Q4 2022 Upwork Inc Earnings Call

Lower Johan during Q&A, you can dial star one one.

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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Thank you for standing by and welcome to up works fourth quarter 'twenty to 'twenty two earnings call. At this time, all participants are in a listen only mode.

The speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone.

I would now like to hand, the call over to VP Investor Relations have been Barbosa. Please go ahead.

Thank you.

Welcome to approach discussion of its fourth quarter and full year 2022 financial results, leading the discussion today Hayden Brown, <unk>, President and Chief Executive Officer. Following management's prepared remarks, we'll be happy to take your questions, but first I'll review the safe Harbor statement.

During this call we may make statements related to our business that are forward looking statements under federal Securities laws.

These statements are not guarantees of future performance.

Rather are subject to a variety of risks uncertainties and assumptions our actual results could differ materially from expectations reflected in any forward looking statements.

In addition, any statements regarding our current and future impact of Russia's invasion of Ukraine, and artificial to suspend business operations in Russia, and Belarus, and the COVID-19 pandemic on our business.

Current and future impact of actions, we have taken in response to the rest of the invasion of Ukraine and the COVID-19 pandemic are forward looking statements related to matters that are beyond our control and changing rapidly.

For a discussion of material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's shareholder letter.

Additional information will also be set forth in our annual report on Form 10-K for the year ending December 31, 2022 when filed in.

In addition reference will be made to non-GAAP financial measures information regarding reconciliation of non-GAAP to GAAP measures can be found in the shareholder letter that was issued this afternoon on our Investor relations website at investors that upward dot com.

As always unless otherwise noted.

According to figures are routed in comparisons of the fourth quarter of 2022 are to the fourth quarter of 2021 and comparisons to the full year of 2022.

For the full year of 2021, all measures are GAAP unless cited as non-GAAP now I'll turn the call right.

Thanks, Evan and thank you all for joining us today for our fourth quarter 2020 earnings call.

In 2022, and the fate of a dynamic environment, we made meaningful progress executing on our strategy to innovate evangelize and scale our work marketplace.

We delivered innovative new products and features including project catalog consultations and project tiers upward Academy and our new client marketplace plan for client pricing, we continued strengthening our enterprise suite and our investment in brand marketing to deliver measurable results.

These innovations and investments, we made it easier and more productive for clients and talent to connect and manage their work and relationships on a park.

For the full year 2020 to GSV grew 16% year over year to reach $4 1 billion and revenue grew 23% year over year to reach $618 million, our full year adjusted EBITDA came in at negative $4 million.

In the fourth quarter of 2022, DSP grew 5% year over year to once again exceed $1 billion and revenue grew 18% year over year to reach $161 4 million.

Fourth quarter, adjusted EBITDA reached $1 1 million.

Our fourth quarter demonstrated the continuation of the macroeconomic trends that we saw in the third quarter, we observed corporate caution during budgeting and planning planning cycle, leading to software client acquisition and retention trends across our customer base.

Hey, there is consistent with our experience in past uncertain macroeconomic environment in which we have typically seen companies moving through I think one of phases in the first phase companies will reduce their costs and freeze hiring budgets as they grapple with uncertainty or the <unk>.

One set of macroeconomic weakness.

This is when we may see a headwind from customers, reducing overall budgets.

As they move into the second phase company's realigned our cost structure and a more efficient manner and start to redeploy resources test solutions, such as a park, where they have confidence they can deliver the best returns. This is one we have typically shifted from being a headwind to a tailwind.

And the final phase of the economy shows definitive signs of improvement companies ramp up budgets and seek to aggressively hire characteristically turning to our solution more than others because of the speed and flexibility. We offer this is when our momentum gathers further today.

Today, we see many of our customers are in the first phase realigning their budgets with some moving into the second phase.

Although this dynamic is creating near term headwinds in our numbers.

Our eyes on the opportunity ahead of US we are taking proactive steps to position <unk> for the full benefit the second and third phases can offer as we provide companies with rapid access to <unk>.

Cost effective highly skilled global talent and flexible solutions to meet their workforce needs.

Capture the opportunity ahead of US we continue to innovate to advance upper evolution from the largest global freelance marketplace to the world work marketplace.

Earlier this week, we announced our end to end solution for full time hiring.

<unk> is the next step in the journey, we started in 2021 to expand our offerings to support all the ways our customers want to work on our work with this launch we are bringing to bear more than 20 years of worker classification expertise as well as existing and new technology solutions to enable our.

<unk> not only to form the trusted long term working relationships that <unk> is known for but to do so via a completes that are full time hiring solutions now available to all our customers enterprise clients and marketplace clients alike.

This strategic expansion affords both clients and talent further flexibility and choice in how they work together and delivers a first of its kind end to end solution that enable businesses to easily quickly and cost effectively find that hire and pay talent who are interested in full time work from all of them.

And the world and offering more than 10000 skills.

Addressing global full time work is a natural extension of our existing work marketplace and supports both our mission and the natural progression of work behaviors, we see an upward today.

Embarking on a brand awareness campaign to introduce ourselves to the many companies and hiring managers, who have not been previously aware of upward has been an ongoing priority. Our goal has been to raise unaided awareness across a broad audience and ensure that companies are hiring managers understand our compelling value proposition.

As companies are increasingly scrutinizing their internal resources and costs. We believe now is the right time to educate them about our solutions.

We are pleased with the results thus far with our this is how we work now campaign, which we launched in September of 2022, we have seen greater progress increasing brand awareness and we expected.

Since the September launch of our new campaign unaided awareness has grown more than 30% with unaided awareness among large businesses, which represent the biggest segment and our tam growing by more by more than 140%.

The third quarter to the fourth quarter of 2022 AD recall, which measures the impact of brand campaign messaging on our chosen target audience for <unk>.

45% among large businesses and we saw 58% growth in top of mind awareness, which is a measurement on being the first brand mentioned in a category.

Looking at the year ahead, we also recognize the macroeconomic climate has changed rapidly and we are moving to reduce our brand working media spend by approximately 12% in 2023 compared to 2022.

Given the strong focus on measure ability and testing that we have deployed to date, we are able to make this reduction in cost while still driving the outcomes. We are speaking with our investment in campaigns in 2023 targeting significant continued growth in unaided awareness as well as delivering insight into how this investment impact.

Our downstream metrics and overall marketing efficiency as our campaigns evolve and our data that's mature.

This approach is tailored to achieve our customer and business impacting coal, while giving us more room to respond to new macroeconomic reality and continue to make strongly data informed decisions about disinvestment area in the future.

In our enterprise business revenue grew 22% year over year, we continue to make progress in ramping our sales force in educating our prospects and customers on the new features and enhancements we launched in the year, including flexible approval workflows talent performance reports and user activity report.

In the fourth quarter, we signed 26, new enterprise clients as we saw the average length of the sales cycle extend by nearly 20% as corporations made changes to and to leave their budgeting and approval processes.

In the fourth quarter. That's also resulted in an unprecedented increase in customers pushing their late stage deal into 2023 as they work through these changes.

Our new enterprise clients included high quality companies like HTC J O L. Mako boosted motors and Sweetwater sound, who have turns to up work to help them solve their workforce needs in this evolving work environment. The decision of these leading companies to source talent through upward is a testament to the <unk>.

Value, we bring through both the quality of talent on a park as well as the ease of use and cost efficiency we provide.

We are making strong progress addressing the internal enterprise sales operational growing pains, we experienced last quarter our efforts to close the gap on them has started to fuel improvement and top of the funnel activity late in the fourth quarter and we expect to see our sales rep productivity normalize as we move into 2023 barring.

Barring further deterioration of the macro economic environment, even with elongated sales cycles. We have experienced recently, we expect to get back on track with our land team at full productivity and performance by the third quarter of 2023, we see a clear path to Reaccelerate, our momentum in enterprise and believe the enterprise opportunity remains as attractive.

As ever for our work.

In 2023, we are proceeding in a balanced and nimble manner and focusing on the things that we can control while being ready to make the most of any opportunities that may arise.

For example in December we made a significant change to our organizational structure moving from a purely functional to a business unit composition with.

