Good day and thank you for standing by. Welcome to the Fiverr Q4 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Jinjin Qian. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the fourth quarter that ended December 31st, 2024. Joining me on the call today are Micha Kaufman, Founder and CEO; and Ofer Katz, President and CFO. Before we start, I'd like to remind you that during this call, we may make forward-looking statements and that these statements are based on our current expectations and assumptions as of today and Fiverr assumes no obligation to update or revise them. A discussion of some of the important risk factors that could cause actual results to differ materially from any forward-looking statements can be found under the Risk Factors section in Fiverr's most recent Form 20-F and other filings with the SEC. During this call, we'll be referring to some key performance metrics and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin and free cash flow. Further explanation and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the earnings release we issued today in our shareholder letter. Each of which is available on our website at investors.fiverr.com. And now, I'll turn the call over to Micha.

Thank you, Jinjin. Good morning, everyone, and thank you for joining us. As we close another year, I've honestly never been more excited by what we've achieved and how it's positioning us for 2025. We delivered incredible execution throughout 2024, capped off by an outstanding Q4 with 13% revenue growth and a 20% adjusted EBITDA margin. This puts us firmly in the elite group of companies hitting the Rule of 30, no small feat, especially at a time when our entire industry is facing macro headwinds. We executed with discipline, just as we said we would, and made steady progress towards our three year targets. We maintained a high velocity of innovation and continued to solidify our position as a leader in the freelancer economy. Our strategy is straightforward. On the one hand, pursuing quality of revenue and upmarket opportunities in the Marketplace segment. On the other hand, expanding our offerings and diversifying revenue in the Services segment. This has clearly paid off, allowing us to drive double-digit growth under macro headwinds. All of this momentum provides us with a very strong setup for 2025, where we believe we can continue to deliver Rule of 30. At the center of our success, is our freelancer community. For the past 15 years, Fiverr has always stayed true to our mission of empowering talent around the world to grow and succeed. We grow only when they grow and we succeed only if they succeed. We pride ourselves on being the most talent focused freelancing platform with the biggest and most robust global community. To give you some idea of the scale of things. In 2024 alone, we hosted about 100 community events in every corner of the world with an aggregate of over 100,000 registrations into these events. Our public forum actively…

Thank you, Micha, and good morning everyone. I'm pleased to report an exceptional quarter, with both top and bottom lines exceeding expectations. Revenue for the fourth quarter was $103.7 million, up 13% year-over-year, representing an acceleration from 8% year-over-year growth in Q3. Adjusted EBITDA for Q4 was $20.7 million, representing an Adjusted EBITDA margin of 20%, an improvement of 240 basis points from a year earlier. While we have yet to see meaningful improvements on the macro front in terms of SMB sentiment or freelancer hiring demand, we are able to deliver growth catalysts through strong execution and expansion of value-added products. At the same time, we continue to optimize the quality of revenue for the Marketplace, expanding our penetration into larger buyers and more complex projects with Fiverr Pro and Dynamic Matching. All-in-all, I'm very happy with how we delivered strong results in Q4 and throughout 2024, and I believe we are kicking off 2025 with a solid financial position and strong business momentum. In order to give more clarity on different parts of our business, starting this quarter, we will provide you with a quarterly and annual revenue breakdown between Marketplace revenue and Services revenue. Marketplace revenue represents the transaction commissions paid by buyers and sellers based on orders completed on our Marketplace. We generate Services revenue from subscription products such as Seller Plus and AutoDS, advertising services primarily via Fiverr Ads, and other services such as financial or learning tools, all of which are optional value-added services to our customers. For the full year 2024, Marketplace revenue was $303.1 million, driven by 3.6 million annual active buyers, $302 annual spend per buyer, and a 27.6% Marketplace take rate. While the overall active buyers are not growing due to macro headwinds, it is worth noting that buyers with…

Thank you. [Operator Instructions] Thank you. We'll now take the first question. This is from the line of Eric Sheridan from Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. Maybe two if I could. In terms of the new initiatives in Fiverr Go, really interesting stuff in terms of the presentation yesterday. How should we think about those types of tools and the platform evolution helping conversion over the medium to long-term, possibly resulting in better top-of-the-funnel dynamics from a growth perspective and then also conversion as well? And then in terms of what you laid out yesterday during the presentation, how much of it could put pressure on margins in 2025 in terms of incremental investments to sort of accomplish those goals around Fiverr Go or how much of that on the investment side is more behind you than ahead of you? Thank you so much.

