FIVERR Q1 beat and raise

Fiverr reported on their Q1 pre-market opening today.

  • Revenue growth accelerating to 100% y/y

  • Active buyers increased 56% y/y to 3.8 million

  • Continued expansion in spend per buyer

  • Continued expansion in take rate

  • Launched ninth vertical, for data related services:
    This quarter, we opened a new vertical on the Fiverr marketplace. The new Data Vertical is focused on data related services and gives businesses access to talent that can provide insights from data analysis and includes services such as storage solutions, data science, analysis and automations. Businesses today not only need an online presence, but a holistic digital strategy to drive their businesses forward. Investing in data science and analytics can help companies make more informed decisions, improve their operational efficiency, and ultimately increase their revenue. By opening a vertical focused solely on data services, we are providing business buyers of all sizes the ability to tap directly into talented data analysts, data scientists and more, on-demand within their specified budget.

  • Raised FY21 guidance: “Fiverr expects business momentum to continue and is upgrading guidance for 2021 from 46-50% to 59-63% revenue growth”

Figures Q1:
$68.3 million revenue (100% y/y growth)
3.8M active buyers (56% y/y growth)
$216 spend per buyer (22% y/y growth)
Gross Margin 83.1% GAAP / 84.1% Non-GAAP
($0.7M) Adjusted EBITDA
(1.0%) Adjusted EBITDA Margin
27.2% Take Rate (10bps y/y improvement)

Financial Outlook
Q2 2021
$73-75M Revenue (55-59% y/y)
$5-$7M Adjusted EBITDA

FY2021
$302-308M (59-63% y/y)
$19.5-$24.5M Adjusted EBITDA

We continue to expect the elevated spend level across our cohorts to sustain into the future with the potential to increase further as we deepen our strategic initiatives around Fiverr Business, Subscriptions and Milestones. As we mentioned earlier this year, existing cohorts from 2018 and older, on average grew 15% in 2020. We are so happy to see our buyers doing more with Fiverr and unlocking the power of remote work!

Shareholder letter here:
https://s23.q4cdn.com/749308338/files/doc_financials/2021/Q1…

(I am long FVRR)

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Nice summary, Nervokid! Piggybacking off a couple points you already made - hope you and the board don’t mind.

This was one of the better earnings reports I’ve seen in this earnings season, mainly because they changed growth cohorts. For this year, previously they were guiding for 46%-50% YoY growth, but now they have updated their forecast to 59%-63% YoY growth! For comparison, Crowdstrike, my highest conviction stock, is “only” forecasting growth at 64% for 2021 (but to be totally fair, CRWD hasn’t reported Q1 yet and so will also likely beat/raise their guidance.)

This is not to say that I like FVRR better than CRWD. FVRR will probably never be as good as CRWD simply because FVRR is not a SAAS company. It’s a marketplace. That doesn’t mean the stock is bad or not worth owning - it just means I probably will never own a huge 25% concentration in FVRR when I can just as easily put my money into SAAS companies, with built in recurring revenue.

Additionally, for Q1 2021 revenue growth accelerated to 100% year-over-year, doubling revenue to $68.3 million. Non-GAAP gross margins were 84%, up from 81% in the comparable quarter last year.

Fiverr is riding the long term tailwind of businesses seeking out digital transformation through project based free lance work, a trend which absolutely got even hotter due to covid. Management highlighted website design, sales management, mobile app development, and ecommerce as areas of work that are particularly popular on the Fiverr marketplace. Although FVRR is yet another covid benficiary, management went out of their way on the call to explain that, even in places where covid has waned significantly (such as Israel, where Fiverr is based), business is a boomin’.

Growth in active buyers was up 56% YoY to 3.8mm. Management cautioned this will normalize once pandemic numbers are lapped. However, from a purely statistical perspective, the numbers show no signs of slowing. From Q2 2020 to the present quarter, active buyers QoQ growth has been 12%, 11%, 10%, 12%. Before Q2 2020 (pre-covid), active buyers tended to grow around 4% or 5% each quarter, a huge difference. It’s worth taking management seriously, but at the same time there is also a decent chance management is just being cautious and sand bagging.

Furthermore, there has been steady growth of spend/buyer. Pre-covid, it was increasing 4% or 5% per quarter, and during covid it continueD to grow 4%-6% each quarter. In q1 2021, the QoQ increase was 5%, which translates to 21% YoY.

Importantly, a new part of Fiverr’s business called “Subscriptions”, launched in February with 8 categories and now has 25 categories as of the end of Q1. Subscriptions gives freelancers on Fiverr the opportunity to establish long-term, ongoing relationships with their customers. This will appeal to larger businesses in particular.