With this new organizational framework, we have been able to strategically reallocate resources from a broader more fragmented portfolio of investments that at times represented incremental opportunities to a more concentrated set of resources and all of our key business unit areas.

At home by a leader laser focus on delivering customer and business outcomes with attractive growth and return opportunities.

As a result, we have set ourselves up for the future with increased efficiency agility and accountability throughout the organization.

We remain committed to achieving our goal of adjusted EBITDA profitability in 2023 and aim to increase our adjusted EBITDA margin by a few hundred basis points per year as we progress towards our previously communicated long term target of an adjusted EBITDA margin of 30% to 35%.

A critical part of our strategy is to remain disciplined with regard to our cost management and we are focused on increasing our operating leverage targeting 2023 revenue growth in excess of operating expense growth. We are entering 2023 on offense ready to capture the opportunity ahead of us with our leading cost.

The solutions, we are uniquely positioned to meet customers, where they are and benefit as customers learn about and turned up work for their full range of talent and work needs. We remain steadfast in our long term vision and will continue to innovate evangelize and scale up work as the world work marketplace.

In 2023 and beyond we.

We will now open the call to your questions.

Okay.

As a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question.

We ask that you please limit yourself to one question and one follow up then return to the queue.

Our first question comes from the line.

Matt Farrell Piper Sandler your question please.

Thanks, guys.

I mentioned that many customers are still kind of in the first phase of the macro planning process, but some are moving into the second phase maybe just help us understand how you're thinking about the transition to each phase as we move throughout the year and what is embedded in guidance from a transition perspective.

Is there anything that upward can do to push customers from one phase to another amid the uncertain macro.

Sure, let me frame for us how we formulated our guidance, Matt, which I think will help answer those questions. So we did see a softening of.

Certain acquisition and retention trends in the back half of last year.

And that informs how we thought about this year as you've seen customers coming out of the gate in some cases.

Slower than we had seen a normal year and in line with the trends we saw in the back half of last year.

So that is really informing how are thinking about the year ahead and have baked into our guidance. The trends that we are seeing in the business right now and our view is targeting customers that a lot of them in Q4 and coming into Q1 have really been reevaluating budgets looking at their spend levels kind of based on the macro uncertainty ahead.

And that showed up with things like elongated deals and things getting pushed for some customers from Q4 to Q1.

In terms of transitioning to the second phase, we do see some customers leaning into the solution with FERC more heavily but this is still outweighed by I think some of the headwinds that we've seen from that first phase for some customers and so we're really doing what we can do to control as you asked about.

The outcomes here by doing a few things one is we've addressed the issues on the sales side that were holding us back at the end of last year in the top of the funnel and that's going to take a little time for those to flow through but that work has already happened.

The second thing is we're focusing our attention and our sales team on the accounts that have the highest probability of spanning expansion, which we are doing actively evaluating constantly where to spend time and effort.

And then overall, our sales and marketing activity at this moment is really laser focused on spreading the message around upper benefit and value proposition at a time when our cost savings options.

Agility that we offer customers those aspects are so resident in the landscape and that's one of the reasons. We are continuing to invest in our brand marketing. This year. Because this is something that most of our target market. Just doesn't know if they can get from up work. So all of those things help connect customers into whatever can offer and get them out from phase one of being a little scared of the.

Two phase two seeing how upper can be the solution in this environment.

And.

Maybe a follow up on your announcement earlier this week moving into the full time hiring it makes a lot of sense based on your mission.

What has been the initial feedback from both buyers and talent and how should we think about this expansion impacting 2023 from a financial perspective. Thanks.

This is something we've gotten a really positive reception from customers around and as we mentioned earlier, we've seen I think in our release, we mentioned that we've seen over 2 million talent already raised their hands to say they want to be part of this contract a higher option and they are interested in those types of work opportunities.

We've also seen really strong demand on the client side with over 40000 jobs posted year to date since we've been opening up this option progressively to customers. So already the reception has been really positive I think customers see this as something they've been either trying to do with upward for quite some time or in the case of some of our larger customers. They have been doing this and so this is something that.

In a way familiar and a natural extension of the places where we play with customers because they do come to us for these longer term projects and relationships that do progress to meeting at times to be converted into payroll then FTE type relationships in terms of the impact of that offering for 2023, we really it's.

It's early days in terms of what that will look like in our numbers and so I'd say our outlook for this year is really based on things that we know about today in the existing business more than specific upside that we would expect from that offering I think we've seen in the past that new offerings get a strong reception, but it does take time for those to flow through to our numbers.

And that may well be the case here as well.

Thank you. Our next question comes from the line of Andrew Boone of JMP Securities. Your question. Please Andrew.

Great. Thanks, so much for taking my question.

Want to go back full time hiring as you think about a more complete offering just with product catalog with full time hiring with the core marketplace can you talk about just how we think about this as an on ramp for more clients versus just additional cross sells and upsells into existing clients. How do we think about that and then just as a tag along with that exact thoughts.

Can you just run through net adds in the quarter. This is kind of the second quarter and understood. The softness that is taking place across macro but is there anything else you can help us think about as we think about net adds for 2023. Thanks so much.

Sure Andrew.

In terms of the full time offering I'd say this is definitely just the next step in us delivering on the vision, we shared a couple of years ago around really becoming the world's work marketplace and giving clients all of the ways that they want to hire and talent all of the ways that they want to work and so you're absolutely right that we have opportunities both to essentially cross sell our existing clients.

Talent base into this offering as well as market this to new customers, who might not have considered upper before because we didn't have this is something that we were going in putting in front of them at the outset as part of our acquisition strategy I'd say, our focus for the near term, it's really around the former first opportunity, which is around existing customers more than going out and building new.

With new customers just because we think there is such a rich opportunity to leverage what this can do for existing customers that are already in our marketplace, but certainly we have our eyes on both of those things and we will be moving on both of those opportunities. When the time is right in terms of the net adds for the quarter.

Certainly there are some a couple of things impacting those metrics, we've seen a few headwinds in acquisition last year, particularly in the performance marketing area of the business. The other channels actually performed really well, but that one was softer than we would've seen largely due to issues around just what was available to us in that environment and we've been moving to really real.

Some aspects of our performance marketing strategy no.

Knowing what we know now that we didn't know what the back half of last year.

Other factors around active clients have really been just lapping.

Lapping issues around larger cohorts that were very strong from tailwind that we had in previous quarters and now that's kind of flowing through the business as you've had some smaller acquisition customer cohorts more recently.

Aggregate, there's a larger base of eligible customers to churn and as you know this is a trailing 12 month metric. So those are some of the key things I'd highlight on there we are lapping just more challenging comps there.

But we will be focused this year on both new client acquisition as well as getting existing customers to be even more successful with things like the full time offering we talked about.

Great. Thank you so much.

Thank you. Our next question comes from the line.

Ron Josey of Citi. Your line is open ran.

Great. Thanks for taking the question.

And I wanted to ask a little bit more just around the enterprise sales.

I think in the letter you talked about you mentioned the land team to be fully productive by <unk>.

Is this basically saying youre able to hit your hiring needs by the end of last year and so now we're just in execution mode and it takes about call. It two to three quarters to get to overall efficiency and then we've been talking about brand marketing for some time and building up the awareness of upward, which we're seeing new products here just talk to us a little bit more about how awareness is coming along and upward overall as you do in <unk>.

And all of these initiatives. Thank you.

Yeah. Thanks on the enterprise side I would say it's helpful to unpack kind of the two pieces that really drive that business. There is land and expand and you touched on the land team a little bit what I would say there is our land number which is really reflected in our new customer count that we report is a function of the newly hired reps that are still ramping in.

Those reps will be fully ramped by the middle of this year.

It's also a function of the operational fixes that we deployed at the end of Q3 and into Q4, which have been returning the expected improvements and now those have to flow through our sales cycle and then we're also seeing in this macro demand is still there for our product, but what we are seeing is that at the contracting stage of closing deals we've seen elongation there.

Pushed a number of very large number of deals out from closing in Q4 into Q1, and so with all of this is happening we do expect that those things will roll through our sales cycle and our team is adapting to things like process units, we need to make to close deals faster in this new environment and that will mean that we can achieve that fully productive.

