Upwork Inc. (UPWK) Q2 2022 Earnings Call Transcript

Upwork Inc  (NASDAQ: UPWK) Q2 2022 earnings call dated Jul. 27, 2022

Corporate Participants:

Evan Barbosa — Vice President of Invertor Relations

Hayden Brown — President, Chief Executive Officer and Director

Jeff McCombs — Chief Financial Officer

Analysts:

Matthew Farrell — Piper Sandler — Analyst

Maria Ripps — Canaccord Genuity — Analyst

Andrew Boone — JMP Securities — Analyst

Bernie McTernan — Needham & Company — Analyst

Eric Sheridan — Goldman Sachs — Analyst

Nathaniel Schindler — Bank of America — Analyst

Rohit Kulkarni — MKM Partners — Analyst

Logan Rick — RBC Capital Markets — Analyst

Sang-Jin Byun — Jefferies — Analyst

Marvin Fong — BTIG — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to the Upwork Q2 2022 Earnings Conference Call. [Operator Instructions] And I would now like to hand the conference over to your speaker today, Mr. Evan Barbosa, VP of Investor Relations. Please go ahead, sir.

Evan Barbosa — Vice President of Invertor Relations

Thank you. Welcome to Upwork’s discussion of its second quarter 2020 financial results. Leading the discussion today are Hayden Brown, Upwork’s President and Chief Executive Officer; and Jeff McCombs, Upwork’s Chief Financial Officer. Following management’s prepared remarks, we will 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, but 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 the current and future impacts of Russia’s invasion of Ukraine and our decision to suspend business operations in Russia and Belarus and the COVID-19 pandemic on our business and current and future impacts of actions we have taken in response to Russia’s invasion of Ukraine and the COVID-19 pandemic are forward-looking statements and related to matters that are beyond our control and changing rapidly. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the 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 quarterly report on Form 10-Q for the quarter ended June 30, and 2022 when filed. In addition, reference will be made to non-GAAP financial measures. Information regarding a 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.upwork.com. As always, unless otherwise noted, reported figures are rounded and comparisons of the second quarter of 2022 or to the second quarter of 2021. All measures are GAAP, unless cited as non-GAAP. Now I’ll turn the call over to Hayden.

Hayden Brown — President, Chief Executive Officer and Director

Thanks, Evan, and thank you all for joining us today for our second quarter 2022 earnings call. Building on the momentum of strong results of the first quarter, Upwork forged ahead on innovating, evangelizing and scaling the world of work marketplace, growing revenue 26% year-over-year to $156.9 million in the second quarter. We continue to focus on product innovation and saw outstanding results in the form of higher customer satisfaction scores, faster time to hire and strong client reengagement rates from our latest innovative feature in the project catalog area called consultations. Consultation is a one-click option for clients to book time with talent for both general getting-started advice and guidance on important project decisions.

Its early success is leading us to expand the pilot from four categories to all 90-plus categories in the third quarter. Product enhancements in the quarter also included the introduction of Project peers, which enables talent to structure their services in a way that helps clients more easily understand and match their needs to preset project scopes. Finally, we also advanced the Virtual Talent Bench, or VTB, experience to enhance the ways clients can find, organize and mobilize the expertise they need. Our continued success with larger customers and our focus on building brand awareness across the market was evident in our sales and marketing performance in the second quarter.

Enterprise revenue increased 45% year-over-year to $12.3 million, and the number of clients that spent $1 million or more in the trailing 12 months increased significantly year-over-year. Our sales team achieved their deals per rep productivity targets, and we have maintained our hiring pace to stay on track to double the land team by the end of this year. We continue to focus on building Upwork into the household name in our space, investing with discipline and a focus on measurability and brand awareness. Many large recognizable companies such as Asurion Fanatics, Newsweek, Payoneer, Pearson and ServiceNow signed on as new enterprise plan customers in the second quarter, turning to Upwork as a high-trust, high-quality destination for remote work and specialized talent at scale in an increasingly low-trust, fragmented volatile world.

We help clients like these respond to and prepare for economic headwinds and ensuring that organization’s growth, digital transformation and talent innovation initiatives can progress undeterred. The success of our new client marketplace plan announced late in the first quarter was also on display with its implementation in the second quarter. This plan gives all self-service clients more features for a flat service fee while simplifying their experience, reducing friction and providing them more value. Many clients have already derived additional benefits from the new plan via access to premium talent, advanced talent searches, utilization of activity codes and more robust reporting capabilities.

