Hello everyone, and thank you for joining the Fiverr Q3 fiscal 2021 earnings conference call. My name is Doris, and I'll be moderating your call today. Before I hand you over to Fiverr's Jinjin Qian, I would like to remind you if you would like to ask a question during the Q&A session at the end of the call, please press star followed by 1 on your telephone keypad. If you have joined us online, please use the request to speak flag icon. Please unmute yourself and look please before asking a question. I now have the pleasure of handing you over to Jinjin Qian. Please go ahead.
Thank you for joining us on Fiverr's earnings conference call for the third quarter ended September 30, 2021. 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 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 Fiverr's most recent Form 20-F and other filings with the SEC. During this call, we'll be referring to some non-GAAP financial measures.
A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are provided in the earnings release we issued today and our shareholder letter, each of which is available on our website at investors.fiverr.com. Now I will turn the call over to Micha.
Good morning, everyone, and thank you for joining us on the call today. We are very excited to talk to you about recent developments at Fiverr. Q3 turned out to be a very strong quarter, with revenue growing 42% year-over-year above the high end of our guidance. All KPIs, including active buyers, spend per buyer, and take rate, performed really well too. Our business, including the traffic to our platform, improved from the hyper seasonality that we experienced in the earlier part of Q3. This is by no means to say that the uncertainty and impact of COVID is over. However, the strength and resilience of our business once more powered us through these volatile times. We believe the secular trends of remote work and the need for digital transformation are here to stay well beyond the pandemic.
Businesses need to stay competitive in their talent strategy to be adaptive in their ever-changing digital landscape, to creatively address the skilled labor shortage, and to be nimble and efficient in execution. Fiverr, with our vast catalog, our resilient community, and best-in-class services and product experience, continues to empower freelancers and businesses across the world in achieving these goals. I am very proud of the entire Fiverr team in delivering strong results quarter after quarter, so we can invest aggressively in long-term initiatives. Today, I want to spend some time talking to you about how we envision the future of work and how we are putting a few important pieces in place as we plan the next 10 years of Fiverr. After that, Ofer will provide more color on the quarter.
When we consider the total addressable market, it is important to note that the majority of freelancing still happens offline. We believe offline channels will continue to be a big part of how businesses get connected with freelancers, just like how after more than 20 years, e-commerce is still less than 20% of total retail sales. We want to make sure that Fiverr is enabling all freelancing engagements for businesses for both online and offline. This is why we recently acquired Stoke Talent, a freelance management software company. Through Stoke, we gain access to the offline freelancing market that is still orders of magnitude larger than the online freelancing. With Stoke's offering, we can enable businesses to better manage their existing freelancer relationships. Most companies today do not use dedicated, purpose-built freelance management systems.
Oftentimes, freelancers are managed through Excel spreadsheets scattered among different teams and individuals throughout the organization. When asked, "How many freelancers does your organization engage with today?" Most companies don't know the answer. This can trickle down to tremendous inefficiencies in managing budget, meeting compliance, setting up payments, sending tax documents, and the list goes on. All of this becomes easy once you sign up on Stoke Talent. With Stoke Talent, Fiverr aims to become a 360-degree partner for businesses to move their entire freelancing budget to our ecosystem. Talent is everywhere, and finding talent is hard. We believe the future of work requires businesses to implement a multi-channel freelancer strategy. We want to help businesses effectively implement such a strategy and efficiently manage it without having to worry about being tied to one platform or one source of talent pool. Now, let's talk about the freelancer side.
We believe the future of work for freelancers is about building a personal brand, a personal audience, and the line between building a freelancing career and a small business is blurring. This has been Fiverr's vision from day one and is how we differentiate ourselves from any other freelancer platform. On our e-commerce platform, freelancers are entrepreneurs, they are store owners, and they take full control in defining which services to provide, at which price, how and when they work. With this in mind, we want to build Fiverr into an ecosystem that not only brings freelancers revenue opportunities but also software and tools to help them manage their business and continue to grow professionally. We recently completed the first phase of integration of AND.CO and rebranded it as the all-new Fiverr Workspace.
Fiverr Workspace enables freelancers to seamlessly integrate their Fiverr orders with all other client engagements, so freelancers can manage contracts, invoices, and earnings in a consolidated fashion. We also completed the acquisition of CreativeLive to round out our offering in the learning and development space. We incubated Fiverr Learn internally a few years ago, and the product has received tremendously positive feedback from our community. Not only they love the high quality content, but it is also a way to connect with top talent in the relevant fields and to increase visibility on our marketplace. The acquisition of CreativeLive will allow us to significantly expand our professional education content library and further grow this part of our business. Leveraging its production capabilities and content distribution technology, we also see meaningful opportunities to expand our value add to the corporate certification partnerships. We'll save that for later.
