UPWORK, INC

Unless otherwise expressly stated or the context otherwise requires, references in this Quarterly Report on Form 10-Q, which we refer to as this Quarterly Report, to “Upwork,” “Company,” “our,” “us,” and “we” and similar references refer to Upwork Inc. and its wholly owned subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements other than statements of historical fact, including any statements regarding our future operating results and financial position, information or predictions concerning the future of our business or strategy, future products, features, or functionality, anticipated events and trends, including future research and development, sales and marketing, and general and administrative expenses, and provision for transaction losses, potential growth or growth prospects, our competitive position, technological and market trends, industry environment, the economy, our plans with respect to share repurchases, and the expected impact and timing of strategic initiatives, including the acquisition of WorkMotion Software GmbH by a subsidiary of the Company, or cost-saving initiatives, including the restructuring announced in May 2026, which we refer to as the 2026 Restructuring, and other future conditions. Words such as “believes,” “may,” “will,” “estimates,” “potential,” “continues,” “anticipates,” “intends,” “expects,” “could,” “would,” “projects,” “plans,” “targets,” and variations of such words and similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections as of the date of this filing about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report and in other documents we file from time to time with the Securities and Exchange Commission, which we refer to as the SEC, that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Quarterly Report are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update such statements for any reason after the date of this Quarterly Report or to conform statements to actual results or revised expectations, except as required by law.

You should read this Quarterly Report and the documents that we reference herein and have filed with the SEC or incorporated by reference as exhibits to this Quarterly Report with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

PART I—FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Notes to Condensed Consolidated Financial Statements

Note 1—Organization and Description of Business

Upwork Inc., which is referred to as the Company or Upwork, through its complementary, wholly owned subsidiaries, connects businesses with global, AI-enabled talent across every on-demand work type, including freelance, agency, fractional, and payrolled. The Company’s portfolio of platforms and other workforce solutions includes the Upwork Marketplace, the world’s human and AI-powered work marketplace that connects businesses with on-demand access to highly skilled independent talent worldwide, and Lifted, the Company’s wholly owned subsidiary that provides a purpose-built solution for enterprise organizations to source, contract, manage, and pay talent across the full spectrum of contingent work.

The Company’s customers consist of both talent and clients, where talent includes independent professionals and agencies of varying sizes that deliver services through the Upwork Marketplace, Lifted, or other Company workforce solutions. Clients range from small businesses and entrepreneurs to large enterprises that seek and engage with talent through these platforms and other workforce solutions.

Upwork Inc. is incorporated in the state of Delaware and is headquartered in Palo Alto, California.

Unless otherwise expressly stated or the context otherwise requires, the terms “Upwork” and the “Company” in these notes to the condensed consolidated financial statements refer to Upwork Inc. and its wholly owned subsidiaries.

Note 2—Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, which is referred to as U.S. GAAP, and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which is referred to as the Annual Report, filed with the SEC on February 13, 2026.

The condensed consolidated balance sheet as of December 31, 2025, included herein, was derived from the audited financial statements as of that date but does not include all disclosures, including notes, required by U.S. GAAP.

The condensed consolidated financial statements include the accounts of Upwork and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

The accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair statement of the financial position, results of operations, changes in stockholders’ equity and cash flows for the interim periods, but do not purport to be indicative of the results of operations or financial condition to be anticipated for the full year ending December 31, 2026. Prior period presentation has been revised to conform to the current period presentation as of September 30, 2026.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods presented. Such estimates include, but are not limited to: valuation of acquired intangible assets; the useful lives of assets; assessment of the recoverability of long-lived assets; goodwill impairment; allowance for expected credit losses; liabilities relating to transaction losses; stock-based compensation; and accounting for income taxes. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. The Company evaluates its estimates, assumptions, and judgments on an ongoing basis using historical experience and other factors and revises them when facts and circumstances dictate.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Summary of Significant Accounting Policies

The significant accounting policies applied in the Company’s audited consolidated financial statements, as disclosed in the Annual Report, are applied consistently in these unaudited interim condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which is referred to as ASU 2025-05. ASU 2025-05 provides an optional practical expedient to permit entities to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of short-term trade receivables and contract assets when developing reasonable and supportable forecasts for estimating expected credit losses. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025. The Company adopted ASU 2025-05. The Company has evaluated the impact of ASU 2025-05 and as a result its adoption did not have a material impact on the consolidated financial statements. The Company’s trade receivables are short-duration in nature and have historically experienced low credit losses, and its existing aging-based allowance methodology is substantially consistent with the practical expedient introduced by ASU 2025-05.

