Q3 2024 Fiverr International Ltd Earnings Call
The End
Speaker Change: Good day and thank you for standing by welcome to Fiverr. It's the 4th quarter 2020-24 earnings conference call. At this time, all participants are in the Listen Only mode.
Speaker Change: After the speaker's presentation, do be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone.
Speaker Change: You would end here in Aldermet a message, advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded.
Speaker Change: I'm now like to hand a conference over to your first speaker today, Jinjin Qian, EVP Strategic Finance. Please go ahead.
Jinjin Qian: Thank you, Operator and Good Morning, everyone. Thank you for joining us on 5th earnings conference call for the third quarter that ended September 30, 2024.
Jinjin Qian: Joining me on the call today on Micha Kaufman, founder and CEO and Ofer Katz, President and CFO.
Jinjin Qian: 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 our current expectations and assumptions as of today, and FIVERR assumes no obligation to update or revise them.
Jinjin Qian: 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 FIBR's most recent Form 20-F and other filings with the SEC.
Jinjin Qian: Thank you for watching!
Jinjin Qian: During this call, we'll be referring to some key performance metrics and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, and free cash flow.
Jinjin Qian: And now I will turn the call over to Micha.
Micha Kaufman: Thank you, Jinjin. Good morning, everyone, and thank you for joining us.
Micha Kaufman: We delivered a tremendous third quarter with both revenue and adjusted EBITDA exceeding the high end of our guidance range.
Micha Kaufman: by successfully executing our strategy to go up market.
Micha Kaufman: expand value-added services, and deliver innovative AI-powered experience.
Micha Kaufman: we are able to grow a higher quality buyer base, drive robust growth in spend per buyer, and strong expansion intake rate.
Micha Kaufman: Thank you for watching!
Micha Kaufman: All of these efforts are clearly paying off, allowing us to accelerate our revenue growth this quarter.
Speaker Change: This is not an easy task considering that the entire professional staffing industry is down double digits year over year.
Speaker Change: and overall SMB sentiment still lingers around historically low levels.
Speaker Change: The fact that we are able to accelerate our growth under such macro conditions underscores the strength of our vision and strategy and our impeccable ability to execute them.
Speaker Change: Thank you for watching!
Speaker Change: We also continue to deliver steady improvement in adjusted EBITDA and strong cash flow generation.
Speaker Change: Last quarter, we laid out a three-year target plan for adjusted EBITDA and free cash flow. With strong execution in Q3, I am confident that we are well on track to deliver these targets.
Speaker Change: Our strong financial position allows us to aggressively invest in products and technology to drive growth while at the same time returning capital to shareholders and driving shareholder value.
Speaker Change: www.mytrendyphone.co.uk
Speaker Change: Fiverr's strategy has always been to relentlessly focus on creating customer value and building the most beautiful, innovative, and simple to use products to transform the way people work.
Speaker Change: One thing that become clear to me in the last year is that with the emergence of GNI and the promise of AGI
Speaker Change: The next generation of products we build must empower our community to fully leverage artificial intelligence.
Speaker Change: It also became clear to me that in the future the best work will be done by humans and AI technology together, not humans alone or AI alone.
Speaker Change: With that in mind, the role of Fiverr must broaden from a talent marketplace to a comprehensive work platform where incredible work happens.
Speaker Change: This means that every business that comes to Fiverr will have a world-class AI assistant to help them get things done.
Speaker Change: From ideation, scoping, and briefing to product management and workflow automation.
Speaker Change: it means that they can seamlessly leverage both human talent and machine intelligence to create the most beautiful results.
Speaker Change: Fiverr has a long history of pioneering the industry with innovative products and this is what we will do with AI as well.
Speaker Change: We are already starting to put a few pieces together to build towards this long-term vision.
Speaker Change: On the buyer's side, we are building a new search experience that not only includes more dynamic catalogs,
Speaker Change: but also incorporates NEO, an AI-powered smart matching tool to help customers match with more contextual information.
Speaker Change: Thank you for watching!
Speaker Change: We launched Dynamic Matching to allow buyers to put together comprehensive briefs.
Speaker Change: with a powerful AI assistant.
Speaker Change: and then get matched with the most relevant freelancer with a tailored proposal.
Speaker Change: These products allow businesses to fulfill much more complex projects on fiber without losing the speed, simplicity, and convenience that they love fiber for.
Speaker Change: Thank you for watching!
Speaker Change: Even in the few weeks since we launched these products, we have already seen an enthusiastic reception from our community and promising performance.
Speaker Change: The projects that come through these products are several times larger than the typical projects on fiber.
Speaker Change: And we believe it has a lot more potential down the road as the awareness and trust of these products grow on the platform.
Speaker Change: Thank you for watching!