Outcome for our team by Q3, and I would underscore that's not dependent on any specific macro conditions. These are just things that we are driving through our business on the other hand, the expand business does have a little bit more of the two.

Two drivers coming from it one is.

The success of our land team in closing new deals and so some of that results in a little bit softer numbers in Q4, because we haven't done as much hiring earlier in the year and that productivity just wasn't there for the team to execute against and then the macro we are seeing a little bit of customer.

Pull back in some cases, where they have budgetary concerns that they need to manage and that is impacting certain accounts. So with that we're really focused on driving activity in the accounts that have the biggest opportunities continuing to execute against the demand signals that we're seeing which are very strong in the market and.

And all of this supports our view that the long term opportunity is very much still intact, even if near term revenue growth in the enterprise area is a bit more tempered.

To your second question, which I think was about.

Our brand awareness overall I would say we did see some of those really positive.

Improvements on awareness across different customer cohorts that are really important from us for us from an acquisition perspective and that is.

Thank giving us confidence that the creative that we're developing the media strategies that we've been deploying the measure ability that we've put in place over the course of the last year plus is giving us the insight around how to continue to build on those strengths and optimize our campaigns. This year to have even more effect on the audience is we care about most.

And so what I think exciting about that is we are able to bring down our brand marketing investment on the media side by 12% in line with achieving our profitability goals and other objectives. We have in the business. While also continuing to execute around that broader awareness strategy, which is about being a bigger umbrella to all of our sales and marketing efforts to make them all.

All more efficient and productive over time and we knew this would take some time to play out. This is a year, where we're going to see a lot more of the data coming in as datasets mature and as these campaigns continue to be executed to give us visibility into how the brand awareness numbers are translating into client performance deeper in the funnel.

Thank you. Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is open air.

Thanks, so much for taking the question.

Really appreciate the framing around the phases, how should we think about that for the business.

The other is the backdrop was there any differential you want to call out in either certain pockets of the economy or certain geographies, where maybe there was a little differences in behavior between the phase what type of impact of the phase two type of impact that we should be keeping in mind about business mix standpoint, as we get deeper into 2023, maybe.

Got a quick follow up after that.

Sure Eric I would say the trends that we saw in Q3 a.

Largely continued into Q4, where the impact was more noticeable in terms of the softness being more noticeable in.

Europe and amongst our.

But although it was also in the U S. But it was again more concentrated in Europe and then we did see it not just in the SMB part of the business, but as noted earlier the enterprise business do you see that slow down on new deals because of that contracting phase of our deal cycle being more prolonged.

So those are some of the key elements that we saw that were maybe slightly different or kind of in.

A continuation of with a few nuances on what we saw in Q3.

Maybe just one follow up on Rob's question, there on the brand marketing side.

How quickly should we think about <unk> going from sort of.

Being more balanced up brand marketing that maybe lead to duck it.

The bucket from going sort of a neutral steps will outfit the stance. If you see more clients moving into phase two and beyond how should we be thinking about the ability to turn that back on and get some of the return you're highlighting from some of the old that you feel good about that have been tested and proven out on the brand marketing side. Thanks.

We feel that we are on an offensive stance now with the investments that we're making and that is going to give us the ability to reach the audience that we're seeking to reach with the frequency we want at the investment level that we are deploying this year. So I think I'm very comfortable that we are seizing the opportunity right now in that area I think what will be different about where we'll be at the end of this year.

Or is the insights that we will have garnered through the progression of the next few quarters will put us in a much stronger position because we'll be able to connect some of these metrics together around what's happening with awareness and how that relates to traffic and registrations and also reactivation of existing customers who might have registered before announcing Adam can become.

Oh.

All of that is going to be a much more informed for us due to the experimentation framework and the measurement that we have this year and so that at that point at the end of this year, we will be in a very strong position to connect the dots even more precisely around ROI for the business and make a call then around what is the right level of investment going forward.

Thank you. Our next question comes from the line of Brent Thill of Jefferies.

Jim Please Brent.

Hi, This is anytime you're in for Brent Thill. Thank you.

Maybe a little bit more regarding the guidance and what's embedded in it.

Macro standpoint, I mean looking at.

Details you guided to 12% growth or so.

In Q1, and 13% for the four years, so it seems like you'll be.

Fairly flat throughout the year.

But I'm wondering are you assuming in terms of macro progression.

A couple of details around that there's any contribution at all from the full time, having and how do you think about the dynamics of the client marketplace plant Anniversarying in Q2.

Sure John So what we're seeing in terms of the kind.

Kind of what's baked into the guidance around macro is.

Basically what we can see today from all of the trends that happen in the back half of last year, which youll recall.

In the middle of last year, we anticipated that we would see that $10 million to $50 million negative impact in the back half of last year and that is very much what we saw similar.

Similar level of I think outlook.

<unk> been informed by the same types of trends that we were using last year to inform the outlook are the ones. We're looking at now to inform our expectations for the year ahead, and so that includes how customers are behaving coming out of the holiday period are they spending at the level of where they would have been in a non macroeconomic impact a year et cetera. So are.

<unk> does not baking in any specific macro condition change it's more based on the current trends that we see in the site as well as information we have from so many years of things like seasonality housings tend to arc through the year as well as our plans in terms of what we will be doing to drive the business going forward.

Your question about full time, specifically I wouldn't say that we're expecting this to be a meaningful contributor. This year. You know it's very early days in this product we literally just got it out the door and we need to do a lot to continue to optimize the experience make sure that we're really listening to customers here rather than jumping to assumption.

It's about what the revenue will be at the backend so.

Not really baking in anything very specific around that is more one of the pieces of our entire mix as we look at the drivers of the business this year.

Thank you.

Thank you. Our next question comes from the line of Rohit Kulkarni of <unk> Partners. Your line is open rohit.

Thank you.

Just a question on the city from a functional to a business unit structure, just maybe just draw your thinking there.

Why why now and over the next year what sorts of.

Observable reserves do you hope to achieve from having this.

Hum.

Late last year.

Yes. This is an exciting change made something we've been contemplating for a long time as we've looked at how to most effectively drive this business and I realized last year that we could be more effective putting.

<unk> in charge of very discrete parts of the business with accountability to both revenue and overtime cost components of their business and these leaders have full ownership of different levers to drive those outcomes, whether it's product marketing levers sales levers et cetera. So this is a big shift for us and is really intended to drive.

Greater alignment internally around the key priorities that we're delivering against.

Certainly it gave us a chance to be more efficient with kind of how we're deploying resources across the business in those key priority areas and.

And ultimately I think gives us a structure for giving different leaders the independents to be risk, taking forward thinking and really kind of big picture owning as they move forward in their respective business areas and it's different than what we had in our functional model. So this was the right time to do it I think especially as we're heading into.

A more complex product mix different customers that we're serving between enterprise and SMB. We just looked at the total picture and I feel like this is the time to give different types of ownership and responsibility that different leaders in the business.

Okay, and just a follow up on them.

I think James you did and the GSV trend that we're seeing at the take rate trends that we see is at a point.

So on the pricing tools that you did was you had hope that at some point GSV would start to stabilize as why you start to get pricing leverage and if so at what point do you feel that the the headwinds or the <unk>.

Two headwinds that you are seeing because of the pricing change starts to diminish in.

In the future.

Sure. So we saw the pricing change was definitely very successful and the outcomes are in line with our expectations custom.

Customers have gone to better benefit in terms of the features and functionality that they are receiving the pricing is working for them. Although we do see for a period of time until we anniversary. This change some of that GSV headwind, even as we've seen a big uptick on the revenue side that has yielded higher.

A more complete a higher overall take rate for the business. So that is kind of the overall.

I think observation of what we've seen with the pricing change we do expect that the GSP headwind that we saw coming out of that change will be something that once we anniversary the change which was made in late April .

Last year will fade out and will be kind of in a new a new situation around that.

Thank you. Our next question comes from the line of Logan.

RBC capital markets. Your line is open Logan.

Hey, Thanks for taking the question.

Just one quick one on artificial intelligence, obviously, John GBT has gotten a lot of buzz recently.

On a more long term basis, how do you view the advent of artificial intelligence I was like a headwind or tailwind for the business just given.