A vibrant inclusive online community is a critical component of what makes Upwork distinctive. We are committed to ensuring our community has the full range of resources to enable talent and clients to innovate their careers and their work to unlock their full potential. In service of this, we launched Upwork Academy alongside improvements to our community to support the hundreds of thousands of actively earning talent on the platform. We’ve seen high levels of engagement on both Upwork Academy and community pages with over 1,200 course completions on Academy in the first month and community page views almost 50% higher than the previous month. Upwork’s values are a key attraction point for our customers on both sides of our work marketplace.

This is exemplified by our role as a trusted adviser in helping clients achieve their objectives with new talent from other regions following our decision to suspend operations in Russia and Belarus where we announced the contract with talent or clients in those countries would be required to wind down by May 1, 2022. Since then, we’ve seen many global customers working with Russia- and Belarus-based talent who have relocated outside of the region as well as with alternative talent they have found through our work marketplace. With respect to business activity in Ukraine, we continue to see strong performance during the second quarter. GSV was above 90% of pre-invasion levels, once again demonstrating the resilience of professionals from Ukraine as well as the key strengths of our platform. Overall, we estimate that the loss of revenue directly attributable to the war was approximately $4 million in the second quarter, and we expect the impact to revenue in each subsequent quarter of 2022 will be slightly less than the impact seen in the second quarter.

As we look to the future, Upwork, alongside our customers, partners and investors, faces macroeconomic conditions that are difficult to predict. While there are risks that a slowing economy puts downward pressure on some parts of our business, we also see this as a catalytic moment for leaders to reevaluate the old ways of working and operating as well as to widen their consideration of more innovative solutions and for Upwork to capture a greater share of the market. Our business model remains durable, and we are confident that our value proposition of delivering highly skilled, diverse talent from over 180 countries more effectively, affordably and quickly than alternatives as well as of enabling clients to have greater flexibility with our cost structure will continue to resonate even in a recessionary environment. The opportunity ahead of Upwork is massive regardless of near-term economic conditions.

In fact, business continuity, talent transformation, a flexible cost base and cost savings will likely become even more critical in the quarters ahead. We remain focused on delivering enduring growth fueled by investments and initiatives with strong economics in every aspect of our business: from core product innovation to building our sales muscle to brand and performance marketing. Upwork is the leading digital platform that clients trust to deliver the talent they need with the exact skills to get work done and is the home that talents trust to champion them in innovating their careers while bringing them exceptional work opportunities. There is vast potential to unlock on both sides of the world’s work marketplace, and we’ve only just begun. Thank you for joining us on this journey. We will now open the call to your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Matthew Farrell of Piper Sandler. Your line is open.

Matthew Farrell — Piper Sandler — Analyst

Thanks guys. Congratulations on the really strong execution and managing through all the moving pieces. I wanted to zero in on the $10 million to $15 million impact from the softening of the global environment. Should we think about that including some further deterioration in the macro from here? And then as I think about that from an Upwork perspective, how does utilizing the freelance workforce benefit you from a cost perspective as you look to balance costs here as we move forward in an unpredictable environment?

Jeff McCombs — Chief Financial Officer

Thanks, Matt. I’ll take the first part of that. So with respect to the $10 million to $15 million impact, our guidance reflects some of the softening that we saw happened in Q2 with respect to client acquisition, client retention, particularly as we noted in Europe and in SMB. And obviously, things are difficult to predict in terms of how they will play out, but it’s our best guess based upon the trends that we’re seeing at this point what that impact could be. Clearly, things could be better, things could be worse, but that’s how we really box what we thought the impact could be. With respect to the second question, which was cost savings on the platform, Hayden, did you want to address that?

Hayden Brown — President, Chief Executive Officer and Director

Sure. I’d say, Matt, we’re seeing, in the broader market, customers are really kind of resonating with us. We’re talking to them the value proposition we have around saving more through programs using talent on Upwork. And on average, they save 50% or more using Upwork talent versus alternatives. Other things that are really resonating are around flexibility and speed. And so while macro is obviously front and center for so many businesses right now, we’re not losing sight of the fact that they still need to get work done, and they are really trying to figure out how they can do that cost effectively. And that’s where our value proposition is resonating. Hence, we have realigned a lot of our marketing and sales talk track to really shine a light on that part of our value proposition, and we’re getting good receptivity around that. So we want to make sure that we are positioning the business to take full advantage of that opportunity, which I think is going to be significant over the coming quarters.

