Fiverr International Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 30, 2024

There are 12 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to Fiverr Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I'd now like to hand the conference over to your first speaker today, Jingjing Chen, EVP, Strategic Finance. Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the Q3 that ended September 30, 2024. Joining me on the call today are Micha Kaufman, Founder and CEO and Ofer Katz, 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 our 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 fiber's most recent Form 20 F and other filings with the SEC.

Speaker 1

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. Further explanation and a reconciliation of each of the non GAAP financial measures to the most directly comparable GAAP measure is provided in the earnings release we issued today and our shareholder letter, each of which is available on our website at investors. Fiverr.com. And now, I will turn the call over to Miha.

Speaker 2

Thank you, Jin Jin. Good morning, everyone, and thank you for joining us. We delivered a tremendous Q3 with both revenue and adjusted EBITDA exceeding the high end of our guidance range. By successfully executing our strategy to go up market, expand value added services and deliver innovative AI powered experience, we are able to grow a higher quality buyer base, drive robust growth in spend per buyer and strong expansion intake rate. All of these efforts are clearly paying off, allowing us to accelerate our revenue growth this quarter.

Speaker 2

This is not an easy task considering that the entire professional staffing industry is down double digits year over year and overall SMB sentiment still lingers around historically low levels. 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. We also continue to deliver steady improvement in adjusted EBITDA and strong cash flow generation. Last quarter, we laid out a 3 year target plan for adjusted EBITDA and free cash flow. With strong execution in Q3, I'm confident that we are well on track to deliver these targets.

Speaker 2

Our strong financial position allows us to aggressively invest in product and technology to drive growth, but at the same time returning capital to shareholders and driving shareholder value. Fiverr's strategy has always been to relentlessly focus on creating customer value in building the most beautiful, innovative and simple fuse product to transform the way people work. One thing that become clearer to me in the last year is that with the emergence of JAI and the promise of AGI, the next generational product we build must empower our community to fully leverage artificial intelligence. 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. With that in mind, the role of fiber must broaden from a talent marketplace to a comprehensive work platform where incredible work happens.

Speaker 2

This means that every business that comes to fiber will have a world class AI assistant to help them get things done from ideation, scoping and briefing to product management and workflow automation. It means that they can seamlessly leverage both human talent and machine intelligence to create the most beautiful results. Fiber has a long history of pioneering the industry with innovative product and this is what we will do with AI as well. We are already starting to put a few pieces together to build towards this long term vision. On the buyer side, we are building a new search experience that not only includes more dynamic catalog, but also incorporates Neo and AI powered smart matching tool to help customers match with more contextual information.

Speaker 2

We launched dynamic matching to allow buyers to put together comprehensive briefs with a powerful AI assistant and then get matched with the most relevant freelancer with a tailored proposal. These products allow businesses to fulfill much more complex projects on fiber without losing the speed, simplicity and convenience that they love fiber for. Even in the few weeks since we launched these products, we have already seen an enthusiastic reception from our community and promising performance. The projects that come through these products are several times larger than the typical project on fiber. 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 2

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. Some of the tools are built in house such as Promoted Gigs and Seller Plus. Some of these tools are through acquisitions such as AutoDS and we believe there will be a lot of opportunities down the road to expand these value added services through partnerships as well. Lastly, I want to say a few words about FiberPro. As you know, Fiverr Pro is a premium offering we launched to grow our penetration into larger businesses with larger freelancing budgets.

Speaker 2

We started by providing businesses with collaboration tools, white glove services and a fully vetted catalog in order to drive better conversion, engagement and retention among buyers with the highest lifetime value. Now with our product expansion into profession, dynamic matching and hourly contract and services such as product management, we are further leaning into these buyers to capture their budgets on long term freelance engagement. Many of you have asked us what our right to win is in this segment of the addressable market. I want to point out to you 2 things. First, we have a very large top of funnel, which allows us to acquire enterprise customers in a super efficient manner.

Speaker 2

Most Fortune 500 companies already have employees who are on Fiverr and are using our services. This bottom up approach allows us to scale with very light sales and accounts team. 2nd is our technology stock. The speed, simplicity and convenience of Fiverr is fundamentally different from a typical staffing solution. From onboarding to compliance to payments and reporting, Fiverr is so much easier compared to a self serve solution and so much more cost effective compared to a managed solution.

