UPWORK INC

Previous wording

Over the past several quarters, we implemented a number of initiatives that positively impacted Marketplace revenue and Marketplace take rate, including (i) retiring the tiered service fee structure for talent working with clients on our Marketplace offering in favor of a flat fee, (ii) increasing the number of virtual tokens, which we refer to as Connects, needed by talent to bid on projects, and (iii) deploying ads products on our work marketplace. These initiatives, along with others, resulted in an increase in Marketplace revenue of $27.7 million, or 20%, for the three months ended March 31, 2024, as compared to the same period in 2023, and drove Marketplace take rate to increase to 17.7% for the three months ended March 31, 2024, as compared to 14.7% in the same period in 2023.

Current wording

Over the past several quarters, we implemented a number of initiatives that positively impacted Marketplace revenue and Marketplace take rate, including (i) retiring the tiered service fee structure for talent working with clients on our Marketplace offering in favor of a flat fee, (ii) increasing the number of virtual tokens, which we refer to as Connects, needed by talent to bid on projects, (iii) deploying ads products on our work marketplace, and (iv) introducing new features, with a focus on machine learning and generative artificial intelligence. These initiatives, along with others, resulted in an increase in Marketplace revenue of $24.5 million, or 17%, and $52.1 million, or 19%, for the three and six months ended June 30, 2024, as compared to the same periods in 2023, respectively. Marketplace take rate also benefited from these initiatives, increasing to 18.0% and 17.9% for the three and six months ended June 30, 2024, respectively, as compared to 15.0% and 14.9% in the same periods in 2023, respectively.

Previous wording

During the three months ended March 31, 2024, we generated net income of $18.4 million and adjusted EBITDA of $33.3 million, as compared to net income of $17.2 million and adjusted EBITDA loss of $2.9 million during the same period in 2023. These improvements were primarily a result of cost-saving measures we implemented in 2023, including reducing our investments in brand marketing and vendor spend and reducing the size of our workforce. We expect these measures will continue to positively impact net income and adjusted EBITDA in 2024, as compared to 2023. Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with generally accepted accounting principles in the United States, which we refer to as U.S. GAAP. See “Key Financial and Operational Metrics—Non-GAAP Financial Measures” below for a definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared under U.S. GAAP.

Current wording

During the three months ended June 30, 2024, we generated net income of $22.2 million and adjusted EBITDA of $40.8 million, as compared to a net loss of $4.0 million and adjusted EBITDA of $14.4 million during the same period in 2023. During the six months ended June 30, 2024, we generated net income of $40.7 million and adjusted EBITDA of $74.2 million, as compared to net income of $13.2 million and adjusted EBITDA of $11.4 million during the same period in 2023. These improvements were primarily a result of cost-saving measures we implemented in 2023, including reducing our investments in brand marketing and vendor spend. We expect these measures will continue to positively impact net income and adjusted EBITDA in 2024, as compared to 2023. Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with generally accepted accounting principles in the United States, which we refer to as U.S. GAAP. See “Key Financial and Operational Metrics—Non-GAAP Financial Measures” below for a definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared under U.S. GAAP.

Previous wording

We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. As of and for the three months ended March 31, 2024 and 2023, our key financial and operating metrics were as follows:

Current wording

We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. As of and for the three and six months ended June 30, 2024 and 2023, our key financial and operating metrics were as follows:

Previous wording

(2) Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with U.S. GAAP. See “—Non-GAAP Financial Measures” below for the definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared under U.S. GAAP.

Current wording

(2) Adjusted EBITDA is not prepared in accordance with, and is not an alternative to, financial measures prepared in accordance with U.S. GAAP. See “—Non-GAAP Financial Measures” below for the definition of adjusted EBITDA, information regarding our use of adjusted EBITDA, and a reconciliation of adjusted EBITDA to net income (loss), the most directly comparable financial measure prepared under U.S. GAAP.

