Q2 2023 Fiverr International Ltd Earnings Call
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Okay.
Good day and thank you for standing by welcome to just Pfizer Q2 fiscal 'twenty 'twenty Suite earnings 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 to ask a question during this.
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Please be advised that today's conference is being recorded I would now like to hand, the conference or whats your speaker today, Brian <unk>. Please go ahead.
Thank you operator, and good morning, everyone.
Thank you for joining us on fibers earnings conference call for the second quarter that ended June 30th 2023.
Joining me on the call today are minhag, Kaufman founder and CEO , Ofer Katz, President and CFO .
Before we start.
I would like to remind you that during this call. We may make forward looking statements. These statements are based on our current expectations and assumptions as of today.
<unk> 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 with fibers. Most recent form 20-F, and other filings with the SEC.
During this call, we'll be referring to some key performance metrics and non-GAAP financial measures, including adjusted EBITDA.
Adjusted EBITDA margin.
Further explanation and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP measures.
Provided in the earnings release, we issued today in our shareholder letter each of which is available on our website at investors got fiber dot com.
And now I will turn the call over to me.
Thank you Brian Good morning, everyone and thank you for joining us.
We are excited about the Q2 results were sharing today.
Not only did we deliver strong financial results, but it has also been a highly productive quarter, where we launched several game changing products that build towards our next leg of growth.
For the second quarter of 2023 revenue came in near the high end of our guidance at $89 4 million representing year over year growth of five 1% an acceleration from one 5% euro for growth in Q1.
We delivered adjusted EBITDA of $15 3 million meaningfully ahead of our guidance range and representing an adjusted EBITDA margin of 17, 1%.
These results show, how we have become financially stronger as a company through the efficiency step we've taking in the past few quarters.
It also underscores the consistent execution that we strive for especially in a continued uncertain macro environment.
We have successfully built a strong operational foundation and our focus remains on our long term strategic goal of investing in product development and marketing efficiency to drive increasingly profitable topline growth.
In Q2, we reached several significant milestones in our product efforts.
With the all new fiber probe the introduction of fiber enterprise fiber certified and fiber business solutions and our latest launch fiber Neo a few days ago. It is frankly, the most exciting and action packed quarter on the product from that I can remember.
This is not to mention the many new features and optimization. We are constantly made which continues to drive incremental improvement in conversion engagement and retention of our market base.
Building beautiful simple and innovative products is in the fiber DNA and something close to my heart and I can't tell you how energized and fulfilling it is to see these endeavors in full swing.
Now at the beginning of the year, we talked about two focus areas for us to drive growth.
First investing in core fundamentals of the market base to drive better discovery, better catalog experience and improved engagement and retention.
Continue investing and growing up market to unlock large buyers wallet share in new addressable markets.
I want to touch on how each of the projects I called out earlier represents a major opportunity within these two focus areas.
In general the fundamental experience of the ecommerce market base hasn't changed much over time.
Browse search listing.
Listing pages and buying these are the basic functionalities any e-commerce site offers today.
That is until the launch of fiber at Neal.
Leveraging the latest large language models neural networks and natural language processing fiber Neal fundamentally changes not only the search to find experience.
Moving from structured catalog experience to a free form conversational experience, but also drastically change how the underlying marching he's done.
Algorithm is not positively taking information based on buyer keywords and auction.
But as the ability to drive the conversation and pull information from the buyer to form a more complete view of the buyer requirements and generate a perfect matching result.
That is a complete game changer.
Think of fiber neo as having the potential to get infinitely close to a human talent recruiter only read more data knowledge patients and far faster turnaround.
We are also taking significant steps in the evolution of our upmarket efforts.
We launched fiber business nearly three years ago, because we saw an opportunity for larger companies to incorporate a global freelance workforce to help fuel skill gaps and provide cost savings.
That opportunity has only become more relevant today and we recognize that these organizations are an even greater need of solutions.
And simplify the process of finding and hiring talent online.
