FIVERR Q2 report - lowers guidance

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Fiverr (FVRR) reported on their Q2 earnings pre-market today.

From their press release:
* Revenue grew 60% y/y in Q2

* Providing Q3’21 guidance and updating FY’21 guidance: We are updating our full year guidance based on the incremental trends we have observed since the second half of May. People are traveling more and taking more vacations and spending less time online as many parts of the world reopen, which has impacted our financial outlook,

Nervokid: So, they are now projecting 30-38% growth y/y in Q3, and 48-52% growth y/y for the whole fiscal year. Last quarter they had updated their previous guidance of 46%-50% YoY growth for the year, to a much more positive 59%-63%.

I guess part of the problem was all this enthusiasm last quarter, that has now fizzled out.

Full release here:
https://investors.fiverr.com/press-releases/press-releases-d…

Updating the financial data tables, we get:
(Q3 and Q4 data for this year according to their guidance)


**Revenue $M	Q1	Q2	Q3	Q4**
FY18	        -	18.4	19.6	20.7
FY19	        23.8	25.9	27.8	29.6
FY20	        34.2	47.1	52.3	55.9
FY21	        68.3	75.3	*72	72*
yoy growth	99.7%	59.9%	*37.7%	28.8%*



**Revenue QoQ %	              Q1	Q2	Q3	Q4**
FY18	                   -	       -	6.6%	5.7%
FY19	                   14.7%	9.1%	7.3%	6.5%
FY20	                   15.5%	37.7%	11%	6.9%
FY21	                   22.2%	10.3%	*-4.4%	0%*



**Active Buyers (Millions)	Q1	Q2	Q3	Q4**
FY18	                        -	1.9	2	2
FY19	                        2.1	2.2	2.3	2.4
FY20	                        2.5	2.8	3.1	3.4
FY21	                        3.8	4		



**Avg Spend per buyer ($)	          Q1 	Q2	Q3	Q4**
FY18	                         -	135	141	145
FY19	                        150     157	163	170
FY20	                        177	185	195	205
FY21	                        216	226

Stock price is down -20% in the premarket, ~$183.50.

I know we shouldn’t get attached etc, but FVRR is now my oldest buy, and that’s less than a year ago, so I’ll admit there’s some sentimentality here when thinking of this company. Pains me to say I think I’m selling my ~4% position, given the lowered guidance. Maybe revisit if the story changes for the better.

  • Luis
20 Likes
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I sold all my shares this morning. While I still think what they are doing is innovative and interesting. The slowdown in their business is just too much for my posrtfolio and I think they are better places to put my money.

19 Likes
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Do the same thing and switch 80% of fund to ZI.
I still think FVRR is a unique idea and really will turn the Z gen work style.
But this ER I got a Flag between yellow and red. They are an Israel company so they had vaccinated for very early time beyond whole world. So they SHOULD know for sure COVID schedule (mostly). But they raise their guidance last ER and lower it next ER. Their excuses not been acceptable for me.
I still love their work and also their MC so little thus they got plenty of room to run. But I just saw many tough comps Q after. So I decided exited.

Best

Rick

5 Likes
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Hello,

I’m relatively new to this board and have been doing my best to learn how to properly analyze earnings reports. I’m wondering if there’s a lesson to be learned with two of the earnings releases this morning: Fiverr and Datadog.

Datadog is a board favorite. It’s classic Saul Stock, high revenue growth, good gross margins, improving cash flow, etc. It’s SaaS and so it has recurring revenue. It seems more “downturn proof" from outside macro forces.

Fiverr on the other hand is owned by some on the board, but I would say not a Classic Saul Stock. It’s definitely an interesting company, and it is many ways a good company. It had very high revenue growth and good gross margins. However, this business is reliant on people actively and continually going to the site, posting their jobs, and looking for freelancers, etc. It’s very much reliant on a certain type of economic environment that can change at any time.

Would it be fair to say this is a good generalization of the differences between what some might call the “classic Saul stock” and some other high growth companies that are not quite as widely embraced on this board?

I understand this is probably an oversimplification, but I’d like to hear what others have to say.

Thanks to everyone for posting their thoughts on this board, it’s been very helpful to me as an investor.

TK

5 Likes
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I try to leave emotions out the door with investments, but this was the most frustrating earnings release for me to read since the Fastly debacle. I truly did not see this coming, and would appreciate someone’s perspective who anticipated this disaster so that I (and others) can improve our anticipation of surprises like these. Let’s recap what happened:

In February, Fiverr announced fourth quarter results. If we follow the numbers, it was a great report.

