Q3 2021 Fiverr International Ltd Earnings Call
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Hello, everyone. Thank you for joining the Pfizer Q3 fiscal 2021 earnings conference call. This call you should begin them a couple of minutes. Thank you for your patience.
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Hello, everyone and thank you for joining the fight about Q3 fiscal 2021 earnings Cobra School. My name is there is no P. Mod rates new Coke today goes I'll hand, you over to your host Chin-chin trend I would like to remind you if you'd like to ask a question during the Q&A session at the end of the coal piece brushed off one by one on your telephone keypad.
If you have joined US online. Please use the request to speak like I called Pizza on mute yourself low keep asking your question and now have the pleasure of Honey Overachieve Chin-chin trend.
Please go ahead.
Thank you operator, and good morning, everyone. Thank you for joining US fiber earnings conference call for the third quarter ended September 30th 2021.
Joining me on the call today are Lee, how Kaufman founder and CEO and also cause president and CFO.
Before we start I'd like to remind you that during this call. We may make forward looking statements and that these statements are based on current expectations and assumptions as of today and Fiverr assumes no obligation to update or revise them.
A discussion of some of the important risk factors that could cause actual results to differ materially from any forward looking statements can be found under the risk factors section in <unk>. Most recent form 20-F, and other filings with SEC.
During this call, we'll be referring to some non-GAAP financial measures.
A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure are provided in the earnings release, we issued today in our shareholder letter each of which is available on our website at investors <unk> Com and now I will turn the call over to Neil.
Good morning, everyone and thank you for joining us on the call. Today. We are very excited to talk to you about recent developments at fiber Q3 turned out to be a very strong quarter with revenue growing 42% year over year above the high end of our guidance.
All kpis, including active buyers spend per buyer in take rates performed really well too.
Our business, including the traffic to our platform improved from the Hyperscale and all of the Pea that we experienced in the earlier part of Q3.
This is by no means to say that the uncertainty and impact of Covid is over however, the strength and resilience of our business once more powered us through these volatile times.
We believe the secular trend over more pork and the need for digital transformation are here to stay well beyond the pandemic.
This is need to stay competitive in their talent strategy to be adopted in their ever changing digital landscape to creatively address the skilled labor shortage and to be nimble and efficient execution.
Fiverr with our vast catalog are resilient community and best in class service as a product experience continues to empower freelancers and businesses across the world in achieving these goals.
I am very proud of the entire fiber team in delivering strong results quarter. After quarter. So we can invest aggressively in long term initiatives. So today I want to spend some time talking to you about how we envision the future of work and how we are putting a few important pieces in place as we plan.
The next 10 years of fiber after that offer will provide more color on the quarter.
When we consider the total addressable market. It is important to note that the majority of freelancing still happens offline.
We believe offline channels will continue to be a big part of how businesses get connected with freelancers, just like how after more than 20 years E. Commerce is still less than 20% of total retail sales we.
We want to make sure that fiber is enabling all freelancing engagements for businesses for both online and offline.
This is why we recently acquired Stoke talent, if freelance management software company.
Through Stoke we gain access to the offline freelancing market that is still orders of magnitude larger than the one I am pronouncing.
Which stokes offerings, we can enable businesses to better manage or existing per ounce or relationships.
Most companies today do not use dedicated purpose built freelance management systems oftentimes freelancers are managed through excel spreadsheets scattered among different teams and individuals throughout the organization.
When oney Freelancer is does your organization engage with today most companies don't know the answer.
And this can trickle down to tremendous inefficiencies in managing budget meeting compliance sitting up payments sending.
Sending tox documents and the list goes on.
All of this becomes easy once you sign up on Stoke.
What stope, however aims to become a 360 degree partner for businesses to move their entire freelancing budgets to our ecosystem.
Talent is everywhere and finding talent is hard.
We believe the future of work requires businesses to implement a multichannel freelancers strategy.
We want to help businesses effectively implement such a strategy inefficiency manage it without having to worry about being tied to one platform or one source of talent pool now.