Speaker Change: On the talent side, we are building the infrastructure to allow us to more efficiently distribute software tools that integrate with the work that is done on the platform.
Speaker Change: Some of the tools are built in-house, such as promoted gigs and seller plots.
Speaker Change: Some of these tools are through acquisitions such as Autodesk, and we believe there will be a lot of opportunities down the road to expand these value-added services through partnerships as well.
Speaker Change: Larkley
Speaker Change: I want to say a few words about Fiverr Pro.
Speaker Change: As you know, Fiverr Pro is a premium offering we launched to grow our penetration into larger businesses with larger freelancing budgets.
Speaker Change: We started by providing businesses with collaboration tools.
Speaker Change: White Glove Services.
Speaker Change: and a fully vetted catalog in order to drive better conversion, engagement and retention among buyers with the highest lifetime value.
Speaker Change: Now, with our product expansion into profession, dynamic matching, and hourly contracts, and services such as project management,
Speaker Change: We are further leaning into these buyers to capture their budget on long-term freelance engagement.
Speaker Change: Thank you for watching!
Speaker Change: Many of you have asked us what our right to win is.
Speaker Change: in this segment of the addressable market. I want to point out to you two things.
Speaker Change: First, we have a very large topo funnel, which allows us to acquire enterprise customers in a super efficient manner.
Speaker Change: Most Fortune 500 companies already have employees who are on Fiverr and are using our services.
Speaker Change: This bottom-up approach allows us to scale with very light sales and account teams.
Speaker Change: Second, is our technology stock.
Speaker Change: The speed, simplicity, and convenience of fiber is fundamentally different from a typical stuffing solution.
Speaker Change: from onboarding to compliance to payment and reporting, Fiverr is so much easier compared to a self-serve solution.
Speaker Change: and so much more cost-effective compared to a managed solution.
Speaker Change: And as I mentioned before, it is going to get even better as we implement AI capabilities further into our platform.
Speaker Change: To close, I'm super excited about the many opportunities that are ahead of us.
Speaker Change: With a strong result in Q3. We are looking forward to wrapping up 2024 on a high note
Speaker Change: and can't wait to kick off another year of growth and innovation.
Speaker Change: With that, I'll turn the call over to Ofer, who will share some financial highlights.
Ofer Katz: Thank you, Micha, and good morning, everyone.
Ofer Katz: I am pleased to report an exceptional quarter with both top and bottom line exceeding expectations.
Speaker Change: Thank you for watching!
Ofer Katz: Revenue for the third quarter was $99.6 million at 8% year-over-year.
Ofer Katz: representing an acceleration from 6% year-over-year growth in Q2.
Ofer Katz: Thank you for watching!
Ofer Katz: Adjusted EBITDA for Q3 was $19.7 million, representing an adjusted EBITDA margin of 19.7%.
Ofer Katz: and improvement of 180 basis points from a year earlier.
Ofer Katz: We continue to demonstrate our ability to deliver both growth and profitability improvement.
Ofer Katz: despite the macro uncertainty and our commitment to execute with the highest level of consistency, efficiency, and focus.
Ofer Katz: Unpacking the Strong Resolve for Q3
Ofer Katz: We continue to see our effort of going up market and extending value-added products works well.
Ofer Katz: Center Buyer was 296 in Q3, representing Erodaril growth of 9%.
Ofer Katz: More buyers are coming to Fiverr for larger and more complex projects.
Ofer Katz: while the active biogrowth was muted.
Ofer Katz: who see continued growth in buyers who spend over $10,000 annually.
Ofer Katz: Thank you for watching!
Ofer Katz: On the macro level
Ofer Katz: We've seen some level of stabilization in terms of the volatility we experienced in June and July. However,
Ofer Katz: The overall SMB sentiment remains weak and the overall hiring environment continues to be challenging.
Ofer Katz: Thank you for watching!
Ofer Katz: We expand GMB.
Ofer Katz: will still take some time to recover. In the meantime, we believe our strategy to lean into products to drive wallet extension and our work to unlock new addressable markets continues to be the right strategy for the future. Thank you very much.
Ofer Katz: to generate growth catalysts.
Speaker Change: Thank you for watching. And I'll see you in the next video.
Speaker Change: Take rate for Q3 was 33.9%.
Speaker Change: representing a year of real improvement of 260 basis points.
Speaker Change: The Continuum's Trend of Promoted Geeks
Speaker Change: The Growth of Cellular Plus Program is the newly launched kickstart program as well as the strong growth momentum at AutoDS.
Speaker Change: all contributed to the take rate upside this quarter.
Speaker Change: As a reminder, title state rate consists of two distinctive components.
Speaker Change: First is Marketplace Commission of approximately 26%.
Speaker Change: and second is value-added services an additional approximate 8% take rate.
Speaker Change: The Marketplace Commission is directly tied with the GMB and the Marketplace and has been relatively stable over the years.