Recent Accounting Pronouncements Not Yet Adopted

With the exception of those discussed below, the Company has reviewed the accounting pronouncements issued prior to or during the nine months ended September 30, 2026, and concluded they were either not applicable or not expected to have a material impact on the Company’s condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which is referred to as ASU 2024-03. ASU 2024-03 requires public entities to disclose detailed information about specific types of expenses included within the expense captions presented on the face of the income statement. While ASU 2024-03 does not alter the presentation of expense captions on the face of the income statement, it introduces requirements for disaggregating certain expense captions into specified categories within the footnotes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statements and accompanying footnotes.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which is referred to as ASU 2025-06. ASU 2025-06 modernizes the accounting for internal-use software by removing all references to prescriptive and sequential software development stages. ASU 2025-06 requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed and the software will be used for its intended purpose. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the timing of adoption and the potential impact of this new guidance on its consolidated financial statements.

Note 3—Revenue

Disaggregation of Revenue

Based on the information provided to and reviewed by the Chief Operating Decision Maker, who is referred to as the CODM, the nature, amount, timing, and uncertainty of revenue and cash flows and how they are affected by economic factors are most appropriately depicted by the type of service and primary geographical markets. Revenues recorded within these categories are earned from similar products and services for which the nature of associated fees and the related revenue recognition models are substantially similar.

The Company disaggregates revenue by two types of services: Marketplace revenue and Enterprise revenue.

The following table sets forth total revenue by type of service for the periods presented:

The following table sets forth total revenue by geographic area based on the billing address of talent and clients for the periods presented:

(1) During each of the three and nine months ended September 30, 2026 and 2025, no single country included in the Rest of world category had revenue that exceeded 10% of total talent revenue, total clients revenue, or total revenue.

(2)For the three and nine months ended September 30, 2025, the Company revised the presentation for Clients between United States and Rest of world to reflect additional information obtained regarding the geographic attribution of revenue from Ascen Inc., which is referred to as Ascen, and was acquired in August 2025. This revision did not affect Total clients revenue, total revenue, or the Company’s condensed consolidated financial statements for any period presented.

Deferred Revenue and Remaining Performance Obligation

Deferred revenue represents amounts billed in advance for services not yet rendered.

Deferred revenue expected to be recognized within the next twelve months is classified as current deferred revenue.

The Company has applied the practical expedients and exemptions and does not disclose the value of remaining performance obligations for (i) contracts with an original expected length of one year or less; and (ii) contracts for which the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation under the series guidance.

Contract Balances

The following table provides information about the balances of the Company’s Trade and client receivables, net of allowance and contract liabilities included in deferred revenue and other liabilities, noncurrent as of the dates presented:

During the nine months ended September 30, 2026, changes in the contract liabilities balances were primarily the result of normal business activity.

Revenue recognized during the three months ended September 30, 2026 that was included in the deferred revenue balance as of June 30, 2026 was $8.6 million. Revenue recognized during the nine months ended September 30, 2026 that was included in the deferred revenue balance as of December 31, 2025 was $7.8 million.

Revenue recognized during the three months ended September 30, 2025 that was included in the deferred revenue balance as of June 30, 2025 was $7.8 million. Revenue recognized during the nine months ended September 30, 2025 that was included in the deferred revenue balance as of December 31, 2024 was $7.3 million.

Note 4—Fair Value Measurements

The Company defines fair value as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance describes three levels of inputs that may be used to measure fair value:

•Level I—Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets;

•Level II—Observable inputs other than Level I prices, such as unadjusted quoted prices for similar assets or liabilities in active markets, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•Level III—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on the Company’s own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

The categorization of a financial instrument within the fair value hierarchy is based upon the lowest level of input that is significant to its fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the assets or liabilities.

The Company’s financial instruments that are carried at fair value consist of Level I and Level II assets as of September 30, 2026 and December 31, 2025. The following tables summarize the Company’s available-for-sale marketable securities’ amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category reported as cash equivalents or marketable securities as of September 30, 2026 and December 31, 2025:

Additionally, the Company deposits funds held in escrow in interest-bearing and non-interest-bearing cash accounts. The interest earned on the interest-bearing accounts is included in Revenue in the Company’s condensed consolidated statements of operations and comprehensive income. As of September 30, 2026 and December 31, 2025, the fair value of the Company’s funds held on behalf of customers and held in interest-bearing cash accounts was measured using Level I inputs.

The Company’s non-financial assets acquired pursuant to its acquisitions of Bubty B.V., which is referred to as Bubty, and Ascen, including intangible assets and goodwill, are measured at estimated fair value on a non-recurring basis. For additional information, refer to “Note 7—Business Combination.”