Before I hand it to Ofer, Fiverr has built a very intuitive, easy-to-use platform with a very efficient go-to-market strategy. Sometimes people forget how complicated our problem space actually is. We are not doing e-commerce for merchandise, but we are dealing with people, services, and relationships. They are much more complicated than merchandise. The underlying technology we've built over the years and the insights we've gained in understanding buyers' intent and sellers' expertise is what makes delivering the simple experience possible. We'll continue to innovate and invest in technology to make the future of work easier and better. With that, I'll turn the call over to Ofer.
Thank you, Micha, and good morning, everyone. We are excited to deliver another quarter of excellent results as millions of businesses continue to come to Fiverr. Revenue for Q3 was $74.3 million, up 42% year-over-year, driven by a 33% growth on active buyers, 20% growth on spend per buyer, and a 140 basis points expansion on take rate. This is especially impressive considering the 88% growth we had in Q3 last year, translating to a 166% revenue growth on a two-year basis. The take rate increase was driven by year-over-year impact from the 50 basis point increase in service fees, the continued expansion of seller tools, including Promoted Gigs and Seller Plus, as well as additional contributions from ClearVoice, Fiverr Learn, and Fiverr Workspace.
We continue to move upmarket, with high-value buyers now representing 62% of core marketplace revenue, up from 57% in Q3 last year. The growth contribution from high-value buyers is driven by two factors. First, the number of high-value buyers grew significantly faster than the overall buyer growth. Second, the average spend per buyer for high-value buyers is many times more than average marketplace spend per buyer. Repeat buyers, those who joined Fiverr over a year ago, contributed to 58% of revenue and core marketplace, up from 55% in 2020. Our older cohorts continue to spend at elevated levels compared to pre-pandemic, and we continue to see recent cohorts in 2020 and 2021 perform better than a typical cohort in previous years.
Adjusted EBITDA for the quarter was $7.3 million, representing adjusted EBITDA margin of 9.8%, an improvement of 180 basis points over Q3 last year. We have continued to improve our operating leverage and our ability to generate consistent positive adjusted EBITDA while growing our top line at a significant pace, which demonstrates the strength of our business model. We made two important acquisitions in Q4, CreativeLive and Stoke Talent. Post-transaction, they will not have a material impact to our P&L in Q4, but they are highly strategic for us as we march towards our long-term vision of the future of work. With CreativeLive, we expect to expand our e-learning offerings to our community. We are also planning to lean more into professional training to strengthen our value proposition with upmarket buyers.
Stoke Talent is a young and fast-growing company that provides best-in-class freelancer management software for medium to large businesses. We believe Stoke's platform-agnostic approach will enable us to capture freelancer spend outside of Fiverr, the vast majority of which is still offline. It also supports Fiverr upmarket initiatives as we look to strengthen our integration with corporate workflow. Dozens of customers are already on Stoke platform with average annual freelancing spend of over $100,000 per customer. Post-acquisition, we expect to significantly accelerate the pace of customer acquisition on the Stoke platform, as well as continuing to optimize the onboarding process to increase freelancing spend from existing customers. Now on to guidance. For Q4, we expect revenue to be $74.5 million-$77.5 million and Adjusted EBITDA to be $5.5 million-$7 million.
We are encouraged by the recent trend in our marketplace as the hyper seasonality is in the past 2 months. Micha mentioned, it is too early to say that the COVID impact is completely behind us. It will take a few additional quarters for us to unwind the COVID impact, and the macro conditions remain highly volatile. For the full year 2021, we now expect revenue to be $292.4 million-$295.4 million. At midpoint, this represent revenue year-over-year and 174% on a two-year basis.
Adjusted EBITDA is expected to be $19.5 million-$21 million, which at midpoint represents 210 basis points year-over-year improvement and a positive swing of 23.7 percentage points. Constantly growing our business at a significant pace and rapidly increasing our market share highlights the strength of our business model and our ability to execute. We expect to continue doing that for many years ahead. With that, we now turn the call over to the operator for questions.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. Alternatively, if you joined us through web, please click the Request to Speak flag icon. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. Please note you'll wait a couple seconds for all attendees to register the question. Our first question comes from Nick Jonas from Citi. Please go ahead, Nick.
