Good day, and thank you for standing by. Welcome to the Upwork's Fourth Quarter and Full Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to David Niederman, Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Upwork's discussion of its fourth quarter 2023 financial results. Joining me today are Hayden Brown, Upwork's President and Chief Executive Officer, and Erica Gessert, Upwork's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first I'll review the state harbor statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. Forward-looking statements include all statements other than statements of historical fact. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. For discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and also on our investor relations website as well as the risks and other important factors discussed in today's earnings press release. Additional information will also be set forth in our annual report on form 10-K for the three months ended December 31st, 2023. In addition, reference will be made to certain non-GAAP financial measures. Information regarding the reconciliation of non-GAAP to GAAP measures can be found in the press release that was issued this afternoon on our investor relations website at investors.upwork.com. Unless otherwise noted, reported figures are rounded in comparisons to the fourth quarter of 2023 or to the fourth quarter 2022. All financial measures are GAAP unless cited as non-GAAP. Now, I'll turn the call over to Hayden.

Welcome everyone to Upwork's fourth quarter and full year 2023 earnings call. I'm excited to review our accomplishments for the year and speak to our plans for the future. We gained further momentum in the fourth quarter. Fourth quarter revenue of $183.9 million grew 13.9% year-over-year, reflecting accelerating growth over the past three quarters. Full year revenue grew 11.5% year-over-year to $689.1 million. We continued to demonstrate strong profitability with GAAP net income of $46.9 million and adjusted EBITDA of $73.1 million for the full year, which is the highest adjusted EBITDA result in our company's history. This success was made possible by our dedicated Upwork team and I want to thank them for their disciplined efforts. 2023 was a significant year for the world of work. As the world's largest work marketplace, Upwork played a critical role in helping the more than 850,000 clients and millions of independent professionals we serve, adapt to new realities and modernize how they work. There are three key areas of focus that we saw pay dividends in 2023, AI investments, partnerships, and ads and monetization. We built innovative new AI-powered features and platform experiences across every category of work. In the fourth quarter, we opened up the waitlist for Upwork Chat Pro, a work tool powered by OpenAI GPT-4 and embedded into the Upwork experience to help customers solve challenging tasks, boost productivity, and do their best work faster. We've already received over 150,000 signups, and the wait list is growing every day. Our AI-powered job post generator tool has also proven to be a major boost for clients, significantly increasing task completion speed and improving results. And lastly, findings from the first version of our proposal tips tool showed that freelancers using it secured work at a higher rate than those not…

Thanks, Hayden. I'm delighted to be here to share more specifics on our strong financial momentum as we enter into a promising 2024. 2023 was a year of heightened uncertainty across the world and in business. Marked by volatility in geopolitical events and capital markets, it was an environment where the rules of the game change rapidly. Within this dynamic, we moved to focus our business on adjusted EBITDA margin and free cash flow generation with tremendous success. In just six months, we moved from negative profitability to a business with adjusted EBITDA margins in the high teens. We showed strong operational agility, quickly identifying opportunities for efficiencies across our business. Our focus on greater efficiency is yielding tremendous results. Our performance marketing engine is working better than ever. In Q4, we saw 20% growth in our new client starts driven by performance marketing, while our CAC in the same period improved by 24% year-over-year. We also had excellent success with higher value client segments, which we expect have an outsized impact on revenue and LTV. And in enterprise sales, we were able to increase our client acquisition in Q4 even with our rationalized sales force. These positive actions helped to drive total active client growth of 5% year-over-year in the fourth quarter. Within the dynamic market environment in 2023, we turned our business into one of steady growth. For the full year 2024, we expect to continue this progress, producing strong year-over-year growth in active clients, revenue, adjusted EBITDA, and adjusted free cash flow. Our momentum exiting 2023 and our plan for 2024 give us conviction that we can provide strong business results and serve our customers even in uncertain economic conditions. This confidence is based on our growing business efficiency, our culture of innovation, and the pipeline of…

Thank you. [Operator Instructions] Our first question today will be coming from Maria Ripps of Canaccord. Your line is open.

Great, thanks so much for taking my questions. First, I appreciate all the color in terms of guidance. Anything you can share about maybe GSV growth this year? And then maybe help us understand what's included in your revenue guidance in terms of contribution from your take rate expansion?