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable securities as of September 30, 2026:

Unrealized Investment Losses

For available-for-sale marketable debt securities with unrealized loss positions, the Company does not intend to sell these securities, nor does it anticipate that it will need to or be required to sell the securities before recovery of their amortized cost basis. As of September 30, 2026 and December 31, 2025, the decline in fair value of these securities was attributable to changes in interest rates and not due to credit-related factors. Accordingly, no allowance for credit losses has been recorded as of September 30, 2026 and December 31, 2025. and the Company did not record any credit loss expense or write-down related to its available-for-sale debt securities during each of the three and nine months ended September 30, 2026 and 2025.

During the three months ended September 30, 2026 and 2025, interest income, net was $4.6 million and $6.8 million, respectively. During the nine months ended September 30, 2026 and 2025, interest income, net was $15.5 million and $20.6 million, respectively. Interest income, net is included in Other income, net in the Company’s condensed consolidated statements of operations and comprehensive income.

Note 5—Balance Sheet Components

Cash and Cash Equivalents, Restricted Cash, and Funds Held In Escrow, Including Funds In Transit

The following table reconciles cash and cash equivalents, restricted cash, and funds held in escrow that are restricted as reported in the condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025 to the total of the same amounts shown in the condensed consolidated statement of cash flows for the nine months ended September 30, 2026:

Property and Equipment, Net

Property and equipment, net consisted of the following as of the dates presented:

For the three months ended September 30, 2026 and 2025, depreciation expense related to property and equipment, excluding internal-use software and platform development, was $1.1 million and $0.7 million, respectively. For the nine months ended September 30, 2026 and 2025, depreciation expense related to property and equipment, excluding internal-use software and platform development, was $2.6 million and $1.5 million, respectively.

For the three months ended September 30, 2026 and 2025, the Company capitalized $9.6 million and $6.3 million of internal-use software and platform development costs, respectively. For the nine months ended September 30, 2026 and 2025, the Company capitalized $30.1 million and $16.7 million of internal-use software and platform development costs, respectively.

For the three months ended September 30, 2026 and 2025, amortization expense related to the capitalized internal-use software and platform development costs was $7.3 million and $3.8 million, respectively. For the nine months ended September 30, 2026 and 2025, amortization expense related to the capitalized internal-use software and platform development costs was $17.9 million and $10.2 million, respectively. Amortization expense for the three and nine months ended September 30, 2026 reflects amortization of certain capitalized internal-use software and platform development projects placed in service on December 31, 2025.

Intangible Assets, Net

The carrying value of intangible assets was as follows as of the dates presented:

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of the dates presented:

Stockholders’ Equity

For all performance stock unit awards, which are referred to as PSU awards, granted under the Company’s 2018 Equity Incentive Plan, which is referred to as the 2018 EIP, the number of PSU awards that become earned and eligible to vest is based on the Company’s achievement of performance conditions established at the time of grant by the compensation committee of the Company’s board of directors, which is referred to as the compensation committee, relating to one or more performance periods, which is referred to as the PSU Performance Condition. Following the completion of the applicable performance period, the compensation committee certifies the Company’s achievement of the applicable PSU Performance Condition, and the dates on which such certifications occur are referred to as Certification Dates. In order for any PSU awards to be earned and vest, recipients must remain in continuous service with the Company through the applicable Certification Date, which is referred to as the PSU Service Condition.

The Company classifies all PSU awards as equity awards. Stock-based compensation expense related to PSU awards is recognized as a component of operating expenses in the Company’s condensed consolidated statements of operations and comprehensive income and is recognized over the longer of the expected achievement period of the applicable PSU Performance Condition or the applicable PSU Service Condition. The grant-date fair value of PSU awards is determined using valuation techniques appropriate for the specific award terms, including valuation models that incorporate the impact of market-based conditions, as applicable. At each reporting date prior to the applicable Certification Date, the Company reassesses the number of PSU awards that are probable of vesting, and any changes are reflected in stock-based compensation expense in the period of change.

2026 PSU Awards

In February 2026, the compensation committee approved the grant of PSU awards to certain members of the Company’s leadership team under the 2018 EIP, which awards are referred to as the 2026 PSU Awards. These awards were granted on February 18, 2026.

