All right, we're gonna go ahead and get started. I'm Doug Anmuth, J.P. Morgan's internet analyst. We're pleased to have with us, Fiverr co-Founder and CEO, Micha Kaufman, and CFO, Ofer Katz. Fiverr's mission is to revolutionize how the world works together. The Fiverr platform connects small businesses and the Fortune 500 with skilled freelancers offering digital services in more than, I think we're close to 700 categories now.
That's right. Yeah.
such as programming, 3D design, digital marketing, content creation, video animation, architecture, lots of others. in the past 12 months, more than four million customers bought a wide range of services from freelancers working in more than 160 countries. Micha is a serial entrepreneur. He's founded and led several tech ventures, and he's been Fiverr's CEO since the beginning, about 13 years ago. Ofer has served as Fiverr's full-time CFO since 2017. consulting CFO to the company since 2011, and he was previously acting CFO at Wix. Thank you both for joining us.
Thanks for having us.
All right. Let's see. Micha, let's start where most tech conversations are starting right now, with AI. Companies and investors are sorting through the opportunities here, the areas of disruption. How do you think about the impact of generative AI on Fiverr?
First, you know, we've been involved in AI for many, many years. Actually, as a company, we launched several AI products within Fiverr in the spaces of voice and graphic design, and we're super excited about the recent developments. First of all, we're excited because AI is a step function in technology, just allows us to build a better product, and that's a huge plus. The second part of it is that it seems that everybody's winning because of AI. I mean, if you, if you look at professionals. We're a two-sided marketplace. We have supply and demand, or sellers and buyers, freelancers and businesses. Everyone can enjoy it.
I mean, our freelancers can use technology to work less hard and focus more time on their creativity, which also means that they can deliver faster output for their customers. Their customers receive a higher quality and faster products. It's a great plus. If anything, I think that this is just changing the nature of skills and professions. You know, I said that many times. I don't think that AI is going to replace human beings, but I think that human beings that are gonna master AI are going to replace professionals who don't. If anything, it's a shiny new tool. It's incredibly powerful, but everybody has access to it, which means that this is going to be the, you know...
Since everybody can use AI, that's gonna be the new baseline. If you wanna create something above the baseline, you're gonna need to either become a professional or hire a professional to do it.
Okay, great. You've talked recently about some of the tailwinds that AI is creating in the business. You know.
Yeah
... rolled out a lot of services and, you know, kind of categories, right, tied to AI. How fast is, you know, what are you seeing so far? I know it's only been a few months.
Yeah.
What are you seeing so far, and how do you think that will trend going forward?
Yeah. it's, you know, since it's been around for just a couple of months, it's very hard to call anything a trend.
Mm-hmm.
Fiverr is a horizontal solution. It's a marketplace with multiple verticals and categories. As you said, close to about 700 different categories. We've launched in a matter of three weeks, we've launched between 20 and 30 new categories that are dedicated to AI-related services, and these categories are booming. Searches for AI-related services has skyward rocketed for over 1,000%. Obviously the demand for these services is booming. It's great because Fiverr wants to be the place where you can always find those next professionals. You know, the professionals, the types of skills that were invented five minutes ago. You wanna be able to find them all on Fiverr. We've been seeing very high demand.
Just as an example, areas of data science, developers, software developers who specialize in integrating AI in ops, prompt engineers. You know, anything that has to do with AI is going up right now. That's a good.
Mm-hmm
... sign for us.
When you have a category like this that's growing so rapidly, how do you vet freelancers and ensure that buyers are receiving high-quality work?
Essentially, obviously, there's a rating and reputation system that is baked into our product. Once activity starts, when conversations start, when orders start, it's very easy to measure because we have so many signals within every transaction that allows us to understand the quality of that transaction. Beforehand, there's many ways of doing such. We have an automated vetting mechanism, and in some cases, we also have team specialists and domain experts that are actually looking into applicants or sellers that are coming into categories to ensure that their profile is intact. Some of it is by way of connecting their professional networks into Fiverr, so we can actually get access to information from there.
We have a multi-tier process of vetting and ensuring that we get top tier. In the case where we offer talent that is the top percentile of talent, like what we offer within Fiverr Business and Fiverr Enterprise, we have a whole vetting process that includes interviews and so forth.
Got it. Okay. All right. Just to wrap on this topic, just when you think back through Fiverr's history, have there been any similar points where, you know, maybe people have questioned kind of opportunity versus threat or technology shifts or where a vertical has grown so quickly?
Yeah, I think You know, The good thing about being horizontal is that you're not dependent on any specific category.
Mm-hmm.
We don't have any.