Previous wording

The following table presents a reconciliation of net income, the most directly comparable financial measure prepared in accordance with U.S. GAAP, to adjusted EBITDA for each of the periods indicated:

Current wording

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure prepared in accordance with U.S. GAAP, to adjusted EBITDA for each of the periods indicated:

Previous wording

(1)During the three months ended March 31, 2023, we recognized a gain of $38.9 million on the early extinguishment of debt, which is included in other income, net in the condensed consolidated statement of operations and comprehensive income.

Current wording

(1)During the six months ended June 30, 2023, we recognized a gain of $38.9 million on the early extinguishment of a portion of our 0.25% convertible senior notes due 2026, which we refer to as the Notes, which is included in other income, net in the condensed consolidated statement of operations and comprehensive income (loss).

Previous wording

(2)During each of the three months ended March 31, 2024 and 2023, we incurred $0.2 million of expense related to our Tides Foundation warrant.

Current wording

(2)During each of the three and six months ended June 30, 2024 and 2023, we incurred $0.2 million and $0.4 million, respectively, of expense related to our Tides Foundation warrant.

Previous wording

Because of these and other limitations, you should consider adjusted EBITDA along with other financial performance measures, including net income and our other financial results prepared in accordance with U.S. GAAP.

Current wording

Because of these and other limitations, you should consider adjusted EBITDA along with other financial performance measures, including net income (loss) and our other financial results prepared in accordance with U.S. GAAP.

Previous wording

Gross Profit and Gross Margin. Our gross profit and gross margin may fluctuate from period to period. Such fluctuations may be influenced by our revenue, the mix of payment methods that our clients choose, the timing and amount of investments to expand hosting capacity, our continued investments in our services and support teams, the timing and amounts paid to talent in connection with our Managed Services offering, and the amortization expense associated with capitalized internal-use software and platform development costs. In addition, gross margin will be impacted by fluctuations in our revenue mix between Marketplace revenue and Enterprise revenue. We expect gross profit to increase in absolute dollars in future periods, although gross margin, expressed as a percentage of total revenue, may vary from period to period.

Current wording

Gross Profit and Gross Margin. Our gross profit and gross margin may fluctuate from period to period. Such fluctuations may be influenced by our revenue, the mix of payment methods that our clients choose, the timing and amount of investments to expand hosting capacity, our continued investments in our services and support teams, the timing and amounts paid to talent in connection with our Managed Services offering, and the amortization expense associated with capitalized internal-use software and platform development costs. In addition, gross margin will be impacted by fluctuations in our revenue mix between Marketplace revenue and Enterprise revenue.

Previous wording

We account for income taxes in accordance with the asset and liability method. Under the asset and liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

Current wording

We account for income taxes in accordance with the asset and liability method. Under the asset and liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. We currently maintain a full valuation allowance on all deferred tax assets, including net operating loss carryforwards and certain domestic tax credits. We regularly evaluate the need for a valuation allowance based on all available positive and negative evidence. Given our recent current and anticipated future earnings, some portion of our U.S. valuation allowance may be released in the near future.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

During the three months ended March 31, 2024, GSV remained relatively flat at $1.0 billion, as compared to the same period in 2023. The number of active clients increased 5% as of March 31, 2024, as compared to March 31, 2023, driven by improvements in both acquisition of new clients and retention of existing clients. As a result of the increase in active clients while GSV remained relatively flat, our GSV per active client decreased 4% as of March 31, 2024, as compared to March 31, 2023.

Current wording

During the three and six months ended June 30, 2024, macroeconomic conditions adversely impacted GSV, which declined 2.7% and 1.1%, as compared to the same periods in 2023, respectively. The number of active clients increased 6% as of June 30, 2024, as compared to June 30, 2023, driven by improvements in both acquisition of new clients and retention of existing clients. As a result of the increase in active clients while GSV declined, our GSV per active client decreased 5% as of June 30, 2024, as compared to June 30, 2023. We expect no material improvement to macroeconomic conditions through the remainder of 2024.

