Upwork Inc. (UPWK) Earnings Call Transcript & Summary

Okay. All right. We're going to get started with our next session as everyone gets settled in. I know we're running around from meeting to meeting, but it's my great pleasure to have the team from Upwork here at the conference this year. Hayden Brown, CEO and President; Jeff McCombs, CFO. Hayden and Jeff, I really appreciate you being here, taking the time and great to catch up live in person.

Absolutely. Thanks for having us.

So I think maybe just level set, I always like to start these things with sort of a big picture question. The company has been through a lot of growth, a lot of building and transformation over the last couple of years, maybe just level set for investors and for people in the room where the company is right now and what you're trying to solve for over the medium to long term.

Yes. I think we're still, frankly, in the very early innings of achieving what's possible for Upwork. We saw, I think, some transformational changes in the macro environment in the last couple of years with the advent of remote work for so many businesses around the world. Because previous to COVID, I think as we were going to market, a lot of businesses would say, we love what we're hearing from you in terms of access to talent, in terms of what you can give our businesses. But the one hiccup is we don't do remote work at our company. That's what we would hear from a lot of customers. Then came COVID and every business started to experiment with and adopt remote work, in some form or fashion, in their business and realize that we can do remote work here. Some part of our business can be done with remote work, if not many or all parts of our business. So where we are today is working against a totally different secular backdrop where businesses, small merch have realized that remote work can work for their teams. But most of them still haven't figured out that Upwork exists and that Upwork can be the solution that really unlocks so much potential for them. Our awareness in the market is actually still relatively low. And so we are still in the very early innings of educating the market about how they can use Upwork specifically in this new context of a totally different environment that is much more remote work friendly, where businesses still need access to talent. They need agility, more than ever, in their teams. Certainly, in this environment today, they want cost savings more than ever in terms of where and how they're getting talent. And we offer all of those benefits. But the market, by and large, doesn't always know that Upwork can give them those things. So we are in the early innings of really unlocking the market opportunity going against this $1 trillion TAM to provide customers, both clients and talent, with the solutions that we offer to really give them benefits on both sides. But again, I think many customers are still figuring out our exist and adopting their workforces on the client side and for talent really leaning into this new way of working that we offer.

Okay. There's a lot to mile in here, thematically, that I want to get through as much of that as we can in the time we have. I do want to just maybe start with the broader macro backdrop. And I thought you guys, as a company, one of the more unique companies last earnings, period, where you called out some headwinds on the macro side. But at the same time, you raised revenue guidance. I think that was -- that made you rather unique among all the companies I cover. So you've seen a lot of headwinds and tailwinds and volatility in the broader macro environment and how it's brought back to your business in the last couple of quarters, just level set for investors, what are you seeing and what's your base level assumption of how the broader demand environment is progressing through the year?

Yes. It's certainly hard to predict in this environment exactly what will play out. But we -- in our last call, what we tried to outline for investors is we do see some headwinds for sure with customers who may in this environment, be pulling back spending because their businesses are struggling, they may be seeing challenges themselves, and that could impact us. We specifically ring-fenced that downside risk at $10 million to $15 million, $10 to $15 million, in our annual guidance. But on the flip side, this is the time when our value proposition and the mega trends out there around remote work, around digital transformation are alive and well, and frankly, more prevalent than ever for so many businesses. Additionally, these specific value propositions that Upwork brings to the table for companies around cost savings, around flexibility in their workforces, those are very real and those are talk tracks that we are leaning into even heavier to make sure the market understands those and the customers and prospects understand those. So there are upside opportunities for us as well, but the timing of when and how those are realized for us may be a little bit different than the downside risk that we may be realizing this year. So we are investing in things like our brand marketing campaigns. We are continuing to invest in growth strategies because we do think this is a time for us to be gaining market share, continuing to drive share shift to Upwork versus competitors and alternatives in the market. But we tried to outline for our shareholders that the timing around those things in terms of some of that downside risk this year versus some of the bigger longer-term value creation that we have for the company, those things exist kind of maybe on a slightly different time horizons.

Got it. And maybe following up on that last statement there. I think one of the main questions we get from investors, I think people generally understand the long-term market opportunity, but I always get a lot of questions about how cyclical versus countercyclical the business is because there's elements of enterprise spend at the core of the business, but you're also a measure by which enterprises and SMBs can save money, and in many ways, have countercyclical behavior in the business. How do you think about how cyclical versus countercyclical the business is over a longer period of time, not the current environment.

