Upwork Q1 2019 Report: The Good, the Bad and The Ugly
Upwork financial report for the first quarter of 2019 is out. It is all about the impressive numbers. Now, the numbers always tell the truth. The trouble, though, is that Upwork’s investors, clients and freelancers look at the different numbers.
Upwork Investors: The Good
There’s something all investors have in common. All they care is that their share prices go sky high. So, how is Upwork doing on NASDAQ these days?
Upwork share prices go up and down. This is a normal stock market roller coaster situation. These oscillations are still acceptable for Upwork investors. But, here’s the thing. Upwork will have to wait for a few more months to light the very first candle on their public birthday cake. That’s why it’s advisable to wait a little bit longer to judge Upwork’s NASDAQ performance.
Compared to Upwork, Freelancer dot com is a public company “veteran.” The Aussies have also had a stock market roller coaster ride.
The huge difference is that their stock prices haven’t fully recovered since 2016. So, if you want to make a move in this field as an investor, you should wait at least a year or two. The investors who couldn’t wait to make the freelance history hand-in-hand with Upwork can still say to themselves: So far so good!
Upwork Clients: The Bad
What do Upwork’s clients care about? Well, it would be good if the service fees don’t go up because, unfortunately, they can’t go down. So, if Upwork is doing fine, the clients can relax and enjoy the ride. Right?
If you compare Upwork’s revenues for the first three months in 2018 and 2019, then you can cheer up. There are positive changes of 16.4% for the total revenue and 20.7% for the gross profit. That’s awesome!
Now, I don’t want to spoil the mood, but do you remember what I told you about the numbers at the beginning? When you take into consideration the Operating Expenses for the same periods of time, you get a completely different picture.
The total operating expenses have increased by 13.3%. If you leave out the provision for transactions losses you get the increase of almost 15%. The most troubling part is that the general and administrative costs have jumped to 28.7%.
I’m just a freelancer who’s looking at the numbers and doing some simple math. It seems to me that the increase of the operating expenses is breathing down the neck of Upwork’s revenue growth. That can’t be a good thing.
Upwork Freelancers: The Ugly
What’s in Upwork’s Q1 2019 Report for freelancers? Well, I actually had a nice look into the Upwork Inc (UPWK) Q1 2019 Earnings Call Transcript. Here’s what Stephane Kasriel Upwork’s CEO has to say:
With the new Connects launch, freelancers will purchase Connects for $0.15 each, which is a decrease from the prior $1 per Connect price. To take into account the value of different projects, the number of Connects required to bid for our projects will vary from zero to six Connects depending on the size of the project, where previously every project required two Connects to bid. Bids submitted in response to invitations from clients will continue to be free. These changes in Connects are aimed at helping skilled professionals win more projects. We expect freelancers will submit fewer proposals, focusing on projects for which they are the most qualified and most likely to win.
Stephane Kasriel got this one right: “freelancers will submit fewer proposals,” because they will have to pay for every single proposal they want to submit.
This one isn’t right: “freelancers will purchase Connects for $0.15 each, which is a decrease from the prior $1 per Connect price.” This isn’t a decrease for a simple reason. The original number of 60 available connects was supposed to be free. You had to pay one dollar per additional connect if and when you spend all free connects. You charge something that’s used to be free and you call it a “decrease.” Why?
As a result, clients will have a smaller selection of highly relevant proposals to review, making it easier for them to identify the best talent for their project. We believe this change in connects will be revenue neutral in the near term as the main objective of this change is to encourage higher quality projects and client relationships on our marketplace.
“Revenue neutral?” Well, I have every reason to doubt that one. You’re going to make every single freelancer on Upwork pay to play. How’s that supposed to be revenue neutral?
Someone has to fill in the gaps between revenue and operating expenses. Any volunteers? Upwork service fees are already the highest in the industry. So, the only thing left to do was to kill the free connects. That’s really ugly.
Until The Next Upwork Quarterly Report — Try To Find Some Comfort in looking at the gorgeous new Upwork offices. You paid for it!