Speaker 2

And as I mentioned before, it is going to get even better as we implement AI capabilities further into our platform. To close, I'm super excited about the many opportunities that are ahead of us. With the strong results in Q3, we are looking forward to wrapping up 2024 on a high note and can't wait to kick off another year of growth and innovation. With that, I'll turn the call over to Ofer, who will share some financial highlights.

Speaker 3

Thank you, Richard, and good morning, everyone. I'm pleased to report an exceptional quarter with both top and bottom line exceeding expectations. Revenue for the Q3 was $99,600,000 up 8% year over year, representing an acceleration from 6% year over year growth in Q2. Adjusted EBITDA for Q3 was $19,700,000 representing an adjusted EBITDA margin of 19.7%, an improvement of 180 basis points from a year earlier. We continue to demonstrate our ability to deliver both growth and profitability improvement despite the macro uncertainty and our commitment to execute with the highest level of consistency, efficiency and focus.

Speaker 3

Unpacking the strong result for Q3, we continue to see our effort of going up market and expanding value added products works well. Stand per buyer was 296 in Q3, representing EBITDA growth of 9%. More buyer are coming to fiber for larger and more complex projects. While the active buyer growth was muted, we see continued growth in buyers who spend over $10,000 annually. On the macro level, we've seen some level of stabilization in France since the productivity we experienced in June July.

Speaker 3

However, the overall SMB sentiment remains weak and the overall hiring environment continues to be challenging. We expect GMV will still take some time to recover. In the meantime, we believe our strategy to lean into products besides wallet expansion and our work to unlock new addressable market continues to be the right strategy to generate growth catalysts. Take rate for Q3 was 33.9%, representing a year over year improvement of 2 60 basis points. The continuous trend of Promoted Geeks, the growth of Seller Plus programs with the newly launched Kickstart program as well as the strong growth momentum at AutoDS, all contributed to the take rate upside this quarter.

Speaker 3

As a reminder, Pfizer's take rate consists of 2 distinctive components. 1st is marketplace commission of approximately 26% and second is value added services an additional approximate 8% take rate. The marketplace commission is directly tied with the GMV in the marketplace and has been relatively stable over the years. The expansion of value added products has driven the vast majority of our take rate expansion. As Micha mentioned, fiber 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 3

PayTrade expansion continues to be an important growth catalyst for us as we further expand our value added product portfolio. The strong Q3 results also translated into strong cash flow generation. Free cash flow was $10,600,000 Free cash flow excluding one time escrow payment for contingent consideration was $22,700,000 representing 22.8 percent of revenue. Together with balance sheet of over $650,000,000 we have ample cash to continue investing in product and growth, while supporting other capital allocation priorities, including optimizing capital structure, buyback and M and A. With regard to the outstanding $460,000,000 convertible note, our objective is to preserve maximum flexibility in this dynamic economic environment.

Speaker 3

We are confident in managing that liabilities through our strong balance sheet, but we will make the decision as we get closer to maturity. Given the strong execution of Q3, we are raising our full year guidance for both revenue and adjusted EBITDA. For the full year 2024, we now expect revenue to be in the range of $388,000,000 to $390,000,000 representing year over year growth of 7% to 8%. In terms of underlying drivers, we expect central buyers to continue growing at our bus pace, offset by decline in active buyer. We now expect the take rate to increase by approximately 3.30 basis points year over year, higher than we had previously anticipated.

Speaker 3

For adjusted EBITDA, we expect full year 2024 to be in the range of $73,000,000 to $75,000,000 representing an adjusted EBITDA margin of $19,000,000 at the midpoint. The updated full year guidance implies Q4 revenue guidance to be in the range of $100,200,000 to $102,200,000 representing ErobaVie growth of 9% to 12%. Adjusted EBITDA for Q4 is expected to be $19,500,000 to $21,500,000 representing adjusted EBITDA margin up 20.2% at the midpoint. I'm very proud of the exceptional results we delivered in Q3 and believe the strong momentum in Q3 will largely carry forward into Q4. 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 3

With that, we'll now turn the call over to the operator for questions.

Operator

Thank you. We will now begin the question and answer session. We'll take our first question from the line of Ron Josey from Citi. Please ask your question, Ron.