Yes. We've seen different behaviors around that ourselves over different eras in the business. And certainly, the business has changed a lot as well. So it's a little hard for us to know that exactly, and we speculate about that ourselves as we look at and try to predict what that could be for Upwork. We look back at time periods like 2008, the business obviously was smaller and very different then, but also grew very healthily during that time period. And as we look ahead, I think what we see in terms of unlocking this opportunity for the business, Upwork is, I think, in some ways, there are so many factors that drive our growth that are less about cyclicality in terms of where the economy is in this moment and more about this broad opportunity for businesses to be discovering and using us for the things that we offer. So I think it's not so evident that our business is going to be whipsawed so much by the cyclicality of the market versus the fundamental unlock of companies discovering that they can use remote talent. They can use a better, faster, cheaper solution. And that is, again, for the market size that we're going after, such an untapped opportunity for us.

So sticking with that last theme on enterprise trends more broadly, when you think about the market opportunity and you think about where you are today and you obviously are having these conversations with clients, potential clients all the time as an organization, what are the key levels of unlock or friction you're trying to reduce or the education curve as you sort of imply that we should be monitoring for what allows you to capitalize on the opportunity against maybe where you are today, which is very early innings from a penetration level.

Well, our strategy is really around 3 main prongs. So innovating, evangelizing and scaling our work marketplace. And that's really where we should be measuring our progress. On the innovation side, it's all around the product enhancements that we are doing in the market to really give customers better solutions for connecting with talent and really serving them both talent and clients with the tools they need to work online together, come together in a solution that we give them to have less friction, faster speed to talent, for talent, faster speed to jobs. And that's where you see us launching new products constantly and innovating on the products we've already launched to basically speed that time to hire, improve the match rate, things like that, to give customers better outcomes. On the evangelizing front, we're investing in things like our marketing programs to get customers into the solution faster, bring our brand awareness and unaided and aided awareness in the market up and get more customers into our solutions. So those are some of the KPIs that we're really looking at there in terms of raising awareness, reducing our CPAs, things like that. And then in terms of scaling the business, that's what we're looking at, things like our enterprise solution and really enabling customers of all sizes, but also large customers who are building programmatic solutions with us really at the large-scale size. These are programs that they're building at large scale with Upwork to really shift their entire workforce from something that is full time into something that's more of a hybrid model using our solution.

Okay. Sticking with this theme, you have recently made some pricing changes in the business. So help us understand a little bit what drove the decision to reexamine pricing of your products? And what's sort of been the market reaction to pricing and how you expect sort of pricing to continue to evolve as a platform?

Sure. We announced and made some changes that really went into effect at the end of April. And our goal there was to really reduce the friction around adopting and scaling the usage of Upwork for our clients. Specifically, this is in the non-enterprise part of our business. So previously, what we had were a set of features and functionality that were behind a paywall for customers who had to adopt a subscription model with Upwork to get things like access to premium talent and the ability to invite 30 freelancers to a job, special reporting functionality and other things. And what we noticed was customers were still trying to figure out, how do I use Upwork, what's the value for me? I'm not ready to pay a subscription yet. Let me just get started with the free service. And then they weren't actually getting the value of the options that we had behind the paywall that were actually critical for them getting the full value from Upwork overall. So by changing the subscription from a paid option to instead giving them those benefits for free and then asking them to pay as you go basically through a higher take rate on the back end, they had access to those benefits that drove up their usage, and then they were happy to pay from a little higher take rate on the back. And so we changed that whole model. So it was free to get going, but as they were hiring freelancers, there's a higher take rate. And we saw great adoption of those features, no negative indications in terms of churn or retention issues with the client base. And so that's been a great win-win for us as we've kind of adjusted the packaging, the pricing to better drive adoption of features, getting clients started and basically their usage of the product overall.

And just to put a sort of a ribbon around it, this is all thematically tied back to your attempts to sort of continue to unlock opportunity set and lower friction broadly...

Absolutely. We want to give people all the features that they need to get the value from the product and get started. And then we'll monetize it on the back end as they're basically adopting and using the product.

Understood. I want to turn to the talent side of the equation. Obviously, we've been through the pandemic. There's been a lot of changes in the way workers want to engage and build time and careers and monetize. How is the level of talent that engages with your platform continued to evolve over the last couple of years? What are you doing to sort of continue to engage with talent on the platform as well?