Previous wording

For the three months ended March 31, 2024, Marketplace revenue increased, as compared to the same period in 2023, due to a number of initiatives that we implemented over the past several quarters, including modifying existing offerings and other services and features. Specifically, we retired the tiered service fee structure for talent working with clients on our Marketplace offering—ranging from 5% to 20%—in favor of a flat fee of 10%, increased the number of Connects needed by talent to bid on projects, deployed ads products on our work marketplace, and introduced a contract initiation fee for clients on our Marketplace offering. These factors also drove Marketplace revenue to grow at a faster rate than GSV from our Marketplace offerings, which caused Marketplace take rate to increase to 17.7% during the three months ended March 31, 2024, as compared to 14.7% in the same period in 2023. We anticipate continuing to add new, and modify existing, offerings, services, and features. As a result of the initiatives we implemented over the past several quarters, as well as new changes anticipated in 2024, we expect Marketplace revenue and Marketplace take rate to continue to increase in 2024, as compared to 2023.

Current wording

For the three and six months ended June 30, 2024, Marketplace revenue increased, as compared to the same periods in 2023, due to a number of initiatives that we implemented over the past several quarters, including modifying existing offerings and other services and features. Specifically, we retired the tiered service fee structure for talent working with clients on our Marketplace offering—ranging from 5% to 20%—in favor of a flat fee of 10%, increased the number of Connects needed by talent to bid on projects, deployed ads products on our work marketplace, and introduced a contract initiation fee for clients on our Marketplace offering. These factors also drove Marketplace revenue to grow at a faster rate than GSV from our Marketplace offerings, which caused Marketplace take rate to increase to 18.0% and 17.9% during the three and six months ended June 30, 2024, respectively, as compared to 15.0% and 14.9% in the same periods in 2023, respectively.

Previous wording

For the three months ended March 31, 2024, Enterprise revenue increased, as compared to the same period in 2023, primarily due to increased revenue from our Managed Services offering, driven by new spend from existing clients. We intend to focus on efforts to attract new clients of both our Enterprise Solutions and Managed Services offerings, as well as talent that meet the criteria sought by such clients. As a result, we expect Enterprise revenue to increase in 2024, as compared to 2023.

Current wording

For the three months ended June 30, 2024, Enterprise revenue remained flat, as compared to the same period in 2023. For the six months ended June 30, 2024, Enterprise revenue increased, as compared to the same period in 2023, primarily due to increased revenue from our Managed Services offering, driven by new spend from existing clients. We intend to focus on efforts to attract new clients of both our Enterprise Solutions and Managed Services offerings, as well as talent that meet the criteria sought by such clients.

Previous wording

For the three months ended March 31, 2024, cost of revenue increased, as compared to the same period in 2023, primarily due to increases of $1.9 million in the cost of talent services to deliver Managed Services revenue and $1.2 million of amortization expense related to internal-use software and platform development costs. For the three months ended March 31, 2024, gross margin increased to 77%, as compared to 75% in the same period in 2023, primarily driven by the increase in Marketplace revenue.

Current wording

For the three and six months ended June 30, 2024, cost of revenue increased, as compared to the same periods in 2023, primarily due to increases in the cost of talent services to deliver Managed Services revenue of $2.0 million and $3.8 million, respectively, and amortization expense related to internal- use software and platform development costs of $1.3 million and $2.5 million, respectively. For each of the three and six months ended June 30, 2024, gross margin increased to 77%, as compared to 76% and 75% in the same periods in 2023, respectively, primarily driven by the increase in Marketplace revenue.

Previous wording

We expect cost of revenue to increase in future periods as we continue to support growth on our work marketplace. Amounts paid to talent in connection with our Managed Services offering are tied to the volume of managed services used by our clients. The level and timing of these items could fluctuate and affect our cost of revenue in the future. We expect the pricing changes that we have made over the past several quarters will continue to positively impact gross margin in 2024, as compared to 2023.

Current wording

We expect cost of revenue to increase in future periods as we continue to support growth on our work marketplace. Amounts paid to talent in connection with our Managed Services offering are tied to the volume of managed services used by our clients. The level and timing of these items could fluctuate and affect our cost of revenue in the future. We expect the pricing changes that we have made over the past several quarters will positively impact gross margin in 2024, as compared to 2023.

