UPWORK, INCUPWK
UPWORK, INC Stock Compensation Disclosure
Stock-Based Compensation
Equity Incentive Plans
2014 Equity Incentive Plan
In 2014, the Company’s board of directors and stockholders each adopted the 2014 Equity Incentive Plan, which is referred to as the 2014 EIP. The total number of shares of common stock reserved and available for grant and issuance pursuant to such plan was originally 12,462,985 plus (i) shares that were then subject to outstanding option grants under the oDesk Corporation 2004 Stock Plan, the Elance 1999 Stock Option Plan, and the Elance 2009 Stock Option Plan, which are referred to collectively as the Prior Plans, but subsequently ceased to be subject to an award for any reason other than exercise of a stock option, (ii) shares that had been reserved but not subject to any outstanding awards under the Prior Plans and (iii) shares issued under the Prior Plans that were repurchased, forfeited, or used to pay employee withholding or exercise price obligations. Under the terms of the 2014 EIP, incentive stock options could be granted at prices not less than 100% of the fair value of the Company’s common stock on the date of grant unless determined in writing by the Company’s board of directors. The options granted under the 2014 EIP generally vest over a four-year period from the original date of grant and expire ten years from the original grant date. As of 2024, no further awards may be granted under the 2014 EIP.
2018 Equity Incentive Plan
In 2018, the Company’s board of directors and stockholders each adopted the 2018 Equity Incentive Plan, which is referred to as the 2018 EIP, which became effective on the date immediately prior to the date of the IPO. A total of 10,701,505 shares of common stock were initially reserved for issuance pursuant to future awards under the 2018 EIP. On January 1 of each year through 2028, shares available for issuance are increased based on the provisions of the 2018 EIP. Any shares subject to outstanding awards under the 2014 EIP that are canceled or repurchased subsequent to the 2018 EIP’s effective date are returned to the pool of shares reserved for issuance under the 2018 EIP. Awards granted under the 2018 EIP may be (i) incentive stock options, (ii) nonqualified stock options, (iii) RSUs, (iv) restricted stock awards, or (v) stock appreciation rights, as determined by the Company’s board of directors or compensation committee at the time of grant.
Pursuant to the terms of the 2018 EIP, the number of shares available for grant was increased by 6,767,422 shares in January 2025.
Option Awards
The fair value of options with service- and performance-based conditions is determined using the Black-Scholes valuation model as of the grant date using the following assumptions:
Dividend Yield—The dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to do so.
Expected Term—The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards containing only service conditions, the Company determines the expected term using the simplified method as the Company did not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior at the time of grant. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the
options. For performance-based awards, the Company uses relevant data, including past exercise patterns, if available, to determine the expected term.
Risk-Free Interest Rate—The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
Expected Volatility—Since the Company did not have a sufficient trading history of its common stock at the time of grant, the expected volatility is derived from the average historical stock volatilities of several unrelated public companies within the Company’s industry that the Company considers to be comparable to its business over a period equivalent to the expected term of the stock option grants.
Fair Value of Common Stock—Given the absence of a public trading market prior to the IPO, the Company’s board of directors considered numerous objective and subjective factors to determine the fair value of its common stock at each grant date. These factors included, but were not limited to: (i) independent contemporaneous third-party valuations of common stock; (ii) the prices for the Company’s redeemable convertible preferred stock sold to outside investors; (iii) the rights and preferences of redeemable convertible preferred stock relative to common stock; (iv) the lack of marketability of its common stock; (v) developments in the business; and (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions. Subsequent to the IPO, the fair value of common stock is based on the closing price of the Company’s common stock, as reported on The Nasdaq Global Select Market on the date of grant.