Speaker 4

Great. Thanks for taking the question. Hi, Micha. Hi, Ofer. I wanted to follow-up on 2 things.

Speaker 4

First is, 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 SMB 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 rates coming down or just any insights on stabilization? And then maybe a bigger question on the buyer base.

Speaker 4

I was wondering with all these new products like new professions catalog, dynamic matching that just launched hourly contracts that 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 2

Thank you, Ron. Good morning. Thanks for the questions. As to the first question, if you recall, in previous earnings, we've mentioned that we've seen some specific volatility around June July June, July, August. And I think what we're calling right now is that we've seen September and the beginning of October to be slightly more stable.

Speaker 2

So there has been some improvement at the top of funnel, but nothing we can call a trend at this point. And 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 this we're not calling a new trend. We just called out the fact that after June, July and August, we've seen some more stabilization and slightly better top of funnel on that.

Speaker 2

Second question was about the buyer base and the products that we're building. Look, I think 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, we know that the things that they usually enjoy is mostly working with agencies offline. And we know that there is even though the fact that there is people are accustomed to doing it, they're used to working offline. There are a lot of weak points in doing so. Speed is 1, convenience is another, clarity of pricing, of delivery of the project itself.

Speaker 2

So everything that we're building right now are really tools 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. And if you look at that strategy and how this has been working out for us in the past year or 2, 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.

Speaker 2

Their retention is better. Their spend is better. Their frequency is better. And that is why we're investing in these products. And don't forget, I mean, we are one of the, if not the 1st company that has done a very aggressive move into AI, not just on the catalog side of opening tens of different categories, but how we integrated AI in making our products much more or much easier to use and much more robust to do a lot of the work that was previously had to do manually.

Speaker 2

So I think that with the removal of all of these frictions, 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 4

That's super helpful. Thank you, Micha.

Speaker 5

Thank you.

Operator

Thank you. Our next question comes from the line of Bernie MacTiernan from Needham and Company. Please ask your question, Bernie.

Speaker 6

Great. Good morning. Thanks for taking the questions. 2 for me. First is, with the guidance for revenue accelerate 4Q, how should we think about the puts and takes between take rate and GMV growth?

Speaker 6

And is auto 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 platform?

Speaker 2

Good morning, Bernie. You were cutting off a little bit, but I think I got most of the questions. So in terms of guidance acceleration, 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 sentiments or you look at the professional staffing market, they're down double digit percentage. So we're already offsetting in our profile, we're offsetting pretty massively on the macro conditions.

Speaker 2

Our view on GMV, we've reiterated it. We've talked about this. I think that within this market, other than just offsetting on these negative trends, we're improving our product and building new products that are creating value for our customers. And those products are working extremely well. Customers are retained and happy to pay for these products because they're adding value for them.

Speaker 2

And so when you look at the makeup of what allowed us to grow, it's a combination of somewhat better top of funnel. It's the tools that we either introduced in the past like promoted gigs and seller tools. It's new tools like the addition of AutoDS and it's higher spend per buyer because of all of our going up market products. So we feel that as long as the macro would not significantly change, what we're doing now with the offset is the right thing. Obviously, we're pushing ourselves to even perform better and I think we are and I think the numbers show it.

Speaker 2

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 3

Thank you.

Operator

Do you have any follow-up question, Bernie?

Speaker 2

No, I think you had the second

Speaker 6

question. Yes. On dynamic matching, I know it's only been a few weeks, but can you just talk about some of the metrics you're using to gauge success product? And then does it have any impact on advertising or take rate? Just really want to know if it could be take rate dilutive if there's less of a need to advertise if all the sellers are fully matched?

Speaker 6

Right.

Speaker 2

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, 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 2

And we're using AI technology to help them create more extensive briefs and then get matched with very, very specific type of talent, which saves them the trouble of actually going through and filtering talent and get tailored proposals. Now I don't think that because of the nature of these products, I don't foresee definitely not an immediate impact on advertising. And the reality is we haven't seen that. I think that this product by itself is a little bit more relevant for very, very customized types of projects, whereas our catalog allows our customers to have a ready made offering that they can just click and buy. So I don't see this influencing and the reality is that the promoted gigs continues to grow and we're very happy with it.

Speaker 6

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Doug Anmuth from JPMorgan. Please go ahead, Doug.