Great. Thanks for taking the questions. I guess two around the acquisitions. One, can you touch on, you know, what the impact of Q4 guide is from the acquisitions this quarter, just so we can try to tease out kind of what's organic and what's additive from CreativeLive and Stoke Talent? Then the second question maybe taking a step back. Stoke Talent in terms of kind of your strategy to go more upmarket. Does this go further than kind of the larger SMB that you kind of were focused on? Can Stoke Talent start to attract enterprise clients that, you know, maybe like Fortune 500 type clients? Thanks.
Hey, Nick. On the first part of the question on the fourth quarter guide, you shouldn't assume any impact, not on the top line or on the bottom line. The two companies are considerably small, and the overall revenue and expenses are not material to where we are today. As for your second part of the question about Stoke Talent. Essentially, as we said in the opening remarks, Stoke Talent is mostly serving customers who are spending over $100,000 a year on their freelancing engagement, which if you compare that to the average spend per buyer on Fiverr, you understand that there's a massive gap.
This is definitely serving as a way for us to engage with much larger types of customers. Those types of customers oftentimes bring their existing freelancers into those platforms, but over time, they need access to additional freelancers, which we can serve through our marketplace, and thus be able to serve that specific work. This works very well with the Fiverr Business as well. We definitely think that this is extremely strategic. It's a young company. It's just starting. The pace of growth is very nice. We're very excited about this.
Great. Thanks for taking the questions.
Thank you.
Our next question comes from Doug Anmuth from J.P. Morgan. Please go ahead, Doug.
Great. Thanks for taking the questions. Hope you guys are doing well. Maybe first just on take rate, you know, 140 basis points of increase year-over-year. Ofer, I know you mentioned basically a third of that, sounds like it's coming from the increase in services. But can you help us understand, you know, kind of the other 100 basis points plus across Promoted Gigs and Seller Plus and ClearVoice, some of the other things you mentioned there? And then also how you think about, where take rate can go over time. And then also just, you know, I know, hyper seasonality, you kind of talked about getting through, perhaps the worst of it, you know, and things getting better.
Just, you know, I know you're not guiding to 2022, but as you look toward next year, you know, just curious to get your early thoughts around just, you know, whether seasonality you think kind of returns to a more normal type of position there? Thanks.
On the first part of the question, yes, I think this is, you know, the answer I'm gonna give is part of the increase we did on the services. The rest is relying on the other services we are promoting, which have a higher take rate. You know, one good example is the Promoted Gig. Second example is the Seller Plus that we initiate two or three quarters ago. This time, whether it's on the supply side or on the demand side, is indeed increasing the take rate. As these services are becoming more popular and adapted by the audience, we anticipate the take rate will increase for the time being.
That you know, again, consistent with what we've seen, you know, since we went public, take rate is growing moderately quarter-over-quarter. We anticipate this is the case for the next few quarters and that regarding the hyper seasonality. Essentially, you know, we've been talking about this since previous quarter. Hyper seasonality started in the second half of May. I think that the worst point of it was July, and it stabilized in August with a moderate improvement in September and October. This is what we're seeing, okay? Our point is that it's too early to say that the COVID impact is behind us, and hyper seasonality is over. I mean, the upcoming holiday season could be a little different this year.
Many people didn't get to visit their families last year. I think we've seen from reports of travel and airlines that this is going to be slightly increased this year. We think that the unwinding of COVID will continue throughout the next few quarters. The good news for us is that the business fundamentals are very strong. You know, we have a huge TAM. The cohort behavior is better than it was, you know, pre-COVID.
All in all, what we're saying is we should be a little bit cautious about how we view the next few quarters because it's these are the stages, maybe in the unwinding of COVID, and some uncertainty should be built into it.
Okay. That's helpful. Maybe just one more to follow up. You mentioned CreativeLive, you know, obviously expands the e-learning capabilities. I'm just curious what other key investments you think you need to make in that direction as you lean into professional training more?
CreativeLive is really a way for us to take the program that we started with Fiverr Learn, fast-forward with adding thousands of high quality classes in both, you know, strong assets in product and content distribution. Really the idea behind this is, as we said, we want to provide opportunities for talented people to advance their careers and translate their learning and training into work achievements, right? The integration of CreativeLive with what we're doing is extremely important. As we think about, you know, working and getting into new verticals, the ability to create training programs that will allow professionals to get into those verticals, we think is critical in the evolution.