Matthew Farrell — Piper Sandler — Analyst

Thanks. And then I wanted to zero in on enterprise, really strong momentum again here in Q2 across all of the metrics. Maybe just help us understand how conversations have changed with clients and potential clients as we’ve gone from a COVID world to an economic slowdown environment. And could we see accelerated trends from Upwork marketplace just given the benefit that the marketplace offers here for enterprise customers over the next couple of quarters?

Hayden Brown — President, Chief Executive Officer and Director

What we’ve seen so far, Matt, is strong execution by the team continues and I think against the backdrop of conversations which storing there’s been an uptick of focus in Q1 and Q2 from customers around things like cost savings, maybe they themselves are doing layoffs or shrinking their budgets, but they’re looking to us as an alternative for getting talent really cost effectively. And I think that’s led to some of the success. We saw a 24% year-over-year growth in new deals. We saw our overall enterprise revenue grew 45% year-over-year in Q2. So there’s a little bit of that that’s probably in the conversation, but I wouldn’t say it’s materially changed anything for us. I think the success has largely been driven by great execution by the teams and continued hiring and everything that we had in the plan coming into fruition. So I think there’s something in the backdrop, but it’s not, I’d say, a major change right now. Companies are still really focused on the three things that we typically help them with the most: critical skill gaps, greater agility, digital transformation efforts. And now just the fact that we offer some of these evergreen things like cost savings is just a little bit more top of mind.

Matthew Farrell — Piper Sandler — Analyst

Awesome. Congrats again.

Hayden Brown — President, Chief Executive Officer and Director

Thanks.

Operator

Thank you. One moment for our next question. Our next question comes from Maria Ripps of Canaccord Genuity. Your line is open.

Maria Ripps — Canaccord Genuity — Analyst

Great. Thank you very much for taking my question. And Congrats on strong results. So it seems like this last couple of quarters, you had a little bit higher contribution to growth from spend per client versus number of clients. Can you maybe just talk about whether this has been consistent with your sort of internal expectations? And how should we think about this dynamic going forward, especially given sort of continued focus on sales force and expansion and brand investments?

Jeff McCombs — Chief Financial Officer

Sure. Thanks, Maria. So there’s a number of factors there. One, we’re really pleased with the quality of the clients that are on the platform and the growth that we’re seeing from them. Their overall spend across the 800,000 approximate clients that we have on the platform is up 16% year-over-year. Those who are spending over 100,000 are up 38%, and million-dollar spenders are growing significantly as well. So we’re really pleased to see that. We’ve mentioned historically that that’s been driven significantly by expansion in hours per project on the platform, which we think is a great signal that clients are getting more and more value from the platform. As we mentioned, we have seen some softening in the client acquisition levels, once again primarily related to SMB and Europe. So that’s putting a little bit of pressure in terms of the overall growth of active clients. But it’s great to see that the clients that are on the platform are continuing to grow their spend, and it highlights additionally the importance of us continuing to invest in our brand marketing so that more and more clients can be aware of the value proposition that we have, particularly as they’re facing the dynamics on the horizon.

Maria Ripps — Canaccord Genuity — Analyst

Got it. Thanks Jeff. And maybe sort of related to this, does the current macro backdrop change your priorities or approach to sales force expansion and brand investments?

Hayden Brown — President, Chief Executive Officer and Director

Maria, maybe I can jump in on that one. I think on the macro side, a couple of thoughts. First of all, we definitely don’t have perfect visibility into how things are going to play out. And while it’s an imperfect analog, we do look to the 2020 environment where we saw initial softening in our overall marketplace that’s been contracted for some businesses. And then things improved as we leaned into the specific opportunity that we saw for Upwork and remote work and some of the other secular trends that were happening and economic aspects. We also see a couple of dynamics playing out as we look ahead. So one is spend will likely contract for the next couple of quarters. And as Jeff mentioned, that’s going to come from specific customers, probably SMBs, Europe, et cetera, but we’ve ring-fenced that as a $10 million to $15 million downside, which is baked into our annual guidance.

