Hayden Brown: Sure, Rohit. So on your first question, just to clarify, what we saw this past quarter was our AI machine learning subcategory grew 70% year-over-year, and that was a really great result. And it was due to, I think, what you were asking about, which was all of the investments we are making in growing this category in this area through things like our AI Services hub which we launched last year, our marketing efforts in this area where we’re focused both on marketplace customers and enterprise customers who all can benefit from the talent in our ecosystem who are specialized in this area where we’ve been curating those talents for enterprise customers and for partners such as OpenAI through that partnership. And so in terms of use cases, we’re really seeing the full range of AI experts being called upon, whether it’s for training models, whether it’s for data labeling and curation.
And I think an interesting fact is that people are really looking for highly skilled experts in a variety of places to review results and outputs of models that really ensure the accuracy because there’s a big quality control issue around a lot of these models, as you might imagine. So there’s a very active set of clients and talent in this space, and it continues to grow. And I don’t think there’s more we can do. We’re just leading into this with product, marketing, talent curation, partnership. We’re kind of putting all of our weapons against this to really make sure we’re capitalizing on this opportunity. Erica can probably comment on your client growth question.
Erica Gessert: Yeah, on active client growth, I think, I don’t know that we feel that there’s — I would say look, the macro environment remains fluid. Our business and platform are very stable and growing. So the most recent environment of tech layoffs, I don’t think we see as a big factor for us. We’ve been — as I’ve kind of articulated already, we’ve seen really strong momentum there. I think it’s a combination of just the attractiveness of our platform, the resilience of our marketplace in this environment. And even on the enterprise side, I think the latest spate of earnings releases really shows that people are still really, really focused on profitability. And even within that environment, we’ve seen nice acceleration on the land side of our business.
We keep growing really nice logos with Instacart, Checkout.com, others signing up. And so I think just the attractiveness of our offer, even within this environment, is really evident with being able to add freelancers faster, cheaper, easier than some of the competitions that’s out there. So I think we’re feeling good about our ability to perform in this environment.
Rohit Kulkarni: Great, thank you. Thank you guys.
Operator: Thank you, one moment for the next question. Our next question is coming from Marvin Fong of BTIG. Your line is open.
Marvin Fong: Good evening. Thanks for squeezing me in here. Maybe the first question, I think maybe people listening might appreciate, just kind of creating a bigger picture overview of the nice quarter, just kind of like what areas of the business, maybe from a geography or a category standpoint are doing well or perhaps are underperforming? I know you called out AI, but maybe some of your other key verticals like software programming, just curious how everything at a higher level is playing out?
Hayden Brown: Yeah, sure. Maybe I’ll take this one. I think there’s really not — there is really nothing notable on the geo front. Things have been pretty, our mix has been pretty steady and persistent, really throughout 2023 and into 2024. So not much to note there. On the category front, yeah, we’ve talked about AI, we’re really excited about the momentum there. Software and — software type jobs continues to be a very, very large category for us. And maybe just, I also noted some of the bigger growers for us in one of my other answers around legal, around sales and marketing. Even logo design, we’ve seen some nice growth in Q4 and some of these categories in GSV. Some of the categories that see headwinds, I think we’ve also talked about this.
We absolutely have seen some headwinds in volume from the categories that I think people would expect in translation, writing. But these are categories that were threatened far before the advent of ChatGPT. And in fact, even with these categories where we see some volume type headwinds, there’s some really interesting dynamics underneath in which we actually see strong wage accretion in both these categories because it’s really the very, very smallest kind of quickest jobs that are getting disrupted. In fact, in the writing category, interestingly enough, in Q4, the average hours per job went up 20% year-over-year in that category. So it’s a tremendously diverse platform. There’s a lot going on, And I really do think we see sort of pluses and minuses across multiple categories.
Marvin Fong: That’s terrific. Thanks for that, color. And maybe my other question, just I think your guidance for EBITDA margin for the year is close to 17% at the midpoint, which is not dissimilar from the fourth quarter margin performance. So just curious on what are some of the puts and takes on margin for the full year. There’s some areas of OpEx that you, I think you cited G&A, you [hold some] (ph) key roles, but any other areas you might be feeling the need to invest a little bit more or just kind of trying to understand the margin picture there. Thanks.
Hayden Brown: Yeah, sure. Yes, look, we’re super, super proud of the very rapid progress we made in 2023. And on a year-over-year basis, obviously our guide contemplates both strong year-over-year revenue growth and strong margin accretion on a year-over-year basis. I think we were really clear as we were marching through 2023 that we did intend to continue to balance margin accretion with investment and growth, and that is really what 2024 is all about. But underlying our guidance, we really do expect really very modest year-over-year growth in total operating expenses, significantly lower than what we expect from revenue growth. And we’re committed to showing that leverage over multiple years as we’ve been emphasizing. Line by line, I think the dynamics will be quite similar to how we manage this year.
We’ll continue to invest in R&D. That line will grow the fastest. And that makes sense because of all of the kind of AI/ML team investments and really the new product pipeline that we have planned for 2024, which I think is really exciting. Sales and marketing OpEx will be down again year-over-year, and we’ll continue to optimize that area. And as we described, I think performance marketing is performing extremely well. We’re going to balance investing in growth with that, with continuing to optimize. And G&A will also be similarly managed to 2023 in that we will continue to manage that line item to show significant operating leverage on an ongoing basis. So hopefully that can clear…
Marvin Fong: No, that was terrific. Thank you very much, Erica, and thanks, Hayden.
Hayden Brown: Sure.
Operator: Thank you. One moment for the next question. Our next question is coming from Matt Burrows of Piper Sandler. Your line is open.
Matt Burrow: Thanks and congrats on the strong results. Just one for me. You had really strong free cash flow in Q4, improving profitability in 2024. I know you made the small acquisition, but it doesn’t look like you executed any of your buyback. We’d love just to hear about the thoughts around cash strategy as we move throughout the year, particularly in this kind of more stable backdrop from the macro side. Thanks.
Hayden Brown: Yeah, sure. Great question. Thanks, Matt. So, absolutely. Look, we were super pleased to get the stock buyback authorized in Q4. It’s obviously a new muscle for us, it’s the first one that’s ever been approved for Upwork. Similarly, we’re super happy to close our very first acquisition in Q4. So we did not buy back any stock in Q4, however, we continue to believe that our stock is a great value at these levels and we do intend to execute that buyback in 2024. At the same time, I think that we really do believe that 2024 should also present some additional opportunities for us to utilize our balance sheet and our growing cash position to identify additional tuck-in acquisitions where we can add to our growing table of talent as well as maybe capability building to continue to advance our roadmap. So we’re going to continue to be active out there and we think there are opportunities for us to utilize our balance sheet with really good ROI.
Matt Burrow: Awesome, thank you so much.
Matt Burrow: All right, thanks.
Operator: Thank you. I would now like to turn the call back over to David Niederman for closing remarks, Vice President of Investor Relations, go ahead.
David Niederman: Thank you. On behalf of the entire Upwork team, thank you for joining us today. And thank you for your interest in Upwork. If you need any clarifications or have any follow-up questions, please do not hesitate to reach out to me at investor@upwork.com. This concludes our call.
Operator: Thank you all for joining. You may disconnect now.