Hey, Eric, good morning. Thanks for the question. So for Fiverr Go, Fiverr Go is actually a tool for conversion. That's the entire idea. As we know that customers these days expect instant responses and instant results. And as a result of that, we designed those two tools. The AI personal assistance which is able to answer customer questions immediately even if the freelancer is away or busy. We know that the first three minutes after a customer writes to a freelancer are the most crucial time for conversion. And this is why we designed this tool. In this tool is essentially encapsulating the entire knowledge of the freelancer and basing itself on it being able to address any possible question and bring it to conversion. Actually, it's fresh from yesterday, but we have many thousands of assistants running on the system converting customers already, which is an amazing sign. When we think about the creation model. The creation model allows customers to get the confidence that this is the freelancer, this is the style that they're looking for. Because now instead of asking the freelancer for samples, waiting for it, causing the freelancer to essentially work for free, they can get those samples right away. Now the quality of these samples is just mind blowing. The level of accuracy that these samples produce are exact match with the style of the freelancer, which gives the customer the confidence that if they played and liked it, this is the type of freelancer that they should engage with. So essentially conversion was one of the most important factors when designing these tools.

And then Eric, on the second part of the question. So obviously we have invested in this product in the last few months and we'll continue to invest in the next few months. But having said that, I think the guidance that speak for the improvement in EBITDA throughout the year take into consideration those investment already.

Thank you.

Thank you. We'll now take our next question. This is from Ron Josey from Citi. Please go ahead.

Great. Thanks for taking the questions. Just a quick follow-up on the Fiverr Go, Micha. I understand the value of the conversion -- to the conversion and the creation model. If they fit -- conversion rates fits into creation model. I wonder if you can talk to us more about category expansion. I know we're launching with around 60 categories today. Do you think this goes to all categories over time? That's question one. And then question two just on the newer cohorts. I believe in the letter, we talked about them being bigger on average spend per buyer in the first year. Want to understand what's driving this specifically? Is this dynamic matching, which I think is pretty impressive. And then any insights on year two for these newer cohorts as they are higher value, higher spend cohorts? Thank you.

Thank you, Ron. Good morning. So as to Fiverr Go, I'll say the following. First, GenAI still cannot handle every possible category. There's no technology for it. And some of these technologies we're developing ourselves. The fact that we're able to ship this basically from day one in 60 categories in my mind is mind blowing. Because you need to understand that the level of accuracy that these models need to have is something that no one has seen before. They need to stay super true to the actual creator, the actual freelancer, the talent. And one of the things that we're doing and obviously, we will continue to ship more and more categories and we do this in very high velocity. What we also introduced is the developer ecosystem. Now what we're doing with this is actually we're opening up the Go platform to outside developers. Think about it as an app store in essence. So what we're doing is, we're allowing them to develop models, APIs, workflows, but then train those models on probably the biggest transactional dataset in existence today that we hold so that they can actually help us build model that freelancers can enjoy from. And we believe that by doing so and giving those developers incentive to do so because every time they're up is going to be used for a transaction, they're going to make money out of it, this will allow us to accelerate the pace of the development of newer models for more category. Why 60 categories? Why not 600? Why not 6,000? This is exactly how we're thinking about this. So I think that the developer network can push us forward much faster, but not only for simple tasks, because we know that it is possible to create not just smart agents, but Agentic AI which can handle very complex types of transactions that sometimes require multiple sets of talent, which we all have on our platform. This is I don't think that the market still realizes the magnitude and the potential of this program. We're so excited about this and we were able to pull this off in an incredible time and we have high expectation from it.