Now, let's talk about the freelancer side.
We believe the future of work for freelancers is about building a personal brands personal audience and the line between building a freelance in career and a small business is blurring.
This has been in fibers vision from day one.
And he is how we differentiate ourselves from any other freons her platform.
On our E Commerce platform freelancers are entrepreneurialism.
Our store owners and they take full control and defining which services to provide at which price how and when they work.
With this in mind, we want to build fiber into an ecosystem that not only brings freelancers revenue opportunities, but also software and tools to help them manage their business and continue to grow professionally.
He recently completed the first phase of integration of Ensco and rebranded it as the all new fiber workspace.
If I heard workspace enables freelancers to seamlessly integrate their fiber orders with all other client engagement. So of freelancers can manage contract invoices and earning in a consolidated fashion.
We also completed the acquisition of creative lives to round up our offering in the learning and development space.
We incubated fiverr learn internally a few years ago and the product is received tremendously positive feedback from our community.
Not only they loved the high quality content, but it is also a way to connect with top talent in the relevant fields and to increased visibility on our March base.
The acquisition of creative lives will allow us to significantly expand our professional education content library and its further grow this part of our business.
Leveraging its production capabilities and content distribution technology, we also see meaningful opportunities to expand our value add to the corporate certification partnerships, we'll save that for later.
Before I hand, it to offer Fiverr is build a very intuitive easy to use platform with a very efficient go to market strategy, but sometimes people forget how complicated our problem space actually is where.
We are not doing e-commerce for merchandise, but we are dealing with people services and our relationships there.
They are much more complicated than the merchandize.
The underlying technology, we've built over the years and the insights we've gained understanding buyers intent and sellers expertise.
What makes delivering simple experience possible with <unk>.
Continuing to innovate and invest in technology to make the future of work easier and better.
With that I'll turn the call over to offer.
Thank you and good morning, everyone.
Excited to deliver another quarter of excellent. Please the millions of businesses continue to come to five of the fine pitch.
Services.
Revenue for Q3 was $74 3 million.
42% driven.
Driven by a 33% growth in active buyers.
So let me first on growth on spend per buyer and 140 basis points expansion in take rate.
This is especially impressive considering the 88% growth we had in Q3 last deal.
Honestly, I think to 106% to 6% revenue growth on a two year basis.
The increase was driven by evil.
<unk> from the 50 basis point increase in service fees.
The continued expansion of seller pool, including promoted gigs and fellow plus.
As well as additional contribution from clear voice fiber Lan and private workspace.
We continue to move up market with high value buyers now representing 62% core marketplace revenue.
Up from 57% in Q3 last year.
The growth contribution from high value buyer is driven by two factors.
The number of high value buyers grew significantly faster than the overall volume growth second the average spend per buyer for high value bio.
This is many times more than everybody marketplace spend per buyer.
We did buy of those.
Those who joined five of over a year ago contributed to 58% of revenue and core marketplace up from 55% in 2020.
Our older cohorts continue to spend at elevated levels compared to pre pandemic and we continue to see the recent cohort in 2020 and 'twenty, one performed better than a typical cohort in previous year.
Adjusted EBITDA for the quarter was $7 3 million.
Adjusted EBITDA margin nine 8% an improvement of 118 basis points over Q3 last year.
We have continued to improve our operating leverage in our <unk>.
BT to generate consistent positive adjusted EBITDA, while growing our topline.
Difficult pace, which demonstrates the strength of our business model.
We made two important acquisitions in Q4 creative lie and spoke pallet.
Most times auction will not have a material impact to our P&L in Q4.
But they are highly but she did for us as we march toward our long term vision of the future work.
What's creating live we expect to expand our offering to our community.
We are also planning to lean more into professional training.
To strengthen our value proposition with upmarket by it.
So talent is a young fast growing company that provides best in class.
Software for medium to large businesses.
We believe spoke platform agnostic approach will enable us to capture a freelancer spend I would tell you the five though the vast majority of which is still offline.