Concentration
Overconcentration on any category. Categories by nature are a moving object, right? If last year everything was about NFT and crypto, now nobody's talking about that. We've been able to take a great advantage at the time, and now it's something else, right? I think that this is one of the strength of being this everything store that can respond super quickly to any change in the market. The market is changing very rapidly. I mean, the fact that the skill market is changing is not a new thing. I mean, if you think about this historically, how many jobs survived between my, you know, grandfather's generation to my father's? My father's to my generation, my generation to my kids?
Very few, right? Now it's another step that is changing this, there's gonna be so many new skills, if some skills are gonna be obsolete, that's fine. I mean, it's. It always happen. You know, I understand why there is a lot of interest right now, maybe some of it is a little bit of panic, but it's just another phase in, you know, in technology. It's a step function, step functions happened before with big data and with IoT and with smartphones and with the. Each one of them has been an opportunity for disruption. This is gonna be another wave as a company that knows how to ride those waves. We feel very confident of being able to take advantage and enjoy.
Okay, great. All right, let's shift gears, talk about macro a little bit. I know another fun topic.
At least everybody's used to it. I mean.
That's true. That's true. I remember conversation at this conference a year ago.
Yeah
...right when it was kind of really early.
Yeah
...in kind of seeing some of those impacts. In any case, you know, Fiverr's actually stood out, right, in the work economy space, I think, you know, having kind of a more stable environment, let's say, you know, over the last several months versus some platforms kind of seeing further softness. What do you think is driving some of that relative outperformance?
I think that this, I mean, we're experiencing a cycle right now. Within that cycle, I think that different segments in the market enters the cycle at some latency, and some will get out of it faster than others. Since Fiverr historically has been very concentrated in the small business side, we're super sensitive to macro.
Mm-hmm.
Being such, we felt macro ahead of everybody else because it's. I mean, small businesses are very similar to consumers, so you feel it very, very quickly. What I think you're seeing now is more companies that are from the SaaS space or enterprise space, bigger ships takes longer to turn. You know, they feel macro slightly slower. They have committees to decide that they wanna cut back on expenses, blah, blah. Smaller businesses don't have that. They just see the wrong headline in the newspaper, and they're done. They're just. They're playing defense instead of offense. We've seen the cycle slightly earlier, I think, than other businesses, maybe similar to consumer businesses. I think that on the flip side, I think we're gonna be one of the first companies to actually see the rebound.
Mm-hmm
...from this cycle, which we've seen before in other cycles.
That's probably the reason why there's a little bit of an offset between different segments of the market.
Do you feel like you're seeing any of those, I mean, are there parts that are improving, do you believe, like, from a geographic perspective or anything?
unfortunately, not really. It's more of a steady state-
Mm-hmm.
since, probably Q4, meaning that it's not becoming worse, and it's maybe a little bit less all around the place. A little bit less hectic, you know, going up or down.
Yep.
It's more normalized, more stabilized.
Mm-hmm.
It's still we're not sensing a recovery, and that goes pretty much global. And by the way, different regions of the world have their own issues, right?
Mm-hmm.
I mean, EU is... has its own issues versus the States or other parts. Largely what we're seeing from a, from a business standpoint is that businesses right now are more in maintenance mode than in growth mode. They're not doubling down, which means that they're not sensing that the market is about to recover.
Mm-hmm.
yet. we'll be happy to call-
Yeah.
trends that tells otherwise, but this is the case right now.
Got it. Okay. Ofer maybe, I mean, You're guiding a 5% to 8% revenue growth this year, with some acceleration in the back half. The assumption there on macro is steady state from here, basically?
We didn't factor any change in macro. It's the kind of nature of what we see, which is flat active buyer throughout the year.
Mm-hmm.
A growth in spend per buyer, which is based on investments we're doing. The end of some lapping in terms of spend behavior over the last few quarters.
Got it. Okay. All right. Okay, that's a good kind of shift into talking about active buyers and spend per buyer. I guess Last year you saw moderating growth in active buyers. You kind of just said flattish, you know, this year. You know, you had some churn last year associated with the COVID cohorts. You know, where are you in terms of that cohort stabilizing and having new buyer growth kind of coming into the business?
Yeah. In terms of cohort behavior, cohorts are stable. This goes to old cohort and new cohort, and give us a lot of confidence as we look forward in terms of the loyalty of our buyer base and ability to acquire a new cohort that behave pretty much similar to the old one. You know, in terms of the top of funnel, due to the softness in the appetite of SMB to invest in their growth, we have accommodate our investment to match the level of intent and the performance marketing environment, which is why the active buyer has flattened.
As we don't anticipate, at least in terms of modeling, any change of this environment, we think that active buyer on, as we look forward, will be flattened.
Okay. Is there any, I guess when you look across kind of cohorts from smaller businesses to larger enterprises, and I know, of course, the business is overall much more, you know, skewed to smaller businesses, but any bifurcation in trends or behavior that you're seeing?
Not specific, worth noting. I think that, you know, we are focused on high value buyer.