Speaker 7

Great. Thanks for taking the questions. Could you guys talk about what you're seeing early on with AutoDS and just how we should think about 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 2

Good morning, Doug. Thanks for the question. Good morning. So on AutoDS, I mean, we're very happy with the acquisition. I think, as I mentioned, it is contributing to the take rate component.

Speaker 2

And actually, they had a better quarter than anticipated. Look, it's still a small business. So in contribution to the larger picture of fiber, it's very small, which is why we're not reporting it separately. But we're happy with the performance. And it's a great addition to the already in house tools that we've built.

Speaker 2

I've mentioned them. I mentioned Promoted Listings. I've mentioned Seller Plus. Our loyalty programs are really tied in from both sides, from sellers and buyers into a place where we're enabling more engagement, both for our sellers and our buyers in a way that pays off. And we know that the repeat and sometimes working with same seller, same buyer is a very is a highly common thing on fiber.

Speaker 2

And these are the types of things that we want to encourage. 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. So retention and engagement are the 2 matrix of how we measure the success of these programs.

Speaker 3

Okay.

Speaker 2

Thank you, Misa.

Operator

Thank you. Our next question comes from the line of Jason Elsztain from Oppenheimer. Please go ahead, Jason.

Speaker 8

Thanks. Good afternoon, everybody. I guess, good morning, depending on where you are. Can you talk about where you see take rates going long term? Obviously, it's quite strong.

Speaker 8

The main driver really is, I guess, mix shift. 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

Speaker 9

the mix of the business over time? Thank you.

Speaker 3

Hey, Jim. So this is Ofer. I think that I'm kind of thinking how to address this question because on one hand, we are 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. But in reality, we do see more room to expand both on existing product. We just launched the Kickstart subscription program for new seller, which is going really well, but there is more in the pipe.

Speaker 3

So I think that during this period of the volatility and macro headwind, take rate expansion is a key driver for growth. I think that in the future, as we believe, 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 percentage wise, it's going to be slower. But for the time being, again, with the existing program expansion, but also new program in the pipe, I think there is a good reason to believe that take rate is going to go higher and modestly over the next few quarters.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Brett Erickson from RBC Capital Markets. Please go ahead, Brett.

Speaker 7

Hi, thanks guys. Good to chat. First question is, you mentioned the stabilization at the top of the funnel, but clearly some crosscurrents going on with S and Ps and 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 over improvement in the macro?

Speaker 7

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 have a follow-up.

Speaker 2

Morning, Brad. Thanks for the question. So essentially, the macro is putting more pressure on SMBs than it is on larger businesses. And therefore acquiring SMBs is mostly a function of macro. Because right now with the current situation from LTV to CAC, it doesn't make much more sense to continue investing more than we are.

Speaker 2

At the same time, when you look at larger businesses, midsized businesses to enterprise businesses And you see the improvement that we've done both on the going up market, but also on their spend 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. And so I think the good news on our end is and I think I said that before and it continues to be the case, the top of our funnel contains every type of customer that we need. 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 2

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. I think that when that sentiment is going to change, I've called out 2 sentiments. 1 is the SMB sentiments, which is not looking well. And the other is professional staffing. And both of these indexes are going down.

Speaker 2

Offsetting these indexes by just pouring money into the market is from our experience is not the most effective, which is why we're not doing it. I think that the 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. But I think that I've outlined those these are the main components for when we can spend more.

Speaker 7

Yes, that's great. That makes sense. And then just a housekeeping question, but one that we are getting from investors. Just curious if you can quantify how much you paid for AutoDS? I look at the balance sheet, see goodwill and intangibles ticked up pretty a bit, I guess.

Speaker 7

I wonder if that's maybe a good way to think about it or any other color you can give there. Thanks.

Speaker 3

I think that we're not disclosing this deal. We've probably seen, but there are some items on the financial statement that indicates so that there is some cash flow component. Bear in mind that we did purchase some we did some acqui hire earlier this year. So the amount is kind of compounded of those 2 deals. So I think it's a few dozen of 1,000,000 of dollars.

Speaker 3

So you can see that in the financial statement.

Speaker 7

Got it. That's helpful. Thanks.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Marvin Fong from BTIG. Please go ahead, Marvin.