And then, Ron, on the second part of the question on the bigger spent per buyer and the drivers behind the scenes. So I think there are multiple elements. We mentioned that several times before as we go upmarket. I think the first one is quality. The release of Pro a while ago has matured and we see more and more business contributing by this segment and then we are able to attract a better quality sellers. We launched agency product a few weeks ago of our scaling up. So generally speaking, in terms of quality, I think that the professional part of the business is growing. So that's one. Second, in terms of the product, so complex projects are being handled by the Dynamic Matching that we have released. That demonstrates really well. Just as an indication, conversion rate is higher three times or four times higher than the Marketplace. And then lastly, on the acquisition strategy, so growing upmarket means that we focus on high value buying. And we indicated in the shareholders letter that buyer that spend more than $10,000 are growing by 2% last year, which is one indication. The second is that high value buyer, those who spend more than $500 on the Marketplace grew by 7.9% last year. So going upmarket and acquisition strategy is definitely one of the driver. And then we know lastly, when we look into the category breakdown, we see more and more Programming and Tech contributing to the overall GMV. And Programming and Tech, usually a bigger project, longer projects. And I think product like the hourly that we have released a few months ago also contribute to this success. So then as just to summarize, a combination of quality projects, a complex project acquisition strategy and Programming and Tech contributing more.

Thank you, Ofer. Thank you, Micha.

Thank you. We'll now take the next question. This is from Jason Helfstein from Oppenheimer. Please go ahead.

Thanks for taking the question. So kind of a bit more on Fiverr Go. So I guess is your conclusion that no matter how sophisticated AI gets that it will struggle to bring unique or creative enough results for what effectively your buyers want. And that's why there still needs to be a human driving the creative decision. Even if the AI tools make the human more efficient and that the idea that your buyer is just people would, if the price is right, would rather pay somebody else to figure it out for them. Like, I mean, obviously, you've been thinking about this for a long time, right? We've been talking about AI for, I don't know, two years now, almost. Just like with all the iterations, is this ultimately the conclusion and kind of what's driving the Fiverr Go strategy.

Good morning, Jason. So from our experience with AI, what we come to learn is that a little bit of creation process using AI is very random. And take you through figuring out what are the best tools because there's thousands of different options around AI. And each one operates slightly differently. And you need to master each one of them and you need to become a prompt engineer. And then editing is extremely, extremely hard. Plus, you don't get the feedback that comes from working with a human being that can actually look at the creation from a human eye and give you a sense if this is actually capturing what you're trying to do. Because of these reasons and without compromising on the power of AI, because we love AI. We love the technology. We just think that there is a different way to design it. There's this entire debate about human versus AI. It's not the right question. The question is who is in the center. And we think that in order to continue motivating people to create, they should be rewarded for it. Right now, the way AI is designed, it's just sucking up whatever everyone writes, designs without giving any rewards. And our fear is that in the long run, this would demotivate people from creating, which for humanity is going to be very bad news. So there is a different way to design AI. And the way we've done it doesn't compromise to anything on its power, the opposites. It allows us or allow freelancers to design their own model in a way that rewards them but remains extremely accurate to their styles. Allowing customers to get the results they expect to get because they see the portfolio of the freelancer like this style, the style of writing or design or singing or narration. And it can get exactly this. So we think that that combination and that confidence that comes from the fact that the creator itself is always there. So if whatever AI churns out is 95%, great. There is a human being to help you cross the finish line. That is the premise under which we developed Fiverr Go and we think that this introduces a new approach and who knows, maybe other companies will follow this. And I think it's important because it will keep people in the center and continue motivating them to create.

Appreciate the color. Thank you.

Thank you. We'll now take the next question. This is from the line of Doug Anmuth from JPMorgan. Please go ahead.

Thanks, guys for taking the question. One for Micha and one for Ofer. First, Micha, just on Fiverr Go, you talked about model creation and AI assistance really being the first pieces. Maybe you can talk more about just how you envision AI agents working in Fiverr ecosystem over time? And then Ofer, just on the double-digit revenue growth at the midpoint of the '25 guide, does that suggest a return to Marketplace growth? And more importantly, what are the factors you need to see there for that to happen? Thanks.

Good morning, Doug. Thanks for the question. So when we think about the AI agents, if you look at the AI personal assistant, the very basic functionality that it provides is really handling routine tasks for the freelancer, allowing the talent to actually have more time to create, think and recharge when needed. And this is done in a very sophisticated way. Because the assistant is rich with capabilities such as being able to convince the customers of the qualities of the freelancers by showcasing them during the conversation, their portfolio schedule consulting meetings in real-time within the conversation. And actually, the assistant is aware of the presence of the freelancer, meaning is the freelancer online right now or not and can invite the freelancer in real-time if they think that the best scenario of the conversation is to hand it over to the freelancer. These are unique capabilities that we've developed that I don't know anyone who has done it before that will allow the assistant to work as a partner with the freelancer. But this is just the first step because as the assistant learns the freelancer better over time, it will start providing with business insights for the freelancer in order to grow the business. As an example, the assistant can do a research to figure out how to optimize the service page or the profile to be better positioned in search results. It might suggest to the freelancer to add certain keywords or descriptions or portfolio in order to maximize their potential. In addition, as I've said, through the developer ecosystem, we think that we can create endless amount of different agents for GenAI, so that we can actually reach this future of Agentic AI where you have agents that can actually do some complex tasks for you in an automated manner and obviously those capabilities are going to be also included in the AI personal assistants.