Previous wording

For the three months ended March 31, 2024, research and development expense increased, as compared to the same period in 2023, primarily due to investments we made to increase the size of our research and development workforce that resulted in increases in personnel-related costs of $6.6 million.

Current wording

For the three and six months ended June 30, 2024, research and development expense increased, as compared to the same periods in 2023, primarily due to investments we made to increase the size of our research and development workforce that resulted in increases in personnel-related costs of $7.5 million and $14.2 million, respectively. Additionally, for the six months ended June 30, 2024, costs related to software and intangible amortization increased $1.3 million and $0.8 million, respectively, compared to the same period in 2023.

Previous wording

We remain committed to ongoing innovation to further enhance our platform, including the quality of our offerings, and to build new features, in particular, with a focus on machine learning and generative artificial intelligence. We expect research and development expense to moderately increase in absolute dollars in future periods, although this expense, expressed as a percentage of total revenue, may vary year over year.

Current wording

We remain committed to ongoing innovation to further enhance our platform, including improving the quality of our offerings and building new features, with a focus on machine learning and generative artificial intelligence. We expect research and development expense to increase in future periods, as compared to the same periods in 2023, but decline as a percentage of revenue throughout the remainder of 2024.

Previous wording

During the three months ended March 31, 2024, sales and marketing expense decreased, as compared to the same period in 2023, due to a number of cost-saving measures that we implemented in the second quarter of 2023, including reducing our investments in brand marketing and vendor spend, as well as implementing a reduction of our workforce and slowing our Enterprise sales hiring pace. As a result, during the three months ended March 31, 2024, we experienced reductions in marketing and advertising expense of $14.7 million and personnel-related costs of $1.7 million, as compared to the same period in 2023.

Current wording

For the three and six months ended June 30, 2024, sales and marketing expense decreased, as compared to the same periods in 2023, due to a number of cost-saving measures that we implemented in the second quarter of 2023, including reducing our investments in brand marketing and vendor spend, as well as implementing a reduction of our workforce and slowing our Enterprise sales hiring pace. As a result, during the three and six months ended June 30, 2024, we experienced reductions in marketing and advertising expense of $8.8 million and $23.5 million, respectively, and personnel-related costs of $2.7 million and $4.4 million, respectively, as compared to the same periods in 2023.

Previous wording

For the three months ended March 31, 2024, general and administrative expense increased primarily due to increases in personnel-related costs of $1.4 million, as compared to the same period in 2023.

Current wording

For the three and six months ended June 30, 2024, general and administrative expense increased primarily due to increases in personnel-related costs of $0.6 million and $2.0 million, respectively, as compared to the same periods in 2023.

Previous wording

We continue to enhance our trust and safety measures to reduce bad debt losses, instances of fraud, and chargeback losses. As a result, for the three months ended March 31, 2024, provision for transaction losses decreased, as compared to the same period in 2023. We continue to closely monitor these activities and maintain a number of measures designed to mitigate transaction losses going forward.

Current wording

We maintain trust and safety measures designed to mitigate bad debt losses, instances of fraud, and chargeback losses. For the three and six months ended June 30, 2024, provision for transaction losses decreased, as compared to the same periods in 2023.

Previous wording

For the three months ended March 31, 2024, other income, net decreased, as compared to the same period in 2023, due to a gain on the early extinguishment of debt of $38.9 million that we recognized during the three months ended March 31, 2023.

Current wording

For the three months ended June 30, 2024, other income, net increased, as compared to the same period in 2023, due to increases in interest income earned on marketable securities. For the six months ended June 30, 2024, other income, net decreased, as compared to the same period in 2023, due to a gain of $38.9 million on the early extinguishment of a portion of the Notes that we recognized during the three months ended March 31, 2023, partially offset by increases in interest income earned on marketable securities.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents and marketable securities. Our cash equivalents and marketable securities primarily consist of money market funds, commercial paper, treasury bills, corporate bonds, U.S. and foreign government securities, asset-backed securities, and other types of fixed income securities. The primary objective of our investment activities from our operating investments is to preserve principal while maximizing income without significantly increasing risk. Since our inception, our business has consisted of the operation of an online work marketplace that connects businesses with independent talent from across the globe, and we do not make investments for trading or speculative purposes. As of March 31, 2024 and December 31, 2023, we had $24.7 million and $79.6 million in cash and cash equivalents, respectively. As of March 31, 2024 and December 31, 2023, we had $465.9 million and $470.5 million in marketable securities, respectively.