Speaker Change: Thank you for watching!
Speaker Change: The extension of value-added products has driven the vast majority of our take-rate extensions.
Speaker Change: Thank you for watching!
Speaker Change: As Micha mentioned,
Speaker Change: Fiverr is increasingly building towards a comprehensive work platform that provides not only access to talent, but also a suite of software and AI tools.
Speaker Change: State Trade Expansion continues to be an important growth catalyst for us as we further expand our value-added product portfolio.
Speaker Change: Thank you for watching!
Speaker Change: Thank you. Thank you.
Speaker Change: The strong Q3 results also translated into strong cash flow generation.
Speaker Change: Pre-cash flow was $10.6 million.
Speaker Change: Pre-cash flow, excluding one-time escrow payment for contingent consideration, was $22.7 million, representing 22.8% of revenue.
Speaker Change: Together with balance sheet of over 650 million, we have ample cash to continue investing in product and growth while supporting other capital allocation priorities including optimizing capital structure, buyback and M&A.
Speaker Change: With regard to the outstanding 460 million convertible nodes,
Speaker Change: Our objective is to preserve maximum flexibility in this dynamic economic environment.
Speaker Change: We are confident in managing the liabilities through our strong balance sheet, but we will make the decision as we get closer to maturity.
Speaker Change: Thank you for watching!
Speaker Change: Given the strong execution of Q3,
Speaker Change: We are raising our pooling guidance for both revenue and adjusted EBITDA.
Speaker Change: Thank you for watching!
Speaker Change: For the full year 2024,
Speaker Change: We now expect revenue to be in the range of $388 to $390 million, representing year-over-year growth of 7% to 8%.
Speaker Change: In terms of underlying drivers, we expect central buyers to continue growing at a robust pace offset by decline in active buyer.
Speaker Change: Thank you for watching!
Speaker Change: We now expect the take rate to increase by approximately 330 basis points year over year higher than we had previously anticipated
Speaker Change: Thank you for watching!
Speaker Change: For adjusted EBITDA, we expect full-year 2024 to be in the range of $73 to $75 million, representing an adjusted EBITDA margin of $19 at the midpoint.
Speaker Change: The updated Four-Year Guidance implies Q4 revenue guidance to be in the range of $100.2 to $102.2 million.
Speaker Change: representing irregular growth of 9 to 12 percent.
Speaker Change: Adjusted EBITDA for Q4 is expected to be 19.5 to 21.5 million representing adjusted EBITDA margin of 20.2% at the midpoint.
Speaker Change: I am very proud of the exceptional results we delivered in Q3.
Speaker Change: and believe the strong momentum in Q3 will largely carry forward into Q4.
Speaker Change: I'm even more excited about what's yet to come in 2025, including an action-packed winter release that's coming up shortly, as well as many pipeline projects that Micha has alluded to in his remarks.
Speaker Change: With that, we'll now turn the call over to the operator for questions.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press Star 11 again.
Speaker Change: We'll take our first question from the line of Ron Jose from CT. Please ask your question, Ron.
Ron Jose: Great, thanks for taking the question. Hi Micha, hi Ofer. I wanted to follow up on two things. First is
Ron Jose: In the letter, you talked about demand trends stabilizing here, but then, obviously, the broader macro continues to have some challenges, and I think you highlighted hiring and S&B sort of challenges. So, just talk to us a little bit more about what you meant by stabilization, Micha. I was wondering if maybe that's a newer thing post...
Ron Jose: you know, rates coming down, or just any insights on stabilization. And then maybe a bigger question on the buyer base.
Speaker Change: I was wondering, with all these new products like New Professions Catalog, Dynamic Matching that just launched, Hourly Contracts, that, you know, as we attract these newer buyers, I wanted to hear more about the product strategy to keep those buyers, call it, on the platform and how you think about your product catalog to continue driving greater overall higher quality buyers on the platform. Thank you, guys.
Speaker Change: and many more. Thank you. Thank you.
Speaker Change: Thank you, Ron. Good morning. Thanks for the questions.
Speaker Change: As to the first question, if you recall in previous earnings, we've mentioned that we've seen some specific volatility around June and July.
Speaker Change: June-July-August, and
Speaker Change: I think what we're calling right now is that we've seen September and, you know, the beginning of October to be to be slightly more, more stable. So there has been some improvement at the top of funnel, but nothing we can we can call a trend at this point.
Speaker Change: Just a reminder, we're just a few days away from election. There's a lot of seasonality coming in, things that might create fluctuations in trends. So I wouldn't say that we're not calling a new trend.
Speaker Change: We just called out the fact that after June, July, and August, we've seen some more stabilization and slightly better topo funnel
Speaker Change: or not.
Speaker Change: Second question.
Speaker Change: was about buyer base and the products that we're building.
