Fiverr’s superb ongoing growth performance

First of all, I have no paid subscriptions with TMF. I first discovered Fiverr International Ltd. (FVRR) at The Mongoose Chronicles Board back in July 2020 among a massive listing of companies posted with their YTD gains and ranking. After conducting my own in-depth due diligence, in July 2020, I decided to make an initial investment in Fiverr and subsequently have increased my holding.

I highly favor promising growth companies that are ahead of the pack in their respective business realms by shifting to on-demand and online e-business platforms from “old school” ways and conduct of business. These include my investments in Carvana (online retail and wholesale used vehicles), Stitch Fix (online retail apparel) and, more recently, Fiverr International, which is in the GICS sector: Consumer Discretionary and GICS Industry: Internet & Direct Marketing Retail.

So here goes a long post (an update of a prior Fiverr post here).

FIVERR INTERNATIONAL’S BUSINESS

For a quick overview, here’s the February 2021 Fiverr Company Presentation:
https://s23.q4cdn.com/749308338/files/doc_presentations/2021…
For those who prefer more in-depth information and data, here’s the latest Fiverr Form 20-F Annual Report filing for the fiscal year ended December 31, 2020:
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001762301/00738e6b…

Business Description

Fiverr International Ltd. (FVRR), founded in 2010 with headquarters in Tel Aviv, Israel, operates an online marketplace worldwide with presence in over 160 countries. Its platform enables sellers (freelancers) to sell their services and buyers (businesses) to buy them. The company’s platform includes over 500 categories in eight verticals, including graphic and design, digital marketing, writing and translation, video and animation, music and audio, programming and technology, business, and lifestyle. It also offer And.Co, a platform for online back office service to assist freelancers with invoicing, contracts and task management; Fiverr Learn, an online learning platform with original course content in categories such as graphic design, branding, digital marketing, and copywriting; and ClearVoice, a subscription based content marketing platform for medium to large businesses. Its buyers include businesses of various sizes, as well as sellers comprise a group of freelancers and small businesses.

For more in-depth information, I highly recommend reading the BUSINESS OVERVIEW (pages 37-51) and the BUSINESS MODEL (pages 53-59) in the above referenced Fiverr Form 20-F Annual Report for FY 2020.

Business expansion into subscription services

On 9/15/2020, Fiverr announced the the official launch of Fiverr Business™. This platform is designed for corporate teams and departments to collaborate with each other while managing projects with freelance talent and will be subscription-based. Previously in beta, Fiverr Business provides larger companies a curated experience with collaboration and administrative tools and an easy way to integrate freelancers into their workflows. Business Wire reported: The global health crisis and subsequent corporate office closures have forever changed how the world works. There has been an acceleration, fast-forwarding the future of work in ways that have stress-tested businesses’ abilities to blend people and technology to maintain productivity. At the same time, they have been forced, like never before, to protect the health and well-being of employees. Technology has played a key role in ensuring this new remote workforce remains in touch, in-the-know and supported. At the same time, businesses are ramping up their use of freelance talent to augment their teams and build agile scalability. In fact, per a recent survey Fiverr conducted of over 2,000 businesses globally, 52% said they are allocating more budget to freelance services. While the pandemic will eventually subside, it remains clear that the notion of remote work and utilizing on demand freelance talent is here to stay..
Micha Kaufman, Fiverr CEO, commented: For the past 10 years, Fiverr has been a leading advocate for the power and importance of remote workers as part of any company workforce. Because of this, we have been at the center of building products and tools to remove all friction from this structure. The pandemic has forced companies everywhere to rethink best practices for hiring, and this means focusing on a full-time team supporting their core competencies while integrating freelance talent as a way to easily scale. Fiverr Business was designed to integrate into a companies’ workflow and become a part of the digital onboarding experience for employees – they get access to email, Slack, and Dropbox, as well as their Fiverr Business team account wherein all of their projects can be managed. It is reliable, budget friendly, and simple, but most of all, it gets the job done faster than any other method..
For more info, click the following website:
https://www.fiverr.com/business

On 02/10/2021, Fiverr announced Subscriptions, a new feature that enables long-term relationships between freelancers and customers.
https://investors.fiverr.com/press-releases/press-releases-d…

Fiverr International is launching Subscriptions, a new feature that allows freelancers on Fiverr the opportunity to establish long-term, ongoing relationships with their customers. In the past, Fiverr has only offered the ability to pay on a per-project basis, so this is a huge step for the company as it continues to expand its product offerings and services to appeal to larger businesses, agencies and corporate teams.

“In light of the COVID-19 pandemic, more businesses are tapping into remote, freelance talent than ever before. Managers have become comfortable managing remote talent and businesses have realized that by working with freelancers, they are able to increase their agility and flexibility, which allows them to scale quickly” said Micha Kaufman, Fiverr CEO. “However, every business is built differently and has needs that are unique to them. Subscriptions gives our community members control over how they want to work together and empowers them to work in ways that best suit their needs.”