Current wording

Our principal sources of liquidity are our cash and cash equivalents and marketable securities. Our cash equivalents and marketable securities primarily consist of money market funds, commercial paper, treasury bills, corporate bonds, U.S. and foreign government securities, asset-backed securities, and other types of fixed income securities. The primary objective of our investment activities from our operating investments is to preserve principal while maximizing income without significantly increasing risk. Since our inception, our business has consisted of the operation of an online work marketplace that connects businesses with independent talent from across the globe, and we do not make investments for trading or speculative purposes. As of June 30, 2024 and December 31, 2023, we had $182.8 million and $79.6 million in cash and cash equivalents, respectively. As of June 30, 2024 and December 31, 2023, we had $314.9 million and $470.5 million in marketable securities, respectively.

Previous wording

We believe our existing cash and cash equivalents, marketable securities, and cash flow from operations (in periods in which we generate cash flow from operations) will be sufficient for at least the next 12 months to meet our requirements and plans for cash, including meeting our working capital requirements and capital expenditure requirements. In the long term, our ability to support our working capital and capital expenditure requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the cost to host our work marketplace, the introduction of new offerings and services, the continuing market adoption of our work marketplace, any acquisitions or investments that we make in complementary businesses, products, and technologies, macroeconomic conditions, the number of shares of our common stock that we repurchase under our share repurchase program, which we refer to as the Share Repurchase Program, or the aggregate principal amount of our outstanding 0.25% convertible senior notes due 2026, which we refer to as the Notes, that we repurchase, and our ability to obtain equity or debt financing.

Current wording

We believe our existing cash and cash equivalents, marketable securities, and cash flow from operations (in periods in which we generate cash flow from operations) will be sufficient for at least the next 12 months to meet our requirements and plans for cash, including meeting our working capital requirements and capital expenditure requirements. In the long term, our ability to support our working capital and capital expenditure requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the cost to host our work marketplace, the introduction of new offerings and services, the continuing market adoption of our work marketplace, any acquisitions or investments that we make in complementary businesses, products, and technologies, macroeconomic conditions, any repurchases of shares of our outstanding common stock or of our outstanding Notes, and our ability to obtain equity or debt financing.

Previous wording

Our principal commitments consist of the Notes and obligations under our non-cancellable operating leases for office space. There were no material changes to our commitments under our lease agreements from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. Assuming the outstanding Notes are not converted into our common stock, repurchased, or redeemed prior to maturity, (i) annual interest expense relating to the Notes will be $2.7 million in each fiscal year through 2025 and $1.8 million in 2026 and (ii) principal in the amount of $361.0 million will be payable upon the maturity of the Notes on August 15, 2026. For additional information about our Notes, see the section below titled “—Convertible Senior Notes Due 2026.”

Current wording

Our principal commitments consist of the Notes, future purchase commitments for cloud infrastructure and other services of $20.0 million for each of the twelve months ending June 30, 2025 and 2026, and obligations under our non-cancellable operating leases for office space. There were no material changes to our commitments under our lease agreements from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. Assuming the outstanding Notes are not converted into our common stock, repurchased, or redeemed prior to maturity, (i) annual interest expense relating to the Notes will be $2.7 million in each fiscal year through 2025 and $1.8 million in 2026 and (ii) principal in the amount of $361.0 million will be payable upon the maturity of the Notes on August 15, 2026. For additional information about our Notes, see the section below titled “—Convertible Senior Notes Due 2026.”

Previous wording

In November 2023, our board of directors authorized the Share Repurchase Program, under which we may repurchase up to $100.0 million of shares of our outstanding common stock. Repurchases of our common stock under the Share Repurchase Program may be made from time to time on the open market (including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act), in privately negotiated transactions, or by other methods, at our discretion, and in accordance with applicable securities laws and other restrictions. The Share Repurchase Program has no expiration date and will continue until otherwise suspended, terminated, or modified at any time for any reason. The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the timing and amount of any repurchases will depend on market and business conditions.