Speaker 9

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 going up market. You mentioned in the shareholder letter things like dynamic matching professions and hourly contracts.

Speaker 9

Just wondering if you could give us some sense of which of those items you feel is having the most impact. And I'm especially interested in hourly contracts, it seems like unlocking a major portion of the market. Could you provide any color on what you're seeing in terms of early start on how much of your mix is going to alloy contracts? And then I have a follow-up.

Speaker 2

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 gives us very high confidence that these are going to be very successful products.

Speaker 2

And the reason is they're dealing with very specific types of needs that fiber didn't deal with before. And it was important because as I've said, most customers work with agencies or freelancers offline 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, pre priced services that are very easy to purchase. 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.

Speaker 2

This is where our remodels come in. And this gives the additional flexibility. Again, these products are super new. What we're seeing there is they're really catering to the types of products and services that are selling for many 1,000 of dollars, okay, and are by definition longer in duration. 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 2

So that for the customers, it's very easy to understand, which of our solutions is the best one for them.

Speaker 9

Got you. And totally understand these are very new products. Appreciate that answer. My second question is just on the guidance and I think you mentioned earlier, this is a pretty seasonal quarter. Correct me if I'm wrong, but typically a pretty seasonally strong quarter, the Q4.

Speaker 9

So as we stand here at the end of October, do you feel like you have that visibility into that seasonal ramp? Or is it still too early to say and still waiting on seeing that develop and how that kind of plays into your guidance? Thanks a lot.

Speaker 3

And I would make the question more interesting by adding the election at the U. S. That make this quarter even more interesting.

Speaker 4

So

Speaker 3

that despite of or on top of the seasonality and the fear with the last 2 weeks, kind of shy in terms of buyer attendance and priorities. I would say that we feel we have enough confidence to guide and beyond. We actually increased guidance or improved guidance for the quarter. And this is based on the exit point of last quarter together with stability of the top of funnel and the strong pipeline and the value of the services. So to address it, the simple question is yes.

Speaker 3

We feel we have been not confident to guide against those trends.

Speaker 9

That's great to hear, Ofer. Thanks so much, guys.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Rohit Kulkarni from ROTH Capital Partners. Please go ahead Rohit.

Speaker 10

Hi, thank you. A couple of questions. One is just on kind of the cost side of the equation. Can you talk about what your hiring plans look like? How have they trended over the last 6 months?

Speaker 10

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? And then second is just I know take rate is something that investors kind of want to get their arms around. But over the last 6 months, there seems to be like a nice step up in how take rate has expanded. Perhaps talk about there are some coincidental factors in terms of how you have expanded up market and that has been successful. To the extent you can provide any more color around what may have led to that kind of slight step up in the expansion and how sustainable that is?

Speaker 10

Perhaps it's about going up market, perhaps it's AI or anything else that would be helpful? Thanks.

Speaker 2

Morning, Rohit. Thanks for the question. On the cost side, what I would say is hiring as done in a very disciplined manner. And we've been very disciplined

Speaker 3

on cost.

Speaker 2

But we're not shy from hiring where we have needs to further invest in product and in growth. I think we've done it in a very responsible manner. The other question about take rate, so I would say there aren't any surprises here. And again, I'm very proud of the fact that as management, this company has been very consistent in the way in which we build the business. And actually, look, if you look at 2024, it's a pretty impressive year.

Speaker 2

But despite the fact that we had very, very high pressure on the macro side, SMBs and professional hiring. We've been able to offset a lot of it 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. We've done buyback to increase and give more value to our shareholders. We build products that allowed us to go up market very efficiently, which we have and they're driving the platform higher.

Speaker 2

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 ability to continue investing in great products. And we've offered great products and solutions 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 and also increase the exposure of these offerings across our products. There is no magic. It's just consistent hard work that pays off. 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?

Speaker 2

The answer is no. Because as I've said, it's a result of very methodical hard and consistent work.

Operator

Thank you. Do you have any follow-up questions, Rohit?

Speaker 10

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 3

I will start by saying that we are lucky or smart to have sufficient cash to fulfill all obligation, including the convertible note, if time comes by the end of next year. We have the flexibility to decide throughout this period and to react to market condition and any opportunity. But again, we have sufficient cash to stand against those liability. I think in terms of share back authorization, we did some share back this year. I think we are on top of this topic to make sure that we do our best and prioritize the shareholders' value on the long term.

