Good morning, and welcome to the Fiverr Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Emily Greenstein, Investor Relations. 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 31, 2025. Joining me on the call today are Micha Kaufman, Founder and CEO; and Ofer Katz, President and CFO. Before we start, I would 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 and our shareholder letter, each of which is available on our website at investors.fiverr.com. And now I will turn the call over to Micha.

Thank you, Emily. Good morning, everyone, and thank you for joining us. Let me start simply, 2025 was an execution year, and we delivered. Revenue grew 10%, accelerating from 8% in 2024. Adjusted EBITDA reached $92 million, up 23% year-over-year with a 21% margin. We met the revenue and profitability targets we set at the beginning of the year while continuing to generate strong cash flow. Importantly, we achieved this while repositioning the business for where the market is headed. Products like Dynamic Matching and managed services are enabling us to expand into larger, more complex projects and drive sustainable wallet share growth. Spend per buyer increased 13% year-over-year, accelerating from 9% in 2024. Buyers spending over $10,000 annually grew 7% and GMV from projects over $1,000 increased 23%. These are not just product milestones. They reflect a broader shift in how businesses engage with talent. As many of you saw in the shareholder letter we published this morning, following the restructuring we undertook a few months ago, we have since developed and begun executing a comprehensive multiyear plan to transform Fiverr from a transaction-oriented marketplace into a trusted work platform, one that enables businesses, AI models and agents to collaborate with talent on complex, high-value outcomes through intelligent matching, integrated workflows, end-to-end orchestration and fulfillment and durable trust. Before I go deeper into that transformation, it's important to step back and understand the broader environment that led us here and why we believe this is the moment to act decisively. There's a prevailing narrative that AI eliminates labor. That framing is incomplete. What AI actually does to work is, one, it compresses task duration. What took weeks now takes days. Two, it expands project ambition. When execution becomes cheaper, scope grows and the number of projects grows exponentially. Three,…

Thank you, Micha, and good morning, everyone. I'm excited about the transformation we are undertaking and very happy to welcome Esti and Jinjin into their expanded leadership role. The work ahead is ambitious, but across the management team and the broader organization, there is a strong alignment, clarity and conviction on the direction we are taking. Most importantly, there is a shared sense of purpose that ties us back to Fiverr's founding 16 years ago. That shared sense of purpose brings tremendous focus, energy and confidence as we enter 2026. With that, let's turn to financial highlights. As we wrap up 2025, we delivered fourth quarter revenue of $107.2 million, up 3% year-over-year, while achieving record adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA for Q4 was $26.5 million, representing an adjusted EBITDA margin of 25%, an improvement of 470 basis points from a year earlier. We continue to generate healthy cash flow with $21.8 million of free cash flow in Q4 '25. We had a convertible note with a principal amount of $460 million, which was fully repaid during Q4 '25. We continue to execute a disciplined, thoughtful capital allocation strategy, and our strong balance sheet allow us to invest in growth, return capital to shareholders and remain opportunistic on the M&A front. Diving into our Q4 results. In Q4, marketplace revenue was $71.5 million, driven by 3.1 million active buyers, $342 in spend per buyer and a 27.7% marketplace take rate. Growth in this segment continues to be influenced by broader softness in the SMB sentiment and muted freelancer hiring demand. More importantly, we continue to see diverse trends on the marketplace between low-end transaction and high-value work. GMV from transaction over $1,000 grew 22.8% year-over-year in Q4 and continued to accelerate. Looking ahead, we expect elevated volatility…

[Operator Instructions] First question comes from Ron Josey with Citi.

I had 2, please. Micha, you talked about an execution plan around matching product, go-to-market and operations. And given the progress, I think, that we've seen around managed services and Dynamic Matching, just talk to us about how you see these investments in those 4 core areas sort of unfold? Meaning do you have more work to do on the product before we start investing in enterprise go-to-market? Any insights there would be helpful as we think about this multi-quarter transition. And then Micha, over the balance sheet, we ended the year with approximately $300 million in cash. I know we've mentioned M&A a few times on the call and Ofer's new role. Talk to us about what you're looking for maybe on M&A or just overall capital allocation.