Yeah, sure. Thanks, Maria, and hi. So first and foremost, I'll say for GSV growth in 2024, we do expect to drive some modest year-over-year growth in GSV in 2024. Look, as we all know, we're coming out of a couple of really volatile years in the broader economic environment in which a lot of companies saw impacts to their growth. But we're really confident that we have the right strategy in place to grow GSV over the long term. Just in terms of what we're contemplating from revenue growth associated with take rate in 2024, obviously we do expect, I think as everyone is pretty well acquainted with the strategic change in our pricing to a flat fee price that we announced in 2023, at the beginning of this year, the remaining 5% contracts did step up to 10%. And so we do expect a step up in take rate from Q4 into Q1. So we'll expect some tailwinds from take rate ongoing into 2024. And just overall, I would say the dynamics of that price change have been extraordinarily good. And it really reflects the health and the strengths of the platform.

I'd add Maria that as we think about GSV growth in 2024 and beyond, there's really two levers that we're focused on. The first one is around winning key customers and work segments with specialization of our product and go to market. And you saw us executing on that already last year with the playbook in the AI category in particular, which really led to the 70% growth in the AI machine learning subcategory, which we mentioned. So we're going to be expanding that playbook this year, and I think that will start to contribute to that GSV growth this year, but also ramp into future years. The other strategy we're focused on is building the world's most innovative work platform. And there's a tremendous opportunity around that. With our AI strategies, we did acquire the company Headroom in Q4, and that's really accelerating our entire roadmap around innovating the platform and watching new features. We have a number that we already put out in Q4, but again, the product pipeline there is really robust. So we're very excited about how that's going to layer in over the coming years.

Got it, that's very helpful. And then maybe secondly, you've talked a lot about sort of new ad products and things like Connect that are driving take-rate extension on the freelancer side. But I'm just wondering whether there is any opportunity to introduce maybe additional products on the client side to drive for the take-rate expansion. And then more broadly, how are you thinking about your long-term pricing power on both sides of the marketplace?

I'd say we're still very early in the ads and monetization journey. I think what we saw in 2023 was very exciting in terms of the momentum with those products. And certainly, you're right, we focus more on some of the talent side features and functionality, which suggests there is a lot more we can do on the client side as well. So I think there's more to come there. We think this is early innings. Every healthy marketplace seems to have very robust ads products. And we believe we can build that, too, as evidenced by the progress we've already made. So more to come there. This is definitely something that we're leveraging this year. And in terms of pricing power, I think the success of our pricing changes over the course of the last year have already demonstrated, I think, that we have a good handle on what that pricing power looks like in the marketplace and that the value of the offering is really robust. All of the pricing changes we've made have really resulted in changes in line with our expectations in terms of adoption, churn rates, et cetera. There's been no surprises and those have been a resounding success. So we're going to continue to lean into the opportunities there to create value both for shareholders, but also for customers through these types of products.

I just had one more nuance there, which is the reason we talk about ads and monetization is that these products are kind of multi-dimensional, right? We have what would be considered probably more traditional ads products, like the boosted proposal product that's shown really nice growth. We also have some of our new subscription products with Freelancer Plus, where we're offering new value props to our freelancers and seeing really good uptake there. And I think that there's a lot more we can do with some of these products, and so that's one of the things that gives us confidence in kind of growing these revenue streams over time.

Got it. That's very helpful. Thank you for the color.

Thank you. One moment for the next question. And our next question will be coming from Bernie McTernan of Needham & Company. Your line is open.

Great. Thank you for taking the questions. Just wanted to dig on to -- dig in on performance marketing a bit. Thought it was some pretty interesting comments that you guys made in terms of the return that you're seeing. And so just wanted to see if that was macro driven or if it's really changes in what you're doing in performance marketing. And I think it's the latter, so just any tangibles or specifics you could give would be really helpful. Thank you.

Yeah, I definitely don't think it's macro driven at all. I think that the team has spent a lot of time optimizing the performance marketing spend. Obviously, we've ramped down our brand spend in 2023 and really focused in on that performance marketing engine. And we're seeing benefits on multiple fronts, right? So we're seeing our CAC, as I noted in the prepared remarks, our CAC is down 24% year-over-year. We also -- we're also accessing the customers that we are adding are coming from higher value segments, kind of in the SB plus segments. And so I think all these factors together are just reflecting the fact that our performance marketing investments and the engine itself. We did a lot of work building new models in 2023, so all those things combined are really driving momentum there.