The following table summarizes activity under the Company’s stock option plans:
Number of Shares Underlying Outstanding Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||||||||||||
| Balances at December 31, 2024 | 2,392,899 | $ | 26.08 | 4.75 | $ | 10,391 | ||||||||||||||||||||
| Exercised | (181,987) | 4.12 | ||||||||||||||||||||||||
| Balances at December 31, 2025 | 2,210,912 | 27.89 | 4.01 | 10,632 | ||||||||||||||||||||||
| Vested and exercisable as of December 31, 2025 | 710,912 | 4.86 | 1.81 | 10,632 | ||||||||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 2,210,912 | 27.89 | 4.01 | 10,632 | ||||||||||||||||||||||
In 2021, the compensation committee of the Company’s board of directors approved a stock option grant, which is referred to as the CEO Award, exercisable for up to 1,500,000 shares of the Company’s common stock to Hayden Brown, the Company’s President and Chief Executive Officer, under the 2018 EIP. The CEO Award is subject to a service-based vesting requirement, which is referred to as the Service Condition, and a performance-based vesting requirement, which is referred to as the Market Condition. In order for any shares subject to the CEO Award to be exercisable, both the Service Condition and the Market Condition must be satisfied with respect to such shares. The CEO Award vests with respect to the Service Condition in sixteen equal quarterly installments following the grant date, subject to Ms. Brown’s continuous service to the Company as Chief Executive Officer, Executive Chairperson, or any C-level officer position. The CEO Award vests with respect to the Market Condition upon the achievement of certain volume weighted-average common stock price targets measured over any consecutive 90-day period between the grant date and April 18, 2026. The 90-day volume weighted-average common stock price targets, and
the number of shares of the CEO Award that become vested with respect to the Market Condition upon the achievement of each such target, are reflected in the following table:
| Stock Price | Number of Shares Vested | |||||||
| $60 | 100,000 | |||||||
| $70 | 200,000 | |||||||
| $80 | 300,000 | |||||||
| $90 | 400,000 | |||||||
| $100 | 500,000 | |||||||
As of December 31, 2025, none of the Market Condition stock price thresholds had been met, and no shares subject to the CEO Award had been earned or vested.
Stock-based compensation expense associated with the CEO Award will be recognized over the longer of the expected achievement period for the Market Condition and the Service Condition. The Market Condition period and the valuation of each tranche of the CEO Award were determined using a Monte Carlo simulation. In the event the Market Condition is met prior to the expected achievement period, any then-unrecognized compensation expense associated with the shares that have vested with respect to both the Market Condition and the Service Condition will be recognized immediately in the Company’s consolidated statements of operations and comprehensive income. For the year ended December 31, 2025, stock-based compensation expense related to the CEO award was immaterial and was recognized in the three months ended March 31, 2025. For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense related to the CEO Award of $1.3 million and $5.1 million, respectively. Stock-based compensation expense for the CEO Award is recorded as a component of general and administrative expense in the Company’s consolidated statement of operations and comprehensive income.
The Company estimates the expected term based on a future exercise assumption. The weighted-average derived service period for the CEO Award is 2.1 years. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes. The expected volatility is derived from the average historical stock volatility of the Company over a period equivalent to the expected term of the CEO Award. The following assumptions were used to estimate the fair value of the CEO Award:
| Dividend yield | — | % | ||||||
| Risk-free interest rates | 1.7 | % | ||||||
| Expected volatility | 65 | % | ||||||
For the years ended December 31, 2025, 2024, and 2023, the intrinsic value of options exercised was $2.4 million, $8.0 million, and $5.4 million, respectively. The aggregate intrinsic value represents the difference between the exercise price of the options and the closing price of the Company’s common stock on The Nasdaq Global Select Market on the day prior to the date of exercise.
The Company did not grant any stock option awards during the years ended December 31, 2025 and 2024. As of December 31, 2025, no unrecognized stock-based compensation expense remained.
RSU and PSU Awards
The following table summarizes the RSU and PSU activity and related information under the 2018 EIP:
Number Outstanding | Weighted-Average Grant Date Fair Value | ||||||||||
Unvested balance - January 1, 2025 (1) | 8,019,048 | $ | 13.08 | ||||||||
| Granted | 6,123,930 | 15.07 | |||||||||
| Vested | (3,826,502) | 14.15 | |||||||||
| Forfeited/canceled | (1,424,005) | 13.25 | |||||||||
| Unvested balance - December 31, 2025 | 8,892,471 | $ | 13.96 | ||||||||
(1) The unvested balance as of January 1, 2025 has been updated to reflect target performance attainment for the outstanding PSU awards.