Today, the launch of fiber business solutions represents the culmination of our strategic efforts to move up market and create multiple impactful solutions that will bring in served higher lifetime value buyers.
With five year business solutions, we offer larger companies a suite of products each with a unique value proposition.
Fiber pro enables the market base experience for corporate buyers offering a curated portal professional experts along with advanced business tools and dedicated customer support to ensure they have the right talent to meet their complex demands.
Okay.
This end to end solution allows us to achieve better conversion and wallet share expansion among high value buyers.
However, enterprise enables us to offer our services to larger organizations, where compliance and avoiding work misclassification is important.
It allows buyers to onboard their existing freelancers and find new freelancers via fibers unified talent base for longer term engagements.
This allows us to tap into a part of the addressable market that has historically been underserved by the market base.
Finally fiber certified <unk>.
Open entirely new acquisition channels through partnerships, providing our partners with a tailor made market base.
With predefined services and certified talent.
We are already working with several of the world's most recognized brands such as Amazon Monday Dot com and stripe and we have proven that this playbook can be quickly replicated with many more partners, allowing us to penetrate targeted SMB communities in highly scalable and efficient manner.
This array of products are significantly enhance our ability to address the more complex and multifaceted talent strategy that bigger companies deployed to date.
We've received strong positive feedback from our early adopters and our customers are thrilled about these solutions as we are.
As I mentioned in the beginning.
Is an exciting time at fiber as we enter the second half of 2023.
I'm incredibly proud of our team for stepping up and delivering so much in such a short time and I'm really looking forward to the continued progress across these long term initiatives both in term of product progress as well as business impact.
We are on track for the rest of the year to continue driving revenue acceleration and margin expansion.
I am optimistic about the road ahead I want to thank all of our shareholders for being on this journey with us with.
With that I'll turn the call now to offer who will walk you through our financial highlights Ofer.
Thank you Luca and good morning, everyone.
We are pleased to report another great quarter as we continued to grow.
While significantly improving our operating efficiency.
Revenue of $89 4 million up five 1% overview, while all of our top end of our guidance and adjusted EBITDA of $15 3 million or 17, 1% in margin exceeded the top end of our guidance.
For the latter with represent nearly 100 basis point improvement from a year ago and over 400 basis point improvement from the previous quarter.
We continue to focus on expanding our Tam opportunity, while maintaining cost discipline to drive further improvement in our operating leverage towards our long term adjusted EBITA margin target.
Our annual active buyer.
At $4 2 million consistent with a year ago, while central buyer was $265 up 2% and a $3 increase from Q1.
Over the past few quarters.
We have accelerated the pace of our upmarket investment as demonstrated by our recent released on the fiber business solution.
Aligned with this priority to move upmarket, we focused our marketing efforts on targeting higher value buyer with larger spend capacity.
We expect this will impact our active buyer account in the near term, but will also increase our spend per buyer as we shift our acquisition budget towards the higher end.
All while reducing investment in certain channels.
Merrily attack low value customers.
We have already seen positive result of this.
Change is.
As the evidence spend from our first time buyer and our 23 Corp has increased compared to the first time buyer Empire cohort in.
In addition, our unit economics remain very strong.
Yes.
Its marketing improved to slightly over three months.
We expect spend per buyer growth to pick up in the second half of the U S.
As we invest upmarket into higher value buyer and fiber business solutions grows faster than the overall marketplace.
Due to take rate.
237% representing <unk>.
Pension up 90 basis points as we continue to scale, our evaluating promoted gigs and incentive plus program.
We are seeing healthy growth and adoption from both programs.
Turning to guidance for the third quarter of 2023.
Revenue is expected to be $89 five to $92 5 million.
Representing growth of 812%.
Adjusted EBITDA is expected to be 14, 5% to $16 5 million.
Presenting an adjusted EBITA margin of 17%.
At the midpoint.
For the full year of 2023.
We expect revenue to be in the range of 358 to 365 million representing growth of 6% to 8%.