Up tofifty percent of the maximum number of shares subject to the 2026 PSU Awards are eligible to vest based on the Company’s achievement of certain financial performance targets over atwo-year performance period consisting of the Company’s fiscal years ending December 31, 2026 and 2027, and up to the remaining fifty percent of the maximum number of shares subject to the 2026 PSU Awards are eligible to vest based on the Company’s achievement of certain financial performance targets over athree-year performance period consisting of the Company’s fiscal years ending December 31, 2026, 2027, and 2028. The performance targets consist of a weighted average achievement percentage, reflecting equal weighting of adjusted EBITDA and revenue achievement for each fiscal year within the applicable performance period, subject to adjustment by a relative total shareholder return compound annual growth rate multiplier, all as established by the compensation committee at the time of grant.

Stock-based compensation expense related to the 2026 PSU Awards is recognized over the longer of the expected achievement period for the PSU Performance Condition and the PSU Service Condition, which is approximately 24 months and 36 months for the portions of the awards eligible to vest based on performance for the performance periods ending December 31, 2027 and December 31, 2028, respectively.

Share Repurchase Program

In September 2025, the Company’s board of directors authorized a share repurchase program for the repurchase of up to $100.0 million of shares of the Company’s outstanding common stock, which is referred to as the 2025 Share Repurchase Authorization. Under the 2025 Share Repurchase Authorization, the Company repurchased and subsequently retired 2.1 million shares of its common stock for an aggregate amount of $36.0 million, at an average price of $17.33 per share, from September 2025 through December 2025, and an additional 4.6 million shares for an aggregate amount of $64.0 million, at an average price of $14.00 per share, from January 2026 through March 2026. As of September 30, 2026, the Company hadno remaining balance available for repurchases under the 2025 Share Repurchase Authorization.

In February 2026, the Company’s board of directors authorized a share repurchase program for the repurchase of up to $300.0 million of shares of the Company’s outstanding common stock, which is referred to as the 2026 Share Repurchase Authorization, and together the 2026 Share Repurchase Authorization and the 2025 Share Repurchase Authorization are referred to as the Share Repurchase Authorizations. Under the 2026 Share Repurchase Authorization, the Company repurchased and subsequently retired 3.7 million shares of its common stock for an aggregate amount of $45.7 million, at an average price of $12.31 per share, since the authorization in February 2026. As of September 30, 2026, the Company had $254.3 million available for repurchase under the 2026 Share Repurchase Authorization.

Collectively, during the nine months ended September 30, 2026, the Company repurchased and subsequently retired 8.3 million shares of its common stock for an aggregate amount of $109.7 million including fees associated with the repurchases and excluding excise tax, under the Share Repurchase Authorizations, at an average price of $13.24 per share. The Company didnot repurchase any shares during the three months ended September 30, 2026.

Repurchases of the Company’s common stock under the 2026 Share Repurchase Authorization 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), in privately negotiated transactions, or by other methods, at the Company’s discretion, and in accordance with applicable securities laws and other restrictions. The 2026 Share Repurchase Authorization has no expiration date and will continue until otherwise suspended, terminated, or modified at any time for any reason. The 2026 Share Repurchase Authorization does not obligate the Company to repurchase any dollar amount or number of shares, and the timing and amount of any repurchases will depend on market and business conditions.

Note 6—Leases

Lisbon Office Lease

In January 2026, the Company commenced a new operating lease for approximately 16,189 square feet of office space and 27 parking spaces in Lisbon, Portugal, pursuant to a lease agreement entered into in December 2025. Although structured as a services agreement under local law, the Company evaluated the arrangement under U.S. GAAP and concluded that it contains a lease under ASC 842. The initial lease term is 72 months from the commencement date, scheduled to expire in December 2031, unless terminated earlier. The Company evaluated thethree-year renewal options and determined they are not reasonably certain to be exercised; accordingly, they have not been included in the measurement of the right-of-use asset or lease liability. As a result of entering into this lease, the Company recognized a right-of-use asset and lease liability of approximately $3.6 million and $3.5 million, respectively. Monthly rent payments under the lease are approximately €0.1 million and are recorded within general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income. The lease is denominated in Euros, and the lease liability is remeasured at each reporting date using the current spot exchange rate, with foreign currency gains and losses recognized in earnings.

Palo Alto Office Lease — Expansion Space

In February 2026, the Company commencedtwo new operating leases for expansion space at its corporate headquarters in Palo Alto, California, pursuant to an amendment to its existing office lease executed in January 2026. The amendment added Suite 125 (approximately 7,540 square feet) and Suite 302 (approximately 1,390 square feet), bringing total leased space at the location to approximately 21,615 square feet across three suites. The term for both suites runs through the existing lease expiration of September 2032. The Company concluded that the expansion representstwo separate leases rather than a modification of the existing lease, and both suites are classified as operating leases. The Company evaluated thetwo existing renewal options, each for an additional three years, and determined they are not reasonably certain to be exercised; accordingly, they have not been included in the measurement of the right-of-use assets or lease liabilities. As a result of entering into these leases, the Company recognized right-of-use assets and lease liabilities of approximately $3.7 million for Suite 125 and approximately $0.7 million for Suite 302. Monthly rent payments, in aggregate under the leases, are approximately $0.1 million and are recorded within general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income.