And additionally, we really haven’t lost sight of the fact that secular trends around remote work and digital transformation continue to be mega trends for our business right now, even as the economic force is going to be what it is for a lot of different businesses. And so for these reasons, and due to the additional Upwork specific value propositions around cost savings, flexibility, speed, we know this is a time when we can drive category growth and share shift to Upwork. And that’s why we are continuing to bet on brand, to your question, against this backdrop to really drive awareness, consideration and ultimately purchasing by customers who, frankly, today may not even be aware of Upwork solution at all. So with that in mind, we want to come out of this catalyzing the business to be even stronger than ever before, which is going to be critical going forward as more customers become aware of and adopt the solution through the coming quarters.

Maria Ripps — Canaccord Genuity — Analyst

Got it. That’s very helpful. Thank you very much for that color.

Operator

Thank you. One moment for our nexxt question. Our next question shall come from Andrew Boone of JMP Securities. Your line is open.

Andrew Boone — JMP Securities — Analyst

Good afternoon. Thank you very much for taking my question. Researchbasis point step-up in take rates quarter-over-quarter, can you help us understand the momentum in take rates and whether that can continue from here? And then just given the greater success in terms of monetization, how do you feel about taking price as a growth lever from here?

Jeff McCombs — Chief Financial Officer

Thanks, Andrew. It was great to see the nice increase in take rates, which is primarily driven by the pricing and packaging structure changes that we made in Q2. When we look at the longer-term horizon, where take rates would go, we do expect that we’ll likely be able to deliver additional value and drive increases in take rates for a variety of factors. One, as enterprise, which has a higher take rate than non-enterprise continues to grow faster than the rest of the business. That will have an upward momentum. Project Catalog and take rate also have higher take rates. And so as they grow faster, same-store dynamic. Now if they’re a smaller portion of the business, so that’ll be a little bit longer.

There’s also additional opportunities to drive take rate through our paid promotional products and potentially value-added services. So we do think that over the medium to longer term market, they will continue to rise. As we flagged at the beginning of the year, we expected nice improvements throughout 2022. We do have the additional dynamic that was really the driver of our take rates decreasing in 2021 as clients continue to find more and more value on the platform. more of their spend is at the lower end of the pricing tiers. And so that dynamic will continue as we continue to see that spend practice client continue to grow.

Andrew Boone — JMP Securities — Analyst

That makes sense. Thanks. And then as you guys laid out kind of a path towards margin expansion over a multiyear period, can you just help us understand the key points of leverage across the various expense line items and how you guys envision that? Thanks do much.

Jeff McCombs — Chief Financial Officer

Yes. Thanks, Andrew. So we actually think there’s good leverage that we can have across the board. So whether that is from cost of revenue, including payments where — the majority of our cost of revenue actually comes from our payments costs and the enterprise portion of the business, which once again is growing faster, doesn’t have those payments costs. So simply that mix shift of that growing faster will provide some leverage within cost of revenue. Also, we’ll be able to drive efficiencies within other areas of cost of revenue, including hosting or customer support.

But we also think that over that medium to long-term mark, that there will be benefits along all of the OpEx lines: so G&A, R&D, and ultimately, sales and marketing. Although we’re obviously investing aggressively in those areas right now. As we look over the next several years, we continue to believe that there’s good opportunities to drive that. We’ve mentioned that we’re providing the target for 2023 of achieving EBITDA profitability and that we’ll continue to expand that EBITDA margin by a few hundred basis points each year thereafter.

Andrew Boone — JMP Securities — Analyst

Great. Thank you.

Operator

Thank you. One moment for the next question. Our next question comes from Mr. Bernie McTernan of Needham & Company. Your line is open.

Bernie McTernan — Needham & Company — Analyst

Great. Thanks for taking my question. Just a follow-up on the macro. So the expected year-over-year growth rate in active clients to decline in the $10 million to $15 million impact. In the release, it seems like that’s really isolated weakness in Europe, but does that contemplate any weakness in the U.S. as well?

Jeff McCombs — Chief Financial Officer

Yes. I think the phrasing was some softening trends, particularly in Europe and SMB. In general, as we look at it, we would imagine that some of the trends that we’re seeing more pointedly in Europe could play out in the U.S. And when we come up with the estimates for our guidance, we’ve taken all that into consideration. Once again flagging that it’s very hard to predict exactly when or how much that will play out, but we have made some assumptions on that.

Bernie McTernan — Needham & Company — Analyst

Understood. And then most of the times, we’re talking about the macro, we’re thinking about from the client perspective. But just interested in terms of what’s happened in the past in terms of from a talent perspective. Is this also a catalyst for higher quality talent to join the platform as well?