Adjusted EBITDA is expected to be in the range of $56 million to $60 million, representing an adjusted EBITDA margin of 16% at the midpoint.
Given the strength of our business, we are increasing the midpoint of our full year revenue guidance, while raising our adjusted EBITDA guidance.
We are focused on accelerating revenue growth and maintaining strong operating margin in the second half of the year.
As we launched our latest product, okay celebrate our upmarket motion and optimize our performance marketing efforts.
In closing.
We have a strong balance sheet positive cash flow.
And we are well positioned to capture the enormous opportunity we see in the future.
Our business is healthy and scalable.
Cited about the new offering we are bringing to the table.
With that we'll now turn the call over to the operator for questions.
Thank you.
As a reminder to ask a question. Please press star one on your telephone.
For your name to be announced.
<unk>. Your question. Please press star one on one again please.
Please standby, while we compile the Q&A roster.
We will now take our first question.
From the line of Eric Sheridan from Goldman Sachs. Please go ahead.
Thanks, so much.
The question I wanted to know.
If we could just get a little bit more granularity or color or how youre thinking about deploying the investments in the coming quarters to move up market and how we should be think about the timetable of return on those investments and how that might feed back into.
New client growth revenue Reacceleration, just a little bit of the pathway going forward of how you think about the returns and the timeframe. Thank you.
Eric Good morning. Thanks.
Thanks for the question.
So essentially.
We've done a tremendous amount of progress.
The investment in growing up market with the introduction of a long list of product, which we've packaged into what we called fiber business solutions.
So the shift or the new <unk>.
<unk> business, which we've turned into fiber pro.
It's an all new product, but building on the success of fiber pro and making it even better.
Introduction of fiber certified and the incredible partnerships that we've already signed and the many others that are in the pipe.
Enterprise.
Which is the enterprise solution product. So all of these products support going up market and I think represents the consistency of what we've been saying all along.
A few quarters ago, we spoke about the fact that.
The business solutions has already contributed about 5% of our business. There are now close to 10%. So we're obviously very happy with appropriate doubling the size of data of that part of our business and definitely in the carton environment, where smaller businesses are.
Obviously more sensitive to.
The current macro environment than mid size and larger businesses. It is the right thing to do.
And we're very happy with the with our results and we will continue reporting on their on the progress.
Thank you so much.
Yes.
Thank you.
We will now take our next question.
From the line of Ronald Joseph from Citi. Please go ahead.
Great. Thanks for taking the question I wanted to ask a bit more on just all of the products that are coming out at on Neo specifically you talked about neo isn't just pull info from the buyer to generate a better matching result, I think you said, but dive a little deeper here and help us understand how this algorithm sort of does that and when you did your test to launch.
Any insights on how you saw or what happened in terms of like improved matching where youre seeing better results on conversion rates on pricing improvements what was it that that sort of launch that made you to launch neo and I have a quick follow up thank you.
Good morning, Ron Thanks for the question.
Essentially what we've done with fiber neo is to tackle.
Ed Zone, the largest challenge every market data.
Which is marketing.
Now being able to to produce a great match is far more than just doing search and search by definition is very limited because.
Customers provide three or four.
The awards and based on that you need to understand their intent and their needs and everything surrounding that need.
And providing good matching for us is really about.
Not just pairing.
Business, where the professional or within agency, but actually being able to produce a product an end result, where the two parties to that transaction are very happy that they work together.
To do this perfect match, you need a lot of information.
Because that allows you to create a very very precise type of match.
And what we've developed with fiber Neil using the latest technologies alongside our deep <unk>.
Data tick, but we've developed along the years.
And the tens of millions of transactions that we've already processed and the learnings from that is a product that can have a.
Human like discussion.
Where our technology deeply understands and can have a conversation that would guide the customer.
Sometimes it's a complex project project in it you would need to pair that customer with an agency or with a number of professionals.
All of that we baked into that technology.
And I just want to stress.
What we've done in such a short time is close to impossible.
We've developed this incredible product.