For Q2 2021, Fiverr is guiding for 10% QoQ revenue bump, which translates to 60% YoY rev growth. On average they tend to beat revenue estimates by 5%, so we can guess they will probably come in at 15% QoQ growth, which would be 68% YoY growth.

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Fvrr is super overvalued at the moment. Because of the Covid it has priced in 5 years of growth into the stock price. It would be very unwise to add position to FVRR now unless the stock price can drop below 100.

Fvrr is super overvalued at the moment. Because of the Covid it has priced in 5 years of growth into the stock price. It would be very unwise to add position to FVRR now unless the stock price can drop below 100.

Do you have numbers to support that statement, or were you just giving us your opinion? Please elucidate.

🆁🅶🅱
post tenebras lux
For not in my bow do I trust, nor can my sword save me.

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No. of Recommendations: 0
Fvrr is super overvalued at the moment. Because of the Covid it has priced in 5 years of growth into the stock price. It would be very unwise to add position to FVRR now unless the stock price can drop below 100.

Selection of FVRR as an investment depends less on valuation and more on conviction and prospects.

Still I think it would be useful to discuss some of the metrics associated with FVRR’s recent results.FVRR market cap is $6.46B and the forward guidance for 2021 is $308M so an EV/S of about 20.

Claiming that the market has factored in 5 years of growth is just a speculative statement about an unknowable quantity. For example FVRR’s revenue growth has been accelerating. This year’s guidance is for 63%. Will this be sustained for five years or will it be smaller. Maybe it will be larger. At a growth rate of 63% 5 years will see a factor of 10 increase which at current prices would represent an EV/S ratio of about 2.

It seems to me there is no point in trying to project any of these numbers. The real question is the meaning or implication of the current market valuation.I surmise that investors are seeing sustained rapid growth for FVRR for all the reasons discussed in the conference call and on the board.

As of now 2021 guidance has been increased by 11% over projected numbers in the prior (Q4 2020) conference call. That seems like a big increase. One could suppose that they are sandbagging again, or even that they underestimate their market (?) There could be a beat next quarter. Probably not 11% but who knows what.

Given a substantial beat of the 63% revenue and good numbers over the subsequent quarters the EV/S value for FVRR could be down substantially. Suppose an 8% beat. 2 years growth at +68% means revenue in the vicinity of 525M. (Assuming the 1st year is as guided)
.At that point a market cap of 6.46B represents EV/S of 12(!!) Sounds like a bargain.

Which brings us full circle. The decision to buy or hold has to hinge on conviction. FVRR is a relatively small company with a possible huge TAM so there may be huge potential. I am long FVRR.

I obtained these numbers from ostensibly reliable sources. Please feel free to correct them if necessary.

cheers

draj

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This is not to say that I like FVRR better than CRWD. FVRR will probably never be as good as CRWD simply because FVRR is not a SAAS company. It’s a marketplace. That doesn’t mean the stock is bad or not worth owning - it just means I probably will never own a huge 25% concentration in FVRR when I can just as easily put my money into SAAS companies, with built in recurring revenue.

FVRR’s numbers are exceptional and signs indicate growth will be maintained post-Covid. So I opened a small position in FVRR on the pull back at about 50% of recent highs. In comparison to CRWD, I think one difference is a moat. CRWD seems to have built a very strong moat with its technological advantages over competitors and increasing data on security breaches. But FVRR may be prone to increased competition which may be the biggest concern. I heard that Linkedin may be entering the space. Whether or not this will be a significant threat to FVRR’s growth, the stock price may take a further hit.

What are your thoughts on the possibility of competition like Linkedin? Would it be a significant threat? Why or why not? Is FVRR building any kind of moat or competitive advantage?

Dave

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What are your thoughts on the possibility of competition like Linkedin? Would it be a significant threat? Why or why not? Is FVRR building any kind of moat or competitive advantage?

My thoughts here are to be reactive to future quarterly reports. So long as revenue growth stays high, I’m more than ok with competitors entering the market whether it’s Linkedin or something else. If revenue growth drops off, that’s when we start to wonder if competition is eating into their business and reconsider the investment thesis.

Regarding Fiverr’s competitive position and moat, Fiverr’s moat comes from the strength of the marketplace, which will grow over time. This has proven to be an effective business model (look at the Apple app store, or Amazon). A big key to Amazon’s power is the fact that they have so many consumers trying to look for products there and also sellers looking to sell products there. For sure, Fiverr has a long way to go before they become “the amazon of freelancing”, but they are on their way.

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