By giving customers the ability to subscribe to a freelancer’s service, the platform is opening itself up to a new group of business buyers, ones that would prefer to work with talent on an ongoing basis and ones that need services that are not simply one off projects. Many services offered on Fiverr, such as SEO, social media marketing, website maintenance, and virtual assistants, require ongoing collaboration in order to be effective. Allowing customers to subscribe to these services rather than having to purchase over and over again gives them peace of mind that the work will get done on a consistent basis and frees them up to focus on other necessary to-do’s.

For freelancers, giving them the opportunity to charge subscriptions for ongoing work provides them with a more predictable stream of income and gives them clear visibility into their workload. Many of them already work with the same clients month over month, and being able to charge a subscription for their services gives them more financial security, knowing that they have work coming in for a set period of time.

Initially, Subscriptions will be available to top freelancers in eight categories across the Fiverr platform, including Social Media Marketing, SEO and Voice Over. The feature enables freelancers to offer their services for 3 and/or 6 months and at a discount, if they choose so. Over time, the feature will be rolled out to other categories across the platform.

The introduction of Subscriptions follows the company’s launch of another new product that simplifies the process for completing larger projects on Fiverr, Milestones. This new feature allows buyers to break the freelancer’s work into a few steps and pay for each one separately without committing to the full project. Clients are given the ability to approve each part of the order before moving to the next step. For freelancers, it allows them to create stepping stones that will ensure they are paid for the tasks completed during the project.

Subscriptions and Milestones are part of Fiverr’s commitment to moving upmarket and launching more features and products that appeal to larger businesses and corporate teams.
———————————————-

On 2/11/2021, Fiverr announced the acquisition of Working Not Working®, a leading platform for high-end creative talent. Working Not Working is trusted by many of the world’s leading brands and agencies, including Google, Netflix, Spotify, Droga5, and Wieden+Kennedy, and is home to tens of thousands of vetted creatives.
The platform currently connects tens of thousands of full-time creatives and freelancers with top brands and agencies through a subscription model. The company will remain a standalone organization and retain its team, with Justin and Adam remaining at the helm.

After this acquisition, on 2/17/2021, Fiverr announced that it is building a new platform aimed at helping the world’s leading corporate brands engage and manage teams of top tier independent creatives and agency teams. The new platform is expected to cater to the changing needs of the industry and signals a move by Fiverr into the multi-billion dollar marketing industry. Fiverr is developing the platform with the help of leading CMOs and Creatives from the advertising and marketing industries.

Business Operation

Fiverr International is a consumer discretionary company and is not yet a fully dedicated SaaS company with subscribers where net dollar retention is monitored closely as a SaaS metric.

Fiverr was founded in 2010 by entrepreneurs who had extensive experience working with freelancers and who had witnessed first- hand how challenging the process can be. To solve these, Fiverr pioneered a Service-as-a-Product (“SaaP”) model to create an on-demand, e-commerce-like experience that makes working with freelancers as easy as buying something on Amazon.

The following is from the February 2021 Fiverr Company Presentation:
https://s23.q4cdn.com/749308338/files/doc_presentations/2021…

Fiverr e-commerce approach to freelancing

• Service-as-a-Product model
To buy and sell digital services as simple as buying on Amazon with a comprehensive SKU-like service catalog.

• On-demand
No hiring process. No long-term commitment.
Getting businesses help when they need it.

• End-to-end platform
So businesses can focus on meeting deadlines and freelancers can focus on doing what they love.

• Global community
Bringing together a global community of businesses and freelancers to shape the future of work.

Fiverr: We are not an online staffing company.


**Staffing company                           vs.  Fiverr**

Short/long term temporary employment            Service-as-a-product (SaaP)           

Bidding, vetting and contract negotiation       Browse, search, click to order       

Opaque and non-standardized scope,              Transparent timing, price and deliverables
timing and cost

Connection only                                 End-to-end platform                  

I provide the above because some might assume that an online staffing company like Upwork (UPWK) has the same type of business operations as Fiverr. Here’s an excellent recently updated 1/06/2021 article “Upwork vs Fiverr: Which is Best for Online Business Owners?” that states, “Both websites give companies a way to connect with workers across a range of skill categories. However, how these two platforms work is very different. Although both Upwork and Fiverr have considerable presence in the freelancing world, they don’t provide the same experience.”
https://www.webhostingsecretrevealed.net/blog/web-business-i…

Furthermore, the two companies are classified in different sectors and industries as follows:


 **Upwork                   Fiverr International**

GICS Sector      Industrials	          Consumer Discretionary

GICS Industry    Human Resource           Internet & Direct Marketing Retail
                 & Employment Services         

—————————————————————————————

Revenue Generation

Currently, Fiverr generates revenue primarily through transaction-based fees. When an order is placed, buyers pay Fiverr the Gig price plus a 5% service fee with a minimum service fee of $2; upon successful completion of an order, Fiverr makes 80% of the Gig price available to the seller of the Gig. Here’s how this works in more detail, using an example of a $100 transaction on core marketplace.