We're seeing at or near-peak engagement levels from talent today, which I think is a sign of the health of the marketplace and the value propositions that we're giving talent at this time against a backdrop where, as you know, the war for talent is alive and well. So talent has many options and yet they are choosing and voting with their feet to come to our platform and sign up again at near-record levels. So the things that we're doing to invest in talent in, like, number one, I think there is a secular shift in the talent ecosystem where -- we call it the work awakening, where talent has woken up over the last few years to this idea that they want more freedom. They want more flexibility. They want to set their own terms around where and how they're working and who they're working for. And that's where fundamentally, our platform is extremely appealing to them. We give them control. We solve all the needs around kind of back-office management of their entrepreneurial life for them, and we continue to invest in those tools. Some of the things that we've done more recently around things like -- actually, what we call kind of pay-to-play products, like boosted proposals, availability badges, things like that, give them more control and put them in the driver seat around advertising. Hey, I'm really interested in this work opportunity, or I am available to do this type of work right now. Hire me because I am ready to go. They have actually given us really positive feedback about how that is giving them more of the control around managing their freelance career, and we're continuing to invest in those types of things that actually give them what they're looking for to basically turn on and off their work life exactly the way they want it.

Got it. I'm sure you get this question from investors and I get it a fair bit as well. How do you think about your engagement with talent in a post-pandemic world or a more normalized labor environment? I think there's always questions I don't know how to answer about how much of what's happening on the talent side is a result of this moment in time, both supply and demand and flexibility becoming a key part of work versus -- that could mean revert or be a different pattern 6, 12, 18 months from now? How do you think about that?

I mean for us, Eric, it hasn't really changed. I think we've always, culturally, and through our products, kind of carried the banner of flexibility. That's what we've always stood for, for talent, and we've always, for example, attracted talent through huge word of mouth and virality with our offering. We've never paid for advertising to talent. And yet, we've always had a huge inflow of talent to the platform by virtue of what we stand for, what we offer and the relationship we have with talent in the ecosystem. I mean we've continued to engage and invest in things like our talent community, the Upwork Academy, where now we're offering even more kind of training and learning modules for talent. So it's incredibly important to us that we have that strong relationship with our talent community. We're serving them in more ways, partnerships with third-party providers who give them services and benefits, including financial products and things like that. But I think for us, that's always been something evergreen, and I don't see that really having changed through the pandemic or changing afterwards other than us continuing to invest in that part of our business.

Okay. And I want to bring that all together because I think on both sides of your marketplace and your platform that you're trying to build, we're seeing a lot of innovation that's facing your enterprise and nonenterprise customers as well as the talent side of the equation. Talk a little bit about some of the product innovation you've built in the recent past and how we should be thinking about the product innovation curve going forward and how it can amplify a lot of value to the platform.

Sure. I think a great example of that, that speaks actually to your prior question is a lot of the product innovation we're doing comes out of insights and working with the talent themselves. So we launched Project Catalog as a new product, probably in -- I think it was late 2020, early 2021. A lot of the feedback we got from talent working on that was, hey, I want to have a way to directly interface with clients on an hourly basis that's even easier than what we had in the past with our hourly jobs model. With that feedback, we launched this new feature consultations, earlier this year. And consultations lets clients basically do a one-click project start with a freelancer to basically just start engaging on an hourly basis with someone in a super lightly way. And that can be to get advice on how to post a job on our platform, it can be to get advice on how do I scope this project? Are you the person that can work with on this. But it was really through dialoguing and doing customer research with our talent as well as clients, but a lot of it was talent-driven, that we launched that feature. And that has been hugely successful. The client feedback on that feature is higher than basically anything else we have in the talent marketplace. People are utilizing that at super high rates to get started. Clients are returning and hiring again at high rates with that feature. So -- that's where I think a lot of the richness is coming out of the partnerships and the insights we have with our customers, including on the talent side.

Okay. And in terms of looking longer term, what do you see -- there's always wish list of things you could sort of improve or where you want the product to go over time. What do you see as some of the key unlocks that you're focused on to think about how the product on either side could continue to evolve looking out over the next couple of years.