That is highly conversational and can understand every aspect of the need of the customer guide them through sometimes customers are vague. They know that they want to achieve something but they don't know how to call. It in terms of a product.
Or they don't know how many services.
They need to actually get the goal that they are seeking.
Neil does exactly that.
Really playing with it.
It's really hard to believe how accurate helped.
How precise and how fun it is to have a conversation with this new technology.
We just launched it. So there is there is nothing too much to call other than the first conversations that Neil hard with customers.
Sure.
Funny fun successful.
Customers were excited about the new product as we are.
That sounds pretty exciting for this is live on the site today I think right and just one quick follow up.
Just when we talked about the mix shift or the move up market or the continued move that market any any changes like that to help us understand the changing profile of the active buyer. Thanks, guys I appreciate it.
Sure.
Mmm capabilities relating to compliance.
The avoidance of work Misclassification.
And so far so essentially this is this is becoming a suite of tools that allow our customers based on their need based on their company size based on their budget.
To pick the right tools with our health and achieve whatever they came to achieve.
And by doing that and by focusing on the steps of buyers will we seize we see.
Better first time experience they.
They spend more would that they actually first time buyers right now are spending 15% more on the first transaction that historical first time buyers, which is incredible but not only dot their lifetime value is higher so we acquire <unk> loyal cohort.
[laughter].
Two mixed with our existing cohorts and in this we believe he's the rights strategic investment on our part.
Did you meet her.
Thank you.
We will now take and next question.
Come the line up that I'm most from J P. Morgan. Please go ahead.
Thanks, So much just wanted to follow up on the last couple, but hoping you could update us on adoption just uptake you're seeing on the AI service categories. Since you've launched over the last several months, if there's anything to update or share their from what you disclose it one Q and then on.
The strategy shifting investments to go after a higher value buyers could you just talk about how do you think that will impact active buyer and spend per buyer growth in the back half and is that the driver of what looks like accelerating revenue growth in the fourth.
<unk>. Thanks.
A dot Gov. Good morning, we we actually go to the first question I'll answer it and then maybe we'll ask you to repeat the second one sorry about that.
So on on the AI services pretty much the same as last quarter, meaning you know.
We've launched tens of categories around AI. The interest is very high it's very healthy.
And we continue to invest in it so basically introducing more and more category that have to do with with AI in general and <unk> in particular in our customers love it they use it and we're happy with what we're seeing on upfront.
If if you can if you don't mind repeating the the first part the second question.
Yeah, just with with this shift from as of investments shifting away from lower value buyers. Just how're you expect that's a play out across active buyers and spend per buyer and the back half of the year and is that what's driving what looks like acceleration in revenue.
Q in four Q. Thanks.
Thanks.
Hey, this is <unk> from the question I think the <unk>.
<unk> from.
No value through high value is not is not to you. This is something we are discussing.
On on those clothes and doing for for a line.
And one of the <unk>.
<unk> time has gone up market.
And in this shift is is not only <unk>.
It's also product wise I think there's a step function with the introduction of the.
Isn't solution.
But in terms of <unk> physician, we are shifting budget from <unk> to <unk>.
For some ton.
The output is.
<unk> mentioned earlier I think the the overall to spend on the new <unk> is better than what we've seen before.
So almost by definition, you know cost of acquisition on high value bio.
Slightly it's actually higher than cause that's a position on no value by on the meaning of this shift is that.
The the number the fire.
On a slightly slightly low F, but they'll spend a lifetime value is higher so what I would.
Anticipating the next the next <unk>.
Is that spelled <unk> I was going to drive growth.
We've seen that in few too and then to see that in the next water.
An octave by it was going to <unk>. This is part of I was tragedy, it's not about quantity, it's definitely about quality.
And we plan to continue with this <unk>.
<unk> <unk> Oh.
Just like to add that.
As a reminder, dot unlike top line and bottom line, which are binding Kpis, which we guide <unk> input numbers not put numbers. Many of these are the two lepers.
