Fiverr (FVRR) Q4 2020 Earnings Call Notes

Fiverr (FVRR) posted strong 2020 results. Summary below:

Fiverr 2020 financial highlights — Source: Fiverr Q4 2020 shareholder letter

Here are some outstanding points mentioned during Fiverr’s latest earnings call that would be useful for an investor (points made over the same topic are grouped together with a “/”):

Looking back, we have now delivered 7 straight quarters of accelerating revenue growth since Fiverr went public in June 2019. This speaks to the resilience of our business model, the consistent execution of our team as well as the tremendous opportunity in the freelancing space we operate in.
Revenue retention from buyers across all of our mature cohorts from 2018 and earlier increased significantly in 2020 as compared to 2019. They contributed more than just consistent streams of revenue, as they have done previously. Instead, spend level from these cohorts increased, on average, 15% in 2020 compared to 2019.
In 2020, we saw more buyers from these existing cohorts coming back to Fiverr, ordering more frequently and purchasing more expensive Gigs as their needs to strengthen their online presence intensified during the pandemic.
The 2019 cohort also showed strong revenue retention of over 70%, higher than a typical cohort from Year 1 to Year 2.
A study by Qualtrics shows that the impact of COVID-19 has driven small and medium businesses to increase their freelance hiring budget by 56%, and Fiverr was able to capture a meaningful share of that spend.
Looking ahead, the impact of COVID-19 should drive a long-term and sustainable tailwind for our business that lasts far beyond the pandemic itself. Businesses of all sizes across all industries are undergoing a paradigm shift as they adopt remote work and optimize workforce distribution.
2021 got off to an excellent start. We saw record level of traffic and buyer registration in January as the strong momentum of 2020 continued into the new year.
We hope you had a chance to see our first Super Bowl commercial a few weeks ago. The ad was viewed by nearly 100 million people on game day and has received extensive media coverage and continues to draw strong engagement on social media. We are extremely excited to bring the Fiverr brand to the forefront of the global stage, and we will continue investing in our brand throughout the rest of this year. / So on the Super Bowl, I think that as a company that said that we’re trying to build a household brand, the Super Bowl is a very important event. It’s definitely a “we have arrived” event in terms of brand marketing. (“According to a 2018 study published in Marketing Science, “the benefits from Super Bowl ads persist well into the year with increased sales during other sporting events.” – from https://medium.com/better-marketing/are-super-bowl-ads-worth-it-5841e4620e4f)
The strong momentum that we’ve seen so far and the continued strength of our cohorts gives us the confidence to provide strong full year 2021 guidance amid continued uncertainty of COVID-19.
We believe that the accelerated adoption of digital transformation and remote work will allow us to exit the pandemic stronger than before, and this is reflected in our 2021 revenue growth rate guidance of 46% to 50%, compared to our pre-pandemic 2019 revenue growth rate of 42%.
I’m also extremely excited about our road map ahead of us. We have many new initiatives, new products and new opportunities heading into the new year.
For the first time in the history of Fiverr, we expect to surpass $2 billion in freelance earnings delivered to our seller community. It is a great and fulfilling achievement for all of us at Fiverr. It is what continues to motivate us and drive us to do more, build better products and create more opportunities for our community.
Regarding our priorities for 2021, we are focused on continuing to execute on our strategic initiatives, that is, going upmarket, international expansion, and building more value-added products and services, as well as continuing to invest in our brand and marketing.
You can expect us to continue to expand our upmarket coverage on both demand and supply fronts.
On the demand front, we will focus on Fiverr Business and our integration with WordPress, continuing to roll out milestones and our subscription features. / Going upmarket continues to be a top priority across Fiverr, and Fiverr Business continues to evolve with additional product features and marketing investments. / We do think that the potential of shifting some of our more established, larger types of customers to Fiverr Business is still untapped. There’s a lot of potential there.
And on the supply front, we will focus on the continued improvement of our catalog infrastructure and the expansion of top creative talents through the acquisition of Working Not Working.
International expansion is another key priority for 2021. We will focus on deepening the penetration in existing markets by providing local buyers and sellers with a more culturally integrated experience, catalog and content. / We are also deepening our efforts around international expansion, with an expanding product team as well as a new linguist team to bring our local offerings to the next level.
And last but not least, Promoted Gigs continued to grow and expand nicely, and we will continue to grow additional value-added services for our sellers on the marketplace. / Lastly, Promoted Gigs are progressing really well. While still very small in terms of revenue contribution, it is growing at a strong pace. We are also exploring opportunities for additional advertising products on our marketplace. / Then in terms of Promoted Gigs, we actually just opened Promoted Gigs for more than 500 categories today. So up until recently, it was open to a certain number of categories. I think it was 60 categories until recently. Then we expanded the exposure into the entire set of categories. Yet to be said, it’s only on the first 4 rows. So that there is a lot of expansion ahead.
We are incubating additional projects to unlock the synergies with the acquisitions we made with SLT Consulting and Working Not Working. Leveraging Fiverr’s technology, we have the vision to build a platform that will allow Fiverr to be an indispensable resource for the marketing teams of large companies.
Our marketplace also continues to enjoy a healthy take rate of 27.1%, reflecting the excellent value we create on our platform and our ability to monetize our products and services. / We expect our take rate to continue to be strong and steady, with potential for modest upside as we continue to grow value-added services on the platform. / So the plan, our expectation to increase take rates modestly over time is based on the road map of product releases that we believe are chargeable and will contribute additional line of revenue. So behind that assumption, there is a full stack of products that we plan to launch over time, both on the buyer and the seller side, that we’ll be able to monetize against and create or increase take rate, modestly, as said.
With the significant growth of the scale of our marketplace, we achieved a key milestone of reaching positive adjusted EBITDA on a full year basis. The significant revenue growth in the past year, together with the continued efficiency in sales and marketing and discipline in operating expenses, is what enabled us to reach this important milestone 2 years ahead of our expectations.
We will continue to prioritize growth, and at the same time, we expect to make continued progress towards our long-term target model.
As Micha mentioned, we are very encouraged by the strong trends we see so far this year, both in terms of new buyer acquisition as well as strong cohort behavior for our existing cohorts. Our cohort behavior gives us excellent visibility into 2021 and speaks to the underlying strength of our model.
As we lap the COVID-19 impact in the second quarter, we expect both active buyers and spend per buyer to become more normalized.
The resilience and visibility of our business model forms a strong foundation that allows us to aggressively invest in many longer-term initiatives.
We always guide based on what we know. We do not factor wishful thinking or a new business model that we don’t feel comfortable and have enough data to support guidance. Having said that, new features or recently initiated features are not included in the guidance. We base guidance based on cohort behavior over the long term.
We also feel that the new cohort that we were able to acquire into 2021 is stronger in terms of spend, in terms of frequency and ASPs. So this all goes into the guidance of 2021.
And lastly, the organic channel performed very well, as well. So all in all, I think that we feel that there will be some normalization in terms of growth as we lap for COVID-19. But yet to be said, the growth rate is anticipated to be higher than pre-COVID.
Again, if you look at — the efficiency of our marketing has been improving over quarters, despite the fact that we’ve been investing more in marketing every quarter. And we don’t plan to stop. As long as we see the opportunity, as long as the unit economy justify continued investment, we will continue to invest more.