• Service Catalog: A seller lists a service for $100.
Under our Service-as-a-Product (SaaP) model, sellers list their service offerings on our marketplace first. Each Gig has well defined scope of work, time of delivery, price, and other spec of the service. Millions of these gigs make up our extensive service catalog, which buyers use to search and browse to find the exact service they are looking for.

• Order: The buyer pays $105 to Fiverr.
Once the buyer navigates through our catalog and finds the service he/she wants, he places the order and pays Fiverr the cost of the gig plus 5% service fee. For transactions under $40, buyers pay a minimum $2 service fee.

• Fulfillment: Work starts immediately upon order.
Upon order, Fiverr prompts the buyer to send the seller the files required in the gig description, along with a briefing document with instructions. Once received, the seller can start to work on the project immediately. They can also communicate and collaborate during the course of project through our platform.

• Delivery & Payment: Fiverr pays the seller $80.
14 days after the delivery of the project, if no issue raised by the buyer, Fiverr makes 80% of the transaction value available for seller to withdraw.

The drivers of revenue growth for Fiverr are the number of active buyers and the annual spend per buyer (SPB),

In the twelve months ended December 31, 2020, active buyers reached 3.418 million, representing 45.3% y-o-y growth. This robust active buyer growth was driven by consistent cohort behavior and efficient marketing investments. Fiverr also continues to focus on higher lifetime value buyers by targeting those with larger budgets.


**FVRR	Active Buyers	 YoY**
**(millions)	Change**

**Q4 '20      3.418(a)    45.3%**		
Q3 ’20      3.108       37.2%      
Q2 ‘20	    2.792	28.4%
Q1 ‘20	    2.450	16.5%
Q4 ‘19	    2.352	18.9%
Q3 ‘19	    2.265	15.9%
Q2 ‘19	    2.175	14.5%
Q1 ‘19	    2.103	10.7%
Q4 ‘18	    2.019	12.2%
Q3 ‘18	    1.954	14.9%
Q2 ‘18	    1.908	12.2%				
Q1 ‘18	    1.900	
Q4 ‘17	    1.800	
Q3 ‘17	    1.700	
Q2 ‘17	    1.700	
[note (a): in the 12 months ended 12/31/2020]

In the twelve months ended December 31, 2020, the annual spend per buyer (SPB) grew to $205, up 20.6% y-o-y from $170. SPB is an indicator of the Fiverr buyers’ purchasing patterns and is impacted by the number of active buyers, buyers purchasing from multiple categories, average price per purchase, and Fiverr’s ability to acquire buyers with a higher lifetime value.


**Annual**
**FVRR	 Spend/buyer	 YoY**
**($)       Change**

**Q4 ’20       205(a)     20.6%**    		
Q3 ’20       195        19.6%
Q2 ‘20	     184	17.2%
Q1 ‘20	     177	16.5%
Q4 ‘19	     170	17.2%
Q3 ‘19	     163	15.6%
Q2 ‘19	     157	16.3%					
Q1 ‘19	     150	
Q4 ‘18	     145	
Q3 ‘18	     141	
Q2 ‘18	     135					
[note (a):  in the 12 months ended 12/31/2020]
		
FY 2020      205        20.6%
FY 2019	     170	17.2%
FY 2018	     145	21.8%
FY 2017	     119	22.7%
FY 2016	      97	16.9%
FY 2015	      83	16.9%
FY2014	      71	 7.6%
FY 2013	      66	 3.1%
Fy 2012	      64	


The take rate for the 12 months ended December 31, 2020, was 27.1%, an increase of 40 bps y-o-y. Fiverr believes their industry- leading take rate reflects the value their platform delivers to both buyers and sellers. The increase in their take rate was driven by the continued growth of back-office software subscriptions, e-learning courses and content marketing subscriptions.

 
**FVRR	 Take Rate     YoY Change**
**(%)       Basis Pts.**

**Q4 '20      27.1%(a)      40**    		
Q3 ’20      27.0%         40
Q2 ‘20	    27.0%	  60
Q1 ‘20	    27.1%	  80
Q4 ‘19	    26.7%	 100
Q3 ‘19	    26.6%	 140
Q2 ‘19	    26.4%	 170					
Q1 ‘19	    26.2%       	
Q4 ‘18	    25.7%	
Q3 ‘18	    25.2%	
Q2 ‘18	    24.7%					

[note (a): in the 12 months ended 9/30/2020]

		
FY 2020     27.1%         40
FY 2019	    26.7%        100
FY 2018	    25.7%		

==============================

Market Size

The estimated United States freelancer market is $815 B annually, and Fiverr estimates that their current addressable market in the U.S. alone is over $115 B, which will continue to increase as the company launches new categories. Fiverr is in over 160 countries, yet approximately 70% of revenue today is generated from English-speaking countries.