Speaker Change: Look, I think, you know, when we think about the types of things that we want to address as we're moving up market and we're entertaining larger customers with higher budgets for freelancing,
Speaker Change: we know that the things that they usually enjoy is mostly working with agencies offline.
Speaker Change: And we know that there is, even though the fact that there is
Speaker Change: You know, people are accustomed to doing it. They're used to working offline. There are a lot of weak points in doing so.
Speaker Change: Speed is one, convenience is another, clarity of pricing, of delivery of the project itself. So everything that we're building right now are really tools.
Speaker Change: that are eliminating all the things that customers dislike about working with freelancers or agencies offline and simplifying them and building beautifully simple products for our customers.
Speaker Change: And if you look at that strategy and how this has been working out for us
Speaker Change: in the past year or two, you see that those customers are growing. They're growing faster than the overall customer, they're spending more with us, they're sticking for a longer period of time, their retention is better, their spend is better, their frequency is better.
Speaker Change: And that is why we're investing in these products. And don't forget, I mean, we are one of the, if not, the first company that has done a very aggressive move into AI, not just on the catalog side of opening tens of different categories.
Speaker Change: with how we integrated AI in making our products.
Speaker Change: much more or much easier to use and much more robust.
Speaker Change: to do a lot of the work that was previously had to do manually.
Speaker Change: So I think that with the removal of all of these frictions...
Speaker Change: Our anticipation is that part, that portion of the business will continue to grow very nicely as it has been growing in recent quarters.
Speaker Change: Thank you.
Speaker Change: Thank you for watching!
Speaker Change: That's super helpful. Thank you, Micha. Thank you.
Speaker Change: Thank you for watching!
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Bernie McTernick from Need Home and Company. Please, that's your question, Bernie.
Bernie McTernick: Great. Good morning. Thanks for taking the questions. Two for me. First, with the guidance for revenue acceleration in 4Q, how should we think about the puts and takes between take rate and GMB growth in this audit?
Bernie McTernick: having an impact on the revenue acceleration? And then secondly, just on dynamic matching, I know it's only been launched for a few weeks, but can you talk about the metrics that you're using to gauge success of the product? And does it have any impact on advertising or
Bernie McTernick: platform.
Speaker Change: Morning, Bernie. You were cutting off a little bit, but I think I got most of the questions.
Speaker Change: So in terms of guidance, acceleration,
Speaker Change: Look, macro hasn't changed, which means that we're working against a very negative market. If you look at the measures of or the trends of SMB sentiment.
Speaker Change: or you look at the professional staffing market, they're down double digit percentage.
Speaker Change: So we're already offsetting in our profile. We're offsetting pretty massively on the macro conditions.
Speaker Change: Thank you for watching!
Speaker Change: Our view on GMV, we've reiterated it, we've talked about this. I think that within this market, other than just offsetting on this negative trend,
Speaker Change: were improving our product and building new products that are creating value for our customers. And those products are...
Speaker Change: are working extremely well, customers are retained and happy to pay for these products.
Speaker Change: because they're adding value for them.
Speaker Change: And so when you look at the makeup of what
Speaker Change: what allowed us to to grow. It's a combination of a somewhat better topofunnel.
Speaker Change: It's the tools that we either introduced in the past, like promoted gigs and seller tools.
Speaker Change: new tools like the addition of Autodesk.
Speaker Change: and it's higher spent per buyer because of all of our going up market products.
Speaker Change: So we feel that as long as the macro would not...
Speaker Change: significantly change.
Speaker Change: What we're doing now with the offset is the right thing. Obviously, we're pushing ourselves to...
Speaker Change: to even perform better, and I think we are, and I think the numbers show it. But the strategy remained very stable, very consistent. We're not zigzagging. We're delivering on the same things that we said we're going to do, and I'm happy to see that those developments are actually paying off for us.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Do you have any full-up question, Bernie? No, I think you had a second... Yeah, on dynamic math. I know it's only been a few weeks, but he just talked about some of the tricks you're using to gauge success in the product. And then does it have any impact on advertising or take rate? Just really wants to know if it could be take rate dilutive if there's less of a need to advertise if...
Speaker Change: All the sellers are perfectly matched.
Speaker Change: Right.
Speaker Change: It's a good question. So first, as you said, it's very early. What we're seeing from early signs are extremely positive signs. I think that the beauty about this product is it allows customers to be more nuanced.
Speaker Change: specific and detailed about the types of projects that they need. And it allows them to actually come up and voice much more complex projects within this product.
Speaker Change: And we're using AI technology to help them create more extensive briefs.
Speaker Change: and then get matched with very very specific type of talent which saves them the trouble of actually you know
Speaker Change: going through and filtering talent and get tailored proposals.