It also supports fiber upmarket initiative as we look to strengthen our integration with cobalt workflow.
That is enough customers all over the phone.
Platform with everybody and Youre willing to spend up over 100000 dollar per customer.
Post acquisition, we expect to significantly accelerate the pace of customer acquisition on the <unk> platform as well as continuing to optimize the onboarding process to increase freelancing spend from existing customers.
Now onto guidance.
For Q4, we expect revenue to be 74, 5% to 77 5 million and adjusted EBITDA to be 5.5 to 7 million.
We are encouraged by the recent trends in our marketplace.
As the hydro seasonality in the past two months.
I mentioned it is too early to say that the COVID-19 impact is completely behind us.
We'll take a few quarters for us to unwind the COVID-19 impact.
And the macro conditions remain highly volatile.
For the full year 2021 we now expect revenue to be 292, four to $295 4 million.
At the midpoint this represents revenue growth of 55% year over year.
And 174% on a two year basis.
EBITDA is expected to be 19, $5 million to $21 million, which at the midpoint, representing 210 basis points.
<unk> and a positive swing of three seven percentage points compared to two years ago.
The fact that we have been consistently growing our business.
Significant space and the rapidly increasing our market share highlights the strengths of our business model and our ability to execute.
And we expect to continue doing that for many years ahead.
With that we'll now turn the call over to the operator for questions.
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Our first question comes from Nick Joseph from Citi. Please go ahead Nick.
Great. Thanks for taking the questions I guess two are around the acquisitions. One can you touch on you know what the impact of <unk> guidance from the acquisitions. This quarter. Just so we can try to tease out kind of what's organic and what's additive from.
Creative live in store talent and then the second question, maybe taking a step back.
How should we think about the talent and and in terms of kind of your strategy to go more up market does it go further than kind of the larger F. N. B that you kind of were focused on can Stoke talent start to attract enterprise clients that you know maybe call fortune 500 type clients.
Yeah.
Yeah.
Hey, Nick on the first part of the question on the fourth quarter.
All right.
You Shouldnt assume any impact not on the top line.
On the bottom line.
The two companies.
We are considering.
Considerably small.
And the overall.
Revenue and expenses.
I'm asking.
Two to where we are today.
And then for your second part of the question about stope, So essentially as we said in the opening remarks.
Stoke is mostly serving customers who are spending over $100000 a year.
On there are freelancing.
Engagement, which if you compare that to the average spend per buyer on fiber you understand that there is.
Market cap. So this this is definitely serving.
As a way for us to engage with much larger types of customers.
So customers oftentimes breeder existing freelancers into those platforms, but overtime.
We need access to additional three answers, which we can serve through our market base.
And thus be able to serve that specifically worked this works very well with that.
All of our business as well so so we definitely think that this is extremely strategic.
The young company, just starting but the pace of growth.
Very nice.
<unk>.
We're very excited about this.
Great. Thanks for taking the questions.
Thank you.
Yeah.
Sure.
Our next question comes from Doug Anmuth from Jpmorgan. Please go ahead Doug.
Great. Thanks for taking the questions you guys are doing well.
Maybe first just on take rate.
140 basis points of increase year over year, I know you mentioned basically a third of that.
It sounds like it's coming from the increase in <unk>.
In service fees, but can you help us understand kind of the other 100 bps plus across promoted gigs and seller plus and clear voice some of the other things you mentioned there and then also how you think about.
Take rate can go over time.
And then also just.
I know hyper seasonality, you kind of talked about getting through perhaps the worst of it.
And things getting better.
You are not guiding to 2022, but as you look towards next year.
Just curious to get your early thoughts around just whether it's seasonality you think kind of returns to.
To a more normal type of position there. Thanks.
Yeah.
So so.
The first part of the question. So yes, I think this is.
I'm, sorry, I'm going to give you three the consistent until we gave previously.
Part of being creative.
Due to the change we need on the on the service fee.
And the rest is.