Understood, and then just on enterprise, given the change in reporting, it will be a bit more explicitly modeled now. I know re-excelling that growth is a priority, but just any other color to give just in terms of where you think that business can go over the next couple of years?

Yeah, Bernie, I think we expect to see modest growth in the business in 2024 with acceleration at the end of the year and into 2025. Through the course of 2023, we were really focused on driving efficiency and productivity of the business, particularly on the land side, and that did yield the addition of 31 new logos in Q4, which is our highest in the year. And I feel good about that, given that it's still a fluid macro environment. And despite all of that, our go-to-market improvements have definitely been effective. This year, we're also extremely focused on improvements on the expand side of our business, which really drives up spend per client account. And as you might imagine, this takes longer to get the results, but we have been taking steps such as our VMS integration partner launches in December, and those will kind of continue to expand and have impacts through this year and help drive that modest acceleration that we expect this year.

Great. Thanks, Hayden. Thanks, Erica.

Thanks.

Thank you. One moment for the next question. Our next question will be coming from Andrew Boone from JMP Securities. Your line is open.

Thanks so much for taking my question. It's great to see marketplace GSV accelerate from 3Q to 4Q. Is there any help you can provide as we think about cohorts that are underlying that and just a more stable macro and how cohorts are responding?

So I do want to emphasize on GSV, number one, as I said, we are expecting kind of modest year-over-year growth in 2024 on GSV front. In Q4 of 2023, we did see, and I talked a little bit about this in the prepared remarks, we did see some benefit on a year-over-year growth rate point of view because of the timing of payments from clients to freelancers and the day of the week that happens. Because there are 14 Sundays in Q4, the quarter ended on a Sunday. We did get a modest uptick in GSV growth in Q4 because of that. So we do expect for GSV growth to moderate just a little bit, still be up in Q1, but a little bit to a lesser degree as we go into the year.

Thanks, And then I had a big question -- a big picture question maybe for Hayden. If I think about a platform fee of 10% and I compare that to 5% or 20%, is that the right comparison as I think about the potential for you guys to continue to increase price on the platform? Is there anything else we should be thinking about as we think about the relativity of pricing versus competitors in a broader picture sense? Thanks so much.

Yeah, Andrew. We're very focused on ensuring that the pricing that we have really aligns with our model, our products, and the value we create for customers, which is a pretty different model than Fiverr, which is we have long-term high-value relationships here, and we monetize those through a variety of mechanisms. So I would say we are early still in unlocking the full value as you mentioned earlier around things like as in monetization which are a different vehicle for monetizing things like [time and attention] (ph) on our platform. And certainly there is room for take-rate expansion through vehicles like that one. However, we're not contemplating changes to our fee structure right now. I think we did a really great job with moving to the 10% platform fee. It has been extremely successful on all the dimensions that we've been able to see and measure and I think it's a good place to be right now. But there are other ways that we can continue to create value and monetize that value for customers and we're very focused on doing that this year and in years ahead.

Great. Thank you.

Thank you. One moment for the next question. Our next question will be coming from Kunal Madhukar of UBS. Your line is open.

Hi, thank you for taking my questions. One, in terms of the jobs that the freelancers are getting from the new clients that you added, is that any different in nature from the jobs that your traditional client base used to do? So that is one part. And then another part of the same thing would be, in terms of duration of the projects, in terms of the amount of the total project, in terms of the rate per hour, do you see any difference between new clients versus older clients? And then I have a housekeeping question on the balance sheet side. Want to understand, we get the adjusted free cash flow measure and that kind of reflects the delta because of the extra Sunday or the extra week. But you have funds held in escrow, which went up significantly, trade and client receivables which went up significantly, and deferred revenue which went down significantly, even compared to the recent past. So can you talk about that too? Thank you.

