Fiverr’s $FVRR Q4 2020 Earnings Recap

How was Fiverr’s Q4 2020 Earnings?

I thought Fiverr had a great Q4 earnings report. There was a lot to like as they continue to benefit from the gig economy and the secular trends in freelancer hiring.

Here’s the key stats:

  1. Q4 Revenue was up 89.4% to $55.9 M and finished the year at $189.5 M revenue a 77% increase (a huge acceleration from 2019 where they saw 41.9% revenue growth)
  2. Q4 Non-GAAP Gross margin continues to expand, increasing 310 bps to 83.9%
  3. Active buyers increased 45.5% which is 7 quarters in a row of YoY acceleration, even sequentially active buyers grew 10% which is huge
  4. Spend per buyer keeps going up, increasing 20.6% to $205 and a decent sequential improvement from $195 in Q3. This is what you want to see as more buyers flock to your platform.
  5. They continue to gain traction moving up-market, with clients with > $500 revenue now representing over 58% of core marketplace revenue. This definitely explains why spend per buyer keeps increasing.
  6. There are now over 500 categories that Fiverr provides services in which enables them to capture both head and tail service queries
  7. Their take rate has increased by 40 bps YoY which means as gross merchandise value increases, they take a bigger chunk of it
  8. Non-GAAP operating expenses now represent 76% of total revenue vs. 92% last year (huge operating leverage), which is a big improvement and increases overall operating margin to 8.3% vs. -11.3% last year
  9. Non-GAAP EPS for 2020 was $0.29 vs. -$0.59, a $0.88 swing to the positive

Their guidance for Q1 was very strong too. They guided for $63-65 M in Q1 which is an 84-90% increase YoY and they guided for $284 M in FY 2021, a 50% increase YoY. This is impressive guidance since they generally outperform the high end of their guidance by 4-6%, so 100% YoY in Q1 revenue is definitely possible and $300 M for FY 2021 is definitely doable which would be a 58% YoY increase in revenue despite tough comparisons in the back half of 2021!

Here are some key takeaways and highlights from the conference call:

  1. Freelancer hiring budgets increased 56% in 2020 vs. 2019 and this is only getting bigger for smaller businesses with fewer than 10 employees. So some strong secular trends.
  2. They’re innovating their product to include Project milestones which helps increase the ticket size and duration by 10x and 4x respectively! They also enabled subscriptions which could be huge for Fiverr’s business model and make revenue even more sticky and predictable.
  3. Their international expansion continues to go well with their recent TV campaigns in Germany, Australia and UK resulting in increased buyers on the platform. They are also increasing their localization efforts which will help with international SEO.
  4. There was a question on promoted gigs, and management said: 

Thanks so much, Ron. Good morning. So, as for Promoted Gigs, to complement to what Ofer said, the rate of opening up Promoted Gigs to all categories today has been faster than we anticipated. And that was same through the fact that what we’re seeing is we’re seeing high level of adoption, high level of retention of those who are using it, and high level of satisfaction from the customers that are actually buying through these ad placements.

Another quote:

But all-in-all, we’re very happy with it. It is generating money. It is increasing its contribution. But as Ofer said, in comparison to the overall activity on Fiverr, it’s still small, but we’re happy to see it grow and grow very, very well.

Since promoted gigs is basically 100% margin, that’s pretty great to hear that promoted 

gigs are getting more traction on their platform.

  1. Here was another question and answer that was very good to hear:

Q: And then Ofer, maybe on the spend per buyer that continues to grow nicely. And I know there’s a bunch of factors in there, but on average, is frequency contributing to the growth or is that you’re seeing kind of an uptick in kind of price when people are spending on a per project basis? Thanks.

A: In terms of contributing to growth, spend per buyer is based on frequency and ASP. And I’m happy to say that, both are contributing. We’ve seen tremendous improvement in those which I think is the balanced approach that we’ve been always pitching to. And as we look forward, we believe there’s tremendous opportunity to impact growth in terms of product and quality and target audience. As we go up market, and we have spoken about Fiverr Business earlier, we see that business buyer that use the product are using it more frequently. And we also see that the average ASP is higher. So that said, as we go up market, the growth which is based on spend per buyer model, actually return to improvement in both frequency and ASP.

Not sure what else to say other than this is VERY GOOD news. Their up-market business makes up 58% of their revenue and they are seeing more frequency and average selling price increases which continues to add to the flywheel effect of a strong two-sided marketplace.

  1. I had noted that Subscriptions was a new product innovation, and I found this comment very compelling: [Subscriptions], we haven’t published the exact percentage of categories in which this is relevant for, although that number is sizable.


When I wrote my Best 7 Stocks article earlier in the year, Fiverr was trading at $267.13 and had a TTM EV/S of 55.72 and a $9.4 B market cap. A little over a month later, Fiverr now is trading at $318.70, a near 20% increase. They are trading at a 59.6 TTM EV/S but their forward EV/S is just 40 and for a company guiding for 90% growth in Q1 and 50%+ growth in 2021, I think this isn’t absurd. I did write that valuation was a concern and I still think it may still be a headwind, but at the growth rate that Fiverr is going, it appears Fiverr can grow into it.

While I had forecasted $350/share by year end, I do think it’s reasonable to adjust that slightly to around $375/share by year end. That would be an increase of 17% from today’s share price and a 63% increase for the year. Quite frankly, given the investor enthusiasm for this company, it wouldn’t be out of the question to see $400+ a share by year end if they continue to outperform expectations and guidance.

In Summary

I noted in my Stock Market recap for this past week that I doubled my position in Fiverr after reviewing their earnings report (average cost basis of $311.10). I honestly don’t know what there is to not like about this earnings report and given my experience working at a two-sided marketplace, I’m definitely impressed.

One thing to note is that LinkedIn announced  a new service called Marketplaces to let their users find and book freelancers shortly after the Fiverr earnings report. I personally don’t think this is a big deal since Fiverr has other competitors already, such as Upwork, and who knows if LinkedIn’s new service will pick up a lot of traction.

The market often overreacts when a big name enters the arena, such as Match Group dropped 20% when Facebook announced a new dating feature a few years back and that obviously didn’t do much. Stitch Fix dropped a lot when Amazon announced Amazon Wardrobe and that didn’t do much either. So, I will just have to wait and see if LinkedIn’s new service will really be competitive and eat into Fiverr’s earnings.

Finally, as cliché as it sounds, Fiverr is firing on all cylinders and they continue to accelerate their business given the secular shifts in business hiring to more freelancer based jobs vs. full-time hire jobs. I’m not terribly surprised that this is happening, especially given COVID since it’s less risky for a business to bring on a bad freelancer vs. a bad full-time hire. Not to mention, a lot more cost-effective given additional payroll costs (employer’s share of social security and medicare) and benefits.

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