What's the best way to analyze a public company's financial report for the second quarter? Well, I think you should keep it simple.
All you have to do is compare the financial results from the second against the first quarter. The numbers always tell the truth, don't they?
So, let's hear what Upwork's numbers have to tell us.
O Captain! My Captain! Why Are You Leaving Your Ship That Still Floats?
I can confirm first-hand that the Upwork team did an amazing job in creating a series of nice-looking presentations and tables as a part of their second quarter report. Unfortunately, it is not only the investors, but it's in our nature to look for the stock prices first.
Here's what happens when you type "UPWK NASDAQ" in Google.
Source: Tech Know Bits
They go up and down, all the time. That's not a big deal. That's something called the "stock-market-roller-coaster." I saw it before when I did a follow-up on Freelancer dot com's stock market performance. Again, this isn't an unusual thing for a public company.
What I found to be a bit unusual, though, were Upwork CEO's Stephane Kasriel transaction activities in the second quarter.
Almost right after Upwork's report for the first quarter was announced, their stock prices plunged dramatically. In May, Upwork's stocks dropped for more than 25%.
I did my very best to pinpoint the exact moment Stephane Kasriel sold the jaw-dropping number of 280,000 shares on the attached illustration. Someone may say, the timing was perfect. This transaction took place "in the middle of fall" of Upwork's stocks before they hit the record low on June 5th.
Then, two weeks later, as soon as Upwork's stocks slightly recovered, Stephane Kasriel sold another quantity of shares (120,000). This time the timing wasn't perfect, but from a broker's point of view, it was still good enough to get the most out of your stocks.
It's not up to me to comment Stephane Kasriel's transactions. I will let the numbers and dates do all the talking. Moving on with Upwork's report.
What All of These Got To Do With Me - I'm Just A Client Or Freelancer?
Source: Upwork
I understand that you just want to move on with your work as a freelancer or business as a client. Who has the time to bother with the financial reports? We aren't brokers, we are freelancers and clients. Right?
I have to say that it's in your best interest to pay close attention to "Sales and Marketing" and "General and Administrative" costs in the official Upwork's report. Why?
Upwork's Operating Expenses are every investor's mood killers, but these two, in particular, hurt all users. How?
When you have a "tiny gap" between your Gross Profit and Total Operating Expenses, the following question is inevitable. Who's going to pay, so Upwork's show can go on?
The first Upwork's financial report in 2019 killed the free bids/connects for freelancers. Do you remember? Here's a direct quote from the Upwork Inc (UPWK) Q1 2019 Earnings Call Transcript where Stephane Kasriel explains how is this actually a good thing:
With the new Connects launch, freelancers will purchase Connects for $0.15 each, which is a decrease from the prior $1 per Connect price. To take into account the value of different projects, the number of Connects required to bid for our projects will vary from zero to six Connects depending on the size of the project, where previously every project required two Connects to bid. Bids submitted in response to invitations from clients will continue to be free. These changes in Connects are aimed at helping skilled professionals win more projects. We expect freelancers will submit fewer proposals, focusing on projects for which they are the most qualified and most likely to win.
Did you think that the second quarter report will be more "merciful?" Here's a "nice" surprise for clients officially announced in Upwork Stockholder Letter Q2 2019 (Page 8):
We are also migrating all Upwork Standard clients from a 2.75% to a 3% payment processing and administrative fee when they transition to an Upwork Basic or an Upwork Plus account. We are ahead of our internal target in transitioning existing clients to Upwork Basic and Plus, which started in June 2019, and all new clients are defaulted to the new rate upon signing up.
That's All Freelance Folks - Good Luck With Upwork's 3rd Quarter Report
The music is still on board the Titanic. I don't have the courage to wait and analyze the next financial report for Upwork's third quarter.
We think of the Titanic orchestra as heroes. I think that they did all passengers a bad favor in convincing them that the "business" was as usual. Did Upwork "orchestra" do the same for their users with this report?