Speaker Change: Now, I don't think that because of the nature of these products, I don't foresee definitely not an immediate impact on advertising.
Speaker Change: And the reality is, we haven't seen that.
Speaker Change: I think that this this product by itself is a little bit more relevant for very very customized types of projects whereas our catalog allows our customers to to have a ready-made offering that they can just
Speaker Change: click and buy. So I don't see this influencing and the reality is that, you know, the promoted gigs continues to grow and we're very happy with it.
Speaker Change: That's great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Doug Enmus from J.P. Morgan. Please go ahead, Doug.
Doug Enmus: Great, thanks for doing the questions. Can you guys talk about what you're seeing early on with Autodesk and just how we should think about...
Doug Enmus: contribution there, and then also if you could talk a little bit more on the business rewards program, how that's increasing spending among some of your larger buyers, and then any impact that you're seeing thus far on loyalty as well. Thanks.
Speaker Change: Thank you for watching!
Speaker Change: Morning, Doug. Thanks for the question.
Speaker Change: So on Autodesk, I mean, we're very happy with the acquisition. I think as I mentioned, it is contributing to the take rate component.
Speaker Change: You know, it's a great addition to the already in-house tools that we've built, you know, I've mentioned them I mentioned promoted listings I've mentioned
Speaker Change: Seller Plus. Our loyalty programs are really tied in from both sides, from from sellers and buyers, into a place where we're enabling more engagement
Speaker Change: both for our sellers and our buyers, in a way that pays off.
Speaker Change: and we know that the repeat and sometimes you know working with same seller same buyer is a highly common thing on Fiverr.
Speaker Change: And these are the types of things that we want to encourage.
Speaker Change: So, we're very happy to see how these programs are shaping up, because it's actually rewarding those who are doing it, and mostly influencing engagement, which is really important.
Speaker Change: So, retention and engagement are the two matrix of how we measure the success of these programs.
Speaker Change: Thank you for watching!
Speaker Change: Thank you, Micha.
Micha Kaufman: Thank you.
Speaker Change: Our next question comes from the line of Jason Elsie from Oppenheimer. Please go ahead, Jason.
Jason Elsie: Thanks. Good afternoon, everybody.
Jason Elsie: I guess good morning, depending on where you are. Can you talk about where do you see take rates going long term? Obviously, it's quite strong.
Jason Elsie: you know, the main driver really is, I guess, makeshift. It's not like this is all headline increases, but just, I guess, where do you see long-term take rates playing out based on where you kind of see the mix of business over time? Thank you.
Jason Elsie: Thank you for watching!
Ofer Katz: Hey Jim, so this is Ofer.
Ofer Katz: I think that, you know, I...
Ofer Katz: Thanks for watching!
Ofer Katz: I'm kind of thinking how to address this question because, on one hand,
Speaker Change: We are very satisfied.
Speaker Change: We're very satisfied with the growth, the pattern of take rate over the last few years, starting with the basic 26% on the transaction, growing all the way up to 30 plus percent with value-added services.
Speaker Change: but in reality we do see
Speaker Change: more room to expand.
Speaker Change: Both are an existing product.
Speaker Change: You know, we just launched the kickstart.
Speaker Change: Subscription program for new sellers.
Speaker Change: which is going really well, but there is more in the pipe.
Speaker Change: So I think that during, you know, this period
Speaker Change: of Volatility and Macro Headwinds, Take Rate Expansion,
Speaker Change: is a key driver for growth.
Speaker Change: where the market is open and macro turnaround and start to expand. I think that the contribution of take rate is still going to be massive, but.
Speaker Change: percentage wise it's going to be slower but for the time being again with the existing program extension but also a new program in the pipe
Speaker Change: I think there is a good reason to believe that take rate is going to go higher.
Speaker Change: and modestly over the next year quarter.
Speaker Change: Thank you for watching!
Speaker Change: Thank you.
Speaker Change: Thank you for watching!
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Brett Erickson from RBC Capital Markets. Please go ahead, Brett.
Brett Erickson: Hi, thanks guys. Did the chat. First question is, you mentioned the stabilization at the top of the funnel, but clearly some cross currents going on with SMBs.
Brett Erickson: hiring trends and everything. What do you guys need to sort of see to put marketing dollars back to work in the model? Like, do you need to see kind of overt improvement in the macro? Or is there anything that's maybe a bit more like in your control that might cause you to lean in on the marketing spend? And then I will follow up.
Speaker Change: Morning, Brad. Thanks for the question.
Speaker Change: Thank you.
Speaker Change: The macro is putting more pressure on SMEs than it is on larger businesses.
Speaker Change: and therefore acquiring SMBs is mostly a function of macro.
Speaker Change: Thank you.
Speaker Change: because right now with the current situation, from a LTV to CAC, it doesn't make much more sense to continue investing more than we are.