Prior to the Corona-virus pandemic, freelancing was already a rapidly growing industry/gig-economy. Here’s a 10/17/2017 Forbes article “Are We Ready For A Workforce That is 50% Freelance?” that reported:
https://www.forbes.com/sites/elainepofeldt/2017/10/17/are-we…

If freelancing continues to grow at its current rate, the majority of U.S. workers will be freelancing by 2027, according to projections in the Freelancing in America Survey, released today by the Freelancers Union and the giant freelance platform Upwork. The survey found that 50.9% of the U.S. population will be freelancing in 10 years if a current uptick in freelancing continues at its current pace.

The number of U.S. freelancers hit 57.3 million this year, from 53 million in 2014—an 8.1 percent increase, according to the survey. That means 36% of the U.S. workforce has freelanced this year. Meanwhile, the U.S. workforce grew from 156 million to 160 million in the same timeframe, reflecting just 2.6% growth.

“The growth of the freelance workforce is three times faster than the traditional workforce,” noted Stephane Kasriel, CEO of Upwork, in an interview. And in a sign of just how much freelancing could grow, 47% of working millennials now say they freelance in some capacity, the survey found.
(snip)
Not everyone welcomes the growth of freelancing. Many people are concerned about the lack of a social safety net to support freelancers once they no longer have access to employer-sponsored benefits, such as healthcare. Buying healthcare independently, even if it’s an Affordable Care Act plan, can be costly.
——————————————————-

From my files, here’s an excellent macro-view of freelancing that provides a ton of food for thought that might help answer post-covid concerns/questions.

30+ Freelance Stats – Why the Gig Economy is Growing in 2020
https://www.websiteplanet.com/blog/freelance-stats/

Living in a time where remote working is not only a perk but an essential part of safe and effective business, companies are forced to rethink the way they operate.

The question of whether freelancing is just a fad is no longer relevant – it’s here, and work flexibility is now a serious consideration for organizations and individuals alike. The real question is: can you actually make a decent living doing it? And is hiring a freelancer for your project a good investment?

Vague reassurances and promises aren’t enough. You need hard data and reliable information before making an investment or changing the course of your career.

We’ve combed through the most recent reports and studies and have pulled together a ton of information that proves freelancing is something that everyone should be taking seriously, whether you’re looking for work or looking to hire.

But don’t take our word for it. The numbers speak for themselves.”
—————————

Here’s another 6/24/2020 article “21+ Freelance Statistics to Know in May 2020” that highlights the following Jaw-Dropping Freelance Statistics among others:
https://spendmenot.com/blog/freelance-statistics/

• US freelancers earned almost $1 trillion in 2019

• Freelancers could represent 80% of the global workforce by 2030 (Source: Peerism)

57 million people freelance in America

• Freelance platforms (e.g., Fiverr, Upwork and Gigster) provide gigs for 73% of freelancers.

• An experienced freelancer earns $70,536 annually.

• A former Google employee made more than $800,000 on Fiverr

• 51% of freelancers say they won’t switch back to their traditional job. (Source: World of Freelancers)

==============================

FIVERR INTERNATIONAL’S FINANCIAL PERFORMANCE

Amidst the ongoing COVID-19 pandemic, Fiverr International has realized superb financial performance and results for Q2 ended 6/30/2020, Q3 ended 9/30/2020 and Q4 and FY FY2020 ended 12/31/2020.

Q2 2020 Highlights

It is highly noteworthy to point out Q2 2020 because for the first time Fiverr reported financial results in the black for non-GAAP net income, non-GAAP diluted EPS, all non-GAAP margins (gross, operating and profit), and free cash flow. Here are the outstanding performance highlights of Q2 2020 drawn from supporting historical data provided herein:

• Q2 2020 Revenue substantially increased 81.9% y-o-y to $47.1 million from $25.912 million, after realizing consistent y-o-y gains of 40.8%, 41.8%, 42.6% and 43.7% for the previous 4 quarters, respectively, since its IPO on 6/13/2019.

• As of 6/30/2020, Active Buyers grew substantially 28.4% y-o-y to 2.792 million from 2.175 million, and Spend per Buyer increased 17.2% y-o-y to $184 from $157.

• Market Cap at the end of Q2 2020 increased 211% sequentially to $2.526 billion from $0.811 billion at the end of Q1 2020.

• For the very first time, Fiverr became profitable, showing a non-GAAP net income of $ 3.617 million and non-GAAP diluted EPS of $0.10 for Q2 2020 compared to a GAAP net loss of {$ 0.124) million and a negative GAAP diluted EPS for the same quarter.

• For the very first time, all 3 margins were in the black, i.e., non-GAAP Gross Margin 84.4% (all-time high), non-GAAP Operating Margin 6.7% and non-GAAP Profit Margin 7.7% for Q2 2020.

• Again for the very time, free cash flow emerged in the black at $4.67 million.

Q3 2020 Highlights

Here are the outstanding performance highlights of Q3 2020 drawn from supporting historical data provided herein:

• Q3 2020 Revenue substantially increased 87.8% y-o-y to $52.3 million from $27.8 million.

• As of 9/30/2020, Active Buyers grew substantially 37.2% y-o-y to 3.108 million from 2.265 million, and Spend per Buyer increased 19.6% y-o-y to $195 from $163.