Thank you, Ron, for the questions. So essentially, the way we're thinking about the investment is really to deprioritize low-end and low-value transactions and focus most of our investment in high-end, high skilled, larger scope projects, a segment that is currently under 15% of our revenues, and we think it should and it will contribute much more to bring us back to GMV growth. That's what 2026 is all about. It's about making that turn so that 2027 and beyond will be growth years. Now bear in mind that the nature of the transactions that are happening on our platform are changing. And we're running a platform that has been built over 16 years. Some parts of it need to be rebuilt. Some parts of it need to be reinvested in and aligned into this new reality. As I've said in my opening comments, the matching portion of it has to deal with the more nuanced needs of businesses today. So we need to calibrate this and make sure that we maximize the usage of our very deep data assets in order to do this. The same goes for product. When we think about the entire matching and fulfillment management, we need to understand that larger projects require more sophisticated fulfillment and collaboration and matching capabilities, also understanding that on the demand side, we may not just see companies and human beings, but also AI agents that can actually take care or find benefit from using our platform. When we think about go-to-market, again, in this case, we are expanding our go-to-market flywheel. So first of all, is the high-value projects of work. And then there's the aspect of AI native use cases. And I've given a few examples in my opening comments in our letter to shareholders where we see more and more businesses and foundational companies that are building more AI models and more agents and all of them require human in the loop to continue calibrating, ensuring their security, their integrity and overall being able to make them customer ready. And we're seeing more businesses that are coming to Fiverr because we probably have the largest and widest scale talent in the world on our platform. And so adjusting for all of these new needs will help us accelerate that portion or that segment of the market, which we feel is the most durable and most sustainable to ensure that we can continue growing for many years ahead.

Ron, on the M&A front, I will start by saying that we have $300 million, but the amount of cash is growing and expected to grow throughout the quarters. And then we continue to be highly disciplined in the way we utilize this cash, looking for tuck-ins and then large transaction at the same time. Of course, we're looking to going up market and any M&A should support this high end and flywheel, as Micha mentioned earlier.

The next question comes from Eric Sheridan with Goldman Sachs.

Just want to come back to the theme of deprioritization of the lower end as you realign the platform. How should we think that manifests itself in financials as we move deeper into the year? Are there any elements of things that will impact the OpEx line as you sort of pare back investments in the lower end of the market or elements where there could be more volatility than usual as we think about either the first half versus second half dynamic as you sort of reposition the business for the longer term?

Eric, thanks for the question. So when we think about the deprioritization, it's really to ensure that the majority of our resources are directed in growing the segment that, as we demonstrated, have grown significantly over last year and make sure that it becomes a much larger portion of our market. As a reminder, when you look at the low skills and small scope, a lot of that is being replaced with AI solutions. And still, that is a large portion that contributes to Fiverr growth. In that segment, we are seeing a decline. And we've been talking about this, and we don't foresee that, that decline is going to slow down. The assumption is that with the newer developments around AI, this will continue to be the case. And so that centralization in our business has to change. And therefore, we're shifting those resources into ensuring that the high-end portion of our business that has been growing will become a larger portion of our overall GMV contribution. That is extremely important, and we want to make sure that we put every available resource towards that. But we're very committed to execute this transformation with very high degree of financial discipline. So we're going to protect the core business to continue generating healthy cash flow. And we talked about the structural profitability of core business to stay north of 20%. I hope this answers your question.

The next question comes from Bernie McTernan with Needham & Company.

Maybe just 2 for me. How should we expect the margin profile of the company to look after Fiverr Forward is done or completed or some progress on? Is this going to be a higher-margin company or a lower-margin company than before? And then how does Fiverr Go fit into this? Are you seeing Fiverr Go help higher-value transactions already? Or just interested in terms of -- if this is still a key product going forward?