There would probably be some categories that could be fulfilled through AI and also some categories that would pop up as a result of artificial intelligence. So just want to get a sense of how youre thinking of that a lot more long term basis.

Yeah, our view of the opportunities here are so exciting for our customers and for upward and certainly the opportunities.

Far outweigh the risks I highlight a couple of things in particular that I'm excited about in terms of AI and how it can impact our customers and our business. So one is we can already see what could be applications that are available today. How incredible. These can be in terms of productivity tools that make our talent all talent baton upper fifth leveraging.

Them better faster and cheaper than what they do and that is just in line with why people come to up work and what they're looking for and we're already seeing talent leveraging these tools to get better and more effective at that work, which I think is a tremendous value. The second one is we do see the companies that are building the AI platforms and infrastructure that are the subject of so much.

Of kind of the headline news these days days.

They need talented skilled workers to do the work that is related to all of the stages of developing deploying.

And commercializing those models and so we already work with.

Notable companies in the space, serving them with the talent that they need and.

And we can continue to expand that as this entire market is growing because these models.

Or does the AI is the models are all built themselves. There are people needed to actually go through and work on the workflows in a variety of ways to make this happen.

The third opportunity that I am excited about is the ways that companies that are integrating new AI tools and applications into their services, whether it's integrating them into their website for offering for customers.

They need talent to do this integration work and to do some of the work around customizing tailoring and deploying these solutions as they're being adopted at scale in the market and this is another place where upper talent already has.

A lot of the activity happening and can continue to serve this market going forward I think we noted that we've seen searches for AI related services on our website grow 3900% in the last four months alone as well as our job posts growing fortune, 100% in the last couple of months. So this is just the beginning I think of many ways.

This will impact our business very positive when the ways that our customers can take advantage of upward as they're navigating kind of this next frontier of technology.

Great. Thanks for the color.

Thank you. Our next question comes from the line.

Maria Rips of Canaccord. Your line is open Maria.

Great. Thanks for taking my questions.

So I just wanted to go back to your point about sort of different phases of recovery and so if you look at the clients that have moved into the second phase are there any sort of common characteristics or perhaps are in verticals that are.

Presented in that group and then I have a quick follow up.

I wouldn't say Maria Theres a specific.

Trend in terms of clustering that activity by industry or anything like that we do see.

As a firm we do serve tech enabled business is broadly and so we see different parts of the business be impacted through the macro.

<unk> are in that phase one as we talked about there kind of navigating a more turbulent time and others are leaning in and theyre comfortable and theyre ready to spend more so.

Both of those things are seen simultaneously in our customer base right now and I wouldn't say, it's even as you've looked at things like industry cut of the data and things like that it hasn't been evident that that is there.

They are kind of clear lines of demarcation that is determining that behavior. It seems very company specific because different companies are moving through kind of different stages of this at their own pace at the moment. So we're not really seeing it by industry.

Got it and then secondly, I appreciate all the color sort of on brand spend and sort of understanding that you were targeting to reduce brand spend this year versus last year can you maybe just talk about how you're thinking about prioritizing Brent spend relative to other investment opportunities this year.

Sure, we think about the brand spend as.

As this umbrella driver that brings the awareness of the market that then our sales team our other marketing channels, whether it's performance marketing digital marketing or other kinds of etc. Can pick up and take advantage of because we've created more of a headroom in Hawaii with FERC space for ourselves in the market. So.

For that reason it is.

Right now something we're deploying is a kind of underpinning strategy, that's mental lift all boats of other activity in the business.

I think if we have to make a trade off later in the year around profitability for some reason or something else due to unexpected or unforeseen thing clearly the brand area and others will be up for evaluation I mean, I think we'll just look at where are we getting the best return and is it from brand or is it something else and that will be a conversation we would have been but I think right now we have <unk>.

<unk> is the brand spend because of the results that we shared and because of the.

Belief that this is a moment when companies absolutely resonate with our value proposition and yet the vast majority of them arent aware of or aren't aware of what we offer and we have to connect those dots for them and then all of the rest of our sales marketing product works, we'll work harder in that environment. When we have more of that awareness.

Thank you. Our next question comes from the line of Mark.

From <unk> Your line is open Marvin.

Great. Thanks for squeezing me in here.

Couple of questions just first on the on the 13% revenue guidance for 2023, just wondering if you could maybe look at it through.

Through the lens of enterprise versus SMB do you expect both of them to be kind of similarly weak year on year, obviously enterprise and kind of outgrow it.

We would all guests, but just maybe just add some color about how you're thinking about those two.

Markets relative to your guidance.

Sure.

I'd say smbs are the faster Twitch part of our business. So they tend to slow down faster when conditions get rocky and then pick up faster once they get comfortable or once conditions change enterprises or the slower twitch part of the business. So they behave through a slightly different arc, but the good news is we are.

Still seeing strong demand in that environment, a lot of the things I mentioned earlier on the call are more timing issues of us getting reps ramps and the flow through from the improvements we made last year on operations and things like that so I think that's why there are some different dynamics on each side, but for both sides. We are baking in an expectation.

Based on the numbers and the trends, we're seeing right now.

As part of the business will both grow and they will both grow.

In a way that's in line with what we're seeing from the end of last year and heading into this year. So we're basically expecting some consistency there.

On our execution and everything that we've done to date.

That's great.

Thanks for answering that one and then my next question My second question.

Returning to that topic I think this is the first quarter declined sequentially since you've been giving us the active client.

[noise] metric and I appreciate the reasons for that I was just curious if you could just dissect for us.

What can you tell us about the clients that are leaving the platform I mean, what are they really just sort of.

Experimenters, who didn't really doing much business and we're really not sorry to see him go.

And then maybe as a follow up to that does history tell you.

Clients are turning out that youre able to recapture them in the future. Thanks.

Yes, sure I'd say that remember I mean to try to simplify on the client net adds number.

Okay.

Kind of the reason that we are lower quarter over quarter has more to do with smaller acquisition cohorts in the recent periods rather relative to very large acquisition cohorts that we had when you go back over the last 18 months or so that create this very large healthy base of active customers, but more recently our acquisition cohorts have been smaller.

Terms of their ability to contribute to that mix and then we have seen.

I wouldn't say no meaningful changes in churn that are concerning its more as you look at how do we look at measuring churn on our sites over different periods of time customers do.

Display kind of episodic behavior and so it's not it's kind of hard to say like why don't we lost the customer because you might see a customer go dormant for three months six months nine months and then they come back and they come back with multiple needs or whatever that keeps maybe so I think that's where we're doing a lot with our product solutions things like full time hiring things that we can.

Put in terms of customers to get them.

Re excited about upper things I might have forgotten or not known that we can offer them. That's part of the strategy in terms of driving that engagement from existing users that may have lapsed.

Then obviously continuing with our acquisition efforts this year.

Make sure that those customer cohort coming in continue to be healthy.

Thank you our final question comes from the line.

Midterm.

Needham <unk> company. Your line is open Bernie.

Great. Thank you for taking the question just lastly, I guess on the end to end solution for full time hiring just what provides you the confidence that this is going to be incremental to the business or to the talent marketplaces is cannibalizing it.

I don't think it matters Bernie I think if we're giving solutions.

Customers that are better than the previous pushes that we're giving to customers.

And then that's.

That's part of our job is to continue to innovate into the spaces, where we can offer something better faster superior and that really meets their needs better. So I don't think we look at this as a cannibalization type of situation. That's much more of this as additive. It gives them an alternative some people will want to do one thing some people want to do one other we see this all the time and talking to customers they have.

A range of needs that need to be met in a lot of different ways.

Previously we didn't have a perfect solution for them in the space now we do and so I think this is additive overall, but certainly have some people take a relationship that was previously worked on one winter in upward and then move it over to this offering we see that as a win.

Got it that makes sense. Thanks, David.

Julie.

Okay.

Thank you at this time I'd like to turn the call back over to management for closing remarks.

On behalf of the entire upper team. Thank you for joining us today and thank you for your interest in upward if.

If you need any clarifications or have any follow up questions. Please do not hesitate to reach out to me or investor at up work Dot Com. This concludes our call.

Thank you for participating you may now disconnect.

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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Okay.