And then, Doug, for the second part of the question about the growth in 2025. So I think as you probably noticed, we have break the revenue into two different segments, the Marketplace and the Services, and I think while the Marketplace is tied-up with macro and GMV, where we haven't seen yet any sign or strong sign of improvement. The Services revenue line is where we are innovating and building many products to drive sustainable growth as we've seen last year. So in terms of 2024, 23% of the revenue is driven by services and we anticipate that in 2025, this portion will grow all the way to 30%. We believe that this two line of revenue approach works well. And when the macro rebound, we'll see the Marketplace go back to growth on top of the growth in the service engine. In terms of 2025, so the guidance applied for double-digit revenue growth at the midpoint and it's based on a flat small decline in GMV or Marketplace revenue, where we think that the center buyer is going to grow and compensate on active buyer declines throughout the year. While the revenue part of the business is going to grow rapidly as we release more products and as we see the existing products contributing more to the top line.

Great. Thank you both.

Thank you. We'll take our next question. This is from Bernie McTernan from Needham & Company. Please go ahead.

Great. Thanks for taking the questions. Micha, you mentioned to an earlier question incentivizing developers in Fiverr Go. Would your take rate be different in Fiverr Go? Just trying to get a sense if you're paying the developer or maybe they're paying you to be on the platform? And then on investments this year, just want to see if it's mostly sales and marketing we should be expecting or something else? And then lastly just as you think about the '25 guide, was there any impact of FX contemplated in the guide? Thank you.

Good morning, Bernie. For now, the take rates remain the same for Go. And as we roll it out and as we see usage, we will figure out what to do or what's the right thing to do. For now we treat it as a normal transaction with the same take rate. There are components where the technology itself is actually paid for, meaning, that it's an additional subscription line that comes to us from providing these tools, these AI tools to our community. But once we have more history with it, we're going to be able to know what's the best strategy around it. For now, I think that it creates, it incentivizes sellers to have those models up. And I think that the contribution to their conversion is going to be noticeable, which will make the entire Marketplace more efficient and because it gives instant our results and involve AI, I think that this will also allow us to influence top of funnel even more which is one of the areas where we're focused on.

And in terms of the investments and the Forex, so there is no material change in the way we invest throughout the year. I think there is some heavy lifting at the beginning of the year on the release of Go, as you probably have seen, a very exciting product that we have released yesterday. I think we'll continue to invest in certain marketing in the most and best efficient as we have done before with a strong TRY. And lastly on the Forex exchange, as the prices on Fiverr are based on US dollar, there is no impact on the top line. In terms of Forex and we are well hedged in terms of the OpEx to cover for any material impact on the EBITDA as well.

Great. Thank you. Appreciate the color.

Thank you. We'll now take the next question. Thisis from Marvin Fong from BTIG. Please go ahead.

Good morning. Thanks for taking my questions and congratulations on the launch of Go. It's a pretty exciting product. I'd actually like to drill down a little bit on what Ofer was saying. It seems like if services is going to be 30% of your revenue, then you're looking for very strong growth, something by my math around 45% next year. I was just curious how much of that should we or could you break down how you think about the contribution from your value-added services for fiscal '25 between ad products? And in particular, how much is the subscription revenue from Fiverr Go impacting that outlook? And then just separately on the Marketplace take rate, should we view that as being a stable in fiscal 2025? Are there any levers that you can pull to change that? Thanks a lot.