• Market Cap at the end of Q3 2020 increased 93.2% sequentially to $4.881 billion from $2.526 billion at the end of Q2 2020.

• Fiverr continued to be profitable, showing a non-GAAP net income of $ 4.734 million and non-GAAP diluted EPS of $0.12 for Q3 2020 compared to a GAAP net loss of $ (0.454) million and a negative GAAP diluted EPS of $ (0.01) for the same quarter.

• All 3 margins were in the black, i.e., non-GAAP Gross Margin 84.4%, non-GAAP Operating Margin 8.0% and non-GAAP Profit Margin 9.0% for Q3 2020.

• Free cash flow remained in the black at $ 4.87 million.

Q4 2020 Highlights

• Q4 2020 Revenue substantially increased 89.2% y-o-y to $55.9 million from $29.5 million, driven by continued growth in active buyers, spend per buyer and take rate. Revenue during the quarter continued to be highly diversified, with no buyer contributing more than 1% of revenue, and no single category accounting for more than 15% of total revenue on the core marketplace.

• As of 12/31/2020, Active Buyers grew substantially 45.3% y-o-y to 3.418 million from 2.352 million, driven by strong cohort behavior and efficient marketing investments. Fiverr continues to focus on higher lifetime value by targeting buyers with larger budgets.

• As of 12/31/2020, Spend per Buyer increased 20.6% y-o-y to $205 from $170.

• The take rate for the 12 months ended December 31, 2020, was 27.1%, up from 26.7% for the year ended 12/31/19.

• Market Cap at the end of Q4 2020 increased 43.3% sequentially to $6.993 billion from $4.881 billion at the end of Q3 2020. Year-to-date, Market Cap is up 63.3% to $11.42 B on 2/19/21 from $6.993 B on 12/31/20.

• Fiverr continues to be profitable for the last 3 sequential quarters, showing a non-GAAP net income of $ 4.769 million and non-GAAP diluted EPS of $0.12 for Q4 2020 compared to a GAAP net loss of ($ 8.077) million and a negative GAAP diluted EPS of ($ 0.23) for the same quarter.

• All 3 margins remain in the black again for the latest 3 sequential quarters, i.e., non-GAAP Gross Margin 83.9%, non-GAAP Operating Margin 8.3% and non-GAAP Profit Margin 8.5% for Q4 2020.

• Free cash flow remained in the black at $ 3.68 million.

• The company’s capital structure is solid, except for long-term debt as shown below:


**CAPITAL STRUCTURE	       Q4 2020**
	
Cash & equivalents (mrq)     $ 268.030 M
Working Capital	             $ 445.281 M
Current Ratio (mrq)	         4.05
Long-Term Debt (mrq)	       $ 356.629 M
Stockholders’ Equity (mrq)   $ 345.403 M
LT Debt/Equity (mrq)	         1.032

Historically, Fiverr has carried very low long-term debt. But in October 2020, the Company issued $460,000 aggregate principal amount, 0% coupon rate, of convertible notes due on 2025. The long-term debt of $356.629 million includes the net carrying amount of $352.034 of the convertible notes as of December 31, 2020. Why? During and as of the year ended December 31, 2020, the conditions allowing holders of the convertible senior notes to convert were not met therefore the notes were classified as long-term liability.

FY 2020 Highlights

It is highly noteworthy to point out Fiscal Year 2020 because for the first time Fiverr reported financial results in the black for non-GAAP net income, non-GAAP diluted EPS, all non-GAAP margins (gross, operating and profit), and free cash flow. Here are the outstanding performance highlights of FY 2020 drawn from supporting historical data provided herein:

• FY 2020 Revenue substantially increased 77% y-o-y to $ 189.5 million from $ 107.1 million.

• For the very first time, Fiverr realized a profitable fiscal year, closing with a non-GAAP net income of $ 10.409 million and non-GAAP diluted EPS of $0.29 for FY 2020 compared to a GAAP net loss of {$ 14.810) million and a negative GAAP diluted EPS ($ 0.46) for the same fiscal year.

• For the very first time, all 3 fiscal year margins were in the black, i.e., non-GAAP Gross Margin 83.7% (all-time high), non-GAAP Operating Margin 4.8% and non-GAAP Profit Margin 5.5% for FY 2020.
———————————————————————————

Fiverrr Non-GAAP vs. GAAP Financial Performance


**NON-GAAP      MARKET			       GROSS		 NET   Diluted	  SHARE**
**FIVERR INT’L    CAP    REVENUE	     YoY      INCOME	YoY	INCOME	  EPS	  PRICE** 
**FY/QTR	      ($ B)      ($ M)	    Change     ($ M)   Change	($ M)	  ($) 	   ($)** 
									