Note 7—Business Combination

2025 Acquisitions

Bubty B.V.

On June 27, 2025, Lifted acquired 100% of the equity interests of Bubty, a Netherlands-based platform supporting enterprise management of contingent workforce solutions, for total purchase price consideration of $20.4 million. This acquisition advances the Company’s strategic objectives by equipping Lifted with enhanced workforce management capabilities and a platform for clients managing global talent.

The acquisition of Bubty was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. Accordingly, the allocation of the purchase price is as follows (in thousands):

The excess of the purchase consideration over the fair value of net assets acquired has been recorded as goodwill. The goodwill is primarily attributable to the expected synergies from integrating Bubty’s workforce management technology and operations with Lifted, and the value of the assembled workforce, which do not qualify for separate recognition as identifiable intangible assets. The goodwill is not deductible for income tax purposes.

The Company engaged an independent third-party valuation specialist to assist in the determination of the fair value of intangible assets acquired. All key estimates, assumptions, and forecasts were either provided by or reviewed by management. While the third-party specialist provided significant input into the valuation, the final conclusions reflect the judgment of management. The fair value measurements of the intangible assets were based primarily on significant unobservable inputs, and this represents a Level 3 measurement.

As of the acquisition date, the fair value and expected useful lives of the identifiable intangible assets acquired were as follows (dollars in thousands):

Ascen Inc.

On August 18, 2025, Lifted acquired 100% of the equity interests of Ascen, a tech-enabled employer of record company specifically designed for the contingent labor space, for total purchase price consideration of $40.8 million. This acquisition supports the Company’s strategic objective to enhance its enterprise offerings by enabling clients of Lifted to engage workers classified as employees for U.S. tax purposes.

The acquisition of Ascen was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. Accordingly, the allocation of the purchase price is as follows (in thousands):

The excess of the purchase consideration over the fair value of net assets acquired has been recorded as goodwill. The goodwill is primarily attributable to the expected synergies from Lifted’s ownership of Ascen and the Company’s expansion into employer of record and staffing solutions, which do not qualify for separate recognition as identifiable intangible assets. The goodwill is not deductible for income tax purposes.

The Company engaged an independent third-party valuation specialist to assist in the determination of the fair value of intangible assets acquired. All key estimates, assumptions, and forecasts were either provided by or reviewed by management. While the third-party specialist provided significant input into the valuation, the final conclusions reflect the judgment of management. The fair value measurements of the intangible assets were based primarily on significant unobservable inputs, and this represents a Level 3 measurement.

As of the acquisition date, the fair value and expected useful lives of the identifiable intangible assets acquired were as follows (dollars in thousands):

During the three months ended December 31, 2025, the Company decreased goodwill by $1.3 million related to the Ascen acquisition based on new information obtained about facts and circumstances that existed as of the acquisition date, resulting in a reduction to the purchase price allocation. The Company finalized the purchase price allocations for the acquisitions of Bubty and Ascen in accordance with ASC 805, and no further measurement period adjustments are expected.

The Company incurred approximately $4.4 million of transaction-related expenses in connection with these acquisitions for the nine months ended September 30, 2025, all of which were recorded in general and administrative expenses in the consolidated statements of operations and comprehensive income. No additional transaction-related expenses were incurred during the three months ended December 31, 2025.

The Company has not presented unaudited supplemental pro forma financial information for the business acquisitions described above, as management determined that such information was not material to the Company’s consolidated results of operations for the periods presented, assuming the acquisitions had occurred as of the beginning of the comparable prior reporting period.

As of September 30, 2026, the remaining aggregate founders’ holdback related to acquisition-related compensation was $12.9 million. The founders’ holdback amounts are to be paid over athree-year period from the date of the respective deal close, subject to the relevant founder’s continued employment or service, as applicable. This represents compensation for post-combination services because the payments are subject to the relevant founder’s continuous employment or service, as applicable, to the relevant vesting dates. The Company expects to recognize related compensation expense over the service period as amounts are earned.

Note 8—Commitments and Contingencies

Letters of Credit

In conjunction with the Company’s operating lease agreements, as of September 30, 2026 and December 31, 2025, the Company had irrevocable letters of credit outstanding in the aggregate amount of $0.3 million. The letters of credit are collateralized by restricted cash in the same amount. No amounts had been drawn against these letters of credit as of September 30, 2026 and December 31, 2025.