Hayden Brown — President, Chief Executive Officer and Director

I think it definitely is not going to be a negative for us. We have such a strong talent base as it is. And we’ve seen continued growth in that through the last years and quarters. And certainly, there’s been a mindset shift, I think, where in prior recessions going back to 2008, perhaps, people might have seen freelancing as a risky place to be during an economic downturn. In fact, today, what we’ve seen in the last two years is we’ve been serving talent on our platform. Freelancers actually are feeling more insulated from economic downturns being freelancers because they feel like they’re not exposed to a single employer who could lay them off. And so to your point, I think today’s professionals are looking at freelancing as a highly desirable place to be. They want to have more options in terms of multiple eggs in their basket where they’re not exposed to this. So we’re certainly going to be positioning ourselves to welcome Newton the platform in the coming quarters, as we always do, and place them into great opportunities.

Bernie McTernan — Needham & Company — Analyst

Understood. And then just lastly for me, if we could just dive into Upwork Academy, would love just some of the most popular types of education the talent seeking out. And ultimately, is this a way for to really match the right clients with the right talent or a way to almost you can screen and be able to show clients say, “Hey, this person passes a certain class, so they should be better equipped to do this job.”

Hayden Brown — President, Chief Executive Officer and Director

Yes, Bernie, this is just the beginning, I think, of what we can do here. So the early courses that we’re offering and where people are getting a lot of value is a lot about kind of freelancing online 101 and how do I get started building a profile and a reputation on Upwork, how do I win my first job. So that’s a lot of the kind of initial course work that we’ve launched and where talent is engaging the most. There’s also some course work on the client side around how to operate in the way of working that we offer. But this is again, the beginning of, I think, a lot of what we can unpack for talent and clients around ways of working online, around both hard and soft skills required to be successful in the platform, around remote ways of working.

And our community has tons of ideas and, frankly, is always doing their own work kind of informally sharing best practices that relate to all of the things that they are doing every day to be successful working in our ecosystem. So we’ll be continuing to evolve the core catalog based on the wisdom of our community. And then also we have partners who potentially we can be bringing in to continue to up the game there as well. And ultimately, the goal here is as we raise the bar with our community on the talent quality and the client quality and kind of the work experience for everyone in our ecosystem, that’s a win for everybody who is participating.

Bernie McTernan — Needham & Company — Analyst

Great. Understood. Thank you very much for taking my question.

Operator

Thank you. One moment please for the next question. Our next question will come from Eric Sheridan of Goldman Sachs. Your line is open.

Eric Sheridan — Goldman Sachs — Analyst

Thanks. Maybe just one question for me. As you’ve seen the broader macro environment become a little bit more volatile, I know it’s early days and sort of the big market opportunity over the next couple of years. But have you seen anything different in terms of competitive intensity across the industry or elements of dynamic in terms of engaging with existing clients or prospective clients on the competition side? Thanks so much.

Hayden Brown — President, Chief Executive Officer and Director

Sure, Eric. We haven’t seen anything materially different in terms of competition. I think in conditions like these, quite often, it’s harder for the smaller kind of ankle biters in our space to stay competitive just because it gets to be a harder landscape for them. But where we’re focused is just continuing to offer our outstanding value proposition to clients and talent and forge ahead with our innovations, which I think are really meeting the needs of the market and staying ahead there. So nothing really material to report at this time.

Operator

Thank you. One moment for our next question. Our next question comes from Nathaniel Schindler of Bank of America. Your line is open.

Nathaniel Schindler — Bank of America — Analyst

Hi guys. I just wanted to focus in on how the brand campaign is going and how you are evaluating at this point now some, call it, eight months into it and whether or not it’s been successful at expanding the business.

Hayden Brown — President, Chief Executive Officer and Director

Thanks, Matt. The focus of this has always been durable growth with strong economics, which is our top priority in every investment area we make, including brand. And I’d say to bolster, the discipline and the measurability that we have and even enhance the ROI in the brand area, we did launch two partnerships in Q2 with Ipsos and Universal McCann, which we were excited about as kind of key milestones here. Secondly, we always knew, and to your point about the eight months, we committed and communicated that this would be a multi-quarter journey. And so additional milestones that we were excited about in this quarter as we’ve been on this journey where the Mother’s Day campaign which really provided us important learnings about how the Upwork brand can resonate with customers in key cultural moments and across critical channels like social.