Speaker Change: At the same time, when you look at larger businesses...
Speaker Change: mid-sized businesses to enterprise businesses and you see the improvement that we've done both on the going-up market but also on their spend.
Speaker Change: on the platform, it does make sense to invest more, and we are. And we are, and we focused our efforts there on high-value buyers.
Speaker Change: And so, I think the good news, on our end, is...
Speaker Change: And I think I've said that before and it continues to be the case.
Speaker Change: The top of our funnel contains every type of customer that we need.
Speaker Change: Yes, there is a little bit of a lesser demand or traffic coming from very small businesses because they're not having the best time of their lives right now as a business.
Speaker Change: But we contain everything from small businesses all the way to enterprise businesses. Which is good news because it means we don't need to massively invest in having a sales force or having account management to entertain those customers.
Speaker Change: I think that when that sentiment is going to change, I've called out two sentiments. One is the S&B sentiment, which is not looking well.
Speaker Change: and the other is professional stuffing and both of these indexes are going down.
Speaker Change: offsetting these indexes by just pouring money into the market, from our experience, is not the most effective, which is why we're not doing it.
Speaker Change: I think that if we have signs, even the smallest signs that this is changing the way we do marketing, the marketing automation, the sophistication of our marketing would allow us to respond to it extremely fast.
Speaker Change: but I think that I've outlined those. These are the main components.
Speaker Change: for when we can spend more.
Speaker Change: Yep, that's great.
Speaker Change: That makes sense. And then just a housekeeping question, but one that we are getting from investors. Just curious if you can quantify
Speaker Change: how much you paid for AutoDS. I look at the balance sheets, see goodwill and intangibles ticked up pretty a bit, I guess. I wonder if that's maybe a good way to think about it or any other color you can give there. Thanks.
Speaker Change: I think that
Speaker Change: We're not disclosing this deal. We'll probably soon, but there are some items on the initial statement that indicate so.
Speaker Change: So that there is some cash flow component Bear in mind that we did purchase some We did some equity higher earlier this year. So the amount is kind of compounded at those two deals
Speaker Change: I think it's a few dozen of millions of dollars, so you can see that in the financial statement.
Speaker Change: Got it. That's helpful. Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Marvin Fung from BTIG. Please go ahead Marvin.
Marvin Fung: Thank you.
Marvin Fung: Good morning. Thanks for taking my questions and congrats on the quarter. Two questions for me. So I would like to just drill down a little bit deeper on
Marvin Fung: You know, going up market, you mentioned in the shareholder letter things like dynamic matching professions and hourly contracts. Just wondering if you could...
Marvin Fung: Give us some sense of which of those items you feel is having the most impact.
Marvin Fung: And I'm especially interested in hourly contracts, it seems like.
Marvin Fung: unlocking a major portion of the market. Could you provide any color on, you know, what you're seeing in terms of, you know, early start on how much, you know, how much of your mix is going to hourly contracts? And then I'll, and then I have a follow-up.
Speaker Change: Thank you for watching!
Speaker Change: All right. Hey, Mervyn. Thanks for the question. So essentially, I think you mentioned yourself, these are extremely new products. And as I've said, what we're seeing there,
Speaker Change: It gives us very high confidence that these are going to be very successful products.
Speaker Change: And the reason is they're dealing with very specific types of needs that Fiverr didn't deal with before.
Speaker Change: And it was important because as I've said, you know, most customers who work with agencies or freelancers offline.
Speaker Change: And they are used to work in a certain way. And I think that some of these behaviors we didn't capture well. So, as an example, if you think about the market-based model, where there's predefined, prepackaged, prepriced services that are very easy to purchase,
Speaker Change: If you have a very long ongoing relationship with a freelancer where it's mostly open-ended Because there's it's not like a project that has an A to Z that is very clear a start and an end But it's mostly on an ongoing basis. This is where hourly models
Speaker Change: come in.
Speaker Change: and this gives the additional flexibility.
Speaker Change: Again, these products are super new. What we're seeing there is they're really catering
Speaker Change: to the types of products and services that are selling for many thousands of dollars.
Speaker Change: Okay.
Speaker Change: and are, by definition, longer in duration.
Speaker Change: So it's doing exactly what they were designed to do, while they're not competing with the other offerings that we have, because we're tailoring each of our offering into a specific use case.
Speaker Change: So that for the customers, it's very easy to understand Which of our solutions is the best one for them?
Speaker Change: Thank you for watching!
Speaker Change: Gotcha, and totally understand these are very new products.
Speaker Change: appreciate that answer. My second question is just on the guidance and I think you mentioned earlier, you know, this is a pretty seasonal quarter, you know, correct me if I'm wrong, but typically a pretty seasonally strong quarter, the fourth quarter. So, you know, as we stand here at the end of October, you know, do you feel like you have that visibility into that seasonal ramp or is it still too early to say?