This allows us to really create this 360 ecosystem that takes care of many different aspects. I think that, you know, having the CreativeLive, the talented team that built this product over the years is an extremely important asset for us in this strategy.
Great. Thank you both.
Our next question comes from Jason Helfstein from Oppenheimer. Please go ahead, Jason.
Hey, thanks for taking the question. I guess, one, how are you thinking about the impact of the acquisitions or how should we think about it? I mean, clearly there's products behind that. These are product acquisitions, but how fast do you think you can kind of integrate them, and then we potentially see the impact on the business? Is that maybe more of a 2023 impact, or could we actually see some in 2022? You know, given there's a lot of discussion about employees kind of you know leaving tech jobs because of burnout, you know, are you seeing more of these people effectively laborers like joining your marketplace? Just how are you thinking about that over the next six to 12 months? Thanks.
Hey, Jason. Good morning. The impact of the acquisition, I think you're right. I think that the impact should be expected in 2023. It's obviously going to take a few quarters to do the integration. Definitely we shouldn't expect to have a very meaningful impact in the coming quarters. As to what we're seeing with employees leaving tech jobs. I think that in a sense what we're seeing, I mean, there is the great resignation, but people don't just resign. They need to assume new jobs. I think that this is more a rotation than just resignation. I think people, yeah, some people are burned out, some people are just rethinking their careers, and this is a good opportunity.
Some people, you know, rethink how they want to have work-life balance. We have been seeing a steady increase in freelancing in general. Yes, more people are engaging in freelancing. I think that this is not largely driven by this because this is more of a rotation. Because of that, you're seeing salary inflation and all of that because as people leave jobs, it creates a lot of demand for new talent, which creates opportunity for that talent to demand higher salaries. It's kind of a cycle that feeds itself. We're not sensing like a massive change. I think that most of the resignations are actually being reemployed by other tech companies. It's just a way to make a change.
Thank you.
Our next question comes from Bernie McTernan from Needham. Please go ahead, Bernie.
Oh, hey, it's actually Chris on for Bernie. How you doing this morning? Does Stoke have a sales force? Would that sales force, you know, as they look to sell into those businesses so doing over $100,000 in revenue, would that help your SMB business? Is that? Could there be an add-on effect there? Is that the right way to think about it?
Yes, Stoke does have a handful team of sales force that complement a partnership effort together with direct marketing and inbound. I think Stoke is, you know, a very early stage company. It grows really fast. Yet to be seen, it's too early to see how it will develop in the next few quarters. That the plan on the SMB business, and I think Micha mentioned it earlier, it will take some time to productize the synergy to combine between the Stoke and Fiverr Business, which is where we are heading.
Yeah. Just to comment on what Ofer said, the idea is to create a holistic solution for businesses, right? If businesses come to us and use Fiverr Business for their purposes, and they may have other freelancers that they have previous relationships with, the Stoke platform should serve these customers very well. This is a great channel in adding large customers into the Stoke product. A lot of Stoke's growth has been organic, and yes, in combination with sales efforts both inbound and outbound. Generally speaking, as Ofer said, it's a young company with just dozens of customers at this point.
You know, we're very happy to see that the growth is going extremely well, and we'll be happy to provide more details on that business in the upcoming quarters.
Thank you.
Our next question comes from Brad Erickson from RBC Capital Markets. Please go ahead, Brad.
Hi. Just a couple for me. First for Stoke, that you envision when you think about, you know, bringing an enterprise on board, and then, like you said, transitioning their offline freelancing activity to the online world. What does that look like? How hard is it? Is there a basic assumption when you sign up for Stoke that, you know, they wanna bring everything online, or is that not how it works?
Thanks for the question. As we always said, the majority of freelancing activity happens offline. It's about 95% of it is offline. Which means that it's mostly based on word of mouth and reference from people, right? When people are looking for talented freelancers to work with, they use their networks mostly to get in touch with them. Over time, businesses are building groups or cohorts of freelancers that the organization has used before, and they become a resource for the organization. What Stoke provides is a way to standardize that relationship.
Because there's so many, you know, difficult touch points in having this, you know, entire very diverse group of freelancers, agencies, studios, work with an organization, while keeping, you know, the same compliance level, and managing budgets and managing communication and so forth. Stoke really allows. The reality is that organizations over time need more and more talent to engage with. Sure, they can use their previous networks to try and source these freelancers. Or now, they can actually enjoy the fact that we have an amazing, one of the largest pools of talent in the world, and we can help them tap into that talent and work with that talent the way they love working with.