Relying on the other services, we are promoting which have a higher one. Good example is the promoted gig.
A second example.
In the solar plus that we initiate.
Two or three quarters ago. So this type of this type of add on services.
Whether it's on the supply side.
On the demand side.
Is indeed provisioning that takes eight.
Services.
Becoming more popular.
And adopted by the Odeon, we anticipate that they will increase further.
For the time being.
So.
Again, consistent with what we've seen.
So we went public safety is growing.
Moderately quarter over quarter. We anticipate this is the case over the next few quarters.
Yes.
And Doug regarding the hyper seasonality so so essentially.
We've been talking about this since previous quarter, so hyper seasonality starting in the second half of May I think that the worst point of it was July and it's stabilized in August with a moderate.
Improvement in September and October.
This is what we're seeing okay. So our point is that it's still early to say that that the COVID-19 impact is behind us.
In hydro is not these over the upcoming holiday season could be a little different this year.
Many people didn't get to visit their families last year.
And I think we've seen from our reports of travel.
Airlines that this is going to be slightly increased.
This year.
But we think that the unwinding of Covid will continue throughout the next few quarters.
The good news for US is that the business fundamentals are very very strong.
We're we have a huge.
Yes.
The business is going extremely well cohort behavior is better than it was.
Pre.
Pre COVID-19.
So all in all we're saying is.
It would be a little bit cautious about how we view the next few quarters because it is.
These are phase.
Maybe the unwinding of Covid and some uncertainty should be built into it.
Okay. That's helpful. Maybe just one more follow up.
You mentioned accretive lives.
Obviously expands the learning capabilities here just curious what other key investments you think you need to make in that direction as you as you lean into professional training more.
Yeah.
So so creative lives is really a way for us to take.
The program that we started with fiber learn.
Box Board.
With adding thousands of high quality classes.
In both strong assets and product and content distribution.
And in really the idea behind this is.
As we said we want to provide opportunities for talented people to advance their careers and translate learnings and training into work achievements.
So the integration of creative like what we're doing is extremely important and as we think about.
Working and getting into new verticals, the ability to create training programs that will allow professionals to get into those verticals.
Is critical in the evolution and this allows us to really create this 360 ecosystem that takes care of many different aspects.
And so I think that having the creative lives.
The talented team.
Appeal of this product over the years.
He is an extremely important asset for us in this strategy.
Sure.
Great. Thank you both.
Okay.
Our next question comes from Jason <unk> from Oppenheimer. Please go ahead Jason.
Yeah.
Hey, Thanks for taking the question.
I guess, one how are you thinking about the impact of the acquisitions or how should we think about it.
I mean, clearly there's products behind that user product acquisitions, but how fast do you think you can kind of integrate them then we potentially see the impact on the business is that maybe more of a 'twenty three impact or could we executed.
In 'twenty, two and then.
From.
Given there's a lot of discussion about employees kind of <unk>.
<unk> tech jobs, because the burn out.
Are you seeing more of these.
You know.
You know people effectively laborers like joining your marketplace and just how are you thinking about that over the next six months to 12 months.
Hey, Jason good morning.
Yeah.
The impact of the acquisition I think I think you're right I think that the.
The impact should be expected in 2023, it's obviously going to take a few quarters.
Do the integration.
So definitely wouldn't expect to have.
A very meaningful impact.
In the coming quarters.
As to what we're seeing with the employees even tech jobs.
I think that would be in a sense, what we're seeing I mean, there is the great resignation, but people don't just resign they need to assume new jobs and I think that this is more a rotation.
Ben.
Then just resignation and I think people. Some people are burnt out some people are just rethinking their careers and this is a good opportunity some people.
Rethink.
How they want to work life balance.
<unk>.
We have been seeing a steady.
Steady increase in freelancing in general.
More people are engaging into freelancing, but I think that this is not largely driven by this because this is more of a rotation and because of that youre seeing youre seeing salary inflation and all of that because as people leave jobs. It creates a lot of demand for talent, which creates opportunity for that talent to demand higher.