Speaker Change: still waiting on seeing that develop and how that kind of plays into your guidance. Thanks a lot.
Speaker Change: Thank you.
Speaker Change: And I would
Speaker Change: make the question more interesting by adding the election at the U.S. that make this quarter even more interesting?
Speaker Change: so that you know despite of or on top of the seasonality and the fear with the last two weeks
Speaker Change: are kind of shy in terms of buyers.
Speaker Change: attendance and priorities. I would I would say that we feel we have enough confidence to guide.
Speaker Change: and beyond. You know, we actually increased guidance or improved guidance for the quarter and this is based on
Speaker Change: at the exit point of last quarter.
Speaker Change: together with stability.
Speaker Change: of Topper Funnel and the strong pipeline and the value of the services. So to address your, you know, the simple question is yes.
Speaker Change: We feel we have enough confidence to guide against those trends.
Speaker Change: That's great to hear, Ofer. Thanks so much, guys.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Rohit Kulkarni from Rolf Capital Partners. Please go ahead, Rohit.
Speaker Change: Thank you. Thank you. Thank you.
Rohit Kulkarni: Hey, thank you. A couple of questions. One is just on...
Rohit Kulkarni: Can you talk about what your hiring plans look like?
Rohit Kulkarni: How have they trended over the last six months and any color that you can provide in terms of What end markets you're feeling about and how that translates into your hiring plans
Rohit Kulkarni: And then second is just, I know, take rate is something that investors want to get their arms around. But over the last six months, there seems to be like a nice step up in how take rate has expanded.
Rohit Kulkarni: perhaps talk about there are some coincidental factors in terms of how you have expanded upmarket and that has been successful. With the extent you can provide any more color around
Rohit Kulkarni: what may have led to that kind of slight step up in the expansion and how sustainable that is. Perhaps it's about going up market, perhaps it's AI or anything else. That'd be helpful. Thanks.
Speaker Change: Morning, Rohit. Thanks for the question.
Speaker Change: On the cost side, what I would say is hiring is done in a very disciplined manner.
Speaker Change: and we've been very disciplined on cost, but we're not shy from hiring where we have needs to further invest in product and in growth.
Speaker Change: I think we've done it in a very responsible manner.
Speaker Change: but the other the other question about about pay trade
Speaker Change: So we'll take...
Speaker Change: There aren't any surprises here.
Speaker Change: and again.
Speaker Change: have been very consistent.
Speaker Change: in the way in which we build a business.
Speaker Change: and actually
Speaker Change: Look, if you look at 2024, you know, it's a pretty impressive year.
Speaker Change: But despite the fact that we had, you know, very, very high pressure on the macro side, SMBs and professional hiring, we've been able to offset a lot of it.
Speaker Change: and continue growing. We've been growing the bottom line, our profitability profile, even faster than we said we will because we have the opportunity.
Speaker Change: We've done buyback to increase and give more value to our shareholders.
Speaker Change: we built products that allowed us to go up market very efficiently.
Speaker Change: which we have, and they're driving the platform higher.
Speaker Change: We were very fast to respond to the opportunity of AI and made it a net positive for us and a force of growth and an ability to continue investing in great products. And we've offered
Speaker Change: great products and solutions.
Speaker Change: to both our sellers and buyers, and they love them, and this is why they embrace them more, which allows us to increase the volume of people that are using these tools.
Speaker Change: and also increase the exposure of these offerings across our products.
Speaker Change: There is no magic. It's just...
Speaker Change: consistent hard work that pays off.
Speaker Change: So, to your question, do we think that there is anything coincidental? Or, if we think that there's any reason to think that this would not be the trend moving forward, the answer is no.
Speaker Change: because as I've said, it's...
Speaker Change: It's a result of very methodical, hard and consistent work.
Speaker Change: Thank you. Do you have any follow-up questions, Rohit?
Rohit Kulkarni: If I could squeak in a couple, one more in terms of capital allocations and debt and buybacks, any latest, excuse me, any updates on the convertible notes as well as the status of any additional share buyback authorization?
Speaker Change: Thank you for watching!
Speaker Change: I will start by saying that we are lucky or smart to have sufficient cash.
Speaker Change: Thank you for watching!
Speaker Change: to fulfill all obligations, including the convertible note, if time comes by the end of next year, we are.
Speaker Change: We have the flexibility to decide throughout this period.
Speaker Change: and to react to market condition and...
Speaker Change: and any opportunity. But again, we have sufficient cash to stand against those liabilities. I think in terms of shareback authorization, you know, we did some shareback this year. I think we'll, you know, we are
Speaker Change: on top of this topic to make sure that we do our best.
Speaker Change: and prioritize the shareholder's value on the long term.
Speaker Change: So there's nothing to update as of now.