You know, at the end of the day, as we think about the future, there's going to be multiple ways to engage with freelancers. Fiverr wants to solve for all of them. We don't care how you know what's your preferred way of working with freelancers. We want to be able to provide a simple, intuitive, easy-to-use solution for that. The idea is that we're going to integrate all of these solutions into one ecosystem, and Stoke plays a great role in doing that. Bridging the offline to the online, you know, Stoke is just another incredible way for us to do so.
Obviously it's focusing on larger types of customers that have their own, you know, groups of freelancers that they have relationships with.
Times here this morning, you know, that we still may have a few quarters as we hopefully come out of COVID, which creates some uncertainty and caution. Can you just kinda help us reconcile why that would be? It seems like that'd be a good thing for Fiverr, particularly given that we don't have to worry about hyper-seasonality. It would seem, you know, just so maybe just a little more help there would be great.
Yeah. The you know, besides the hyper-seasonality, the fact that we are lapping a very strong growth of active buyer during the last few quarters, since the way we calculate active buyer is on a four-quarter basis of activity. What we anticipate in terms of modeling is that you know, we'll see some headwind in active buyer growth for the next three quarters. That's the kind of the main place where we anticipate the headwind as we look to the future.
That's great. Thanks.
Thanks.
Our next question comes from Rohit Kulkarni from MKM Partners. Please go ahead, Rohit.
Great. Thanks. Couple questions. One on marketing and any early signs of success from the brand marketing campaign that you could share. As part of marketing, as in a lot of internet companies are facing, you know, uncertainty with user acquisition, traffic acquisition and whatnot. As part of your buyer and traffic acquisition, are you seeing any of that, given the way you spend your marketing dollars? Then I have a follow-up.
Thanks for the question. Yes, we have launched a new brand. We're doing, you know, we're launching it multichannel, so the combination of TV, digital, out-of-home, and we're doing it multi-U.S., U.K., Australia, Germany. The signs that we're seeing from the campaign so far, and it was just launched, are extremely positive. We're very happy with it. As we always said, the strategy of combining brand marketing and performance marketing is key to what we're doing. In terms of what we're seeing as trends in buyer acquisitions, I think that the performance speaks for itself, meaning the TROI, the time to return on investment, hasn't been longer. It's about a quarter.
The lifetime value of our customers is increasing all the time. Essentially we're not just buying more cohorts of customers, but the customers that we acquire are actually spending more with us over time, and their contribution to the overall revenues of Fiverr is increasing and increasing pretty massively. I mean, when you look at high-value buyers, they're contributing 62% of our revenues, which is 500 basis points more than last year, which is a very significant efficiency of our marketing, both at the combination of brand and performance as we target higher lifetime value buyers, which we're very happy with.
Okay. Great. A follow-up on kind of the hyper seasonality and the kind of travel issues that you had cited back in August. As in, are you assuming any kind of change in behavior or kind of any change in linearity of typical Q4 as you get into the late kind of December period? Perhaps kind of there is going to be more travel this year than even 2019. I'm wondering if your guidance for Q4 assumes any change in how buyers or sellers might behave later in December.
Yeah. So again, I think that there's some level of course is that we are baking into the guidance. It is baked. My point about this was that we may see the upcoming holiday season a little different than previous years. I've explained it by saying that I think, you know, at least last year, a lot of people—like, if you take the U.S. as an example, the holiday season is a great opportunity for families to unite, right? Make a trip and spend time together. Last year this was impossible. I think this year it's probably gonna be slightly higher than previous years, and maybe the holiday season could be slightly longer than usual. I mean, people taking time off a little bit earlier than usual.
Again, I'm speculating, and what we wanna do is just to say that we may see some different behaviors. We have seen seasonality slightly different this year. I think it's not just us. Many businesses reported about this to the market. We just want to be cautious. All of what we're saying here and what we said is that the seasonality is more moderate. It's not, at this point, it's not hyper seasonality, at least in September, October. We believe that provides more color.
Yeah. Yeah, it definitely does. Thanks a lot.
The Q&A session has now concluded. I'm gonna hand back to the management team for any final remarks.
Thank you. Thank you, everyone, for spending your morning with us. Have a great day and we'll talk to you soon. Thank you.
This concludes today's call. Thank you for joining. You now can disconnect your lines.