Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fiverr International Ltd (FVRR, Financial) reported Q2 revenue of $94.7 million, up 6% year-over-year, exceeding the midpoint of their guidance.
- Adjusted EBITDA for Q2 was $17.8 million, representing an adjusted EBITDA margin of 18.9%, near the top end of their guidance.
- The company completed a $100 million share buyback program, demonstrating strong cash flow and a robust balance sheet.
- Fiverr International Ltd (FVRR) launched a summer product release, including a profession-based catalog and time-based transactions, expanding their addressable market.
- The integration of AI tool Neo throughout the marketplace aims to enhance customer experience and drive product innovation and growth.
Negative Points
- Active buyers decreased by 8% year-over-year to 3.9 million, indicating a slowdown in user growth.
- Overall GMV decelerated in Q2, impacted by a slowdown in traffic starting in June.
- The company noted macroeconomic challenges, including higher inflation and interest rates, affecting small business spending and delaying large projects.
- Despite the positive impact of AI, there is ongoing volatility in larger projects and certain categories like programming and technology.
- The company expects Q3 revenue growth to be relatively muted, with improvements anticipated in Q4, indicating potential short-term challenges.
Q & A Highlights
Q: Can you provide more details on the benefits of Neo and its impact on conversion rates?
A: Micha Kaufman, CEO: Neo, our AI assistant, has shown positive results in improving conversion rates by helping customers complete briefs more accurately. It is being gradually integrated throughout our platform to assist with search, project briefing, and decision-making, enhancing the overall customer experience.
Q: How is the macroeconomic environment affecting Fiverr's performance, particularly in June and July?
A: Micha Kaufman, CEO: We observed some volatility in June and July, particularly in top-of-funnel traffic. The macro environment, including high inflation and interest rates, continues to impact small businesses more significantly. However, our spend per buyer remains robust, and we are seeing stabilizing trends in simple services.
Q: What capabilities does the AutoDS acquisition bring, and how will it impact financials in the second half of the year?
A: Micha Kaufman, CEO: AutoDS enhances our offerings in the dropshipping category, providing software solutions that complement our existing services. This acquisition is expected to drive synergies and growth in related categories like e-commerce and social media. Financially, it will contribute to our take rate and overall revenue growth.
Q: What is the long-term potential for Fiverr's take rate, and how do you plan to achieve it?
A: Micha Kaufman, CEO: Our take rate growth is driven by value-added products and services. We have not capped the take rate as we continue to develop products that our community values. The transactional portion remains stable, while the added value services will drive future growth.
Q: Can you elaborate on the new long-term freelancer hiring platform and its expected impact?
A: Micha Kaufman, CEO: The new platform allows businesses to hire freelancers for longer-term projects, addressing a need for ongoing engagements. This expands our market and provides new monetization opportunities. Early feedback is positive, and we expect it to drive additional GMV and revenue growth.
Q: How do you plan to allocate the $300 million in free cash flow over the next three years?
A: Ofer Katz, CFO: Our capital allocation priorities include investing in product growth, optimizing our balance sheet, and pursuing opportunistic M&A. We also consider share buybacks if the price is attractive. Our goal is to drive steady and consistent free cash flow per share.
Q: What are the leading indicators that give you confidence in the second half of the year despite recent volatility?
A: Micha Kaufman, CEO: Our confidence is based on the positive impact of recent product releases, the addition of AutoDS, and the continued growth in spend per buyer. While we account for potential volatility, we believe our strategic initiatives will drive revenue acceleration in Q4.
Q: How are Promoted Gigs and Seller Plus performing amid the current market conditions?
A: Micha Kaufman, CEO: Both Promoted Gigs and Seller Plus continue to perform well, with strong growth and adoption among freelancers. These programs provide significant value, helping freelancers grow their businesses and generate more income, which is crucial in the current market environment.
Q: How does the transition to a platform with software solutions impact Fiverr's future strategy?
A: Micha Kaufman, CEO: Transitioning to a platform with software solutions allows us to offer a broader range of services and capture more of the freelance market. AutoDS is an example of this strategy, providing software solutions for dropshipping while leveraging our existing community and services to drive growth.
Q: What are the implications of achieving GAAP profitability for Fiverr's business strategy?
A: Ofer Katz, CFO: Achieving GAAP profitability will allow us to focus on further improving our EBITDA and free cash flow. We anticipate a reduction in share-based compensation expenses, which will enhance our GAAP profitability. This will support our long-term targets and strategic initiatives.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