RSUs. The fair value of RSUs awarded to employees is determined based on the closing price of the Company’s common stock, as reported on The Nasdaq Global Select Market on the date of grant. For the years ended December 31, 2025, 2024, and 2023, the weighted-average grant-date fair value of RSUs granted was $14.95, $11.90, and $11.73, respectively.
For the years ended December 31, 2025, 2024, and 2023, the fair value of RSUs vested was $52.0 million, $66.2 million, and $61.9 million, respectively. As of December 31, 2025, the Company had $91.3 million of unrecognized stock-based compensation expense related to outstanding RSUs to employees that is expected to be recognized over a weighted-average period of 2.3 years.
PSUs.
For all PSU awards granted under the 2018 EIP, the number of PSUs 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 PSUs 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 PSUs is recognized as a component of operating expenses in the Company’s 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 certification, the Company reassesses the number of PSUs that are probable of vesting, and any changes are reflected in stock-based compensation expense in the period of change.
2025 PSU Awards
In March 2025, 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 2025 PSU Awards. These awards were granted on March 18, 2025.
Up to fifty percent of the maximum number of shares subject to the 2025 PSU Awards are eligible to vest based on the Company’s achievement of certain financial performance metrics over a two-year performance period consisting of the Company’s fiscal years ending December 31, 2025 and 2026, and up to the remaining fifty percent of the maximum number of shares subject to the 2025 PSU Awards are eligible to vest based on the Company’s achievement of certain financial performance targets over a three-year performance period consisting of the Company’s fiscal years ending December 31, 2025, 2026, and 2027. The performance targets consist of adjusted EBITDA margin and relative total shareholder return compound annual growth rate targets established by the compensation committee at the time of grant.
Stock-based compensation expense related to the 2025 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 23 months and 35 months for the portions of the awards eligible to vest based on performance for the performance periods ending December 31, 2026 and December 31, 2027, respectively.
2024 PSU Awards
In March 2024, the compensation committee approved the grant of PSU awards to certain members of the Company’s leadership team under the 2018 EIP, which are referred to as the 2024 PSU Awards. These awards were granted on March 18, 2024.
Up to fifty percent of the maximum number of shares subject to the 2024 PSU Awards are eligible to vest based on the Company’s achievement of certain financial performance targets in the fiscal year ending December 31, 2025, and up to the remaining fifty percent of the maximum number of shares subject to the 2024 PSU Awards are eligible to vest based on the Company’s achievement of certain financial performance targets in the fiscal year ending December 31, 2026. The performance targets consist of year-over-year revenue growth and adjusted EBITDA margin targets established by the compensation committee at the time of grant.
Stock-based compensation expense related to the 2024 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 23 months and 35 months for the portions of the awards eligible to vest based on performance for the performance periods ending December 31, 2025 and December 31, 2026, respectively.
2023 PSU Awards
In February 2023, the compensation committee approved the grant of PSU awards to certain members of the Company’s leadership team under the 2018 EIP, which are referred to as the 2023 PSU Awards. These awards were granted on February 18, 2023.
The number of shares subject to the 2023 PSU Awards that were earned by the recipients, which are referred to as 2023 Earned PSUs, was determined based on the Company’s revenue achievement during the year ended December 31, 2023. PSUs earned based on achievement of the PSU Performance Condition are subject to a time-based vesting requirement, pursuant to which 25% vested on the one-year anniversary of the grant date and the remaining balance vests in equal quarterly installments over the subsequent four-year service period, subject to continued service.
Stock-based compensation expense related to the 2023 PSU Awards is recognized over the longer of the expected achievement period for the PSU Performance Condition and the PSU Service Condition associated with the time-based vesting requirement.