There's so much opportunity for us because, again, we're still in the early days. As much as I'm proud of how far we've come, what we're doing, I think, around things like better, faster, cheaper. I think on all of those fronts, we can serve customers, again, continuing to invest. We are already the market leader in these dimensions, but as you look at the ways that we offer customers a single destination where they can hire talent in so many different ways, whether it's through the hourly work marketplace, fixed-price projects, Project Catalog and then graduating up for larger customers to our enterprise suite. We're going to continue to innovate on all of these ways that customers can hire in a single destination for everything from small projects to large programmatic engagements. And that is something that no one else in our ecosystem can touch upon on or is innovating at the same speed that we are. So that's, I think, one area where we will continue to give customers this best-in-class experience where they can get what they need done faster, better and higher quality than anywhere else.

Okay. And last one on sort of platform and monetization, you started to talk more about boosted proposals. Any update there on how you're thinking about that and what it can do for the platform over the medium to long term?

I think it's just a great example of the type of feature that is such a win-win for our customers in the sense of them being able to signal in the marketplace, key features around, I'm available. I want to work. And there's a lot of work that we're doing to enrich the signal value in our marketplace because we are such a large ecosystem and we're basically running this giant labor marketplace. And as we continue to invest in the signal value, the signal quality with things like monetization as a component of that, it's a win for customers and it's a win for our business. I mean, it's not -- that wasn't launched as a monetization feature, but it has nice monetization components as well. And I think that's the type of thing where we're really using monetization as a way to get higher quality signals from customers who are willing to pay a small amount of money to give us a really high-quality signal about their interest level and something. And we're continuing to experiment with features like that, that has this nice duality to them.

Got it. Yes. Understood on the signal. I want to bring Jeff into the conversation to get maybe both your perspectives on this. I think one of the main topics over the last couple of earnings calls have been the investments you're making in marketing. What's driving some of the decisions behind those investments? What you're seeing as a platform as brand awareness goes up? And then maybe I want to bring back higher brand awareness of what it does for the platform and create a bit of a halo effect. But maybe just start with a little bit of giving me your perspectives on the push into marketing more, what you're seeing from the way marketing dollars are performing, just as a start.

Yes. Maybe to start, going back to an earlier question, our primary competition really is the old way of doing things, the old way of working. And so we've had this meteoric change in our opportunity, which is that now clients are open to working remotely. But just because they're open to working remotely, it doesn't mean they have any idea that we exist. And so while our numbers were benefited during COVID from the changes in the marketplace at that point in time, what fundamentally changed was the magnitude of the opportunity. The fact that they are now open to working remotely allows brand advertising to potentially work. I can't imagine that it would have worked prior to this because there just wouldn't have been that receptivity. So if we can get more clients to be aware of our value proposition, particularly during a time like this, which is hard when there's more scrutiny on EBITDA margins and all of that. But if clients or the companies can be aware of our value proposition of better, cheaper, faster, being able to have a flexible cost base and hiring talent that is more economical than really any other option that they have. We have the opportunity to potentially capture much more of that market opportunity than we would if we don't. And our general investment philosophy is -- we want to deploy as much capital as we possibly can, wherever the returns are comfortably above our weighted average cost of capital. And we have applied that against marketing, sales, products, whatnot. We know that in times like these, there's obviously more appreciation for driving that EBITDA margin. We gave the guidance last quarter of, hey, we believe that we'll be able to invest in brand marketing while being profitable in 2023 and growing that EBITDA margin over time. And we'll take a very rigorous approach to measuring the impact, brand is always difficult to measure. But we're triangulating and looking at all of the data to try to figure out what is the impact that's having on real business outcomes on new client acquisition on client spend and to the extent we're able to drive that, that will have a positive impact on growth. And to the extent we -- and it's not going to be binary, but where we can't -- that will have a positive impact on EBITDA margin. And ultimately, it's not going to be that we spend the money or not. It's going to be, hey, it works really well in these areas, and we've struggled to find it working well here, and we're still confident that we can iterate in this bucket. We just don't yet know what the size of those different buckets are. So we're very much in the iterate and innovate phase of that.

Got it. And then one follow-up question, and I do want to get into elements of hiring and efficiency and scale of the sales force. But when you see brand lift playing out as an output of your marketing effort, how does that feedback into the broader ROI you're seeing as a platform? Because you're making investments away from marketing dollars, but better brand awareness can also create ROI not just measured as revenue dollar and against marketing dollar. How should we be thinking about that broader impact to the marketing spend?