  • Revenue growth: +89%
  • Active buyers: +45%
  • Spend per buyer: +20%
  • Take rate: +50 bps
  • Gross margin: +330 bps
  • FY2021 guidance of 46%-50% revenue growth

Three months later, Fiverr announces their first quarter results. Again, we get a great report:

  • Revenue growth: +100%
  • Active buyers: +56%
  • Spend per buyer: +22%
  • Take rate: +10 bps
  • Gross margin: +310 bps
  • Increased FY2021 guidance to 59%-63%!!! This was a massive indication of management’s confidence on the business for the coming year

I was surprised at the resiliency of the business after “peak Covid”, especially compared to other peak-pandemic plays that faced deep slowdowns, such as Etsy. Fiverr was showing consistent acceleration across its key metrics, and management echoed this sentiment.

And now today, just three months later, we get guidance reverted back to 48%-52%??? I understand that we’re living in a very unpredictable environment, but I think this was a very poor miscalculation that sent the wrong signal to their investors. Raising guidance by 20% to later go back and decrease it by 7% is inexcusable in my eyes.

I skimmed last quarter’s transcript again to try to read through any indications of a potential slowdown, and I only found the opposite, as summarized Kaufman (CEO): “We took Fiverr public less than two years ago. This year, we are going to be about three times larger while growing approximately 50% faster. All of this is reflected in the significant upward revision of our 2021 revenue growth rate guidance of 59% to 63% compared to our previous guidance of 46% to 50%. We are confident and highly bullish on the ability to deliver and execute on our goals. We are just getting started.”

On today’s earning call, we get a totally different sentiment by Kaufman: phrases like “we need to consider the tough comps” “to be prudent, we need to adjust guidance” “we see some near-term fluctuations in our marketplace” “unprecedented nature post-pandemic hyper seasonality” “we don’t know how long this unusual level of seasonality is going to last” …and long-winded answers on how Israel was ahead of the curve with vaccinations, and the delta variant changed things, etc.

It’s almost like reading the transcripts of two different companies. For what it’s worth, I immediately sold all of my deeply underwater shares.

-RMTZP
Protect the identity of this board and maximize your learning https://discussion.fool.com/for-board-newcomers-and-oldtimers-34… before participating.

40 Likes
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RMTZP

I think this sums it up perfectly. What a change in sentiment and language used. I fell for it, Q1 earnings call was just dripping in positivity and it looked like Fiverr wasn’t a covid stock.

I will be keeping a close eye on them as I think they are nicely placed to capture the tailwinds of remote/freelance but I’ve definitely lost confidence in management. Yes, they will be worth a lot more in years to come, but I think they’re going to struggle in the next couple of quarters.

I’ve sold all my shares today.

9 Likes
7

I try to leave emotions out the door with investments, but this was the most frustrating earnings release for me to read since the Fastly debacle. I truly did not see this coming, and would appreciate someone’s perspective who anticipated this disaster so that I (and others) can improve our anticipation of surprises like these.

I also opened a smaller but good sized position recently based on the strength of the recent quarter and optimistic outlook. I honestly don’t think it was foreseeable from the outside.

And now today, just three months later, we get guidance reverted back to 48%-52%??? I understand that we’re living in a very unpredictable environment, but I think this was a very poor miscalculation that sent the wrong signal to their investors. Raising guidance by 20% to later go back and decrease it by 7% is inexcusable in my eyes.

I agree with this overall sentiment. This may be a sign of management that has a poor grasp of business trends. Or it could be a sign of the very unpredictable macroenvironment. This is a definite possibility given the unique situation of a subsiding pandemic. Regardless, it undermines any confidence in management’s outlook and projections. This creates significant uncertainty which the market typically hates, resulting in a lower stock price for now. In this case, the lowered outlook for the entire year suggests that there is unlikely to be a short term catalyst. So it’s likely to be dead money or a deteriorating position.

Given this scenario, I also sold my shares. And I moved the capital into a couple of my other positions (ZI and LSPD) where trends and market sentiment are favorable at this time.

FVRR does seem to have a great business model and is a leader in its niche with a large exciting opportunity ahead. So I will keep it on my watchlist and consider investing again once the dust settles and the outlook is clearer.

Dave

5 Likes
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Didn’t necessarily see this coming via the numbers, but sort of felt it coming.