So on the second part of the question, yes, there are leverage we can pull, but the guidance does not assume any such -- any change in the Marketplace take rate. In terms of the Services revenue, I think, we haven't broke it beyond the services itself. There are multiple products that contribute to this line item. All the way from Seller Plus which is the subscription to promote the gig which is ad advertising and the Marketplace. We have a Kickstarter that goes to subscription. We have the AutoDS, that's implied for subscription as well. And we have the Go that we just launched that we've had some subscription as well so that just this is kind of the breakdown between subscription and services that apply for the 30% revenue.

Got it. Thanks a lot, Ofer.

Thank you. We'll take our next question. This is from Andrew Boone from Citizens. Please go ahead.

Thanks so much for taking my questions. I wanted to ask on the Services side. There's certain heuristics that investors use in terms of thinking about a ceiling for the percentage of advertising as a percentage of GMV. Can you guys talk about that? Like how do we think about advertising and whether there's a potential peak for what you guys are able to monetize the platform via advertising ads? And then secondly, as we think about Fiverr Go and AI creating more of the actual work, can you help us understand kind of theoretically, how do you think about that as a deflationary aspect as technology is doing more of the work versus the freelancer? How do we think about that? And then clearly you're starting to monetize that product. As Fiverr Go continues to improve, how do we think about Fiverr's ability to take more of that aspect as your own software and AI models are helping freelancers do more? Thanks so much.

On the first part of the question, the percentage of advertisement or the room to expand. So definitely a lot of runway ahead of us. This product is just evolving over time. There's a lot of real estate that we haven't monetized and our Go improvement which are undertaking so feel very confident and expect this product to extend.

And on a question on Go, first of all, it's very early to tell, but the idea of Fiverr Go is really that, the talent that actually creates their model is basing this model on their entire world of creating. They need to continue creating to fine tune this model and create new models. There is no incentive for them to give it for a very cheap price. Plus it is always connected with human work that is included in the order where they define the price and the scope of editing that they add to anything that is generated. So while it remains to be seen how they're going to price it, what we think should happen is that because their work is involvement and their investment in the model is included that this would not put a meaningful pressure on pricing.

Thank you.

Thank you. We'll now take our next question. This is from Josh Chan from UBS. Please go ahead.

Hi, Micha, Ofer, thanks for taking my questions. I guess my first question is on the lag between SMB and the results of Fiverr, I guess as you are aware, some of the SMB sentiment has improved somewhat in the recent months. And so I was just wondering your thoughts about how that ultimately translates into Fiverr from a timing perspective. And then my second question is on Services revenue. Is there any notable seasonality within Services? I'm not sure if AutoDS has a major Q4 weighting, but just some color on how Services kind of weighs through the year would be helpful. Thank you.

I think we have noted earlier, we don't, we haven't identified or seen any sign that suggests a trend. There are some fluctuations throughout the week, but I think it's too early for us to close our trend of improvement in the SMB sentiment. And then on the seasonality, so the answer is pretty flat or straight line behavior over the year. There is no significant seasonality that we can notice.

Great. Thank you for the color.

Thank you. We'll now take our last question today. And this is from Rohit Kulkarni from ROTH. Please go ahead.

Hey, thanks for taking my questions. Couple. In this upmarket demand, clearly, strategy is working. Perhaps any more color you can provide on what are the categories of kind of products and projects that you're getting that are unlocking new verticals for you and over the near-term, any learnings from the last 18 months that you can help kind of accelerate some of the growth that you're seeing in upmarket demand? And second would be just on this Freelancer Equity program. Any sounds very interesting and to incentivize freelancers, but perhaps talk about the genesis behind it, why now? And what do you hope to achieve from that? Thanks.

On the first part, as I mentioned earlier, I think that Programming & Tech is getting a bigger piece of the cake. And I think this is driven by acquisition quality, but also product like Dynamic Matching which is doing really well as I mentioned earlier on the call.

As to the question on the Freelancer Equity program, we're very excited about this program and we've been wanting to do this for a while. This program is designed for top performers on the platform. And in our mind, those are extremely loyal and are building meaningful businesses with us in helping us shape the future of work should have the option to own a piece of it. And obviously, we're going to have the details of the plan announced in our F3 filing soon. It's an industry first as a public company and we're very excited about this and we know that our freelancers are extremely excited about this.

Thank you. And there are no further questions. So I will now hand back to the speakers for any closing comments.

Thank you, everyone, for joining the call today, and thank you, Sarah, for moderating the call. I wish all of you a great day and hope to see you soon.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.