Yes. So we want to understand the full impact that brand has on our overall business. The most obvious areas are what is it doing to acquisition of new clients and what is it doing to engagement of existing clients. And that's both on the SMB side and the enterprise side. But it will also have a collateral benefit on freelancer acquisition. While we're not targeting that. It will absolutely reach freelancers who will make the decision to come to our platform because of that. And while the campaign is not directly targeted at specifically enterprise over SMB or vice versa, it will have a benefit on, theoretically, shortening the sales cycle, improving the conversion funnel on our marketing side. So we believe the benefits can be pretty broad. And we're taking that broad approach, making sure that we understand the economics. The thesis at a high level is by spending we can drive brand awareness, brand awareness will lead to improvements in all these areas. And we're working through the math to try to figure out what do we see in each of those areas that we can attribute back to that spend. And then take that holistic view and say, okay, based upon all that, what is the ROI.

Got it. Okay. Understood. I want to turn back to sales force, similar to what we talked about with the enterprise trends. Can you give us a little bit of a snapshot of what are the hiring trends like now when you're trying to build and scale a sales force? There's always a lot of competition for talent in that area. And how should we be thinking about some of the tools and mechanisms you're putting in place to build productivity in your sales force?

Yes, I think we've had really good success in hiring the sales team. We've basically hit our goals in terms of scaling the team throughout this year. Our goal this year has been to double the land team by the end of the year, and we're on track to do that. I think what helps is our team is winning. We've been having success in terms of hitting our internal KPIs and the reps hitting their goals in terms of how we think about the unit economics, targets that we have for those teams and the reps themselves hitting their goals overall. So that's a big -- that's the sell in itself. The fact that people on the outside and the people in the recruiting process can see, okay, I'm joining a team where the model is working, the machine is working, the sales talk track and everything else is resonating in the market. We also have another thing going for us, being a mission-driven company in general, I think that helps with our recruiting overall. People want to be part of that, and they see that they are joining something that is in the early stages of scaling up to be something really exciting. And we've been investing a lot in tooling and mechanics, the process, et cetera, to support our sales team and our overall organization to win. So I think we feel good about the machine that we're building. It's not going to be perfect every day. There's a lot of work we still have to do. But generally, this has been a huge focus for us in terms of getting it right and building the foundation so we can continue to scale from here.

When -- you've talked a lot about land versus expand and sort of building both sides of sort of a funnel over time. How should we be thinking about relative investments and where you feel like you're seeing better ROI right now if you deploy $1 into sort of land versus expand. How should we think about the relative weighting of those? And how you think about relative ROI?

Do you want to talk about that?

Yes. So we -- a bulk of our efforts to date have really been driving on the ROI on the land side. So go back to Q4 2020, we took a deep dive into the unit economics of our account execs. It wasn't where we wanted it to be, and we made a decision that we needed to reduce the size of the team by 1/3 and also focus them on the right client profile, the right capabilities of selling into the right levels within this organization and selling 1 of the 2 products we had at that point. We stopped selling one. And we use 2021 to prove out are those unit economics going to work. We believe from the data that it would, but we didn't have -- the data wasn't clean enough to totally know that these reps would do that. We did that in 2021. We feel really good and we believe that we can hire the reps needed to continue to reach the $300 million revenue goal that we set for 2025, which is a 70% CAGR from 2021. And so the key -- it's really an execution game at this point. Can we hire the reps, can we onboard them? Can we ramp them to do basically 6 deals per year? And can those accounts spend the amounts that they that the past accounts that have been going through that cycle have. And that's where the account management side comes in. We have less data at this point to totally understand what is the optimal number of account managers per account. And we're still figuring that out. We think there's a big opportunity to potentially improve that, and we're -- our guidance to our sales team is, listen, we want you to go as fast as you can, and we know you're going to hit some points where you have some hiccups, and that's okay because there's such a big opportunity out there. If we're not, we're probably not investing fast enough. And so we have greater confidence on -- great clarity into the AE side, the land side and we have belief that there's the opportunity to invest greater at the AM side. We just don't yet know that, with as much conviction. But we feel really good that the overall unit economics are very attractive.

And we can achieve the targets that we've shared without any improvement in productivity versus our current model today. So there may be potential upside beyond -- if we can improve the productivity of the AMs or other things that will be additional upside beyond the targets we have. Just to be clear, we're basically setting our sights based on the current model we have in place, the current performance we've seen today with our current reps.

Okay. I do want to give an opportunity if there's any questions, raise your hand. We can bring a mic around. If not, I've got plenty to still get through. We have one in the audience.