2/19/21      11.42 B                                                             318.70											

**FY 2020      6.993 B   189.510      76.9%    158.668    83.0%   10.409    0.29   195.10**

**Q4 '20       6.993 B    55.885      89.2%     46.860    83.9%    4.769    0.12   195.10**
**Q3 '20       4.881 B    52.345      87.8%     44.175    96.1%    4.734    0.12   138.98** 
**Q2 ’20	     2.526 B	47.130	    81.9%     39.759	88.6%	 3.617	  0.10	  73.82**
Q1 ’20	     0.811 B	34.150	    43.7%     27.874	44.8%	(2.577)	 (0.01)	  25.17	    
									
FY 2019	     0.751 B   107.073	    41.8%     86.719	41.9%  (16.780)	 (0.58)	  23.50	
									
Q4 ’19	     0.751 B	29.531	    42.6%     23.853	40.3%	(2.700)	 (0.08)	  23.50	    
Q3 ‘19	     0.580 B	27.867	    41.8%     22.526	39.5%	(3.955)	 (0.12)	  18.70	
Q2 ‘19		        25.912	    40.8%     21.085	43.5%	(4.943)	 (0.19)				
Q1 ‘19		        23.763		      19.255		(5.182)	 (0.20)		
									
FY 2018		        75.503		      61.130	       (20.599)	 (0.89)		
									
Q4 ‘18		        20.705		      17.000		(5.883)	 (0.16)		
Q3 ‘18		        19.653		      16.145		(3.822)	 (0.17)		
Q2 ’18		        18.399		      14.698		(5.671)	 (0.26)		

vs.


**GAAP	      MARKET			       GROSS		  NET   Diluted   SHARE**
**FIVERR INTL     CAP    REVENUE       YoY      INCOME	YoY	 INCOME	   EPS	  PRICE**
**FY/QTR	      ($ B)	 ($ M)      Change     ($ M)   Change	 ($ M)	   ($)     ($)**
											
2/19/21      11.42 B                                                             318.70							

**FY 2020      6.993 B   189.510      76.9%    156.322    84.2%  (14.810)  (0.46)  195.10**

**Q4 '20       6.993 B    55.885      89.2%     46.182    97.2%   (8.077)  (0.23)  195.10**
**Q3 '20       4.881 B    52.345      87.8%     43.637    98.3%	(0.454)  (0.01)  138.98**
**Q2 ’20	     2.526 B	47.130      81.9%     39.173    90.1%	(0.124)  (0.00)   73.82**	
Q1 ’20	     0.811 B	34.150	    43.7%     27.330	45.2%   (6.155)  (0.19)   25.17	
											
FY 2019	     0.751 B   107.073	    41.8%     84.849	41.7%  (33.539)  (1.67)   23.50	
											
Q4 ’19	     0.751 B    29.531      42.6%     23.411	40.3%	(7.439)  (0.23)   23.50	
Q3 ‘19	     0.580 B	27.867      41.8%     22.004	38.7%	(8.434)  (0.26)   18.70	
Q2 ‘19		        25.912      40.8%     20.607	42.9%	(9.353)  (0.88)					
Q1 ‘19		        23.763	              18.827		(8.313)  (1.26)			
											
FY 2018		        75.503	              59.882	       (36.061)  (5.42)			
											
Q4 ‘18		        20.705	              16.687		(5.883)  (0.84)			
Q3 ‘18		        19.653	              15.861		(7.240)  (1.10)			
Q2 ’18		        18.399	              14.421		(6.685)  (1.03)				


Fiverr Stock-Based Compensation

The SBC/Revenue for Q4 2020 exceeded 10% (my upper limit) which hereafter demands investor vigilance.


**FVRR	 SBC	SBC/Revenue**
 **($ M)**

Q4’20   6.235     11.1%
Q3'20   3.756      7.2%		
Q2’20	3.062	   6.5%
Q1’20	2.762	   8.1%
Q4’19	2.337	   7.9%
Q3’19	2.600	   9.3%
Q2’19	2.216	   8.6%
Q1’19	1.746	   7.3%
Q4’18	1.293	   6.2%
Q3’18	2.737	  13.9%
		
FY-20  15.815      8.3%
FY'19	8.899	   8.3%
FY'18  11.648	  15.4%


Fiverr Margins


**FVRR**
**MARGINS	 GROSS	  OPERATING     PROFIT**	   GROSS  OPERATING    PROFIT
      **(non-GAAP) (non-GAAP)  (non-GAAP)**    (GAAP)   (GAAP)     (GAAP)

**Q4 '20   83.9%       8.3%        8.5%**       82.6%   (14.5%)     (6.7%)
**Q3 ’20   84.4%       8.0%        9.0%**       83.4%    (1.9%)     (0.9%)
**Q2 ‘20	 84.4%	     6.7%	 7.7%**       83.1%    (1.3%)	(0.3%)
Q1 ‘20	 81.6%	    (8.4%)	(7.5%)	    80.0%   (18.9%)    (18.0%)
Q4 ’19	 80.8%	   (11.3%)	(9.1%)	    80.8%   (27.3%)    (25.2%)
Q3 ’19	 80.8%	   (15.6%)     (14.2%)	    79.0%   (31.7%)    (30.3%)
Q2 ’19	 81.4%	   (19.0%)     (19.1%)	    79.5%   (36.0%)    (36.1%)
Q1 ’19	 81.0%	   (22.7%)     (21.8%)	    79.2%   (25.9%)    (35.0%)
Q4 ’18	 82.1%	   (19.7%)     (18.8%)	    82.1%   (29.4%)    (28.4%)
Q3 ’18	 82.2%	   (19.9%)     (19.4%)	    80.7%   (37.3%)    (37.2%)
Q2 ‘18	 79.9%	   (34.3%)     (30.8%)	    78.4%   (35.8%)    (36.3%)