Current wording

In November 2023, our board of directors authorized a share repurchase program for the repurchase of up to $100.0 million of shares of our outstanding common stock, which we refer to as the Share Repurchase Program. Repurchases of our common stock under the Share Repurchase Program may be made from time to time on the open market (including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act), in privately negotiated transactions, or by other methods, at our discretion, and in accordance with applicable securities laws and other restrictions. The Share Repurchase Program has no expiration date and will continue until otherwise suspended, terminated, or modified at any time for any reason. The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the timing and amount of any repurchases will depend on market and business conditions.

Previous wording

During the three months ended March 31, 2024, we repurchased and subsequently retired 5.0 million shares of common stock for an aggregate amount of $64.8 million at an average price of $12.83 per share, including fees associated with the repurchases. In addition, during the three months ended March 31, 2024, we repurchased 0.2 million shares of common stock for an aggregate amount of $2.1 million at an average price of $12.22 per share, including fees associated with the repurchases, that were subsequently retired in April 2024 and recorded as treasury stock in the condensed consolidated balance sheet as of March 31, 2024. As of March 31, 2024, we had $33.1 million available for repurchases under the Share Repurchase Program. In April 2024, we repurchased the remaining amount available under the Share Repurchase Program.

Current wording

During the three and six months ended June 30, 2024, we repurchased and subsequently retired 2.9 million and 8.1 million shares of common stock for an aggregate amount of $33.1 million and $100.0 million at an average price of $11.60 and $12.38 per share, including fees associated with the repurchases, respectively. As of June 30, 2024, we had no remaining balance available for repurchases under the Share Repurchase Program.

Previous wording

As a licensed internet escrow agent, we offer escrow services to customers of our work marketplace and, as such, we are required to hold our customers’ escrowed cash and in-transit cash in trust as an asset and record a corresponding liability for escrow funds held on behalf of talent and clients on our balance sheet. We expect the balances of our funds held in escrow, including funds held in transit, and the related liability to grow as GSV grows and may vary from period to period. Escrow regulations require us to fund the trust with our operating cash to cover shortages due to the timing of cash receipts from clients for completed hourly billings. Talent submit their billings for hourly contracts to their clients on a weekly basis every Sunday, and the aggregate amount of such billings is added to escrow funds payable to talent on the same day. As of each Sunday of each week, we have not yet collected funds for hourly billings from clients as these funds are in transit. Therefore, in order to satisfy escrow funding requirements, every Sunday we fund the shortage of cash in trust with our own operating cash and typically collect this cash shortage from clients within the next several days. As a result, we expect our total cash and cash flows from operating activities to be impacted when a quarter ends on a Sunday. As of March 31, 2024 and December 31, 2023, funds held in escrow, including funds in transit, were $222.9 million and $212.4 million, respectively. Funds held in escrow are deposited in interest-bearing checking accounts.

Current wording

As a licensed internet escrow agent, we offer escrow services to customers of our work marketplace and, as such, we are required to hold our customers’ escrowed cash and in-transit cash in trust as an asset and record a corresponding liability for escrow funds held on behalf of talent and clients on our balance sheet. We expect the balances of our funds held in escrow, including funds held in transit, and the related liability to grow as GSV grows and may vary from period to period. Escrow regulations require us to cover the trust with our operating cash in the event of shortages due to the timing of cash receipts from clients for completed hourly billings. Talent submit their billings for hourly contracts to their clients on a weekly basis every Sunday, and the aggregate amount of such billings is added to escrow funds payable to talent on the same day. As of each Sunday of each week, we have not yet collected funds for hourly billings from clients as these funds are in transit. Therefore, in order to satisfy escrow funding requirements, every Sunday we match the shortage of cash in trust by restricting our own operating cash and typically collect this cash shortage from clients within the next several days. As a result, we expect our total cash and cash flows from operating activities to be impacted when a quarter ends on a Sunday. As of June 30, 2024 and December 31, 2023, funds held in escrow, including funds in transit, were $218.7 million and $212.4 million, respectively. We deposit a portion of funds held in escrow in interest-bearing checking accounts.

