Upwork reported mixed second quarter earnings amid COVID-19. Upwork CEO Hayden Brown joins the On the Move panel to discuss.
JULIE HYMAN: Upwork, which is a platform to find freelancers work at companies, reported a second quarter results yesterday after the close of trading that results did beat estimates and adjusted loss of $0.03 a share. Revenue of $87.5 million. And the company came out with a forecast that left it room to beat estimates for this current quarter. Well, I want to bring in Hayden Brown now. She is the CEO of Upwork. Interestingly, the shares are trading pretty sharply lower today, even though on the face of it the quarter looked pretty good. Hayden, it seems like the outlook is also good here. The jobs market, on the other hand, looks like it's recovering quite slowly. So talk to me about what you are seeing in your business versus those sort of big numbers that we see in the economy.
HAYDEN BROWN: Absolutely. Thanks for having me on, Julie. We are seeing you know a big once in a lifetime change in how people and organizations are thinking about remote work. And I think our story is really resonating in that landscape where companies have gone through a once in a lifetime change in how they are adapting to remote work, moving their organizations online, virtually overnight in the last few months, and really reassessing not just what this means for them during the pandemic but what this means for them ongoing after the pandemic passes.
Because they've realized that there are tremendous benefits to remote work. And so, where we've been focusing our time and attention is we've been a remote work company for 20 years. So we're helping customers navigate what remote work can look like for them and how to make the most out of an opportunity where they're really realizing how positive this can be for their businesses and how this can be an enduring strategy going forward.
ADAM SHAPIRO: Hayden, it's good to see you again. I was curious that post-pandemic, it doesn't matter, I would imagine, if they're working from home or if they're going to an office. But are you starting to get any indication as cities and places slowly reopen, are the people who are getting work being asked to come into the office?
HAYDEN BROWN: I think the story is people are still very hesitant to go back to the offices, even in cases where offices have been reopening. And we've been hearing that across a lot of different customers, both because people have health and safety concerns. But also there's an underlying trend where a lot of workers actually are saying they prefer a lot of the benefits they get from working at home. And a lot of hiring managers are saying remote work has gone better than expected.
More than half of hiring managers have reported this is working better than expected and three quarters of CFO's say remote work will be part of the new normal. So I think the benefits around fewer commutes, around fewer non-essential meetings, a lot of these things are aspects of work that people want to capture and keep doing even as offices do reopen.
- Hayden, this is Dan. I wanted to ask you. We're seeing a lot of movements kind of in the political sector where we talk about freelancers being treated more along the lines of full time employees. What kind of impact would that have on Upwork? And have you guys given any thought to that kind of problem in the future?
HAYDEN BROWN: Freelancers on Upwork are very clearly independent professionals who run their own businesses. And so they really are not subject to some of the regulatory issues that maybe you are thinking of. I say as you look forward, there's a lot of reasons why freelancers have actually felt more protected during this downturn than some employees. So as an example, the average freelancer that we speak with has five clients. And they say, look, I'm really glad to have five clients because if one of them is laying off employees or pulls work, I know I still have four other clients that I can be working with.
And so, my income is actually more secure because I am less exposed to any one single employer having to Furlough or lay off employees, in which case I might be completely exposed from that bad aspect. So I think a lot of freelancers are finding during a downturn that they have a lot of optionality and a lot more security than some people might have thought in terms of thinking about how they can really sustain and move their businesses forward in a very dynamic environment like we're seeing right now.
- Hayden, just looking a bit closer at your business model, it seems like when it comes to the billing process new users and smaller jobs are actually paying higher prices and fees to use the platform itself. I'm not likening it exactly to the WeWorks of the world, but no one will argue that a WeWork isn't nice, right? But from a freelancers perspective, especially when there may not be many job opportunities right now, taking a 20% cut or 10% cut to give to a middleman rather than kind of proactively seeking out those opportunities on their own may seem like a big sort of gamble to take. How are you really, perhaps, thinking about adjusting your business model to attract more of those smaller freelancers that you are trying to serve?
HAYDEN BROWN: Yeah. There's really two things I would say that are important about that comment. So number one, we actually have an incredibly competitive pricing model where freelancers have been flooding into our site over the last couple of months looking for work and finding it as a really strong value proposition for them, relative to traditional staffing firms and others who charge a far higher markup for doing similar types of work.
Our markup is low and we do a lot very efficiently with technology to really reduce that markup so that freelancer can take home the maximum amount of pay. We've also set up our fee structure so that it actually gets lower over time. Where that 20% fee only applies to the first $500 in a new relationship between the client and freelancer. And very quickly, that tiered services fee goes down to a 5% fee so that the freelancer is taking home more and more of that earnings as a relationship with a client matures.
Because we know we are matching those customers together upfront and then those relationships can be very long lasting. We want the freelancers to benefit from those long lasting relationships.
JULIE HYMAN: Hayden, finally I want to circle back around to the stock price. I know as CEO your main job is the business, not how the shares are trading. But I'm just wondering if you saw any downsides in your report that could be responsible for the drop that we're seeing, which is fairly substantial.
HAYDEN BROWN: Yeah. I think what we're really seeing if you step back, Julie, is our stock is up more than 60% since the beginning of the year. And so, day to day and week to week, certainly, there is fluctuation. But that run up that we've seen in the stock since January, I think, is speaking to the larger story around how we are well positioned in an environment where increasingly companies are finding it essential to go remote, are more and more focused on a dynamic way of managing their costs. And those are two aspects of a value proposition that's incredibly strong for Upwork.
And so, I think that's the bigger story here and that's where we're very focused on executing our strategic growth strategy, which is, I think, going to deliver incredible results going forward.
JULIE HYMAN: Hayden, it's good to see you again. Thanks for joining us. Hayden Brown is the CEO of Upwork. Appreciate it.