So it's kind of a it's kind of a.
Cycle that feeds itself.
We're not sensing like a massive massive change I think that most of the resigns or actually.
Being re employed by other companies, it's just a way to get to.
A change.
Thank you.
Yeah.
Okay.
Our next question comes from Bonnie.
Bernie Mcternan from did that neither had please go ahead Bernie.
Okay, It's actually Chris on for Bernie how are you doing this morning.
Still kind of a sales force and would that sales force you know as they look to sell into those businesses are doing over 100000 in revenues would that help your SMB business is that that kind of could there be an add on effect. There is that the right way to think about it.
So yes.
So it does have.
Handful a thin market.
Therefore.
A compliment.
Powerful.
Therefore, together with direct marketing and inbound.
I think.
I think now the stock is.
And I was at a fairly early stage company.
Really fast.
Yet to be said.
It's too early.
We'll see how it how it is.
Hello.
In the next few quarters.
So that's the plan on the SMB business and the thing for me if I mentioned that earlier it can take some time.
The product ties.
The synergy.
So combined between.
Between the stope and fiber business, we choose.
Where we are headed yes, so just to augment what ofer said.
The idea is to create a holistic solution for businesses right. So.
Businesses come to us and use fiber business for their purposes, and they may have other freelancers that they have previous relationships with.
The stope platform should serve.
This should serve these customers very well. So this is this is a great channel.
Adding large customers into the Stoke.
Our products are.
A lot of Stokes growth has been organic and yes in combination with wood sales efforts.
Both inbound and outbound.
But generally speaking as Ofer said, it's a young company with just a.
Dozens of customers at this point.
We're very happy to see that the growth is going extremely extremely well and.
And we will be happy to provide more details on that business in the upcoming quarters.
Okay. Thank you.
Thank you very much. Our next question comes from scrap Ericsson from RBC capital markets. Please go ahead Brad.
Hi, just a couple for me first for Stoke can.
Can you just talk about the mechanics, there that you envision when you think about bringing in enterprise onboard.
And then like you said transitioning their offline freelancing activity.
The online world what does that look like how hard is it is there a basic assumption when you sign up for.
Stoke that.
I want to bring everything online or is that not not how it works.
Yes so.
Thanks for the question.
So as we always said the majority of freelancing activity happens offline. It's about 95% of it is a fun, which means that it's mostly based on word of mouth and reference from people right. So when people are looking for talented freelancers to work with they use their networks mostly.
To get in touch with them and and overtime businesses are building.
Groups are cohorts of freelancers that the organization.
<unk> is used.
As used before and they become a resource for the organization.
What stope provides is a way to standardize that relationship because theres. So many so many.
Difficult touch point in having this.
Very diverse group of freelancers agencies studios.
Work with an organization.
While keeping.
The same thing compliance level.
And.
Managing budget, and managing communication and and so forth. So stope stope really allows these organizations to standardize all of that but.
But the reality is that organizations overtime needs more and more talent to engage with so sure. They can use their <unk>.
Previous networks to try and source these.
These freelancers.
Freelancers or now because we're integrating Stoke and fiber they can actually enjoy the fact that we have an amazing one of the largest pools of talent in the world and we can help them tap into that into the talent.
And work with that talent the way they love working with.
At the end of at the end of the day as we think about the future there is going to be multiple ways to engage with pre downturn fiber wants to solve for all of them.
Don't care how are you.
What's your preferred way of working with freelancers, we want to be able to provide a simple intuitive easy to use solution for that.
<unk> gave that where we're going to integrate all of these solutions into one ecosystem.
And stop place plays a great role in doing that so for bridging the offline to online.
Okay.
Just another incredible way for us to do so and obviously, it's focusing on larger types of customers that have their own.
Groups of freelancers that they that they have relationships with.
Got it and then maybe just a follow up you've mentioned a couple of times here. This morning.
We still may have a few quarters as we hopefully come out of Covid, which creates some uncertainty.