Mm-hmm.
-bigger organization. I think that the softness is across the board. slightly more aggressive on the SMB on the bigger organization. The retention is better, and this is why we are focused on those type of organization. All in all, wouldn't note any specific or gap between the two type of audience.
Mm-hmm. Okay. You've talked about spend per buyer growth kind of gradually improving in the back half of this year.
Yeah.
I guess how much of that is comp dynamic, right? Just the easing versus more organic improvement.
I think As I mentioned earlier, during the last few quarters, we've seen SMB reducing the spend. This has been partly compensated by the investment we are doing in growing up market in terms of product release and focus on high value buyer. Now that this period is lapping, we anticipate spend per buyer to go back to what we call normal growth, which is approximately $5 per quarter. Again, this is driven, now that the baseline is flat, this is driven both by the investment we are doing in product and quality, but also in terms of focus on high value buyer and the acquisition channel.
let's talk about Fiverr Business a little bit. I know it's early, but also a major initiative, right? As you've talked about. Overall, how would you gauge your progress so far on Fiverr Business?
We're very happy with it. It's growing extremely well. It is, you know, outgrowing in its pace the growth of the market base.
Mm-hmm
...which is a great sign. It's a product where we're investing a lot in understanding the life cycle of a customer and being able to identify and segment the right customers. Identifying them as they land on Fiverr, making sure that we can move them into the right solutions as fast as possible. What we've demonstrated is that by moving them to Fiverr Business, we're able to extract multiple times their investment and multiple times their lifetime value as a customer. We continue developing this product.
We've been some features we've announced, some we just released, and are working extremely well because it's not just the ability to match, you know, larger customers with the right talent. It's being able to tackle more complex projects. It's introduction of solutions like Project Partner, which is allowing our customers to actually outsource entire projects into our platform. It's aspects of the product that has to do with the way they, you know, these large companies pay or get invoiced. It has to do with team collaboration, and so there's, from that perspective, that really allows us to get into a much different segment of the market, which Ofer mentioned has a better retention, has a much higher lifetime value that we can engage with in many more categories.
What we're learning to do is not just identifying them and moving them into the product, but making sure that their success is being maximized. If we start engaging with the customer through a small team, extending from that team to a department, from that department to multiple departments, and eventually becoming their tool of choice for managing their entire freelancing, you know, talent base, is what we're offering. It's a suite of solutions, and I think that, you know, what we're doing now is essential to be able to cater for all of these needs. What we see from the progress of adoption and new customers that are joining that type of engagement is. I mean, we're super happy with it. Still early days for that, and it's a very different mentality for us.
It's more like moving from a B2C to a B2B-
Mm-hmm
...kind of thing. The team is doing a great job and it's progressing. I mean, we're very happy with the progress right now.
You talked about kind of identifying, being able to, like, pull out kind of existing customers, right? Existing buyers.
Mm-hmm
...right, who are actually really enterprise business, right? Buyers and moving them. What other changes are there in terms of, like, go-to-market strategy or sales, you know, to go into the bigger businesses?
The vast majority of the funnel is driven by the existing go-to-market strategy. We don't plan to change it anytime soon. I think as Micha said, the challenge is to segmentize this funnel into the appropriate product and as early as we can. Starting with the landing experience, it goes all the way to identifying existing customer and route them through or offer them to move to a more advanced offering. I think that this is where we are focused. It goes to product, it goes to customer success, and being able to communicate with this audience while transforming to the new service. I think this is where the majority of the investment is being.
Got it. Okay. Maybe talk about, take rate a little bit. Take rate in 1Q, you're over 30% for the third straight quarter. I think it's up about 400 basis points over the past four years. Maybe if you can talk about some of the drivers here and how you think this can go going forward.
I think, you know, take rate is being a question since we went public. Happily, as we go off market, we also increase take rate. take rate is based on two different component. One is transactional, which stands for approximately 25.5% on all categories, all transaction. We have additional layer of value-added services, both on the buyer and the seller side. Part of that is Promoted Gigs. Other part is Seller Plus. We do have some subscription on the buyer side. All in all, this stands for the additional layer. As times goes and we introduce new services and been able to monetize against, take rate is going up.
We feel the take rate is sustainable, and as we further adopt more product and add Promoted Gigs, Seller Plus and other services that have been introduced a while ago are being well deployed, we see some potential for upside.
Okay. Anything you can add there just in terms of how you think about penetration of Promoted Gigs or, you know, growth in that business?
Has been growing very nice. I mean, we're even a little bit ahead of what we thought it would be at this point, which is good. It still have room to grow into both in terms of the number of customers that are actually taking advantage of it, but also the space in which we can promote those services.
Mm-hmm.
