Good morning and welcome to the Fiverr Second Quarter Fiscal 2021 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Maya Tracey.
Please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the Q2 ended June 30, 2021. Joining me on the call today are Mitra Kaufman, Founder and CEO and Ofer Katz, President and CFO. Before we start, I would 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 Fibre 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 Fibre'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. And now, I will turn the call over to Nikka.
Good morning, everyone, and thank you for joining us on the call today. With strong execution and continued growth momentum, we finished the 2nd quarter with 60% year over year revenue growth above the top end of our guidance. When we consider the past comp as we start to lap our previous fiscal growth rate of over 80%, This is an especially impressive result.
Looking at
the last 2 years, we have effectively doubled our active buyer base, tripled our revenue base and achieved a nearly 30% positive swing in EBITDA margin. We grew significantly faster than our competitors and rapidly expanded our market share in the freelancing economy. Fiber is leading the changes in how the world works together and setting the industry standards with our disruptive and first of its kind business model. COVID has created some unprecedented growth spikes for our business in the past year. Like many of the companies which reported their Q2 in Last 2 weeks, we also see a new post COVID effect.
Most of the world has been confined to home for the past 18 months. When COVID restrictions were lifted in the U. S. And Europe around the second half of May, people were in desperate need to get out of home and have some off screen time. Coinciding with the summer and school holidays, people are taking vacations, which is a really healthy thing to do.
And that translates to less time spent online. To be prudent, we are guidance for fiscal year 2021 based on these incremental trends over the past few weeks. I would like to highlight Our fundamentals continue to be very strong, far stronger than pre pandemic. The reduced online activity translates into more modest new customer cohorts and less activity from those who are taking vacations.
All that said, None of
this changes the underlying strength of our business, our long term outlook and the massive market opportunity that's ahead of us. Our cohorts continue to spend much elevated levels compared to pre pandemic. We continue to drive majority of our revenue from repeat buyers and majority of our new buyers from organic channels. Spend per buyer continues to grow rapidly as we go up market. Buyers continue to buy large ticket size services through products such as milestones and subscription.
We continue to be highly efficient in acquiring new buyers. And lastly, our take rate grew nicely from 27.2% last quarter to 27.8% this quarter, serving as a testament to the massive value we generate for our buyers and sellers. Against the backdrop of the increasing demand for skilled talent, Over most work and continued investment in digital channels, businesses are increasingly turning to Fiverr to access digital service providers. Driven by accelerated pace of investment and innovation, Fiverr maintains its position as a powerhouse that enables more buyers and sellers participate in the digital service economy and allow them to do more on fiber with greater convenience and efficiency. During this quarter, we made exciting progress towards our upmarket strategy.
Fiber business was launched just 3 quarters ago and even with limited exposure already represents 5% of core marketplace business growing faster than our overall market base. This product is still in its early cycle to become a mature solution for larger businesses. Early data indicates as buyers significantly increase their end with us after joining Fiverr Business. The white glove service we provide reduces the friction in last mile conversion, allowing our buyers to execute their projects on Fiverr with peace of mind. Combined with collaboration and project management we see improvement in overall engagement and spend.
We signed 2 important partnerships this quarter with Salesforce and Wix. The partnership allows the customers of these companies to have a streamlined experience in accessing qualified talent on the fiber platform. With dedicated training programs to prepare and qualify sellers with the desired skills, we will enable a one click order for corporate buyers. At the same time, ensuring a smooth onboarding experience and a high quality service delivery. While these partnerships currently focus on seller candidates from the disabled community, they serve as pilots for additional corporate partners and a broader seller audience.
Another area that I'm super excited about is the seller services. We are increasingly establishing our platform to be more than just a place to transact, but also an ecosystem that allows talent to grow their business. Following Fiber Learn and Promoted Dig, we launched Seller Plus in Q2 is the latest addition to this family of products. Seller Plus is a subscription based loyalty program that provides The subscribers including advanced analytics dashboard, the ability to send coupons, access to dedicated success manager and so on. So now we have Fiverr learn to help a seller improve their skills and deliver better services to our buyers.
Added to that, we have promoted GIGS to bring our sellers more traffic and exposure. And now Seller Plus equips our sellers with data and tools, convert better, retain their clients better and become more sophisticated participants of our marketplace altogether. Initial feedback from our seller community has been extremely positive. We plan to further expand benefits in the program and to make it a no brainer for any quality and motivated Fiverr sellers. We are also making continued progress in expanding Promoted Gigs.