Contingencies

The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. Potential contingencies may include various claims and litigation or non-income tax matters that arise from time to time in the normal course of business. Due to uncertainties inherent in such contingencies, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability or damages. Any claims, litigation, or other contingencies could have an adverse effect on the Company’s business, financial position, results of operations, or cash flows in or following the period that claims, litigation, or other contingencies are resolved.

As of September 30, 2026 and December 31, 2025, the Company was not a party to any material legal proceedings or claims, nor is the Company aware of any pending or threatened litigation or claims, including non-income tax matters, that could reasonably be expected to have a material adverse effect on its business, operating results, cash flows, or financial condition. Accordingly, the amounts accrued for contingencies for which the Company believes a loss is probable were not material as of September 30, 2026 and December 31, 2025.

Indemnification

The Company has indemnification agreements with its officers, directors, and certain key employees to indemnify them while they are serving in good faith in their respective positions. In the ordinary course of business, the Company and its operating subsidiaries enter into contractual arrangements under which they agree to provide indemnification of varying scope and terms to clients, business partners, vendors, and other parties, including, but not limited to, losses arising out of the Company’s or its operating subsidiaries’ breach of such agreements, claims related to potential data or information security breaches, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from their products and services or their acts or omissions. In addition, subject to the terms of the applicable agreement, as part of the Enterprise Solutions and certain other premium offerings, the Company and its operating subsidiaries indemnify clients that subscribe to worker classification services for losses arising from worker misclassification. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the facts and circumstances involved in each particular provision.

Note 9—Debt

The following table presents the carrying value of the Company’s debt obligations as of September 30, 2026 and December 31, 2025:

Convertible Senior Notes Due 2026

In August 2021, the Company issued 0.25% convertible senior notes due 2026, which are referred to as the Notes. The Notes were issued pursuant to and are subject to the terms and conditions of an indenture between the Company and Computershare Trust Company, National Association (as successor in interest to Wells Fargo Bank, National Association), as trustee. The Notes were offered and sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Notes were senior, unsecured obligations of the Company and bore interest at a rate of 0.25% per year, which was payable semiannually in arrears on February 15 and August 15 of each year. The Notes matured on August 15, 2026. No holders converted any portion of the Notes into shares of common stock prior to maturity. Upon maturity, the Company repaid the $361.0 million aggregate outstanding principal amount of the Notes in full using cash on hand. As of September 30, 2026, no principal amount of the Notes remained outstanding. As of December 31, 2025, $361.0 million aggregate principal amount of the Notes was outstanding.

For the three months ended September 30, 2026 and 2025, interest expense related to the Notes was $0.1 million and $0.2 million, respectively, and amortization of the debt issuance costs related to the Notes was $0.3 million and $0.5 million, respectively. For the nine months ended September 30, 2026 and 2025, interest expense related to the Notes was $0.6 million and $0.7 million, respectively, and amortization of the debt issuance costs related to the Notes was $1.2 million and $1.4 million, respectively.

As of December 31, 2025, the if-converted value of the Notes did not exceed the outstanding principal amount.

Capped Calls

In connection with the issuance of the Notes, the Company entered into privately negotiated capped call transactions, which are referred to as the Capped Calls, with various financial institutions. The Capped Calls expired in accordance with their terms in components from July 10, 2026 through August 13, 2026, in connection with the maturity of the Notes.

The Capped Calls were separate transactions and were not part of the terms of the Notes. The Capped Calls met the criteria for classification as equity and, as such, were not remeasured each reporting period and were included as a reduction to additional paid-in capital within stockholders’ equity.

Revolving Credit Facility

On June 23, 2026, the Company entered into a credit agreement, which is referred to as the Credit Agreement, with Bank of America, N.A. as administrative agent, and BofA Securities, Inc. and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners, providing for a secured revolving loan facility of up to $150.0 million, referred to as the Revolving Credit Facility, including a $10.0 million sublimit for standby letters of credit and a $10.0 million swingline sublimit. The Credit Agreement includes an accordion option to increase the revolving commitments or incur new term loans up to an additional $50.0 million. The Revolving Credit Facility matures on June 23, 2029 and is secured by substantially all assets of the Company and its wholly owned domestic subsidiaries, which provide a full, unconditional guarantee of the Company’s obligations thereunder.

Interest Rate and Fees

Borrowings bear interest at Term SOFR or Daily Simple SOFR (each as defined in the Credit Agreement) plus 2.00% to 2.50%, or at the Base Rate (as defined in the Credit Agreement) plus 1.00% to 1.50%, in each case based on the Company’s Consolidated Net Leverage Ratio (as defined in the Credit Agreement). An undrawn commitment fee of 0.20% to 0.30% per annum accrues on the unused portion of the facility, payable quarterly in arrears.