Thank you for standing by and welcome to upwards fourth quarter 2022 earnings call. At this time, all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone.

I'd now like to hand, the call over to VP Investor Relations.

Barbosa. Please go ahead.

Thank you welcome to approach discussion of its fourth quarter and full year 2022 financial results, leading the discussion today Hayden Brown, <unk>, President and Chief Executive Officer. Following management's prepared remarks, we'll be happy to take your questions.

First I'll review the Safe Harbor statement.

During this call we may make statements related to our business that are forward looking statements under federal Securities laws.

These statements are not guarantees of future performance.

Other are subject to a variety of risks uncertainties and assumptions our actual results could differ materially from expectations reflected in any forward looking statements.

In addition, any statements regarding our current and future impacts of Russia's invasion of Ukraine, and artificial to suspend business operations in Russia, and Belarus, and the COVID-19 pandemic on our business and current and future impact of actions. We have taken in response to the restaurants invasion of Ukraine, and the COVID-19 pandemic are forward looking statements related to matters.

Is that are beyond our control and changing rapidly.

For a discussion of material risks and other important factors that could affect our actual results. Please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's shareholder letter.

Additional information will also be set forth in our annual report on Form 10-K for the year ended December 31, 2022 when filed.

In addition reference will be made to non-GAAP financial measures information regarding reconciliation of non-GAAP to GAAP measures can be found in the shareholder letter that was issued this afternoon on our Investor Relations website at investors got upward dot Gov as always unless otherwise noted reported figures.

And comparisons of the fourth quarter of 2022 are to the fourth quarter of 2021 and comparisons to the full year of 2022.

Our to the full year of 2021, all measures are GAAP from a cited as non-GAAP now I'll turn the call right.

Thanks, Evan and thank you all for joining us today for our fourth quarter 2022 earnings call.

In 2022 in the face of a dynamic environment, we made meaningful progress executing on our strategy to innovate evangelize and scale our work marketplace.

We delivered innovative new products and features including project catalog consultations and project tiers.

<unk> Academy, and our new client marketplace plan for client pricing, we continued strengthening our enterprise suite and our investment in brand marketing delivered measurable results.

Through these innovations and investments, we made it easier and more productive for clients and talent to connect and manage their work and relationships on a park.

For the full year 2020 to GSV grew 16% year over year to reach $4 1 billion and revenue grew 23% year over year to reach $618 million, our full year adjusted EBITDA came in at negative $4 million.

In the fourth quarter of 2022, DSD grew 5% year over year to once again exceed $1 billion and revenue grew 18% year over year to reach $161 4 million.

Fourth quarter, adjusted EBITDA reached $1 1 million.

The fourth quarter demonstrated a continuation of the macroeconomic trends that we saw in the third quarter.

<unk> corporate caution during budgeting and planning planning cycle, leading to softer client acquisition and retention trends across our customer base.

Behavior is consistent with our experience in past uncertain macroeconomic environment in which we have typically seen companies moving through a sequence of phases in the first phase companies will reduce their cost and freeze hiring budgets as they grapple with uncertainty or the onset of macroeconomic weakness. This is when we may see a head.

<unk> from customers, reducing overall budget.

As they move into the second phase company's realigned our cost structure and a more efficient manner and start to redeploy our resources to solutions, such as <unk>, where they have confidence they can deliver the best returns. This is when we have typically shifted from being a headwind to a tailwind.

And the final phase as the economy shows definitive signs of improvement companies ramp up budgets and seek to aggressively hire characteristically turning to our solution more than others because of the speed and flexibility. We offer this is when our momentum gathers further today.

Today, we see many of our customers are in the first phase realigning their budgets with some moving into the second phase.

Although this dynamic is creating near term headwinds in our numbers, we have our eyes on the opportunity ahead of US we are taking proactive steps to position <unk> for the full benefit the second and third phases can offer as we provide companies with rapid access to <unk>.

Cost effective highly skilled global talent and flexible solutions to meet their workforce needs.

Capture the opportunity ahead of US we continue to innovate to advance our evolution from the largest global freelance marketplace to the world work marketplace.

Earlier this week, we announced our end to end solution for full time hiring.

<unk> is the next step in the journey, we started in 2021 to expand our offerings to support all the ways our customers want to work on up work with this launch we are bringing to bear more than 20 years of worker classification expertise as well as existing and new technology solutions to enable our.

<unk> not only to form the trusted long term working relationships that <unk> is known for but to do so via a completes that are full time hiring solutions now available to all our customers enterprise clients and marketplace clients alike.

This strategic expansion affords both clients and talent further flexibility and choice in how they work together and delivers a first of its kind end to end solution that enable businesses to easily quickly and cost effectively find that hire and pay talent who are interested in full time work from all of them.

The world and offering more than 10000 skill.

Addressing global Fulltime work is a natural extension of our existing work marketplace and supports both our mission and the natural progression of work behaviors, we see on a park today.

I am Barking on a brand awareness campaign to introduce ourselves to the many companies and hiring managers, who have not been previously aware of effort has been an ongoing priority. Our goal has been to raise unaided awareness across a broad audience and ensure the companys and hiring managers understand our compelling value proposition.

As companies are increasingly scrutinizing their internal resources and costs. We believe now is the right time to educate them about our solutions.

We are pleased with the results thus far with our this is how we work now campaign, which we launched in September of 2022, we have seen greater progress increasing brand awareness and we expected.

Since the September launch of our new campaign unaided awareness has grown more than 30% with unaided awareness among larger businesses, which represent the biggest segment and our Tam growing by more by more than 140%.

From the third quarter to the fourth quarter of 2022 AD recall, which measures the impact of brand campaign messaging on our chosen target audience for <unk>.

45% among large businesses and we saw 58% growth in top of mind awareness, which is a measurement on being the first brand mentioned in a category.

Looking at the year ahead, we also recognize the macroeconomic climate has changed rapidly and we are moving to reduce our brand working media spend by approximately 12% in 2023 compared to 2022.

Given the strong focus on measure ability and testing that we have deployed to date, we are able to make this reduction in costs, while still driving the outcomes. We are speaking with our investment in campaigns in 2023 targeting significant continued growth in unaided awareness as well as delivering insight into how this investment impact.

Our downstream metrics and overall marketing efficiency as our campaigns evolve and our dataset mature.

This approach is tailored to achieve our customer and business impacting coal, while giving us more room to respond to new macroeconomic reality and continue to make strongly data informed decisions about this investment area in the future.

In our enterprise business revenue grew 22% year over year, we continue to make progress in ramping our sales force in educating our prospects and customers on the new features and enhancements we launched in the year, including flexible approval workflows talent performance reports and user activity report.

In the fourth quarter, we signed 26, new enterprise clients as we saw the average length of the sales cycle extend by nearly 20% as corporations made changes to and delayed their budgeting and approval processes.

In the fourth quarter. That's also resulted in an unprecedented increase in customers pushing their late stage deal into 2023 as they work through these changes.

Our new enterprise clients included high quality company like HTC, J O L. Mako boosted motors and Sweetwater sound, who have turns to upper to help them solve their workforce needs. In this evolving work environment. The decision of these leading companies to source talent through upwards as a testament to the <unk>.

Value, we bring through both the quality of talent on our pork as well as the ease of use and cost efficiency we provide.

We are making strong progress addressing the internal enterprise sales operational growing pains, we experienced last quarter our efforts to close the gap on them has started to fuel improvements in top of the funnel activity late in the fourth quarter and we expect to see our sales rep productivity normalize as we move into 2023 borrowing.

Barring further deterioration of the macroeconomic environment, even with elongated sales cycles. We have experienced recently, we expect to be back on track with our land team at full productivity and performance by the third quarter of 2023, we see a clear path to Reaccelerate, our momentum in enterprise and believe the enterprise opportunity remains as attractive.

As ever for our pork.

In 2023, we are proceeding in a balanced and nimble manner and focusing on the things that we can control while being ready to make the most of any opportunities that may arise for.

For example in December we made a significant change to our organizational structure moving from a purely functional to a business unit composition with.

With this new organizational framework, we have been able to strategically reallocate resources from a broader more fragmented portfolio of investments that are times represented incremental opportunities to a more concentrated set of resources in all of our key business unit areas.