**FY ’20   83.7%       4.8%        5.5%**       82.5%    (6.2%)     (7.8%)
FY '19	 81.0%	   (16.8%)     (15.7%)	    79.2%   (32.5%)    (31.3%)
FY '18	 80.8%	   (27.8%)     (27.3%)	    79.3%   (48.3%)    (47.8%)


Fiverr Free Cash Flow


**FCF       ($ M)**

**Q4’20      3.68**
Q3’20      4.87
Q2’20      4.67
Q1’20     -0.11
Q4’19     -3.31     
Q3’19     -3.26
Q2’19     -3.86

**FY 2020   13.10**
FY 2019  -15.70 
FY 2018  -53.27

============================

FIVERR INTERNATIONAL’S OTHER FINANCIAL & SHARE PRICE PERFORMANCE

Here’s a current 2/19/2021 snapshot.


**FVRR**
Date	                    02/19/2021
	
GICS Sector	      Consumer Discretionary
GICS Industry	Internet & Direct Marketing Retail
	
MARKET CAP	            $ 11.42 B
Employees	             515
	
52-WK HIGH	           $ 336.00
PRICE/SHARE 	           $ 318.70
52-WK LOW	             $20.42
	
Price Y-T-D change	      63.4%
Price 52-wk change	     807.7%
S&P 500 52-wk change	      16.7%
	
EV/Revenue (ttm)	      59.67
P/S (ttm)	              55.78

FVRR share price at $318.70 on 2/19/21 has pulled back 5% from its recent 52 week high $336.00 on 2/16/21.

A major concern is Fiverr’s currently high P/S of 55.78 as of 2/19/2021. Years ago, one of my favorite Fools earslookin asserted that P/S should not be looked at in insolation, especially for companies without positive earnings, and posited the following:
“The answer to this is expectations. What drives stock price is expectations about earnings growth. As we have seen, that translates into expectations about not only sales growth, but also profit margin. Using the formula P/E = P/S * (1/Profit Margin), we can see what market expectations are built into a company’s current P/S.”

On 7/17/20 when I made my initial Fiverr investment, its P/S was 18.66:
• At 10% Profit Margin: P/E = 18.66 * (1 / 0.10) = 187
• At 20% Profit Margin: P/E = 18.66 * (1 / 0.20) = 93
• At 30% Profit Margin: P/E = 18.66 * (1 / 0.30) = 62

For Fiverr’s current P/S of 55.78 on 02/19/2021:
• At 10% Profit Margin: P/E = 55.78 * (1 / 0.10) = 558
• At 20% Profit Margin: P/E = 55.78 * (1 / 0.20) = 279
• At 30% Profit Margin: P/E = 55.78 * (1 / 0.30) = 186

The market currently has extraordinary high expectations for Fiverr for sales growth, but also has high expectations for its future profit margins. Looking at P/S in isolation misses this.

As of 02/19/2021:
• Recent 52-week period: FVRR up 808% vs. S&P 500
https://bigcharts.marketwatch.com/advchart/frames/frames.asp…

• Y-T-D: FVRR up 63% vs. S&P 500
https://bigcharts.marketwatch.com/advchart/frames/frames.asp…

CONCLUSION

So far, I like what I see in Fiverr International’s superb ongoing growth performance and financial results, i.e., an up and coming high growth company, now operating in the black with positive non-GAAP net income, positive high non-GAAP gross margins, positive non-GAAP operating and profit margins, positive free cash flow, and a solid capital structure with a very high current ratio. Fiverr’s currently high P/S of 56 demands investors’ attention and vigilance, not in insolation, but in consideration of expectations for future sales growth and profit margins.

As previously mentioned in the launch of Fiverr Business™ and in the market size section, the ongoing global health crisis and subsequent corporate office closures have forever changed how the world works. More importantly, Fiverr International is well positioned to continue to grow and thrive in a newly evolving and changing workplace where the notion of remote work and utilizing on demand freelance talent are real and here to stay.

As always, conduct your own due diligence and decision-making.