Covenants

The Credit Agreement contains financial maintenance covenants requiring the Company to maintain (i) a maximum Consolidated Net Leverage Ratio of 2.50 to 1.00, with cash netting of up to $100.0 million, and (ii) a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25 to 1.00, tested quarterly. The Credit Agreement also contains customary affirmative and negative covenants and events of default. As of September 30, 2026, the Company was in compliance with all covenants.

Availability and Borrowings

As of September 30, 2026, there wereno borrowings andno letters of credit outstanding under the Revolving Credit Facility, resulting in available borrowing capacity of $150.0 million.

Debt Issuance Costs

In connection with the Credit Agreement, the Company incurred approximately $1.2 million of debt issuance costs, presented as a deferred financing cost asset within prepaid expenses and other current assets and other long-term assets on the condensed consolidated balance sheet. These costs are amortized on a straight-line basis over thethree-year term of the Revolving Credit Facility as a component of interest expense. Amortization of the debt issuance costs related to the Revolving Credit Facility for each of the three and nine months ended September 30, 2026 was $0.1 million.

Note 10—Net Income per Share

The following table sets forth the computation of the Company’s basic and diluted net income per share for the periods presented:

The following potentially dilutive shares were excluded from the computation of diluted net income per share for the periods presented because including them would have been anti-dilutive:

Note 11—Income Taxes

The Company computes its provision for income taxes by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjusts the provision for discrete tax items recorded in the period.

For the three months ended September 30, 2026 and 2025, the Company’s income tax provision was $6.7 million and $6.3 million, respectively. For the nine months ended September 30, 2026 and 2025, the Company’s income tax provision was $19.7 million and $19.3 million, respectively.

The increases in income tax provision for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, were primarily attributable to tax deficiencies related to stock-based compensation.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that some or all of its deferred tax assets will not be realized. This assessment is based on the weight of all available evidence, including cumulative pre-tax income or losses, anticipated future earnings, the impact of permanent differences, and items recorded in other comprehensive income or losses.

Based on all available positive and negative evidence, including demonstrated sustained profitability, which is objective and verifiable, and after considering anticipated future earnings, the Company concluded it is more likely than not that its U.S. federal deferred tax assets will be realizable. The Company continues to maintain a valuation allowance against its California deferred tax assets, as it is more likely than not that these assets will not be realized, primarily due to expected research and development tax credit generation exceeding the Company’s ability to utilize these assets in future periods.

The Company is subject to taxation in the United States and various other state and foreign jurisdictions. Due to certain tax attribute carryforwards, the tax years 2001 to 2024 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax. Due to differing interpretations of tax laws and regulations, tax authorities may dispute the Company’s tax filing positions. The Company periodically evaluates its exposures associated with its tax filing positions and believes that adequate amounts have been reserved for adjustments that may result from tax examinations.

On July 4, 2025, Public Law 119-21 was enacted, introducing changes to U.S. tax law, including 100% bonus depreciation and the expensing of domestic research costs. In accordance with ASC 740, Income Taxes, the effects of enacted tax law changes must be recognized in the period in which the legislation is enacted. Certain provisions became effective in the first quarter of 2026, and these impacts have been reflected in the Company’s first quarter 2026 results.

Note 12—Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly provided to the CODM in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The accounting policies of the Company’s reportable segment, as well as how the Company derives revenue, are consistent with those described in “Note 2—Basis of Presentation and Summary of Significant Accounting Policies” of the Annual Report.

The CODM uses consolidated net income to assess performance, evaluate cost optimization, and allocate resources, including personnel-related and financial or capital resources, in the annual budget and forecasting process, as well as budget-to-actual variances on a monthly basis. As such, the Company has determined that it operates asone operating and reportable segment.

The following tables set forth significant expense categories and other specified amounts included in consolidated net income that are otherwise regularly provided to the CODM for the three and nine months ended September 30, 2026 and 2025:

(1) For all periods presented, excludes stock-based compensation and depreciation and amortization included in cost of revenue, research and development, sales and marketing, and general and administrative expenses, as these amounts are regularly provided to the CODM.

(2) For the three and nine months ended September 30, 2026, excludes charges related to the 2026 Restructuring (as defined below).

(3) For the three and nine months ended September 30, 2026 and 2025, excludes acquisition-related costs.

(4) For all periods presented, excludes expenses related to the warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.01 per share issued to the Tides Foundation in 2018, which is referred to as the Tides Foundation Warrant.