And so we’ve been wrapping those learnings into our brand and marketing programs going forward. The third thing I’d say about this is we are really finding already that the value proposition that we have does really resonate given the broader secular trends around remote work and digital transformation as well as Upwork specific benefits around cost savings and workforce flexibility, which are so top of mind for executives in these very moments. So this is all informing our brand and marketing programs right now, as we’re going into the back half of the year at this critical time when we are really aware that we can drive share shift and catapult out of this period even stronger. So as you look to the future, because of our disciplined approach, we feel good about our ability to continue to achieve both our brand goals and achieve EBITDA profitability in 2023 and further expand our margin thereafter.

Nathaniel Schindler — Bank of America — Analyst

Great. Thanks. And then just a separate question to totally hammer in on all this macro talk because I figured that’s what everybody is going to talk about with everybody for the next couple of quarters. Can you just speculate or anything you have on history of how does the contracting business, your style of contracting business, get affected in recessions? How do enterprises respond usually in this size of the business? And is there any sort of learnings on kind of timing of where they contract and expand coming into cycles? That would be great if you could help with that.

Hayden Brown — President, Chief Executive Officer and Director

Sure. I think there’s a couple of things to say about that. We’ve looked at a few analogs for our specific business, which I think is unique and different from even traditional staff and others. So we’ve looked at our business. We’ve looked at what happened in 2008, and we grew really healthily through that period. Of course, that was 14 years ago, and the business has changed a lot since then. This is certainly a lot bigger and has more aspects to it. We looked at 2020 and what happened with the pandemic economy at that time. And what we saw there was an initial slowdown in kind of the March, April period as businesses were overall just contracting their own spend and many businesses were struggling or going under. And then, of course, we grew really nicely out of that. And I think one of the takeaways that I have from looking at those two analogs is, for us, the economy and the health of the economy is certainly a factor that impact our results.

And that’s why we have put in the $10 million to $15 million impact in the annual guidance for this year. But I think the other big impact, and perhaps even bigger impact for us, is things like these major secular trends around remote work, around digital transformation, around access to critical talent and skills, which are evergreen topics for executives that have become huge and impactful for almost every business and certainly huge for our business and core to our value proposition at this time. So I think those things together — we’re focused on the macro for sure, but we’re also as much or more focused on these critical things that are secular trends driving our business as so many businesses and the crosshairs of the value proposition that we’re selling into right now.

Nathaniel Schindler — Bank of America — Analyst

Great. Thanks guys.

Operator

Thank you. One moment for our next question. And next, we have Rohit Kulkarni of MKM Partners. Your line is open.

Rohit Kulkarni — MKM Partners — Analyst

Thanks. Nice call, guys. One question on the pricing plan. Wondering if you have any feedback in terms of the pricing plan affect any client additions, gross additions. And just broadly speaking, how have kind of gross additions trended as you kind of lap through all the tougher comp periods for active clients as such?

Jeff McCombs — Chief Financial Officer

Thanks, Rohit. Yes, as we looked at the impact of the pricing change, we paid attention to a number of different things. One, what was the level of adoption of the features that were previously behind the subscription paywall and how are those going. We’ve been really pleased to see that increase materially. And that was one of the fundamental premises of the change was to make sure those valuable tools were available to many broader folks. Second of all, was to monitor how is the overall package impacting retention. And clearly, the price was going up in some key areas. And we haven’t seen anything noticeable. We did a holdout test compared [Indecipherable] from a retention perspective. So we’re very pleased to see that. And then from a financial impact on it, we achieved our highest gross margin as a public company and our marketplace take rate was the highest [Indecipherable] company and our marketplace take was the highest marketplace take rate since being a public company as well. So we’re really pleased with the value that we’re delivering to customers and the reception of the changes.

Rohit Kulkarni — MKM Partners — Analyst

Okay. And a question on Project catalog. It’s been a while since you disclosed metrics, contribution from catalog in terms of bit client additions or GSV, wondering if you have any more details to share or anything that we can look from the outside in terms of how successful you’ve been with the rollout of Project Catalog.