Speaker Change: but I recommend that you guys stay tuned to see how we react again against the shareholders value.
Speaker Change: Thank you for watching!
Speaker Change: Great, thank you.
Speaker Change: Thank you.
Speaker Change: We'll take a last question today from Josh Chen of UBS. Please go ahead, Josh.
Josh Chen: Hi, good afternoon. Thanks for taking my questions and congrats on the good quarter.
Josh Chen: I've got two questions. One is on the take rate guidance going up. I guess, could you talk about what factors drove you to be able to raise your take rate guidance?
Josh Chen: and what kind of supplies you in that regard. And then secondly, just on AutoDS, does that business happen to have a very seasonal dynamic in Q4 with the holidays? I'm just wondering whether revenue contribution is stronger in Q4 than other quarters. Thank you.
Speaker Change: Morning, Josh. Thanks for the question. Take great guidance. Again, not massive surprises.
Speaker Change: It's just working.
Speaker Change: and maybe it's working a little bit better. I called out the fact that AutoDS had a slightly better quarter than initially anticipated, which had some contribution. The same goes for our other take rate driving products.
Speaker Change: So, that is why we...
Speaker Change: We have the confidence and that's why we guided the way we did.
Speaker Change: In terms of O2DS,
Speaker Change: Look, every business including Fiverr has a seasonality factor. And there is a seasonality factor in Q4 for Fiverr as well in Q1. And the same goes for any other of our businesses.
Speaker Change: We're not guiding specifically to any one of our businesses. Again, it's a small contributor at this point.
Speaker Change: We're happy with how it's growing and it gives us nice contribution, but it's still small. We're not guiding
Speaker Change: specifically, it's a SaaS business, right, which is in many ways different than a lot of our businesses, which is one of the reasons why we like it and it allows us to, you know,
Speaker Change: to extend and proliferate our different offerings.
Speaker Change: And as Ofer said, it's just, we're guiding based on how we're seeing the previous quarter ending, this one.
Speaker Change: starting
Speaker Change: and that's it. I don't have that much more color to add.
Speaker Change: Okay, great, yeah. Thanks for the color and the time and congrats on the new quarter. Thank you.
Speaker Change: Thank you for watching!
Speaker Change: Thank you. We have another question from Andrew Boone from JMP Securities. Please ask your question, Andrew.
Andrew Boone: Thanks so much and good morning. Mika, in the prepared remarks you talked about the vision of expanding Fiverr beyond a marketplace and adding more tools for freelancers and I guess users of the platform overall. Can you just expound upon the vision of what you might be willing to offer? What does that start to look like?
Speaker Change: And then in the letter, new cohorts were called out as outperforming COVID cohorts.
Speaker Change: Can you guys just help us understand kind of COVID cohorts given their size and the importance of what that's been historically for the business, kind of how those are trending? Are you guys seeing stabilization there as we continue to move away from COVID or is macro kind of overwhelming that? Thanks so much.
Speaker Change: Yeah, I think... Andrew, thanks for the question.
Speaker Change: Thank you for watching!
Speaker Change: There isn't that much more I can talk about the fission, and this is because of competitive reasons and because of the fact that we do want to keep some nice surprises for our community and for the market.
Speaker Change: But I think I've alluded enough in where we make our investments.
Speaker Change: and how we think about our products and how we think about this combined opportunity for intelligent machines to work with extremely talented people. I think that around
Speaker Change: that space, there's a lot to do.
Speaker Change: and we are and I'm super excited and I'm not gonna jump the gun and you know and and talk about this more but I will say that
Speaker Change: We'll be happy to share news as soon as we have some some interesting things to
Speaker Change: to demonstrate. In terms of COVID cohorts,
Speaker Change: Yeah, I mean...
Speaker Change: Yes, they're larger in size, we know that. These courts are pretty stable at this point.
Speaker Change: There are a few years into maturity now.
Speaker Change: You know, I think it's worth calling out that the efforts that we're doing to focus on high-value buyers.
Speaker Change: We do see that cohorts of the last two years are performing better.
Speaker Change: than COVID cohorts.
Speaker Change: So it's not just the fact that there is a maturation phase into these COVID cohorts, it's the fact that newer cohorts
Speaker Change: are different in quality because we focused more on high value which also is something that you see on the Spencer buyer that is growing very nicely.
Speaker Change #100: Thank you for watching!
Speaker Change #100: Thank you.
Speaker Change #101: We have reached the end of the question and answer session. Thank you all very much for your questions. And I'll turn the conference back to Micha for closing comments.
Micha Kaufman: Thank you, Amber. You've been wonderful in running this call. I appreciate that and I appreciate everyone for dialing in and giving us some great questions. Looking forward to talking to you very soon.
Micha Kaufman: Have a great day.
Speaker Change #102: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.