by $100.0 million cash paid for repurchases under the 2023 Share Repurchase Authorization, partially offset by an increase in escrow funds payable of $10.0 million, proceeds received from the 2018 ESPP of $4.8 million, and cash received from stock option exercises of $3.3 million.
Net cash used in financing activities during 2023 was $139.8 million, which was driven by $171.3 million that we paid to consummate the repurchase of a portion of the Notes, including related fees to effect the repurchases, partially offset by an increase in escrow funds payable of $25.4 million, proceeds received from the 2018 ESPP of $4.1 million, and cash received from stock option exercises of $2.0 million.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from these estimates and assumptions. Certain of our accounting policies require higher degrees of judgment than others in their application. These include certain aspects of accounting for revenue recognition, stock-based compensation, and income taxes.
Revenue Recognition
We generate revenue from talent and clients through our platforms and other workforce solutions. We account for revenue in accordance with Topic 606. Revenue is recognized upon transfer of control of promised services to customers in an amount that reflects the consideration we expect to receive in exchange for those services.
Determining the method and amount of revenue to recognize requires management to make judgments and estimates. Judgments include determining whether to present revenue gross, as a principal, or net, as an agent, which is based on an evaluation of whether we control the service prior to it being transferred to the client.
We recognize deferred revenue as the related performance obligations are satisfied, on a ratable basis over the relevant service period. Management applies judgment in assessing the continued appropriateness for the estimates, which include assessing the continued appropriateness of the methodology and relevant data inputs to estimate the likelihood and the period of time over which to defer and recognize the consideration allocated to the material rights. We utilize historical customer transaction data in developing these estimates. We recognize revenue related to the material rights based on our estimate of when the material rights are exercised, and adjust revenue for changes in estimates in the period of change on a cumulative catch-up basis.
Stock-Based Compensation
We measure and recognize compensation expense for all stock-based awards granted to employees and non-employee service providers, including stock options, restricted stock units, which we refer to as RSUs, performance stock units, which we refer to as PSUs, and purchase rights granted under the 2018 ESPP based on the estimated fair value of the award on the grant date.
We calculate the estimated fair value of stock options and purchase rights granted under the 2018 ESPP on the date of grant using the Black-Scholes option pricing model, which is impacted by the fair value of our common stock, as well as changes in assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected dividend yield, the expected term of the awards, the offering period for purchase rights granted under the 2018 ESPP, the risk-free interest rates, and the expected common stock price volatility over the term of the option awards.
We use the quoted market price of our common stock as reported on The Nasdaq Global Select Market for the fair value of RSUs, stock options, and purchase rights under the 2018 ESPP. The grant date fair value of PSUs is measured in a manner similar to RSUs for awards that vest based on service and performance conditions or using a Monte Carlo model for awards that vest based on service and market conditions.
We generally recognize the fair value of stock options and RSUs on a straight-line basis over the period during which a service provider is required to provide services in exchange for the award (generally the vesting period). We recognize the fair value of purchase rights granted under the 2018 ESPP as an expense on a straight-line basis over the offering period and account for forfeitures as they occur.
For PSUs that vest based on service and performance conditions, we recognize the grant date fair value as stock-based compensation expense ratably over the vesting period based on the number of awards expected to ultimately vest. For PSUs that vest based on service and market conditions, we recognize the grant date fair value as stock-based compensation expense ratably over the requisite service period based on the number of awards expected to ultimately vest.
Income Taxes
We utilize the asset and liability method under which deferred tax assets and liabilities arise from the temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided for under current tax law.
A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. The assessment of the need for a valuation allowance involves significant judgment and requires consideration of various factors, including historical levels of pre-tax income or loss adjusted for permanent book-tax differences on a jurisdictional basis, the timing and magnitude of future reversals of existing temporary differences, and projections of future taxable income. The assessment of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis, as the realizability of deferred tax assets may vary based on jurisdiction-specific factors. A valuation allowance is reduced or removed when, based on a comprehensive evaluation of all available evidence, it becomes more likely than not that the deferred tax assets will be realized. Key factors in determining the removal of a valuation allowance include sustained profitability, changes in business operations that increase taxable income, or significant new sources of taxable income, such as new contracts or operational expansions.
We regularly review our tax positions and benefits to be realized. We recognize tax liabilities based upon our estimate of whether, and the extent to which additional taxes will be due when such estimates are more likely than not to be sustained. An uncertain income tax position will be recognized only if it is more likely than not to be sustained. We recognize interest and penalties related to income tax matters as income tax expense.
Recent Accounting Pronouncements
See "Note 2-Basis of Presentation and Summary of Significant Accounting Policies" of the notes to our consolidated financial statements included elsewhere in this Annual Report for recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.
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