Hayden Brown — President, Chief Executive Officer and Director

If I can jump in on that one, Rohit. I think the catalog experience, the way we’re seeing it now is really it’s wrapped into the overall work marketplace. Because the point of that product was never about just catalog by itself, it was about bringing customers into the broader Upwork marketplace. And where we are now is incredibly pleased with the progress we’ve made not just with catalog but with the innovations on top of that, such as consultation, which we launched in the last quarter and now are going to be rolling out from four categories to all of our categories presently because we’re really seeing that catalog and consultations are excellent inroads for customers to get started either with something small and bite-sized or becoming, for example, consultations, a great way to get into a conversation with the talent that more often than not leads to follow-on work.

And so with consultations, for example, we’re seeing clients are averaging a much faster time to hire than we had in the talent marketplace. So lower with this 1.5 days to get started. And they’re also returning to do follow-on work, which often is in the talent marketplace at a much higher rate, 50% higher than we’ve seen with talent marketplace shops historically. And so this is a nice kind of like in between offering that is really graduating clients really nicely from some version of catalog kind of into the broader marketplace. And so this is really validating yet again our whole thesis around catalog, talent marketplace, consultations as being part of this broader work marketplace ecosystem that is just adept at getting customers in the door and getting started with any variety of our products.

Rohit Kulkarni — MKM Partners — Analyst

Okay. Great. Thanks hayden. Thanks jeff.

Hayden Brown — President, Chief Executive Officer and Director

Thanks.

Operator

Thank you. One moment for the next question. Our next question comes from Logan Rick of RBC Capital Markets. Your line is open.

Logan Rick — RBC Capital Markets — Analyst

Thanks for taking my question. Logan on for Brad Erickson. A question on enterprise. You guys had a strong client growth add this quarter. Just curious what you think is the driver of that. Why are you seeing increased adoption of people signing up for enterprise now? And how much would you attribute that to the larger sales force? And I have a follow-up.

Jeff McCombs — Chief Financial Officer

Sure. Thanks Logan. I’ll start with that. So part of it is it’s simply the fact that we are executing against our plan where we identified the opportunity to invest more aggressively in building out our sales motion here. We started adding reps in Q4 of 2021. And those reps are starting to ramp and really have an impact really starting in Q2 of this quarter. So we delivered the 36 new accounts. That was up, I think, 24% year-over-year. And so we’re really pleased to see that. And then as Hayden mentioned earlier, obviously, our value proposition resonates very strongly for accounts of all sizes. We haven’t yet started to see those accounts shift exactly what they’re interested in to cost saving dynamics as a result of any recessionary dynamics. But we are actively engaged with them on those topics. So we’re really pleased by what we’re seeing both on the land side as well as the expand side and continue to be pleased with the opportunity ahead of us.

Logan Rick — RBC Capital Markets — Analyst

Great. Thanks. And then just any sort of divergence you guys might have noticed in the behavior from companies that might be cutting costs or laying off full-time employees? Are you noticing any difference in behavior from those clients relative to your overall client base?

Hayden Brown — President, Chief Executive Officer and Director

We’re really not seeing this yet. I’d say the average customer is looking just like it was over the past couple of quarters and the success stories are very similar. We have customers like Emirates NBD, that’s one of the largest banks in the Middle East and North Africa. And they came to us looking for new flexible talent that can drive innovation in their marketing team. And this is typical for us. We’re not really seeing an influx of customers who are coming to us just because they’re doing a big layoff or even our existing customers who maybe are trimming headcount coming back and saying, “Okay, now we need to overhaul the program.” So as Jeff mentioned, as we look ahead, maybe as the economy worsens or other things, there may be more of those types of things. But certainly, as we look to Q2, it was really more of kind of, I hate to call it same old, same old, but these value propositions that we’ve always had is really driving customer activity in really great ways.

Logan Rick — RBC Capital Markets — Analyst

Great. Thanks for the color. I appreciate it.

Operator

Thank you. One moment for the next question. Our next question comes from Brent Thill of Jefferies. Your line is open.

Sang-Jin Byun — Jefferies — Analyst

Hi. Thank you. This is Sang-Jin. A couple of macro questions, if possible. So you talked about the client acquisition in Europe and SMBs. I wanted to see if you could maybe add a little more color in terms of behavior there. I don’t know whether there’s any tendency for smaller projects or use of more project catalog as opposed to more hours, whether by geography or by industries or customer size? And then is a little bit different than the previous questions about enterprise, but any signs of anything on the enterprise segment in terms of activity on your platform?