For a while now my conviction on FVRR has been steadily dropping. The numbers looked good as you say but I wasn’t convinced it could continue as the world began to “open up” again. I felt like growth would definitely stall for at least some period of time. I was questioning this to the point that I considered selling it all earlier this week, but did not.

And now today, just three months later, we get guidance reverted back to 48%-52%??? I understand that we’re living in a very unpredictable environment, but I think this was a very poor miscalculation that sent the wrong signal to their investors. Raising guidance by 20% to later go back and decrease it by 7% is inexcusable in my eyes.

Perhaps I’m oversimplifying this but to me this is a sign that management either can’t see what’s happening in the business or chooses not to. And either option shakes my confidence. If I can see something that the CEO can’t, that’s a problem.

I did end up selling my entire position (~4.5%) this morning which resulted in almost 1% hit to my whole portfolio. That hurt, but I did learn a valuable lesson. When you start to lose confidence in any position take the time to really investigate why you’re losing confidence. There may be something there that isn’t showing up in the numbers, yet…

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When you start to lose confidence in any position take the time to really investigate why you’re losing confidence. There may be something there that isn’t showing up in the numbers, yet…

Excellent advice.

Yet there were no clues as to what was coming at least as far as I can tell. I see their press releases and they all were positive and reinforcing of my initial evaluation of their prospects.

My impression FWIW is that the TAM for gig workers is not what FVRR projected. I don’t really know. As soon as I saw the drop in guidance I sold out. Since FVRR was 6% of my holdings and it dropped 20% the decline represented about 1% of the portfolio. I netted about 8% on the initial investment.

The only indication I had that something might be amiss was a feeling that the stock was erratic and not moving along with the other service stocks…but nothing solid.

As they say stuff happens.

cheers

draj

1 Like
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No skin in the game, but was following as a potential buy.

My theory is that FVRR was providentially positioned for the COVID pandemic; during the large lay-offs, it was one of the few fall-back options available to workers to keep the lights on while looking for steadier employment.

As companies slowly adjusted to the new norm of telework, there were more remote jobs with consistent hours, pay, and benefits…intermittent freelance jobs became less appealing.

2 Likes
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Thanks to Saul, we know that the right time to sell is as soon as the narrative changes. What was Fiverr’s narrative?

Fiverr’s narrative was one of accelerating, predictable growth. In Q1 2021, they grew revenues 22% sequentially, making it their strongest Q1 of all time. For the six quarters leading up to and including Q1 2021, they had beaten their guidance every single time by an average of 9%. That’s what prudent management does. Guidance given by great companies is an excellent “floor” for what revenue should beat (not just match) 95% of the time. Guidance should not be made lightly, and it should only be raised with great confidence.

Fiverr raised their full year guidance to 63% at the high end at the end of Q1. Since they had always beaten guidance, I expected this number to be beaten. I expected possibly 70% revenue growth or more for the year. Now, Q2 has finished, and they yanked guidance back down to 52%. They also just barely beat guidance for the current quarter and guided for a very weak 38% YoY growth for Q3, or -4% QoQ.

What does that tell us? It tells us Q3 is going poorly. It tells us there is uncertainty in the business. It tells us they played fast and loose with their guidance, having misread their business just one quarter ago. It tells us that Fiverr has gone from a business that was accelerating rapidly to one that is in a deceleration, a deceleration that may continue.

Now, let’s look at Fiverr’s excuse as written in the conference call:
Like many of the companies which reported their Q2 in the past 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 adjusting guidance for the fiscal year 2021 based on these incremental trends over the past few weeks.

I think if I paraphrase the above quote, I land on something like “people are tired and went on vacation”? I’m sorry, but this just sounds like a bad excuse. A bunch of people going on vacation should not be able to tank their business that much. And if it can, it tells us Fiverr’s business is weaker than previously thought.

And more:
“But what we are seeing is what we call hyper-seasonality. That is as a result of the long lockdown, online fatigue, summertime, school holidays, people just need time out-of-home now more than ever.”