Just on the enterprise side, I think one of your competitors is trying to get into the enterprise space at this point. Could you just talk about the -- your sort of competitive moat? What is that technology? Is it scale? Is it -- is it network effect? If you could just elaborate on that, it would be great.

Sure. I think we've been doing this -- some version of sales motion have had customers buying our enterprise -- a version of our enterprise product today. It's changed a lot over the years and we've had enterprise customers. I mean I've been at the company almost 11 years, and I think when I joined, we had enterprise-sized customers. We had like some of the largest names buying our product. So I think one of the advantages we have is we have been serving these customers and building programs for them on different kinds for more than a decade. And that gives us a huge advantage in terms of understanding enterprise-specific needs and having built capabilities for them around things like security, compliance, worker classification, automation around some of those things that we offer them out of the gate and out of the box. So these customers really require a different level of product tooling support than what your average customer in our self-service products will tolerate and withstand. So the types of things that we have to go through for these customers in terms of auto controls, data management. And then program management for them is often at a totally different level than what is required for your average kind of self-service customer. So for us, we have not only built out the knowledge, the know-how, the tooling and everything to serve them and which has, I think, taken many years and many iterations to get. We also have the leverage of our size, scale and the talent in our marketplace where we can graduate from this giant pool of talent that we have in our business, our enterprise had a talent program, things like that where we're basically curating talent for these customers in a variety of sophisticated ways to give them kind of the best of the best in terms of exactly the talent they need for those programs. So I think we have numerous advantages in terms of a variety of different capabilities that really let us set up for these customers, the types of programs that they need in a number of different categories of work, whether it's technical work, customer support work, marketing creative work. And what we're hearing from these customers as we are going to market, there's a couple of things that give us, I think, advantages as we're leveraging all of that. One is they really want vendor consolidation. When you're working with an enterprise, they want a single solution provider who can kind of do it all across multiple categories, meet all of their security compliance requirements, et cetera, and we give them that. They also want a provider who can often do things like onboard and provide them solutions for the bring your own aspect of what we give them, which is very unique versus the competitors in the market because of the richness of our compliance controls, which competitors do not have. And more and more about enterprise engagements involve them onboarding tens, hundreds, often thousands even of independent freelancer and agency talent that they're bringing to us to manage through a single consolidated interface. So -- and then the third thing is they often want pretty expensive program management from us. That can be in the form of our managed services offering, where we're really just managing for against an SLA or it can be other things around us curating talent pools and doing recruiting for them. And that, again, is through both unique expertise we have, tooling we have and knowledge we have leveraging kind of, again, the scale in the tooling of our marketplace. So I think a lot of those things give us a pretty significant advantage and distinguished capability versus competitors.

One in the back.

Thank you. Could we maybe come back to a question that Eric briefly asked, i.e., the topic of cyclicality versus non-cyclicality. I mean having been with the firm kind of for about a decade, I mean you've seen a lot, and let's put the product part aside and just look a bit more on the macro side. Because I think for investors, it's pretty important to understand how to look at you. I mean, will companies rather see you as a flexible rather cheap solution for their own problems or would they simply not care at all? Can you maybe kind of -- I mean, how do you think about this question when managing the business, right, running different scenario analysis? I mean you have seen some elasticity in the past. I mean you must have some experience, right? I think it's a crucial question in order also to value the stock and to get a feeling for kind of your proposition here?

Sure. I shared with you one of the data points we have from 2008, which is a little, again, not a perfect analog to today. There's not probably no perfect analog to today. Another one we've looked at is what happened in 2020. And obviously, at that time, we also built a bunch of scenarios as we're through March and April, and then we can obviously look back and see what happens. And what happened for us was in late March we saw, at the very end of the month and into early April, a decline in spending, largely from our smallest customers who were impacted negatively by the COVID economy at that time, and a lot of them kind of froze and were paralyzed in terms of what to do. That did negatively impact us initially. And at that time, just for transparency, we were wondering what was going to happen, what would be the outlook. And then what we did see subsequently was a lot of customers realized Upwork was a very critical tool, not only for them and their businesses in terms of continuing to run sustained operations, but then also to expand spending as they were looking for an economical way and a flexible remote solution for continuing to deploy business operations through the remainder of 2020. And so -- and that continued obviously through 2021 and so forth. So I think that is another analog we look to that certainly, even as the economy at that time was struggling for a lot of sectors, we did see an initial pullback from certain parts of our business, and then we saw an acceleration from other parts of the business and even from certain customers that they got more comfortable with their visibility kind of going through that economy. So as we look at where we are today and what we shared in our last earnings call was we did see some softening from some segments of our customer base in the time period of going through the end of Q2 that was more evident with smaller customers, and that was more evident with customers in Europe. This is less evident in the U.S., although it did -- we did see some of that in the U.S. as well, which is not a perfect analog to 2020, but certainly had some similarities. And so that's where we came up with, from a forecasting perspective, and Jeff can talk more about this. But we saw, okay, let's -- we got comfortable that, that could be a $10 million to $15 million impact for our 2022 annual guidance. But as we think about the similar factors around people leaning into remote workers, the cost savings that we offer both existing customers and prospective customers as we're continuing to be in market with our advertising and customer acquisition activities. Clearly, there is upside for us there as well. It's harder to predict the timing of that upside. And so I think that is less of the known. And clearly, these economic conditions we don't have a good -- a perfect analog in the history of this business to really know what that will be. I don't know, Jeff, if you want to add anything?