Jeff McCombs — Chief Financial Officer

Sure. Thanks, John. I’ll start. In terms of activity that we’re seeing from a geographic perspective, I can’t say that there’s any notable trends or more details that we can provide. We just saw a little bit greater softening in the Europe market overall but nothing in particular to call out about specific customer segment behaviors. And then with respect to enterprise, is your question what sort of impact we’re seeing in the enterprise? Or can you clarify the question?

Sang-Jin Byun — Jefferies — Analyst

Yes. I mean in terms of the overall level of activity or clinic acquisition and so on, I mean was there any softness at all among the larger customers?

Jeff McCombs — Chief Financial Officer

Yes. What we’re seeing in enterprise is starting at the very top, we’re having good success hiring our land reps against our plan there. They continuing to execute well against their productivity targets, and we’re beating and achieving that. The new reps that we’re hiring are onboarding well. It’s early. We’re just basically, I guess, 7, eight months out of the first kind of reps that we started hiring in Q4 last year. Conversations with those accounts are going very well. No material impact is noticeable from a sales cycle perspective. And engagement with our existing accounts, also continues to go well, and you can see that in the overall revenue per account or revenue growth from the enterprise segment. So nothing to call out there.

Sang-Jin Byun — Jefferies — Analyst

Great. Thank you.

Operator

Thank you. One moment. Our last question will come from Morgan Fong of BTIG. Your line is open.

Marvin Fong — BTIG — Analyst

Good evening. Thanks for taking my question. And congratulations on LLC the quarter. Maybe to start, so many questions about the current environment, a bigger picture question perhaps. I’m just curious on maybe we just think about some of your other key performance indicators like time to hire or fill rates. In light of all the improvements you’ve been making to the platform over the past years and the new client membership structure, has either time to hire or fill rates change meaningfully in, let’s say, before the pandemic to right now? And how are those trending? And then I have a follow-up.

Hayden Brown — President, Chief Executive Officer and Director

Sure. I’d say we feel good about the state of time to hire, fill rate. Certainly, it was pretty remarkable, I think, to us that as we went through Q1, for example, and we saw a pretty significant shock to the system within the WSD web mobile software development category, as the Ukraine war and our decision to suspend operations inside of Russia and Belarus played out that, as you reported in the Q1 call, there was really no impact to fill rate in that category, for example. And so I think we’ve navigated both some external shocks potentially very well with regards to a metric like that, which is a critical on our platform. And with innovations like the launch of consultations, we’re seeing the potential for acceleration in places like time to hire with a product like that and with catalog which connects the talent and clients get on the platform even faster.

So I think all of these metrics are really healthy. And even as we look to some of the things that I think are viewed by the outside world as monetization oriented features, but truly, our marketplace health features like boosted proposals and things like that, that we’ve also launched over the last couple of quarters. These are also leading to higher quality connections, faster connections between available talent and seeking clients in the marketplace. So across the board, I think we’re feeling great about all of these metrics and where they are, and we’ll continue to just focus on innovating the product portfolio and the specific features to dial how clients and talent are getting connected.

Marvin Fong — BTIG — Analyst

Great. Thanks for that. And then just a question on guidance. So it looks like $7 million to $8 million EBITDA loss in the third quarter. And based on your full year guidance, it seems that they just pretty healthy improvement, a lower loss in the fourth quarter. And I realize the fourth quarter is probably larger revenue-wise. But is there anything else to call out, for instance, is your brand marketing spend peaking in the third quarter? Is there anything you can call out there would be great.

Jeff McCombs — Chief Financial Officer

Yes, there’s nothing overly notable. Primarily, Q4 is often a little bit stronger than Q3 from a revenue perspective and a bit harder from a marketing perspective in terms of efficiency of dollar spend. So there’s a little bit of a decline on a quarter-over-quarter basis for marketing from Q3 to Q4. Those really are the primary drivers that impact the EBITDA change from Q3 to Q4.

Marvin Fong — BTIG — Analyst

Great. Thanks jeff.

Operator

Thank you. And with our last question, I would now like to turn the conference back to Mr. Evan Barbosa for closing remarks.

Evan Barbosa — Vice President of Invertor Relations

Thanks. On behalf of the entire Upwork team, thank you for joining us today, and thank you for your interest in work. If you need any clarifications or have any follow-up questions, please do not hesitate to reach out to me at investor@upwork.com. This concludes our call.

Operator

[Operator Closing Remarks]