<unk> held by a leader laser focused on delivering customer and business outcomes with attractive growth and return opportunities.

As a result, we have set ourselves up for the future with increased efficiency agility and accountability throughout the organization.

We remain committed to achieving our goal of adjusted EBITDA profitability in 2023 and aim to increase our adjusted EBITDA margin by a few hundred basis points per year as we progress toward our previously communicated long term target of an adjusted EBITDA margin of 30% to 35%.

A critical part of our strategy is to remain disciplined with regard to our cost management and we are focused on increasing our operating leverage targeting 2023 revenue growth in excess of operating expense growth. We are entering 2023 on offense ready to capture the opportunity ahead of us with our leading cost ifs.

The solutions, we are uniquely positioned to meet customers, where they are and benefit as customers learn about and turned to <unk> for their full range of talent and work needs. We remain steadfast in our long term vision and will continue to innovate evangelize and scale up work as the world work marketplace.

In 2023 and beyond we.

We will now open the call to your questions.

Okay.

As a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question.

We ask that you please limit yourself to one question and one follow up then return to the queue.

Our first question comes from the line.

Matt Farrell Piper Sandler your question. Please mapped.

Thanks, guys.

I mentioned that many customers are still kind of in the first phase of the macro planning process, but some are moving into the second phase maybe just help us understand how you're thinking about that transition to each phase as we move throughout the year and what is embedded in guidance from a transition perspective.

Is there anything that upward can do to push customers from one phase to another amid the uncertain macro.

Sure, let me frame for us how we formulated our guidance, Matt, which I think will help answer those questions. So we did see a softening of.

Certain acquisition and retention trends in the back half of last year.

And that informs how we thought about this year as we've seen customers coming out of the gate in some cases.

Slower than we had seen a normal year and in line with the trends we saw in the back half of last year.

So that is really informing how we're thinking about the year ahead and have baked into our guidance. The trends that we are seeing in the business right now.

Our view is talking to customers that a lot of them in Q4 and coming into Q1 have really been reevaluating budgets looking at their spend levels kind of based on the macro uncertainty ahead and that showed up with things like elongated deals and things getting pushed for some customers from Q4 to Q1.

In terms of transitioning to the second phase, we do see some customers leaning into the solution with FERC more heavily but this is still outweighed by I think some of the headwinds that we've seen from that first phase for some customers and so we're really doing what we can do to control as you asked about.

The outcomes here by doing a few things one is we've addressed the issues on the sales side that were holding us back at the end of last year in the top of the funnel and it's going to take a little time for those to flow through but that work has already happened.

The second thing is we're focusing our attention and our sales team on the accounts that have the highest probability of span and expansion, which we are doing actively and evaluated constantly where to spend time and effort.

And then overall, our sales and marketing activity at this moment is really laser focused on spreading the message around upper ex benefit and value proposition at a time when our cost savings options.

Jewelry that we offer customers those aspects are so resident in the landscape and Thats one of the reasons, we are continuing to invest in our brand marketing. This year. Because this is something that most of our target market. Just doesn't know if they can get from upward. So all of those things help connect customers into whatever can offer and get them out from phase one of being a little scared of the.

<unk> to phase III seeing how upper can be the solution in this environment.

In may.

Maybe a follow up on your announcement earlier this week moving into the full time hiring it makes a lot of sense based on your mission.

What has been the initial feedback from both buyers and talent and how should we think about this expansion impacting 2023 from a financial perspective. Thanks.

This is something we've gotten a really positive reception from customers around and as we mentioned earlier, we've seen I think in our release, we mentioned that we've seen over 2 million talent already raised their hands to say they want to be part of this contract a higher option and they are interested in those types of work opportunities.

We've also seen really strong demand on the client side with over 40000 jobs posted year to date since we've been opening up this option progressively to customers. So already the reception has been really positive I think customers see this as something they've been either trying to do with upper for quite some time or in the case of some of our larger customers. They have been doing that and so this is something that.

In a way familiar and a natural extension of the places where we play with customers because they do come to us for these longer term projects and relationships that do progress to meeting at times to be converted into payroll then FTE type relationships in terms of the impact of that offering for 2023, we really.

It's early days in terms of what that will look like in our numbers and so I would say our outlook for this year is really based on things that we know about today in the existing business more than specific upside that we would expect from that offering I think we've seen in the past that new offerings get a strong reception, but it does take time for those to flow through to our numbers.

And that may well be the case here as well.

Thank you. Our next question comes from the line of Andrew Boone of JMP Securities. Your question. Please Andrew.

Great. Thanks, so much for taking my question.

I want to go back full time hiring as you think about a more complete offering just with product catalog with full time hiring with the core marketplace can you talk about just how we think about this as an on ramp for more clients versus just additional cross sells and upsells into existing clients. How do we think about that and then just as a tag along with that exact thoughts.

Can you just run through with net adds in the quarter. This is kind of the second quarter and understood. The softness that is taking place across macro but is there anything else you can help us think about as we think about net adds for 2023. Thanks so much.

Sure Andrew.

In terms of the full time offering I'd say this is definitely just the next step in us delivering on the vision, we shared a couple of years ago around really becoming the world's work marketplace and giving clients all of the ways that they want to hire and talent all of the ways that they want to work and so youre absolutely right that we have opportunities both to essentially cross sell our existing clients.

Alan base into this offering as well as market this to new customers, who might not have considered upper before because we didn't have this is something that we were going in putting in front of them at the outset as part of our acquisition strategy I would say our focus for the near term is really around the former first opportunity, which is around existing customers more than going out and building new Chan.

With new customers just because we think there is such a rich opportunity to leverage what this can do for existing customers that are already in our marketplace, but certainly we have our eyes on both of those things and we'll be moving on both of those opportunities. When the time is right in terms of the net adds for the quarter.

Certainly there are some a couple of things impacting those metrics, we've seen a few headwinds in acquisition last year, particularly in the performance marketing area of the business. The other channels actually performed really well, but that one was softer than we would've seen largely due to issues around just what was available to us in that environment and we've been moving to really real.

Some aspects of our performance marketing strategy, knowing what we know now that we didn't know what the back half of last year the.

The other factors around active clients have really been just <unk>.

Lapping issues around larger cohorts that were very strong from tailwind that we had in previous quarters and now that's kind of flowing through the business as we've had some smaller acquisition customer cohorts more recently means that on aggregate, there's a larger base of eligible customers to churn and as you know this is a trailing 12 month metric so though.

Some of the key things.

Highlight on there we are lapping more challenging comps there, but we will be focused this year on both new client acquisition as well as getting existing customers to be even more successful with things like the full time offering we talked about.

Great. Thank you so much.

Thank you. Our next question comes from the line of.

Ron Josey of Citi. Your line is open ran.

Great. Thanks for taking the question.

I wanted to ask a little bit more.

Around the enterprise sales.

In the letter you talked about you mentioned the land team to be fully productive by <unk>.

This basically saying youre able to hit your hiring needs by the end of last year and so now we're just in execution mode and it takes about call. It two to three quarters to get to overall efficiency and then we've been talking about brand marketing for some time in building up the awareness of upward and we're seeing new products here just talk to us a little bit more about how awareness is coming along on upward overall as you do embark.

And all of these initiatives. Thank you.

Yeah. Thanks on the enterprise side I would say it's helpful to unpack kind of the two pieces that really drive that business. There is land and expand and you touched on the land team a little bit what I would say there is our land number which is really reflected in our new customer count that we report is a function of the newly hired reps that are still <unk>.

And those reps will be fully ramped by the middle of this year.

It's also a function of the operational fixes that we deployed at the end of Q3 and into Q4, which have been returning the expected improvements and now those have to flow through our sales cycle and then we're also seeing in this macro demand is still there for our product, but what we are seeing is that at the contracting stage of closing deals we've seen elongation, there and that's what.

Pushed a number of very large number of deals out from closing in Q4 into Q1 and so it was all of this is happening we do expect that those things will roll through our sales cycle and our team is adapting to things like processing as we need to make to close deals faster in this new environment and that will mean that we can achieve that fully productive.