Regards,
Ray
Fiverr investor

Fiverr Corporate Sources of Information

The following Fiverr corporate sources provide more detailed information and data:

Fiverr Overview/Fiverr 101
https://s23.q4cdn.com/749308338/files/doc_financials/2019/q3…

COMPANY PRESENTATION February 2021
https://s23.q4cdn.com/749308338/files/doc_presentations/2021…

Q4 & FY2020 Shareholder Letter
https://s23.q4cdn.com/749308338/files/doc_financials/2020/q4…

Form 20-F Annual Report for the fiscal year ended December 31, 2020
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001762301/00738e6b…

Q4 2020 Earnings Call
https://seekingalpha.com/article/4407089-fiverr-internationa…
https://seekingalpha.com/symbol/FVRR/earnings/transcripts

Q3 | 2020 Shareholder Letter
https://s23.q4cdn.com/749308338/files/doc_financials/2020/q3…
https://investors.fiverr.com/press-releases/press-releases-d…
6K
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001762301/d8de7d94…

Fiverr Q2 2020 Shareholder Letter
https://s23.q4cdn.com/749308338/files/doc_financials/2020/q2…

134 Likes

Imuafool,

What a phenomenal write up, the amount of recommendations to your post is a testament to its merits.

It would be interesting to hear your thoughts on Linkedin’s intention to enter the market through the new “Linkedin Marketplace” product. Even though I tend to be reluctant to the threat of “big tech” against the leaders in a niche, I do think think this is a legitimate threat to Fiverr’s dominant position due to the following reasons:

(1) Fiverr’s robust growth has led to 3.418 active buyers. There are ~738M Linkedin users, of which 260M are monthly active users. This is an order of magnitude of a difference. To emphasize, if 2% of Linkedin’s monthly active users become “buyers,” that represents 5.2M (1.8M more than Fiverr).

(2) Linkedin also provides the advantage of already being an established social network. In other words, if I want to become a freelancer, I already have a Linkedin profile - I don’t have to navigate to a new platform to set it up. Additionally, my Linkedin profile already showcases my experience, network, etc - it already generates credibility.

(3) Fiverr’s ended the year with $190M in revenue, reaching profitability. Linkedin’s revenue in 2020 was $8B+. Its revenue sources are also more versatile than most other social media platforms that rely on ads - it has Linkedin premium subscriptions, business subscription services, job posting ads, etc. It has the powerhouse of Microsoft to relentlessly seek to win in a sector with an abundance of cash at its disposal.

With the amount of freelance workers expected to triple this year to 42M, there is plenty of opportunity for marketplaces (and other players) to succeed in this industry. The rise of independent workers making a living through through their talent is one of the most exciting “Covid accelerated” trends. I don’t think this will be a “winner take all” sector, but I do worry about Linkedin’s threat to Fiverr’s momentum.

Sources:
Linkedin Marketplace: https://aimgroup.com/2021/02/22/linkedin-building-gig-market…
Linkedin’s user estimate: https://news.linkedin.com/about-us#Statistics
Linkedin’s revenue estimate: https://www.microsoft.com/investor/reports/ar20/index.html#
Freelance economy growth: https://www.ft.com/content/92c6d068-384e-11ea-ac3c-f68c10993…
Further reading on the “passion economy”: https://li-jin.co/2019/10/22/the-passion-economy-and-the-fut…

-RMTZP
Protect the identity of this board and maximize your learning by reading https://discussion.fool.com/monday-morning-rules-of-the-board-34… before participating

10 Likes

RMTZP: It would be interesting to hear your thoughts on Linkedin’s intention to enter the market through the new “Linkedin Marketplace” product. Even though I tend to be reluctant to the threat of “big tech” against the leaders in a niche, I do think think this is a legitimate threat to Fiverr’s dominant position due to the following reasons ……

==============

At present, according to G2 - the world’s largest tech marketplace where businesses can discover, review, and manage the technology they need to reach their potential - here’s a side-by-side comparison of Fiverr vs. LinkedIn’s existing Marketing Solutions based on preference data from user reviews.

Fiverr rates 4.4/5 stars with 117 reviews. By contrast, LinkedIn Marketing Solutions rates 4.0/5 stars with 211 reviews. Each product’s score is calculated with real-time data from verified user reviews, to help you make the best choice between these two options, and decide which one is best for your business needs.
https://www.g2.com/compare/fiverr-vs-linkedin-marketing-solu…

When assessing the two solutions, reviewers found Fiverr easier to use, set up, and administer. Reviewers also preferred doing business with Fiverr overall.

• Reviewers felt that Fiverr meets the needs of their business better than LinkedIn Marketing Solutions.

• When comparing quality of ongoing product support, reviewers felt that Fiverr is the preferred option.

• For feature updates and roadmaps, our reviewers preferred the direction of Fiverr over LinkedIn Marketing Solutions.

Indeed, a rather nice edge and track record thus far for Fiverr’s performance and use in this case, a David vs. Goliath situation.

Now regarding LinkedIn’s yet to be launched new service Marketplaces that supposedly will focus on white-collar services like consulting, marketing and writing, it’s way way too early to speculate or opine about any competitive impacts on or make any competitive comparisons with Fiverr, Upwork or anyone else without first knowing the full details about the Marketplaces platform and, most importantly, its subsequent performance and users’ satisfaction and feedback.

So until then, I’ll be in wait and see mode.

Regards,
Ray

4 Likes