During the quarter, we reached an important milestone by achieving quarterly ad revenue and promoted gigs of $1,000,000 While this is still small compared to our overall revenue, the potential is significant. In the coming quarter, we will continue to grow the coverage of Promoted Bigs on the market space and continue to explore and innovate new ad In conclusion, I am super proud of our team for the relentless focus and ability to navigate through the post pandemic will share a few Q2 highlights as well as some color for the rest of the year. Ofer?
Thank you, Micha, and good morning, everyone. Our Q2 results show continued strong growth across all of our metrics as we continue to expand our market share and drive the transformation of how the world works together. Revenues for Q2 were 75,300,000 Up 60% year over year, driven by a 43% growth on active buyer, 23% growth on center buyer and 80 basis point expansion on PayTree. We continue to move up market with high value buyers now representing over 61 As Micha mentioned, we saw some near term fluctuations in our marketplace that are consistent with the broader post COVID trends. As COVID restrictions were largely lifted in the U.
S. And Europe, where the majority of Fiverr's revenue is coming from, people are taking time off, visiting families and having a break for work after the extended period of lockdown. The seasonality in the second half of this year was We provided guidance in May. However, we didn't have the visibility to the unprecedented nature of post pandemic hyper seasonality. Based on the incremental trend we saw since the second half of May, we are adjusting our full year guidance.
For full year 2021, We now expect revenues to be in the range of $280,000,000 to $288,000,000 representing year over year growth rate of 48% to 52%. At the low end, we expect the hyper seasonality to continue for the remainder of the year. On the high end, we expect the end of demand for personal travel to ease in Q4 as summer is coming to an end. Full year adjusted EBITDA is expected to be in the range of $12,000,000 to $14,000,000 representing an adjusted EBITDA margin of 4.6% to 3 points. We have ramped up our hiring based on the tremendous growth of 2020 and expected growth going forward.
We continue to believe that these investments are critical for us to drive long term growth initiatives and the reduction in leverage is short term by nature. For Q3, we expect revenue to be $68,000,000 to $72,000,000 and EBITDA to be $2,500,000 to 3,500,000 In light of recent post COVID trends, we expect Q3 revenues to be slightly down from Q2. All that said, we are well positioned to stay resilient through this period of volatility and uncertainty. 1, We operate a horizontal marketplace and our revenue is well diversified across over 500 categories. When stay at home orders were in place, categories related to e commerce and gaming performed really well, such as drop shipping and graphic for streamers.
Now as the world reopens and we meant for hiring and travel surges, We are seeing strength in categories such as resume writing and Airbnb listening. 2nd, Majority of our revenue came from existing Cohort and those buyers continue to stay engaged in our marketplace for a very long time. In Q2, while spend from repeat buyers modestly came down from peak level, we remain massively elevated compared to pre profit levels. And our highly sophisticated SEO SEM engine continues to be a key competitive advantage. The continuous channel diversification and automation of our marketing technology allowed us to stay disciplined in Q2.
The ROI for the quarter was 1x, and we continue to return our performance marketing investment in the last 3 months. We expect that when post COVID seasonality winds down, the fact that we don't have a sales force and long sales cycle will allow us to quickly pick up In summary, we had an amazing Q2 and the fundamentals of the business are stronger than ever. We as management are committed to stay transparent and forthcoming. We remain heads down focused on continued execution, innovation to empower our community of buyers and sellers and to drive long term sustainable growth of our business. 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. And the first question will be from Brad Erickson with RBC. Please go ahead.
Hey, thanks guys. Good morning. So a couple of questions. I guess, first, you mentioned the change in buyer behavior in the past Few months here, just curious to learn a little bit more there. I guess, when you think about things like traffic and Conversion and any of the inputs that drive your funnel of demand, I mean, I guess, did you see all of those things sort of generally slow down at The same commensurate rate versus revenue.
And I guess also wondering if you've seen freelancers making themselves sort of less available in light of the labor shortages and do you think that Also had any effect on the slowdown you're seeing? And then I have a follow-up.
Hey, Fred. Good morning. Thanks for the question. So what we're seeing
is this.
The existing fundamentals and cohorts are very strong. When we look at our older cohorts, those of 2018 and box, spend levels are 15% higher in 2020 and they expand further into Q1 2021 through May and they came down slightly still massively above pre pandemic levels. And if we look at 2019 2020 cohorts, 10% to 20% better than fiscal cohorts in its 1st 2 years. These are big cohorts and quality looks strong so far. When we look at 2021, we expect smaller cohort size in H2.