Speaker 3

So there's nothing to update as of now. But I recommend that you guys stay tuned to see how we react again against the shareholders' volume.

Speaker 10

Great. Thank you.

Operator

Thank you. We'll take our last question today from Josh Chan of UBS. Please go ahead, Josh.

Speaker 5

Hi, good afternoon. Thanks for taking my questions and congrats on a good quarter. 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 and what kind of surprised you in that regard?

Speaker 5

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 2

Good morning, Josh. Thanks for the question. Take rate guidance. Again, not massive surprises. It's just working.

Speaker 2

And it's maybe it's working a little bit better. I called out the fact that AutoDS had a better quarter than initially anticipated, which had some contribution. The same goes for our other take rate driving products. So that is why we have the confidence and that's why we guided the way we did. In terms of AutoDS, look, every business including fiber has seasonality factor.

Speaker 2

And there is a seasonality factor in Q4 for fiber as well in Q1. And the same goes for any other of our businesses. We're not guiding specifically to any one of our businesses. Again, it's a small contributor at this point. We're happy with how it's growing and it gives us nice contribution, but it's still small.

Speaker 2

We're not guiding 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 extend and proliferate our different offerings. And as Ofer said, it's just we're guiding based on how we're seeing the previous quarter ending, this one starting and that's it. I don't have much more color to add.

Speaker 5

Okay, great. Yes, thanks for the color and the time and congrats on the good quarter. Thank you.

Operator

Thank you. We have another question from Andrew Boone from JMP Securities. Please ask your question, Andrew.

Speaker 11

Thanks so much and good morning. Nika, in the prepared remarks, you talked about the vision of expanding fiber beyond the 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? And then in the letter, new cohorts were called out as outperforming COVID cohorts.

Speaker 11

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

Speaker 3

much.

Speaker 2

Yes. I think Andrew, thanks for the question. There isn't that much more I can talk about efficient. 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. But I think I've alluded enough in where we make our investments and how we think about our product and how we think about this combined opportunity for intelligent machines to work with extremely talented people.

Speaker 2

In I think that around that space, there is a lot to do and we are. And I'm super excited. And I'm not going to jump the gun gun and talk about this more, but I will say that we'll be happy to share news as soon as we have some interesting things to demonstrate. In terms of COVID cohorts, yes, I mean, yes, they're larger in size, obviously, and we know that. These cohorts are pretty stable at this point.

Speaker 2

There are a few years into maturity now. And I think it's worth calling out that the efforts that we're doing to focus on high value buyers. We do see that cohorts of the last 2 years are performing better than COVID cohorts. So it's not just the fact that there is a maturation phase into these COVID cohort, it's the fact that newer cohorts are different in quality, because we focused more on high value, which also is something that you see on the spend provider that is growing very nicely.

Speaker 11

Thank you.

Operator

Right. Thank you. We have reached the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to Micha for closing comments.

Speaker 2

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.

Speaker 2

Have a great day.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Key Takeaways

  • Fiverr delivered Q3 results above guidance with revenue of $99.6 million (up 8% YoY) and adjusted EBITDA of $19.7 million (19.7% margin), marking acceleration from Q2.
  • Despite weak SMB sentiment and a down professional staffing market, growth was driven by an up-market focus, rising spend per buyer and expanding AI-powered, value-added services like dynamic matching and Neo.
  • The take rate rose to 33.9% (up 260 bps YoY), fueled largely by value-added offerings—Promoted Gigs, Seller Plus and AutoDS—while the core marketplace commission held steady at ≈26%.
  • Fiverr generated $10.6 million in free cash flow (or $22.7 million ex-one-time payment), exited Q3 with over $650 million in cash and raised full-year 2024 guidance to $388–$390 million in revenue (+7–8%) and $73–$75 million in adjusted EBITDA.
  • Looking ahead, Fiverr aims to evolve from a talent marketplace into a comprehensive AI-enabled work platform—rolling out AI assistants, enhanced search, dynamic catalogs and hourly contracts to blend human expertise with machine intelligence.
AI Generated. May Contain Errors.
Earnings Conference Call
Fiverr International Q3 2024
00:00 / 00:00