All right, Kunal, packed a lot in there, so let me start to break it down. So let's start with your first question in terms of the jobs that freelancers are getting from new clients. So I wouldn't say that the new clients coming on the platform, which we do anticipate to be a nice strong growth driver for GSV going forward. I wouldn't characterize that there's any significant mix shift in Q4 with the new jobs that clients are hiring for. I think just in general -- that the general dynamics of the platform that we've been seeing over the last couple of quarters are persistent with new client acquisition. And those obviously are that AI-related jobs are one of our biggest growers. And we actually also continue to see some pretty interesting dynamics on the platform. Some of our biggest growth categories in Q4 were actually categories that some of the conventional wisdom thought might get disrupted by AI, but we're not seeing that. Things like legal, things like logos for marketing and sales, other things like that are actually showing good, nice, healthy growth dynamics in Q4. So, and that's consistent with the way that we're seeing client ads come onto the platform as well. In terms of duration and the kind of total project totals that you asked, similar to last quarter, we saw on a sequential basis the average hours for contracts just increased ever so slightly quarter to quarter. And overall, I would say that those dynamics remain pretty persistent over time. And I'm just trying to look at my list of your questions here. Rate per hour also is pretty flat quarter to quarter, so not a lot to point to there. And then on the questions on the balance sheet, so just…

Thank you. No, in fact, if I could follow up. So then when we look at deferred revenue, we look at deferred revenue going down. Does that kind of imply that maybe the total number of projects that are longer term projects, the value of those projects is going down?

No, no, that is not accurate. The reason that the deferred revenue has declined is because we -- because of the dynamic of tiered pricing versus flat fee pricing, in the past we were required to defer more revenue because we were -- different contracts were priced at different rates and we're no longer required to do that with our new flat fee pricing.

Thank you so much.

So it does not have nothing to do with duration. Okay, yeah, sure, no problem.

Thank you. Thank you.

Yep.

Thank you. One moment for the next question. And our next question will be coming from Ron Josey of Citi. Your line is open.

Great, thanks for taking the question. Maybe, Hayden, two higher level questions, and one on AI and then one on ads products. Just on AI, we're just seeing significant traction in the number of tools and products that Upwork offers across the buyers and freelancers. So can you just tell us maybe how this is changing or improving the overall supply and demand and just the vibrancy of the marketplace? That's on AI tools. And then on ad products, clearly, the ability badges, business proposals are having a good impact here. Longer term, where do you think -- where can advertising go as a percentage of revenue, given your comments on just the complementary aspect to marketplaces. Thank you.

Sure, Ron. On the AI front, we're seeing really good traction so far in terms of the adoption of the tools that we've been launching for talent. So, Upwork Chat Pro, which was built on OpenAI’s GPT-4, has more than 150,000 signups. We've seen tools like Jasper, Adobe Tools, Amazon CodeWhisperer, and others definitely getting a lot of trial interest from talent. And overall, as with this platform shift to AI, what we've seen in other previous shifts around new tools and technologies, freelancers are always the fastest to move these technologies and ramp up their skills. And so this is what's happening right now. They're eagerly adopting these tools and really using them to drive performance metrics around productivity and quality of work. So even though it's still early days in some of this, the indicators are there that this is happening. And we're going to continue to pursue our strategy this year and empower our talent with the best possible tools out there. To your second question on ad products, this is an interesting question for us and certainly we're thinking a lot about it. If you look at companies like Instacart or others, I think in their [F1] (ph) they said they had something like 25% or 28% of their revenue coming from ads. And so it certainly seems like we have a lot of headroom to grow this business. I think it's too early for us to say exactly how big that runway is, but we are certainly early innings of unlocking that path and the fact that this is the fastest revenue grower for us in the past year and we see more runway with both the existing offerings scaling up as well as new offerings that we can put in the hands of our customers. I think it's a great sign of the value creation opportunity ahead of us.

Thank you, Hayden.

Sure.

Thank you. One moment for the next question. And our next question will be coming from John Byun of Jefferies. Your line is open.

Hi, thank you. This is John Byun for Brent Thill. First question was, so under guidance, so Q1 you said 15% growth, full year 11.7% I think. So obviously some deceleration through the year which you did talk about, but is there anything else that we should think about other than the lapping the price moves? I mean, to average out to by 12%, it looks like you would have to step down quite a bit by Q4. Not sure how to think about that curve. Thank you.