Previous wording

For the three months ended March 31, 2024, net cash provided by operating activities was $5.7 million, which resulted from net income of $18.4 million and non-cash adjustments of $17.5 million, offset by net cash outflows of $30.3 million from changes in operating assets and liabilities.

Current wording

For the six months ended June 30, 2024, net cash provided by operating activities was $42.9 million, which resulted from net income of $40.7 million and non-cash adjustments of $40.2 million, offset by net cash outflows of $37.9 million from changes in operating assets and liabilities.

Previous wording

For the three months ended March 31, 2023, net cash used in operating activities was $8.7 million, which resulted from net income of $17.2 million, offset by adjustments of $15.1 million, driven by the gain of $38.9 million on the early extinguishment of debt, and net cash outflows of $10.8 million from changes in operating assets and liabilities.

Current wording

For the six months ended June 30, 2023, net cash used in operating activities was $4.4 million, which resulted from net income of $13.2 million and adjustments of $5.7 million, driven by the gain of $38.9 million on the early extinguishment of a portion of the Notes, offset by net cash outflows of $23.3 million from changes in operating assets and liabilities.

Previous wording

For the three months ended March 31, 2024, net cash provided by investing activities was $6.1 million, which was primarily a result of proceeds from maturities of marketable securities of $131.8 million and proceeds from the sale of marketable securities of $26.9 million, partially offset by investing $149.9 million in various marketable securities, as well as $2.5 million of internal-use software and platform development costs that we paid during the period.

Current wording

For the six months ended June 30, 2024, net cash provided by investing activities was $156.5 million, which was primarily a result of proceeds from maturities of marketable securities of $321.8 million and proceeds from the sale of marketable securities of $35.4 million, partially offset by investing $194.3 million in various marketable securities, as well as $5.6 million of internal-use software and platform development costs that we paid during the period.

Previous wording

For the three months ended March 31, 2023, net cash provided by investing activities was $152.1 million, which was primarily a result of proceeds from maturities of marketable securities of $167.4 million and proceeds from the sale of marketable securities of $143.7 million to enable the repurchase of a portion of the Notes, partially offset by investing $156.1 million in various marketable securities, as well as $2.7 million of internal-use software and platform development costs that we paid during the period.

Current wording

For the six months ended June 30, 2023, net cash provided by investing activities was $196.9 million, which was primarily a result of proceeds from maturities of marketable securities of $307.4 million and proceeds from the sale of marketable securities of $149.9 million, including $143.7 million to enable the repurchase of a portion of the Notes, partially offset by investing $254.1 million in various marketable securities, as well as $6.1 million of internal-use software and platform development costs that we paid during the period.

Previous wording

For the three months ended March 31, 2024, net cash used in financing activities was $56.2 million, which was driven by $66.9 million cash paid for repurchases under the Share Repurchase Program, partially offset by an increase in escrow funds payable of $10.6 million.

Current wording

For the six months ended June 30, 2024, net cash used in financing activities was $90.0 million, which was driven by $100.0 million cash paid for repurchases under the Share Repurchase Program, partially offset by an increase in escrow funds payable of $6.3 million, proceeds received from our 2018 Employee Stock Purchase Plan, which we refer to as the 2018 ESPP, of $2.9 million, and cash received from stock option exercises of $0.8 million.

Previous wording

For the three months ended March 31, 2023, net cash used in financing activities was $152.0 million, which was driven by $170.8 million that we paid to repurchase a portion of the Notes, partially offset by an increase in escrow funds payable of $18.0 million and cash received from stock option exercises of $0.8 million.

Current wording

For the six months ended June 30, 2023, net cash used in financing activities was $151.6 million, which was driven by $171.3 million that we paid to consummate the repurchase of a portion of the Notes, including related fees to effect the repurchase, partially offset by an increase in escrow funds payable of $16.2 million, proceeds received from the 2018 ESPP of $2.6 million, and cash received from stock option exercises of $0.9 million.