Yes, if you take the longer-term mark as well. our hypothesis is that the disruption, whether acceleration of the economy or deceleration, is generally good for our business. And that goes -- the reason we believe that is, in viewing the primary competition as the old way of doing things, when people are forced to deal with a new set of circumstances, they evaluate what are the options, when the economy was accelerating, they needed to hire fast. And we can get people, you can go on the app and hire someone, have them working today. And so that was great for our business because they come to us in the need of -- I need to be open to new solutions because the old things aren't working. And same on the downside of, hey, my boss took away my budget, says, I need to do more with less. How do I rationalize this? And yes, there's the initial period of like, oh, I can't hire what am I going to do? Then there's the, yes, but I still need to get stuff done, and how am I going to do that? And our retention curves are really good. So once those customers come to us, they don't forget about the value that they get on the platform. And so now they're hiring faster, more cheaply with high-quality talent. And if there is a downturn later, they don't want to necessarily cut that. Oftentimes, you get a question of, well, is your budget going to be the first to go. First off, our budget is probably a relatively small portion of any of these companies, so they're not going to massively make up their budget reductions from ours. And they're getting such value from it. That it's -- yes, it's an easy place to throttle down if they need to, but it's a hard one to continue delivering what you need to because you're getting such ROI out of it. And the challenge, obviously, as you come back to like the in-quarter dynamics, what's it going to be in this quarter or next quarter, that's much harder to forecast.

Do we have one more in the back still? we've got, I think, 2 minutes of...

Yes, it's a quick one. What portion of your volumes involve a cross-border transaction where effectively an American customer is buying cheaper labor from overseas?

So the majority of our revenue -- if you define our revenue based upon where is the client based or where is the talent based, the majority of the client revenue comes from the U.S., it's over 60%. And the majority of the freelancer revenue comes from outside the U.S., it's probably over 70%. So a good portion of the overall revenue would be cross-border, how we generally defined between 2 different countries. And we have lots of companies that spend within their existing region, their existing country, within their existing time zone, whatever their important consideration is, we have a solution to help them.

Okay. This is going to be unfair for Hayden, but you only got 1 minute left, but I want to ask you a big picture question in a short answer, time, unfortunately. We've talked a lot about growth. We've talked a lot about wanting to invest against the big opportunities that you have. How do you think about aligning those goals of capturing the growth you want, but continuing to execute against sort of the path to profitability and delivering returns to equity holders and some of the things we've talked about over the longer term.

I think fortunately for us, those are not at odds. We have said that we plan to achieve profitability from an EBITDA perspective next year. And we are in a fortunate position where we have strong investments already happening and will continue to be happening in our R&D side of the house. We've been launching some really great new products this year. We'll continue to do that. So continue to innovate on the products will be a priority, and that is we're at a size and scale from our market leadership perspective that we can continue to do that, and we have a huge advantage there, I think, relative to others in the market that we can continue to invest and innovate there and continue to kind of double down the competitive moat we have there. And similarly do that from a brand marketing and other marketing perspective as we evangelize the market opportunity and investment sales. So we're in this great position from a market leadership perspective to innovative, evangelize and scale our business. while achieving EBITDA profitability next year and continue to expand from there, which I think is a really great place to be.

Great. Well, that's a great point to leave it on. Hayden and Jeff, thanks so much for being here and doing it in person, really enjoyed the conversation. Please join me in thanking the team from Upwork for being a part of the conference this year.

Thank you, Eric.