And caution can you just kind of help us reconcile why that would be it seems like that would be a good thing for fiber, particularly given that we don't have to worry about hyper seasonality it would seem.
So maybe just a little more help there would be great.
Yeah. So.
So.
Besides the hypo seasonality. The fact that the fact that we are lapping a very strong growth.
Occupy buyer during the last few quarters.
Since the the way we the way we calculate active buyer.
<unk>.
As on a full quarter basis of activity.
We anticipate in terms of modeling is that.
We'll see some some headwind.
And active buyer growth for the next quarter or so.
That's the kind of the the main place where we anticipate that the headwind.
As we look to.
For the future.
That's great. Thanks.
Okay.
Our next question comes from Rohit Kulkarni from MK and partners. Please go ahead for heat.
Great. Thanks, a couple of questions.
One of them marketing and any early signs of success from.
Our brand marketing campaign, but you could ship and as part of marketing.
A lot of Internet companies are facing.
Uncertainty with user acquisition traffic acquisition and whatnot.
As part of your body or in traffic acquisition are you seeing any of that given the way you spend.
Marketing dollars and then I have a follow up.
Thanks for the question. So yes, we have launched a new brand and we're doing well.
We're launching it multichannel so the combination of television digital out of home and we're doing into multi country.
U S UK, Australia, Germany, the signs that we're seeing from the campaign so far in <unk>.
It was just launched are extremely positive. So we're very happy with it and as we always said the.
Our strategy of combining brand marketing and performance marketing is key to what we.
What we're doing.
In terms of what we're seeing is as trends in buyer acquisition.
I think that the the performance speaks for itself, meaning the tiara, while the time to return on investment.
Hasn't been longer it's about a quarter.
The lifetime value of our customers is increasing all the time so essentially we're not just we're not just buying more.
More cohorts of customers.
The customers that we acquire are actually spending more with us over time and their contribution to the overall revenues of fiber.
Is increasing and increasing pretty massively I mean, when you look at it.
At a high value buyers that theyre contributing 62%.
Our revenues, which is this 500 basis points more than last year.
Which is a very significant growth. So what we're seeing is we're seeing that we're able to maintain the efficiency of our of our marketing, but with the <unk>.
Combination of brand and performance as we target.
Higher lifetime value buyers, which were very.
Very happy with.
Okay, great and.
A follow up on.
The hypo seasonality in kind of travel.
The issues that you had started back in August.
Are you, assuming any kind of change in behavior or kind of.
Any change in linearity of typical for you.
You get into the.
The late December you heard.
Perhaps a bit it's going to be more travel this year then.
Even 2019, even so I'm wondering if your guidance for Q assumes any change in how are buyers or sellers might behave.
Later in December.
Yeah.
So again I think that there is some level of courses.
Our baking into the guidance it is baked and my point about this was that we may be the upcoming holiday season, a little different than previous years.
I've explained it by saying that I think.
At least last year.
A lot of people if you take the U S. As an example.
Holiday season is a great opportunity for families to night alright.
And make a trip and spend time together last year. This was impossible I think this year, it's probably going to be slightly higher than previous year, and maybe the holiday season could be slightly longer than usual I mean people, taking time off a little bit earlier than usual, but again.
I'm speculating.
But we want to do is just to say that we may see some some different behaviors.
We have seen seasonality slightly different this year I think it's not just us many many businesses reported about this to the market and so we just would it be cautious but all in all we're saying here.
What we said is that the seasonality is more moderate it's not at this point is it's not hyper seasonality.
In September October and.
And.
We baked that into into the guidance so.
So hopefully that provides more color.
Yeah, Yeah. It definitely does thanks a lot.
The Q&A session has now concluded I'm going to hand back to the management team for any final remarks.
Thank you. Thank you everyone for spending your morning with us.
Great Day, and we'll talk to you soon thank you.
<unk>.
This concludes today's call. Thank you for joining you know kind of disconnect your lines.
Yeah.
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