The efficiency and the quality has remained, but the quantity is slightly smaller. Now What we're seeing is mostly in the top of the funnel of the traffic. Now it should be said Seasonality was expected. It was factored when we provided guidance last quarter. But what we are seeing is what we call hyper seasonality.
That is a result of the long lockdown, online fatigue, summertime, school holidays, People just need time out of home now more than ever. And so when we look at the guidance that we provide, we The hyper seasonality will continue throughout the rest of the year. And this is just given the unprecedented nature of COVID. We don't know how long this is going to last. Hence, guiding the way we have is the prudent thing to do.
We know that this is unusual level of seasonality and it would end at some point. So to your specific question, We are seeing it mostly on the top of the funnel. The existing activity remains very high. Yes, More people you've asked about on both sides of the market, people are indicating On both sides of the market, if people are indicating that they're taking more time off, the answer is absolutely yes. We have a way to measure within our studies, our research team, time that people mark as out of the office.
And this is now increasing. Now again, we know it's temporary. People have been locked for almost 18 months. They spend tremendous amount online. They just need to go out.
It's going to end I don't know if it's going to end at the end of the summer or if it's going to last throughout the entire second half of the year, our assumption to be prudent is that this is going to last Throughout the second half of the year. I think that this is the right thing to guide it.
Got it. That's helpful. And I guess, yes, generally squares with the Q4 guidance. I guess second question I'd have is, What have you seen in parts of the world that have gone back down back into lockdown? And I guess Have any of those geographies maybe seen a smaller amount of reversion since the business turned a couple of months ago?
Thanks.
Thank you. So this is really interesting. I think this is the unprecedented nature of this pandemic. And we're seeing this. I mean, You look at Israel, Israel was ahead of the curve in everything.
In the beginning, maybe not, but then high degree of cases, then the highest
degree of vaccination. And we
were one of the Highest degree of vaccinations and we were one of the first to relapse or dismiss all the restrictions of lockdown. Now we've seen the delta variant coming in. We're starting to give the 3rd vaccination and there's talks about Lockdown during September, which is the holiday time in Israel. So we're definitely not done with this. We shouldn't even call it post pandemic.
The pandemic is not over. So one interesting case is what happened in July in Australia. So two factors for Australia. 1 is the fact that there is full lockdown since July. The second thing is it's winter.
And what we're seeing there is we're seeing amazing It's as if there wasn't any change from the height of the pandemic. So definitely, when you have very broad Either lifting of restrictions, definitely coinciding with summer because summer is a time when people can actually go out. If it were to be in the winter, we may have seen slightly different behavior. Right now, Australia is a good case to look at what happens when there's lockdown and there's winter. Activity there is very, very high.
That's great. Thank you.
And the next question will be from Ron Josey with JMP Securities. Please go ahead.
Great. Thanks for taking the call taking the question. Maybe, Mika, another question Just on the hyper seasonality, can you talk about maybe the size and scale of the projects that you're seeing on the platform from, call it, mid May to current? From from call it mid May to current. Wondering if maybe you're still seeing the number of projects is smaller in Gulp, as folks take more time off, which makes sense.
And then as a follow-up to that, maybe just talk about the freelancer base. Are you still seeing More freelancers joining from a supply perspective. And while we're talking supply, might as well talk to demand side. Any We understood the vacations and whatnot, but just talk a little bit more about where you're seeing like new active buyers and things along those lines. Thank you.
Good morning, Ron. Thanks so much for the question. So no, the number of projects, the smaller Projects in scope is not something that we see. As I said, what we're seeing is mostly top of funnel. Now if you look at the different Sizes of customers on the other hand, you see that the larger types of customers are less affected by this Hyper seasonality.
And again, this is common sense. If you think about it, if it's a larger organization and one of the team members is going on vacation, it's fine because the rest Are actually working. So they're less volatile. If you think about freelancers on the one hand or if you look at SMBs, they don't need to get Permission from anyone to go on vacation, just close shop and they can disappear for 3 or a month if they want to. So what we're seeing and this is one of the reasons why we spoke about Fiverr Business as an example and high value buyers.
Both are increasing very, very nicely. So you're seeing high value buyers getting to the level of 61%, right? And you see Fiverr business, even though it's a super young Product being scaling up very rapidly, which we're very happy with. So again, top of funnel, that's what we're seeing, slightly less activity, people spending slightly less time in front of screens And that is what's pushing it. It's not changing the mix.
This is what we call the fundamentals. The fundamentals are extremely strong. They're strong And Eberr.