Definitely space to grow into. When we released it, we said it's not gonna be overnight. It's a full product with a complete bidding system and an ROI system. It, we said that it's gonna take time to prove itself. In the size of, you know, the size of course, that are using it and are sticking with it, are loving it and continuing to use it is, I mean, is surprising even for us.
Mm-hmm.
There's room to grow. This is definitely one of these tools that we're very happy and have a great contribution. Seller Plus is another one which is doing extremely well. It also allows us to identify, you know, sellers that are highly engaged and wanting to actually make a living.
Mm-hmm
... out of the platform and providing them with the tools to do so. These are just two examples of great tools that could continue evolve and continue grow and have a even a higher penetration. continue to contribute to potentially higher take rate over time.
Okay, great. I think we have a mic in the back. If there are any questions, feel free to raise your hand. We'll get a mic around. In the meantime, while that's circulating, let's hit on margins and profitability. You have a long-term EBITDA margin target of 25%. Despite the slower top line that we're seeing, you know, given macro, you're continuing to improve that margin trajectory, and essentially doubling EBITDA margin this year into the mid-teens. Can you just walk us through the major margin levers this year and how you've built that discipline into the company?
You wanna talk about this?
You know, we've been asked earlier, about, you know, whether we would act differently if we would have been a private company. We've been a private company for some time. I think the level of discipline we have within the organization, across the team, across countries, is as much as I can imagine. It gives us a lot of confidence as to the effectiveness of everything we do and the measurement of every investment we're making. EBITDA for us is not an, you know, a nice thing to have.
Mm-hmm.
You know, we have committed to become profitable, we are lucky to become profitable ahead of time. We are doubling EBITDA this year, first because the business is scaling to a level of point where we make $0.01 on each transaction, so that everything that we do is measurable against its ROI. We're not buying growth just to grow faster. We are growing with a healthy unit economy. I think that, as we look forward, we do know how to double down and increase this EBITDA margin, as we scale further.
Whether it's high growth period as we experienced in the past or whether it's a more challenging period, I think, within those two different business scenario, we have the ability, the proven ability to improve EBITDA, and I think that's the plan for the next few quarters.
Okay, great. Just a quick question on the artificial intelligence freelancers. Can you give us some sense as to how that's beginning to unfold in terms of your ability to get good workers on your platform? What is the interest of the customers in those workers? Over what timeframe do you think it would take for it to become a meaningful growth driver to the company?
Sure. as we mentioned before, we, you know, as soon as ChatGPT came out in mid-December, by mid-January, we already had about 20 new categories in our catalog that are devoted to AI services. Obviously, we've seen peak interest in searches within our marketplace, and we've seen a very nice increase in demand for those services. We definitely see... I mean, this... it's a little bit of a hype right now, right? Everybody's talking about this, but nobody really know where this is going to land and what the regulatory environment is going to be like. You know, while everybody's super excited about this, there's still an understanding that a lot of it is just misunderstood or not understood enough. There's a lot of inaccuracy in AI. There's...
I mean, it's not exactly production ready, but it's definitely exciting because it sparks the imagination in terms of what can be done with it. I think one of the things that are very unique to Fiverr is the fact that the type of talent that we have on the platform are the extreme version of early adopters. They've been playing with AI for two years. They didn't wait for December for ChatGPT to be out. They've been playing with tech that only geeks had access to. They've been toying with this, and they've been, you know, they've been in the forefront of everything. While this new technology comes out and it's available, to really be able to extract the most out of it, you need to know the tech.
You need to learn it, you need to master it. It's much like, I mean, everybody in this room can get a license to Adobe Photoshop, but that doesn't make us graphic designers, right? It's the same about AI. I mean, sure, you can ask it to do something, but this is not gonna, you know, result with breathtaking results. To get those amazing results that all of us are seeing out there, these are experts. These are people that have. I mean, sometimes you see commercials that have done with technologies like Stable Diffusion. It's incredible. This is not one person saying, "Make me an ad for." No, these are tens of people that are experts in getting the most out of this tech. Since it's not us, we need access to these people.
You can find those people on Fiverr. That's our job, right? That combination, that cooperation between human beings and machine, this is, this is the power. These people are coming to us because they're a part of our community. They're the early adopters, that's the purpose. The purpose is that Fiverr is going to be the place where you can find that talent always, even if that talent was invented three weeks ago.
All right. We're gonna wrap up quick. Word association.
All right.
All right? Whatever comes to your mind.
Whatever you ask, I'm gonna say AI, so.
Fiverr brand.
Powerful.
Macro.
Stable.
Europe.
Mess.
ake rate.
High.
AI.
Optimism.
Cohorts.
Strong.
SMBs.
Resilient.
Enterprise.
Not now.
Margins.
Improving.
Last one, freelancing.
Opportunity.
Incredible. All right, cool. Leave it there. Thank you.
Take care, everyone.