For the years ended December 31, 2025, 2024, and 2023, the weighted-average grant-date fair value of PSUs granted was $15.66, $12.06, and $11.72, respectively. During the years ended December 31, 2025, 2024, and 2023, the Company recorded stock-based compensation expense related to PSUs of $15.5 million, $3.1 million, and $2.4 million, respectively. As of December 31, 2025, unrecognized stock-based compensation cost was $23.3 million, which is expected to be recognized over a weighted-average period of 1.6 years.
2018 Employee Stock Purchase Plan
In 2018, the Company’s board of directors and stockholders each adopted the 2018 ESPP. A total of 1,700,000 shares of common stock was initially reserved for issuance under the 2018 ESPP. On January 1 of each year, shares available for issuance are increased based on the provisions of the 2018 ESPP, up to an aggregate maximum of 20,400,000 shares issued under the 2018 ESPP, subject to adjustment for certain company capital changes. The 2018 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan limitations. Except for the initial offering period, the 2018 ESPP provides for 24-month offering periods beginning November 15 and May 15 of each year, and each offering period consists of four 6-month purchase periods. Pursuant to the terms of the 2018 ESPP, in January 2025, the number of shares of common stock available for issuance was increased by 1,082,787 shares.
For the years ended December 31, 2025, 2024, and 2023, the assumptions used to determine the fair value of the shares to be awarded was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Dividend yield | — | % | — | % | — | % | |||||||||||
| Expected term (in years) | 0.5 - 2.0 | 0.5 - 2.0 | 0.5 - 2.0 | ||||||||||||||
| Risk-free interest rates | 3.6% - 4.3% | 4.3% - 5.4% | 4.0% - 5.4% | ||||||||||||||
| Expected volatility | 49% - 58% | 44% - 64% | 58% - 74% | ||||||||||||||
On each purchase date, eligible employees may purchase the Company’s common stock at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date or (2) the fair market value of the Company’s common stock on the purchase date. In the event the price is lower on the last day of any purchase period, that price is used as the purchase price for that purchase period.
Additionally, in the event the fair market value of the Company’s common stock on the first day of a subsequent offering period is less than the fair market value of the Company’s common stock on the offering date of the current offering period, the offering period resets, and the new lower price becomes the new offering price for a new 24 month offering period. During the year ended December 31, 2025, the Company issued 412,658 shares of common stock under the 2018 ESPP.
As of December 31, 2025, there was $3.0 million of unrecognized stock-based compensation expense that is expected to be recognized over the remaining term of the respective offering periods.
Stock-Based Compensation
The following table summarizes the components of stock-based compensation expense recognized in the consolidated statements of operations and comprehensive income for the years ended December 31, 2025, 2024, and 2023:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of revenue | $ | 760 | $ | 1,586 | $ | 1,900 | |||||||||||
| Research and development | 23,023 | 29,923 | 28,006 | ||||||||||||||
| Sales and marketing | 6,347 | 11,670 | 14,030 | ||||||||||||||
| General and administrative | 35,260 | 25,212 | 30,259 | ||||||||||||||
| Total | $ | 65,390 | $ | 68,391 | $ | 74,195 | |||||||||||
For the years ended December 31, 2025 and 2024, the Company recorded $10.1 million and $12.8 million, respectively, of tax benefit on total stock-based compensation expense. The amounts are reflected in income taxes (provision) benefit in the consolidated statement of operations and comprehensive income. Tax benefits on total stock-based compensation for the year ended December 31, 2023 was not material.
Stock-Based Compensation to Employees
Stock-based compensation expense related to employees for the year ended December 31, 2025 was $68.4 million and $1.8 million related to RSU and PSU grants and the 2018 ESPP, respectively. Stock-based compensation expense related to employees for the year ended December 31, 2025 for stock options was immaterial and no unrecognized stock-based compensation expense related to employee stock options remained as of December 31, 2025.
Stock-based compensation expense related to employees for the year ended December 31, 2024 was $1.3 million, $66.2 million, and $2.6 million related to stock options, RSU and PSU grants, and the 2018 ESPP, respectively.
Stock-based compensation expense related to employees for the year ended December 31, 2023 was $5.1 million, $65.1 million, and $5.0 million related to stock options, RSUs, and the 2018 ESPP, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.