(5) During the three and nine months ended September 30, 2026, the Company incurred $4.3 million and $18.1 million in costs related to the execution of the 2026 Restructuring, respectively. Of these amounts, $2.7 million and $15.6 million, respectively, are included in “Restructuring charges”, while the remaining amounts are allocated to “Stock-based compensation expense”, “Depreciation and amortization”, and “Other segment items”. See “Note 13—Restructuring Charges” for more information.

(6) For each of the three months ended September 30, 2026 and 2025, the Company incurred $0.2 million of expenses related to the Tides Foundation Warrant, and for each of the nine months ended September 30, 2026 and 2025, the Company incurred $0.6 million of such expense.

(7) For each of the three and nine months ended September 30, 2026, the Company incurred transaction-related costs of $5.7 million in connection with Lifted’s acquisition of WorkMotion Software GmbH. These costs primarily consist of legal, accounting, and other professional fees, and are recorded in general and administrative expenses in the condensed consolidated statements of operations.

(8) For the three and nine months ended September 30, 2025, the Company incurred acquisition-related costs of $1.9 million and $4.4 million, respectively, in connection with the Company’s business combinations. These costs primarily consist of legal, accounting, and other professional fees, and are recorded in general and administrative expenses in the condensed consolidated statements of operations.

Substantially all of the Company’s long-lived assets, including operating lease right-of-use assets, were located in the United States as of September 30, 2026 and December 31, 2025.

Note 13—Restructuring Charges

In May 2026, the Company initiated a restructuring plan, referred to as the 2026 Restructuring, intended to build a more efficient operating model and position the Company for profitable growth as the nature of work evolves. The 2026 Restructuring included various cost-reduction measures, including workforce reductions, reductions in operating expenses, as well as decreases in capital expenditures. As part of the 2026 Restructuring, the Company reduced its total workforce by approximately 20% as of September 30, 2026. The Company expects additional reductions to be substantially completed by December 31, 2026.

The total restructuring charges for the three and nine months ended September 30, 2026 were $4.3 million and $18.1 million, respectively, and are presented within the respective functional line items in the Company's condensed consolidated statements of operations and comprehensive income, as shown in the following table. Restructuring charges for the three months ended September 30, 2026 primarily reflect costs under vendor contracts that the Company ceased using and impairment of certain internal-use software.

Contract termination costs include expenses related to the reduction in force of the Company’s contracted workforce impacted by the 2026 Restructuring, as well as vendor contracts that the Company ceased using.

Other charges include additional expenses incurred as part of the 2026 Restructuring, such as the impairment of certain internal-use software and disposal of certain fixed assets.

No restructuring charges were recorded for the three and nine months ended September 30, 2025.

The following table summarizes the Company’s restructuring liability:

As of September 30, 2026, the remaining restructuring liability of $1.9 million consists primarily of $1.5 million related to a software license agreement under which the Company no longer expects to receive economic benefit, with the remainder consisting of accrued severance and benefit costs. The liability is recorded within “Accounts payable” and “Accrued expenses and other current liabilities” in the accompanying condensed consolidated balance sheet. The remaining severance liability is expected to be settled by December 31, 2026, and the remaining contract termination liability is expected to be settled by December 31, 2027.

The Company expects to incur additional restructuring charges during the remainder of 2026 as affected employees continue through their required service periods under the 2026 Restructuring and as the Company completes its evaluation of vendor contracts impacted by the 2026 Restructuring.

In connection with its 2026 Restructuring, the Company issued cash retention awards to certain continuing employees with an aggregate value of $12.4 million. These awards are separate and distinct from the termination benefits described above, are earned through future service, and are accounted for as compensation expense under ASC 710-10, recognized ratably over each award’s applicable service period. Payments are scheduled across 2026, 2027, and 2028, subject to each recipient’s continued employment and good standing on the applicable payment date.

Note 14—Subsequent Events

On October 30, 2026, Lifted completed the acquisition of 100% of the equity interests of WorkMotion Software GmbH, a privately held, Germany-based employer-of-record business, for cash consideration of approximately $129.7 million. The Company funded the purchase price with cash on hand. The Company will account for the transaction as a business combination in accordance with ASC Topic 805—Business Combinations (“ASC 805”).

The Company has not yet completed its initial accounting for the transaction, as the acquisition closed shortly before these condensed consolidated financial statements were issued. Accordingly, certain ASC 805 disclosures are not yet available, including the allocation of the purchase consideration to the fair values of assets acquired and liabilities assumed, including goodwill and the qualitative factors that comprise it. The Company expects to complete the acquisition accounting within the measurement period.