We constantly pay that play with based on market conditions based on opportunities that we see in his offer said this has been very consistent with how we've done it focus on the quality of our buyers are rather than the quantity and this is why these numbers fluctuate from time to time based on.
How we decide to managing input numbers not I'll put that is an important point and I think the proof at the end is in the top line and bottom line, which we're obviously very excited about.
Great. Thank you both very helpful.
Thank you.
We will now take the next question.
From the line of <unk> during from J T J and P. Securities. Please go ahead.
Great. Thanks for taking my questions I'd like to ask about macro just bigger picture. What are you guys seeing as it now more stabilized it seems that way from the guide and results, but anything you can add there.
And then secondly, as we think about cohorts can you provide any insight in terms of pre COVID-19 cohorts and where they are today right. So cohorts going back to 2019 at a higher or lower they're about the same and if he can provider would be so helpful. Thanks, so much.
Good morning, Andrew Thanks for the questions.
<unk> I think you you called it it's pretty stable at this point.
<unk> I I've I've mentioned this in in my previous answers, which is that macro affect different segments of our of buyer buyers in different ways. So essentially in the card macro environment, where the cost of boring is is really high and there is.
Definitely not peaked consumption then small and micro businesses are right now on the sidelines, they're playing it cautious at this point.
And dirt dirt definitely not aggressively investing in anything.
With mid size businesses in larger businesses is different they have budget plan for the year. They can do.
Have been necessary locations for for for the steps of services and the professional help that they need and this is why I also what we're <unk>, we're focusing more on the on the type of business solutions that we offer because these cohorts obviously be a different.
So that's what we're seeing with macro and it's pretty stable and on the second part of the question on the what specifically asked about the cohort pre COVID-19. So what you're seeing is an elevated span comparing to pre COVID-19 think we discuss it last quarter or do you want to be called with periods elevation was very high end.
Just saw some decline, but then it's table again and it's continued to continue to perform and elevate the 11, comparing the pre Covid <unk>.
Thank you.
Thank you.
We will not take the next question.
From the line of Matthew Survey from <unk>. Please go ahead.
Thanks, guys congrats on the really strong results.
You've done an amazing dropped job and driving leverage in the model over the last couple of quarters, but based on me updated guidance. It kind of assumes flattish adjusted EBITDA margins in Q3 and Q4.
Is that kind of view leaning back into some of the investments around the new product is revenue reaccelerates or is this kind of a level that you just feel comfortable maintaining moving forward after after driving leverage for several quarters here in a row. Thanks.
Hey, Mary. Thank you for the question, it's not about leaning back to to investment just kind of ketchup in terms of a head count.
That we haven't anticipating in the in.
And this quota to three and a little bit into your phone.
That might by the little bit of the <unk> you know we did a significant change so if you can lift.
We do believe that the <unk>.
You're still the target you can see if you go back a few years back you can see how both the overcoat, though we are achieving the target improving <unk>. This is the plan looking forward, sometimes there is a ketchup, which is happening as we speak but the plan is to continue.
Continue this past.
And dry for better data closer closer looking for.
And then my second question is just it's impressive your ability to kind of continue to drive K, great higher here quarter. After quarter, you know as you're kind of pushed promoted gigs in some of your other value added services just how much further do you think take right could expand is there sort of a ceiling.
Thanks.
We do see a good momentum.
In terms of audience of the patients acceptance of the.
The product that's the all of the launch.
And we have other products that we plan to launch in the foreseeable future. So I would say there is an opportunity to hear you to increase takes weight.
Over the over the next over the next year.
Thank you.
We will not take the next question.
From the line of Jason <unk> from <unk>. Please go ahead.
Thank you, yes, if I think about kind of the implied fourth quarter revenue guide I mean, it does assume slight acceleration.
You know clearly if I looked at the last few quarters and your guy for the quarter. It does look like theirs.
You're seeing clear momentum in the business why not like I guess, what are you seeing that's making you like not more optimistic on the fourth quarter or it's just that.