No. Hey, John. No, I think -- look, I think when we introduced our new kind of flat fee pricing structure back in May, and I think we talked about then that we would probably see a lapping effect in terms of growth rates in the back half of 2024, given the pacing of when that pricing change is moving through. So that's really the major dynamic in the back half of the year. And like we said, we've kind of been touching a lot on some of the other kind of nascent new revenue streams that we've gotten going in 2023. And I think we have kind of just a lot more work to do on execution and launching and supporting some of these additional new revenue streams, which we're confident we can kind of build and show growth in the future. So I think overall, yes, we'll see a little bit of moderation in the back half of 2024 on a growth rate point of view, but we feel pretty confident with the combination of kind of growth vectors that we've got in our pipeline that we'll be able to produce double-digit revenue growth on an ongoing basis.

Great, thank you. And then second question was on the AI acquisition. Was that, I don't know if you can provide more color, but was that just kind of a talent, a team? I don't know if the $3 million I see on the cash was [indiscernible] balance sheet might be that, or any revenue associated with that, or just a tech talent acquisition? Thank you.

Yeah, this was really about the team and the talent. I mean, certainly we're really excited about this because Andrew and his expertise are going to be extremely meaningful in terms of accelerating our roadmap around AI machine learning. He comes from incredible leadership roles at Google and Magic Leap. And the fact that his vision and his team's excitement to join us, given our assets, the data and our vision on future work, were really extremely exciting to us. But this was not about revenue, it was really more about the team and our shared vision around what we're doing and I think it's going to be exciting to see what we can launch this year in the coming years given the combined efforts.

Great. Thank you very much.

Thank you. One moment for the next question. Next question will be coming from Brad Erickson of RBC Capital Markets. Your line is open.

Hi, thanks. So first, just going back to the GSV comments, you called out the modest growth for ‘24. But then obviously you've also called out to seeing some of this nice success in the performance marketing channel. So I guess just kind of wondering why maybe not be a little bit more aggressive maybe with advertising in ‘24 or is that kind of embedded in your guidance to some degree? And then secondarily, just generally, no -- recognize you mentioned the pledge to kind of drive margin expansion from here. So just curious if the same goes for sales and marketing intensity within the P&L going forward? Thanks.

Yeah, sure. Look, I think I'll first just say, we do not -- we don't plan to increase our brand marketing spend in 2024. And that's largely because we don't think we need to right now. Like I said, we saw a really nice step-up increase in new active clients in the back half of the year, underneath the covers there in Q4, we have the highest new client acquisition that we've seen on the platform in two years. And I just want to remind people that the performance marketing engine is performing extraordinarily well, and we're super pleased with optimization there. We think we can drive more growth in 2024. But 75% of our new client acquisition comes from organic or unpaid channels. So we really do have some nice tailwinds behind us on this. And so at this point in time, we don't feel the need to reinvest in brand marketing. And all of our marketing planned expenditure is contemplated in the guidance for this year. Going forward, over the future years, we -- this marketplace business, it's a highly profitable business. We have 75% gross margins now. I think we see opportunities over the medium term to even improve that. And I think we have the flexibility in the model to consider reinvestments in growth whether it be ongoing investments in R&D or back into brand as we go forward and still produce the growing profit margins that we've committed to. So I feel comfortable with a lot of different scenarios there, but we're confident in growing both profit margins and pre-cash flow.

Got it. Thank you.

Thank you. One moment for the next question. Our next question will be coming from Rohit Kulkarni of Roth MKM. Your line is open.

Hey, thank you. A couple questions. First, just on this AI contributing to GSV growth, 70% growth in GSV from AI. Maybe if you could call out any anecdotes or any emerging new use cases where you feel there is a bigger opportunity for you to do the matching around AI use cases and what can Upwork do more to tap into this new opportunity? And then second, just on the active client growth, encouraging couple quarters in a row, uptick in new clients. Perhaps talk about the why and how sustainable is that? What are you embedding into your guidance around the near term client growth, perhaps macro tech hiring or whatnot?

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.

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.

Great, thank you. Thank you guys.

Thank you, one moment for the next question. Our next question is coming from Marvin Fong of BTIG. Your line is open.

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?

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.

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.

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…

No, that was terrific. Thank you very much, Erica, and thanks, Hayden.

Sure.

Thank you. One moment for the next question. Our next question is coming from Matt Burrows of Piper Sandler. Your line is open.

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.

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.

Awesome, thank you so much.

All right, thanks.

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.

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.

Thank you all for joining. You may disconnect now.