So it’s hyper seasonality? Let’s see how much truth is in that. For Q3 2021, they are guiding for $72m, which is -4% growth QoQ or 38% YoY. Last year’s Q3 saw growth of 11% QoQ or 86% YoY (remember that Q3 2020 YoY results are heavily skewed by the strong covid quarter, which was Q2 of 2020). 2019 Q3 saw growth of 8% QoQ and 40% YoY, while 2018 saw growth of 11% QoQ (I don’t have YoY numbers for that far back). So for QoQ in Q3 from 2018-2021 we have 11%, 8%, 11%, and now, -4%. Seasonally, they usually make around 9% QoQ growth in Q3. Clearly -4% is way worse than any Q3 we’ve ever seen. How would this be considered hyper seasonality, or even just seasonality? To me, it’s just a bad quarter. And as far as guidance goes, they have never guided for anywhere near as low -4%. Before this, their weakest guidance ever was positive 3%.

I had written previously that, due to its market place business model (as opposed to my favorite business model, SAAS), Fiverr would never be a big position for me. Luckily I held true to that and collectively it was just a 5.5% position.

Bad guidance can be adjusted and trust can be won back in time, but in my opinion the bigger issue is just that management doesn’t have a good handle on the business. And the business is flimsier and not as consistent as I thought. If the excuse seemed reasonable and temporary, I would be a bit less inclined to sell. The excuse does sound temporary (hyper seasonality / people on vacation), but it does not sound reasonable. I simply don’t buy it.

Should another global-ish lockdown happen, Fiverr’s business could thrive again. And without another lockdown, the business might turn around and reaccelerate. But why invest in Fiverr, which has fresh question marks attached to it, when there are a dozen other companies in my portfolio with growth as good or better and far fewer question marks!

You can’t predict the future, but you can interpret the present. For that reason, I sold out entirely.

69 Likes
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I don’t think this was easy to spot in the numbers but FVRR lacks one quality that the board favorites tend to have: a subscription based model where customers commit to long contracts. In essence the companies lock-in future revenue so a sharp decline is somewhere between unlikely and impossible.

Sell your customers additional services (“land and expand”) and you get a dollar based net expansion rate >100 aka growth.

Throw in acquisition of new customers and you accelerate growth further.

FVRR doesn’t have this business model. In contrary, it’s a rather flexible and enables sharp short-term declines if the customers see fit to reduce their spending.

3 Likes
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, it’s a rather flexible and enables sharp short-term declines if the customers see fit to reduce their spending.

On the other hand, this model invites more customers to try out the services. Low entry hurdle, low exit hurdle. Lots of volatility to be expected, but this volatility says more about the economy than the company. Since the Saul way is never to hope they get better, but follow the actual numbers for the next quarter or two, this certainly is no longer a fitting stock here. Different view in one of the services I follow here.

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I truly did not see this coming, and would appreciate someone’s perspective who anticipated this disaster so that I (and others) can improve our anticipation of surprises like these. -RMTZP

I just want to close this thread with a quote that David Sachs said over the weekend which helped me reflect over the Fiverr incident.

“One of the reasons why we like SaaS and marketplaces is that they’re very milestone-based. You show incremental progress. If we’re going to do a Series A, we need to see some revenue…if we’re going to do a growth round, we need to see more revenue and more customers. The amount of money you raise and the valuation you get, scales with the amount of proof that you have delivered to investors about the company. And the crazy thing about these spectacular implosions is because these entrepreneurs can tell a story, and people seem to suspend belief and don’t demand proof for years and years.”

Even though he was speaking about private companies, I think this point is very relevant to the Saulesque way. Some folks were able to foresee the challenges that Fiverr would have as the economy recovers, but some (like me) didn’t. These challenges didn’t appear in the numbers, so it’s not like the ones that didn’t foresee the challenges made a mistake.

It may take years of experience to have the vision that some of the leaders have here to get out of positions as soon as they intuitively feel a change. And its OK for us to accept that doing this is very difficult. But when there is tangible proof that there are underlying issues with the investment thesis (e.g. Fiverr), it’s time to interpret the present and make a decision (as ExponentialDave mentioned). A failure to make a decision of that point would be a mistake. Saul reminded us recently about the consequences of not making the right decision during these moments (post 78599).

We get a peak into how each of our businesses are doing on a quarterly basis, and we’re lucky enough to count on this board to elevate our interpretation on these “proofs.” It’s crucial to remember that the allocation of our capital is dependent on the amount of proof that we’re delivered about our companies.

I think we’ve said enough about Fiverr’s report, so no need to add to this topic anymore - but I hope this quote is also helpful to others.

-RMTZP
Protect the identity of this board and maximize your learning https://discussion.fool.com/for-board-newcomers-and-oldtimers-34… before participating.

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