You know we've been through a lot and.
You just don't want to stick your neck out, but just some more Colorado.
Why wouldn't we see kind of better than 12% revenue growth on the fourth quarter.
Good morning, Jason Thanks for the question.
Essentially.
We've been talking this year by the fact that the the second half of the year. He was going to be the part where we go back to growth and the numbers reflect that so there's no surprise on that and I do think that.
From a from a guiding perspective, we shouldn't be over optimistic because we've seen the microsd here, it's pretty steady.
So there is no reason to incorporate wishful thinking into it.
And you guys are gonna be the first to know if that changes I think our market is extremely sensitive tomorrow. So.
So we'll see when things pick up.
And so essentially this is this is just in line with that growth and I think I J stomach stomach say, if we always say that we always guide based on what we know what we are seeing.
Based on the momentum we are seeing both on the octopi.
And this as well.
We're going to land.
That's the.
Philosophy will review and communicate and that's what's your name.
Okay. That's it for me thanks.
Thank you.
We will now take the next question.
From the line of Danny <unk> from Me gentlemen company. Please go ahead.
Great. Thank you for taking my question to.
I believe you said that spend per first time buyer was up 15% year over year, just wondering how that's trended.
Other periods and how much of an acceleration that represents.
Good morning, Bernie just to clarify.
What I said is that the first time buyers that we acquire.
Spent on their first purchase.
15 per cent more than they used to than older first time buyers used to spend so hopefully.
Hopefully that clarifies and.
Yeah, I guess the question being is that generally been trending higher over the past few quarters.
The answer the answer to that is yes, but we're doing we're doing a nice a nice step function as we accelerate our investment in the fiber business solutions.
Understood. Thank you.
Thank you.
We will not take our last question.
From the line of <unk> Kulkarni from Ross M. K M. Please go ahead.
Alright, Thanks for taking my question <unk> couple more product and perhaps one see this question on this five or certified I think kind of impersonal global is there like Amazon ads and <unk>, perhaps talk about just how did these relationships coming.
<unk> how closely do you work with these companies in terms of vetting certified experts on a specific project.
Projects for these companies. So just that's just one <unk> overall kind of mechanics logistics question on fireworks certified and then.
This.
Newly repackaged firewater business solutions, which now includes gonna three things inside it Uhm is there are you trying to do a different approach you with go to market I know traditionally Europeans predominantly on digital with no <unk>.
Perhaps with this kind of some newly repackaged and kind of impressive product portfolio does that need a different.
Approach and go to market to get.
Buyers.
Good morning, or hate and thanks for the questions.
So the first one was on fiber certified so essentially as as you said super impressive logos incredible companies.
And obviously the relationship there is.
<unk> provides a mission critical solution for these brands.
Mostly to engage with with a <unk>.
Where their level of support.
More difficult and more scarce.
And.
We call the fiber certified because those who provide the services are certified in there they they need to standards of each of these brands that work with us.
So there.
Essentially the best of the best and they will meet the qualification.
Which is which is why this this product it's April .
It allows us to pair customers with with experts for each of these password.
In terms of 500 business solution.
We said that a few times before I'll I'll say it again for the sake of consistency.
The the pipe that we have of customers.
<unk> Dot com.
Is incredible.
Essentially.
The reason what we've created this this suite of solutions is that we have all of these customers coming to us.
And we want to make their life easier.
Self identifying themselves.
Based on the right product.
Solutions the basic.
So no change in strategy in terms of sales force.
But really making the life of our customers much better now allow us to convert them better identify them by their sigmund them better and so forth.
Which obviously improve the performance of our of our product.
Okay. Thank you very much.
Thank you I would now like to turn to confirm <unk> remarks.
Thank you Sandra Thanks for running the call today and thank you everyone for participating we look forward to seeing you in the conferences and speaking with you soon.
And have a great day. Thank you.
That does conclude our conference for today. Thank you for participating you may now disconnect.
Mmm.
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