UPWORK, INCUPWK
UPWORK, INC Leases Disclosure
Leases
Operating Leases
The Company leases office space and certain equipment under various operating leases, with the vast majority of its lease portfolio consisting of operating leases for office space. The Company has also entered into arrangements where it acts as a sublessor in its leases of office space. The Company has not entered into any significant finance, sales-type, or direct financing leases.
The Company’s significant judgments include determining whether an arrangement is or contains a lease, the determination of the discount rate used to calculate the lease liability, and whether or not lease incentives are reasonably certain to occur in the initial measurement of the lease liability. Operating lease assets and lease liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term. Lease expense is recognized on a straight-line basis over the lease term.
A contract is or contains an embedded lease if the contract meets all of the below criteria:
•there is an identified asset;
•the Company has the right to obtain substantially all of the economic benefit of the asset; and
•the Company has the right to direct the use of the asset.
For initial measurement of the present value of lease payments and for subsequent measurement of lease modifications, the Company is required to use the rate implicit in the lease. Since the majority of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is a collateralized rate. The application of the incremental borrowing rate is performed on a lease-by-lease basis and approximates the rate at which the Company could borrow, on a secured basis for a similar term, an amount equal to its lease payments in a similar economic environment.
The Company’s leases have remaining lease terms of approximately three years to seven years. The Company includes lease payments associated with renewal options in its operating lease asset and liability only when it becomes reasonably certain the company will exercise the renewal option. The Company has not included renewal options for any of its operating leases in its determination of lease liabilities. The Company does not have lease agreements with residual value guarantees, sale leaseback terms, or material restrictive covenants. Leases with an initial term of 12 months or less are not recognized on the consolidated balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The following table summarizes the Company’s operating lease assets and lease liabilities as of December 31, 2025 and 2024:
| (In thousands) | |||||||||||||||||
| Balance Sheet and Cash Flow Classification | 2025 | 2024 | |||||||||||||||
| Assets | |||||||||||||||||
| Operating—noncurrent | Operating lease asset | $ | 5,011 | $ | 5,752 | ||||||||||||
| Liabilities | |||||||||||||||||
| Operating—current | 1,672 | 1,624 | |||||||||||||||
| Operating—noncurrent | Operating lease liability, noncurrent | 9,707 | 9,567 | ||||||||||||||
| Total lease liabilities | $ | 11,379 | $ | 11,191 | |||||||||||||
For the years ended December 31, 2025, 2024, and 2023, operating lease cost, inclusive of variable lease charges, was $2.6 million, $5.6 million, and $6.3 million, respectively, and sublease income recognized was approximately $1.2 million, $1.7 million, and $1.7 million, respectively. For the years ended December 31, 2025, 2024, and 2023, charges related to operating leases that are variable, and therefore not included in the measurement of the lease liabilities, were $1.0 million, $2.1 million, and $2.2 million, respectively. For the years ended December 31, 2025, 2024, and 2023, the Company made lease payments of $2.0 million, $5.8 million, and $6.8 million, respectively.
Palo Alto Office Lease
In June 2024, the Company entered into a new lease agreement to lease approximately 12,685 square feet of office space in Palo Alto, California, which serves as the Company’s corporate headquarters. The lease commenced in September 2024, and rent payments began in March 2025. The initial lease term is 91 months from the commencement date and is scheduled to expire in September 2032, unless terminated earlier. The lease includes two options to extend the term, each for an additional three years, exercisable under certain conditions specified in the lease agreement. The Company evaluated these extension options as part of the lease accounting under ASC 842 and determined that the extension options are not reasonably certain to be exercised. As such, the options 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 recorded a right-of-use asset and lease liability of $4.5 million and $4.4 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 consolidated statements of operations and comprehensive income.
Santa Clara Sub-Sublease
In November 2023, the Company amended its sub-sublease agreement, originally executed in April 2021, to sublease the entirety of its former headquarters in Santa Clara, California. The amended sub-sublease extends the term by an additional 51 months, through August 31, 2028, unless terminated earlier. The amended sub-sublease term aligns substantially with the remaining term of the Company’s master lease. Monthly rent payments under the amended agreement are approximate $0.1 million and are recorded within general and administrative expenses within the Company’s consolidated statements of operations and comprehensive income. Neither party has the option to renew or extend the sub-sublease agreement.
Under the amended sub-sublease agreement, the Company is not relieved of its original obligation with the master lessor, which expires on October 15, 2028. The Company determined that the sublease agreement constitutes an operating lease, consistent with the classification of the original sublease agreement with the landlord.
Chicago Leases
In December 2024, as a result of the restructuring plan announced in October 2024, which is referred to as the Restructuring Plan, the Company entered into an early termination agreement for the Chicago leases, which was effective December 31, 2024. The Company recognized approximately $1.1 million in early termination costs, primarily consisting of remaining lease payments under the termination agreement. Operating lease costs for the year ended December 31, 2024, including variable lease charges, reflected amounts incurred prior to the lease termination.
The following table shows the Company’s future lease commitments due in each of the next five years for operating leases, which excludes amounts received in the form of sublease income discussed above:
| (In thousands) | ||||||||
| Year Ended December 31, | Leases | |||||||
| 2026 | $ | 2,962 | ||||||
| 2027 | 3,050 | |||||||
| 2028 | 2,735 | |||||||
| 2029 | 1,347 | |||||||
| 2030 | 1,387 | |||||||
| Thereafter | 2,531 | |||||||
| Total lease payments | 14,012 | |||||||
| Adjustment for discount to present value | (2,633) | |||||||
| Total | $ | 11,379 | ||||||
As of December 31, 2025, the weighted-average remaining lease term is 3.8 years. For the year ended December 31, 2025, the weighted-average discount rate is 6.6%.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.