Outcome for our team by Q3, and I would underscore that is not dependent on any specific macro conditions. These are just things that we are driving through our business on the other hand, the expand business does have a little bit more of the.

Kind of two drivers coming from it one is.

The success of our land team in closing new deals and so some of that results in a little bit softer numbers in Q4, because we hadn't done as much hiring earlier in the year and that productivity just wasn't there for the team to execute against and then the macro we are seeing a little bit of customer.

Pull back in some cases, where they have budgetary concerns that they need to manage and that is impacting certain accounts.

So with that we're really focused on driving activity in the accounts that have the biggest opportunities continuing to execute against the demand signals that we're seeing which are very strong in the market.

And all of this supports our view that the long term opportunity is very much still intact, even if near term revenue growth in the enterprise area is a bit more tempered.

To your second question, which I think was about <unk>.

Brand awareness overall I would say, we did see some of those really positive.

Improvements on awareness across different customer cohorts that are really important from us for us from an acquisition perspective and that is <unk>.

I think giving us confidence that the creative that we're developing the media strategies that we've been deploying the measure ability that we've put in place over the course of the last year plus is giving us the insights around how to continue to build on those strengths and optimize our campaigns. This year to have even more effect on the audience is we care about most.

And so what I think exciting about that is we are able to bring down our brand marketing investment on the media side by 12% in line with achieving our profitability goals and other objectives. We have in the business. While also continuing to execute around that broader awareness strategy, which is about being a bigger umbrella to all of our sales and marketing efforts to make them all.

More efficient and productive over time and we knew this would take some time to play out. This is a year, where we're going to see a lot more of the data coming in as datasets mature and as these campaigns continue to be executed to give us a visibility into how those brand awareness numbers are translating into client performance deeper in the funnel.

Thank you. Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is open air.

Thanks, so much for taking the question.

Really appreciate the framing around the phases, how should we think about that for the business with others. The backdrop was there any differential you want to call out in either certain pockets of the economy or geographies, where maybe there was a little differences in behavior between the phase what type of impact of the phase two type of impact that we should be keeping in mind.

From a business mix standpoint, as we get deeper into 2023 of them, maybe I've got a quick follow up after that.

Sure Eric I'd say the trends that we saw in Q3.

Largely continued into Q4, where the impact was more noticeable in terms of the softness being more noticeable in.

Europe and amongst.

But although it was also in the U S. But it was again more concentrated in Europe and then we did see it not just in the SMB part of the business, but as noted earlier the enterprise business do you see that slowdown on new deals because of that contracting phase of our deal cycle being more prolonged.

So those were some of the key elements that we saw that were maybe slightly different or kind of in.

A continuation of with a few nuances on what we saw in Q3.

Maybe just one follow up on Rob's question, there on the brand marketing side, how quickly should we think about you go from sort of.

Sort of.

More balanced of brand marketing that maybe lead to duck.

The market for going sort of a mutual steps to allow for substantial placebo clients moving into phase two would be how should we be thinking about the ability to turn that back on and get some of the return you're highlighting some of the old that you feel good about that have been tested and prove it out on the brand marketing side. Thanks.

We feel that we are on an offensive stance now with the investments that we're making and that is going to give us the ability to reach the audience that we're seeking to reach with the frequency we want at the investment level that we are deploying this year. So I think I'm very comfortable that we are seizing the opportunity right now in that area I think what will be different about where we'll be at the end of this year.

Or is the insights that we will have garnered through the progression of the next few quarters will put us in a much stronger position because we'll be able to connect some of these metrics together around what's happening with awareness and how that relates to traffic and registrations and also reactivation of existing customers, who might have registered beforehand, and now see an AD and can become one.

Active <unk>.

All of that is going to be a much more informed for us due to the experimentation framework and the measurement that we have this year and so at that point at the end of this year, we'll be in a very strong position to connect the dots even more precisely around ROI for the business and make a call then around what is the right level of investment going forward.

Thank you. Our next question comes from the line of Brent Thill of Jefferies. Your question. Please Brent.

Hi, This is Jeremy on for Brent Thill. Thank you.

Maybe a little bit more regarding the guidance and what's embedded in it from a macro standpoint, I mean looking at <unk>.

Details you guided to 12% growth or so.

In Q1, and 13% for the four years, so it seems like you'll be.

Fairly flat throughout the year.

But I'm wondering are you assuming in terms of macro progression.

A couple of details around that as any contribution at all from the full time hiring and how do you think about the dynamics of the decline in marketplace plant Anniversarying in Q2.

Yeah.

Sure John So what we're seeing in terms of the kind.

Kind of what's baked into the guidance around macro is.

Basically what we can see today from all of the trends that happen in the back half of last year, which you will recall.

In the middle of last year, we anticipated that we would see that $10 million to $15 million negative impact in the back half of last year and that is very much what we saw similar.

Similar level of I think outlook.

<unk> been informed by the same types of trends that we were using last year to inform that outlook are the ones. We're looking at now to inform our expectations for the year ahead.

So that includes how customers are behaving coming out of the holiday period are they spending at the level of where they would have been in a non macroeconomic impact a year et cetera. So our guidance does not baking in any specific macro conditions change it's more based on the current trends that we see in the site as well as.

Information, we have from so many years of things like seasonality housings tend to arc through the year as well as our plans in terms of what we will be doing to drive the business going forward to your question about full time, specifically I wouldn't say that we're expecting this to be a meaningful contributor. This year. It's very early days in this.

Product, we literally just got it out the door and we need to do a lot to continue to optimize the experience make sure that we're really looking to customers here rather than jumping to assumptions about what the revenue will be at the backend. So.

Not really baking in anything very specific around that is more one of the pieces of our entire mix as we look at the drivers of the business this year.

Thank you.

Thank you. Our next question comes from the line of Rohit Kulkarni of <unk> Partners. Your line is open rohit.

Thank you.

Just a question on the city from a functional to a business unit structure, just maybe just draw your thinking there.

Why why now and in over the next year.

<unk>.

Observable reserves do you hope to achieve from having this.

Well done.

Late last year.

Yes. This is an exciting change made something we've been contemplating for a long time as we looked at how to most effectively drive this business and I realized last year that we could be more effective putting.

<unk> in charge of very discrete parts of the business with the accountability to both revenue and over time.

Cost components of their business and these leaders have full stock ownership of different levers to drive those outcomes, whether it's product marketing levers sales levers et cetera. So this is a big shift for us and it's really intended to drive.

Greater alignment internally around the key priorities that we're delivering against.

Certainly it gave us a chance to be more efficient with kind of how we're deploying our resources across the business in those key priority areas.

And ultimately I think gives us a structure for giving different leaders the independents to be risk, taking forward thinking and really kind of a big picture owning as they move forward in their respective business areas and different than what we had in our functional model. So this was the right time to do it I think especially as we're heading into.

A more complex product mix different customers that we're serving between enterprise and SMB. We just looked at the total picture I think this is the time to give different types of ownership and responsibility to different leaders in the business.

Okay, and just a follow up on them.

Rising James you did and the GSV trend that we're seeing at the take rate trends that we see is at a point.

So the pricing to that you did was you had hope that at some point GSV would start to stabilize as why you start to get pricing leverage and if so at what point do you feel that the headwind or the incremental headwind that you are seeing because of the pricing change starts to diminish.

Future.

Sure. So we saw the pricing change was definitely very successful and the outcomes are in line with our expectations.

Customers have gone better benefit in terms of the features and functionality that they are receiving the pricing is working for them. Although we do see for a period of time until we anniversary. This change some of that GSV headwind, even as we've seen a big uptick on the revenue side that have yielded higher marketplace, a higher overall take rate for the business. So.

That is kind of the overall I think observation of what we've seen with the pricing change we do expect that the GSV headwind that we saw coming out of that change will be something that once we anniversary the change which was made in late April .

Last year, we will fade out and will be kind of in a new a new situation around that.

Thank you. Our next question comes from the line of Logan.

Of RBC capital markets. Your line is open Logan.

Alright, thanks for taking the question.

One quick one on artificial intelligence, obviously, John GBT has gotten a lot of buzz recently.

On a more long term basis, how do you view the advent of artificial intelligence.

Wind or a tailwind for the business just given.