I would just add Ron, if you look at the spend per buyer, which is another good indication for the amount Mani, our buyers are spending in the marketplace, it's actually grown by 23%. So that by all means what Micha said is go across all categories and countries. It's the top of the funnel that has been reduced, but the fundamentals in terms of activity and behavior It's the same and getting better as we go up market.
That's very helpful.
Yes. You had a question about the freelance base. So we're seeing a very steady stream of new freelancers coming in. However, again, When you look at the freelancing side, they also have been locked down for a long time and they also need some time off. And do remember that we're still within the stimulus package and this is going to last until, if I'm not mistaken, September 6.
So I think that people have also lack of very high motivation to necessarily go back or start their career. We're always seeing a very high stream of freelancers coming in. Nothing has changed in this This idea of people wanting more freedom of how they create their career. And remote work is also not changing. That concept is not reversing itself.
The ideas that were born during the pandemic We'll just accelerate. But we just need to get out of the hyper seasonality. And again, as I said, it's really impossible. Nobody has a crystal ball to understand how this is exactly going to play out. This is why we're being cautious.
Makes sense. Thanks, guys.
The next question will be from Doug Anmuth with JPMorgan. Please go ahead.
Thanks for taking the questions. Just to I think you explained all that fairly well. Just wanted to follow-up on one point there. Just curious on the top of the funnel, we've seen some other companies that have had some impacts from Google SEO changes. Just curious in particular if there's anything there that you're seeing?
And then maybe just secondly on Fiverr Business, up to 5% of core Replaced revenue, sounds like you're doing a lot of things there to remove friction. Obviously, you can get onboarding right. Just curious what other functionality and tools you're kind of thinking about there for Fiverr Business as you look to further enhance that product? Thanks.
Thank you, Doug, and good morning. I think you're right to point that Generally speaking, we've been listening to a lot of the earning calls in the past 2 weeks. And I think in general, Companies are talking about reduction in traffic. I think most of them are actually because of the hyper seasonality. Maybe some are because of SEO.
We haven't seen any change in organic or We've been preparing very, very well in advance for those changes and these changes haven't impacted us at all.
And Doug, if you go to the CROI chart, I think well demonstrated The resilience of the performance marketing environment where we kept the 3 months, TRY Despite the fact of lower traffic and slightly higher cost of acquisitions, We kept the lifetime value to tax as high and consistent to And I think that bear in mind lastly that we are increasing the investment In terms of marketing comparing previous calls, so all of those factors are well demonstrated In the TRY and the long term life from value to cash, which hasn't been changed with the reference to the Google SEO. On the fiber business, Yes, we are removing friction. I think that the more we have audience and buyers using the system, We get more and more data based upon we are building the next step. I think that we mentioned on our prepared remarks and the shareholders' letter that we reached the 1st milestone of 5% of the overall marketplace revenue from Fiverr Business, which is for us is a great achievement given The early days of the product, when we look Forward, we see more customer CSM involved QA and supply that give additional value, those are comment that we get from the thousands of buyers who are using the systems.
And we're also looking to what is called FMS, which is a financial management system. We plan to offer in the long term the ability of businesses to manage a different class of freelancers So that road map for the long term is pretty happy. We adjusted the early days, I think 3 quarters since we launched the product. We already have As said, thousands of buyers, it's a new buyers and buyers of the marketplace that are transforming themselves into the system Because of the value they see, their loyalty is higher, their spend per buyer is higher. So We are pretty excited about this project in the long term.
Okay, great. Thank you.
The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.
Hi, this is Patrick Joseph on for Jason. Thanks You just spoke about Fiverr Business helping the business diversify away from the slower SMB demand. Just curious to hear how your subscription products are helping diversify as well. And when do you see subscription products picking up to be material to growth?
Thanks for the question. So on subscriptions, They were launched in February of this year, currently operating in 152 categories, which is up from 25 categories in Q1. But we can some data that we can share on this is that 52% Transactions are buyer working with sellers for the first time, which is really great. It indicates that the March base have created the level Without even working for the first time together. And 20% about 20% of the subscriptions are for 6 months.
So we're now working on expanding this, the entire market base. And this is obviously the larger the customer, the larger their Projects and their commitment ability, the more they use it, so this is definitely one of the products We're super happy with and super relevant for fiber business customers.
Okay, thanks. Appreciate it.
Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Neha Kauffman for any closing remarks.
Thank you, everyone, for participating In the call today, I wish all of you a good rest of the day and we'll talk to you in the next quarter. Thank you.
And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.