There will probably be some categories that could be fulfilled through AI and also some categories that would pop up as a result of artificial intelligence. So just want to get a sense of how youre thinking about it a lot more long term basis.

Yeah, our view of the opportunities here are so exciting for our customers and for upward and certainly the opportunities.

Far outweigh the risks I highlight a couple of things in particular that I'm excited about in terms of AI and how it can impact our customers and our business. So one is we can already see what could be applications that are available today. How incredible. These can be in terms of productivity tools that make our talent all talent baton upper fifth leveraging.

Them.

<unk> faster and cheaper than what they do and that is just in line with why people come to up work and what they're looking for and we're already seeing talent leveraging these tools to get better and more effective at that work, which I think is a tremendous value. The second one is we do see the companies that are building the AI platforms and infrastructure that are the subject of so much of kind of the head.

<unk> news these days.

You need talented skilled workers to do the work that is related to all of the stages of developing deploying.

And commercializing those models and so we already work with.

Notable companies in the space, serving them with the talent that they need and.

And we can continue to expand that as this entire market is growing because these models at.

As smart as the AI and the models are all built themselves. There are people needed to actually go through and work on the workflows in a variety of ways to make this happen.

Third opportunity that I'm excited about is the ways that companies that are integrating new AI tools and applications into their services, whether it's integrating them into their website for offerings for customers.

Again, they need talent to do this integration work and to do some of the work around customizing tailoring and deploying these solutions as they're being adopted at scale in the market and this is another place where upper talent already has.

A lot of the activity happening and can continue to serve this market going forward I think we noted that we've seen searches for AI related services on our website grow 3900% in the last four months alone.

As well as our job posts growing 4100% in the last couple of months. So this is just the beginning I think of.

Many ways that this will impact our business very positively in the ways that our customers can take advantage of upward as they're navigating kind of this next frontier of technology.

Great. Thanks for the color.

Thank you. Our next question comes from the line.

Maria Rips of Canaccord. Your line is open Maria.

Great. Thanks for taking my questions.

So I just wanted to go back to your point about sort of different phases of recovery and so if you look at the clients that have moved into the second phase are there any sort of common characteristics or perhaps are in verticals that are represented in that group and then I have a quick follow up.

I wouldn't say Maria Theres a specific.

Trend in terms of clustering that activity and by industry or anything like that we do see.

We as a board we do serve tech enabled businesses broadly and so we see different parts of the business will be impacted through the macro.

<unk> are in that phase one as we talked about there kind of navigating a more turbulent time and others are leaning in and theyre comfortable and theyre ready to spend more so.

Both of those things are seen simultaneously in our customer base right now and I wouldn't say, it's even as you've looked at things like industry cut of the data and things like that it hasnt been evident that that is there.

They are kind of clear lines of demarcation that is determining that behavior. It seems very company specific because different companies are moving through kind of different stages of this at their own pace at the moment. So we're not really seeing it by industry.

Got it and then secondly, I appreciate all the color sort of on brand spend and sort of understanding that you were targeting to reduce brand spend this year versus last year can you maybe just talk about how you're thinking about prioritizing Brent spend relative to other investment opportunities this year.

Sure, we think about the brand spend as as.

As this umbrella driver that brings the awareness of the market that then our sales team our other marketing channels, whether it's performance marketing digital marketing or other kinds of etc. Can pick up and take advantage of because we've created more of a headroom in awareness FERC space for ourselves in the market. So.

For that reason it is right.

Right now something we're deploying as a kind of underpinning strategy that mental lift all boats of other activity in the business.

I think if we have to make a trade off later in the year around profitability for some reason or something else due to unexpected unforeseen things clearly the brand area and others will be up for evaluation I mean, I think we'll just look at where are we getting the best return is it from brand or something else and that will be a conversation we would have been but I think right now we have <unk>.

<unk> is the brand spend because of the results that we shared and because of the.

Belief that this is a moment when companies absolutely resonate with our value proposition and yet the vast majority of them arent aware of or aren't aware of what we offer and we have to connect those dots for them and then all of the rest of our sales marketing product works, we'll work harder in that environment. When we have more about awareness.

Thank you. Our next question comes from the line of Marvin Fong from <unk>. Your line is open Marvin.

Great. Thanks for squeezing me in here.

Couple of questions just first on the on the 13% revenue guidance for 2023, just wondering if you could maybe look at it through.

Through the lens of enterprise versus SMB do you expect both of them to be kind of similarly weak year on year, obviously enterprise and kind of outgrow it.

We would all guests, but just maybe just add some color about how you're thinking about those two.

And markets.

I'll go to your guidance.

Sure.

I'd say you know smbs are the faster Twitch part of our business. So they tend to slow down faster when conditions get rocky and then pick up faster once they get comfortable once conditions change enterprises or the slower twitch part of the business. So.

<unk> through a slightly different arc, but the good news is we are still seeing strong demand in that environment a lot of the things I mentioned earlier on the call are more timing issues of us getting reps ramped and the flow through from the improvements we made last year on operations and things like that so I think that's why there are some different dynamics on each side, but for.

Both sides, we are baking in an expectation based on the numbers and the trends we're seeing right now.

That is part of the business will both grow and they will both grow.

And in a way that's in line with what we're seeing from the end of last year and heading into this year. So we're basically expecting some consistency there.

Based on our execution and everything that we've done to date.

That's great.

Thanks for answering that one and then my next question My second question.

Returning to that topic I think this is the first quarter declined sequentially since you've been giving us the active client.

Metric and I appreciate the reasons for that I'm, just curious if you could just dissect for us.

What can you tell us about the clients that are leaving the platform I mean, what are they really just sort of.

Experimenters, who didn't really doing much business and we're really not sorry to see him go.

And then maybe as a follow up to that does history tell you.

Clients that churn out you are able to recapture them in the future. Thanks.

Yes, sure I'd say the reason, our I mean to try to simplify on the client net adds number.

Okay.

Kind of the reason that we are lower quarter over quarter has more to do with smaller acquisition cohorts in the recent periods rather relative to very large acquisition cohorts that we had when you go back over the last year 18 months or so that create this very large healthy base of active customers, but more recently our acquisition cohorts have been smaller.

Because of their ability to contribute to that mix and then we have seen.

I wouldn't say no meaningful changes in churn that are concerning its more as you look at how do we look at measuring churn on our sites over different periods of time customers do.

Display kind of episodic behavior and so it's not it's kind of hard to say like why don't we lost the customer because you might see a customer go dormant for three months six months nine months and then they come back and they come back with multiple needs or whatever that Keith maybe so I think that's where we're doing a lot with our product solutions things like full time hiring things that we can.

Put in terms of customers to get them.

Re excited about where things are made of foregone or not known that we can offer them. That's part of the strategy in terms of driving that engagement from existing users that may have lapsed.

Then obviously continuing with our acquisition efforts this year.

Make sure that those customer cohort coming in continue to be healthy.

Thank you our final question comes from the line.

Midterm.

Needham <unk> company. Your line is open Bernie.

Great. Thank you for taking the question just lastly, I guess on the end to end solution for full time hiring just what provides you the confidence that this is going to be incremental to the business or to the talent marketplaces have cannibalizing it.

I don't think it matters Bernie I think if we're giving solutions.

Customers that are better than the previous pushes that we're giving our customers.

Then.

That's part of our job is to continue to innovate into the spaces, where we can offer something better faster superior and that really meets their needs better. So I don't think we look at this as a cannibalization type of situation is much more of this as additive. It gives them an alternative some people will want to do one thing some people want to do one other we see this all the time and talking to customers they have.

A range of needs that need to be met in a lot of different ways.

Previously we didn't have a perfect solution for them in the space now we do and so I think this is additive overall, but certainly some people take a relationship that was previously working on one winter in upward and then move it over to this offering we see that as a win.

Got it makes sense thanks, David.

Julie.

Okay.

Thank you at this time I'd like to turn the call back over to management for closing remarks.

On behalf of the entire upper team. Thank you for joining us today and thank you for your interest in <unk>. If you need any clarification or have any follow up questions. Please do not hesitate to reach out to me or investor.

<unk> Dot Com this concludes our call.

Thank you for participating you may now disconnect.