I think on the margin profile, so we are going to see some lower margin in terms of EBITDA in the short term. We anticipate the long-term EBITDA to go back to the 25% long-term EBITDA shortly after. In terms of gross margin, I think it's going to remain the same. It's all about the profile of investments, investing a little bit more into R&D, which is why we anticipate some pressure on the margin in short term.

Bernie, on your question about Go, so essentially, a lot of what we built into Go has already been integrated into several aspects of our product. And when we talk about the investments that we're doing in the product side as one of the pillars of this year, a lot of what we've taken from Go and how it can help buyers and sellers communicate more effectively, scope their work, the nuanced understanding of exactly what they need and what is the most suitable talent for the task is going to be integrated further into the product. So we're not we're not focusing on Go as a product by itself, but actually taking the assets that we've developed for that project and integrating them into the customer experience.

The next question comes from Jason Helfstein with Oppenheimer.

This is Chad on for Jason. It seems like you're taking one step back for kind of 2 steps forward. You're cutting a lot of costs out of the business with the restructuring. Is that having a bigger impact on revenue in '26 than maybe you previously thought? And then how should we think about OpEx growth in 2026? Do you have to invest more in the business or -- that's it.

Thanks for the question, Chad. So on the first question, the answer is no. The revenue is not impacted by restructuring. It reflects the ongoing trends on the marketplace, meaning lower end versus higher end, lower end seeing a decrease, higher end seeing an increase. And again, going back to our strategy, the entire idea is to double down on high end and make it grow faster and make it become a more meaningful contributor to our GMV growth. We've been talking about this for a couple of quarters. What we've seen is an elevated sense of urgency to move faster, which is why a lot of the strategic -- the multiyear strategic plan that we have is all about that. And we said that once the high end is going to become a more meaningful contributor to GMV, GMV will go back to growth. And again, we're seeing this with double-digit percentage growth in transaction over $1,000. And so we're doubling down on that. So again, the reflection is just ongoing trends of what we're seeing in the low scale versus high end.

Then on the second part on the OpEx, I think that -- we think that the core business will continue to deliver a 20% plus margin. The portion of what we will reinvest into the business on the transformational work.

The impact of that is going to be around 2 percentage points. And I think it's also worth noting that due to recent appreciation of Israeli shekel to U.S. dollar, FX have added over $10 million of headwind on EBITDA -- on EBITDA guidance for the year.

The next question comes from Marvin Fong with BTIG.

Congrats to Jinjin and Esti. My first question, you talked about returning to growth in 2027. And I just wanted to understand that commentary a bit better. So are you expecting the high-value work to reach a majority of the marketplace by 2027, even in maybe a single quarter of 2027? Or when do you actually expect the majority of the marketplace to be high-end work? And then I have a follow-up.

Thanks for the question. So there's a GMV mix shift. High-value growth will continue to grow and become a bigger portion of the total market base. And this will lead to GMV inflection. And as we said both in the letter to shareholders and in the opening comments, that change is also going to allow us potentially over the year to start giving the market, the signals that we're seeing. Right now, the metrics that we're reporting is going to remain intact. But over time, we want to put more emphasis on what's strategic and what we feel is going to drive the sustainable growth of the business over the coming years. We haven't guided specifically for that, and we're not talking about percentage. And mathematically, even before it gets to the majority, it will drive GMV growth. But this is the plan, and we expect to see signals over the coming quarters to let us know that the investment there is actually accelerating the growth of that segment.

Got it. Okay. That's great. And then my second question, I would just like to double-click more. I think you mentioned or we've been talking about go-to-market and distribution channels. And so I'd like to talk about both enterprise a little bit more. Is there anything structurally you're doing to either the offering or the way you intake enterprises or approach enterprises that's going to change maybe a more formalized enterprise segment? And then in the shareholder letter, you talked about one of the measurable signs of progress would be one -- at least one AI native distribution channel contributing to GMV. I just would love to understand, is that a specific partnership you're developing there? Or do you just kind of expect the growth of those channels for at least one of them, presumably ChatGPT or Gemini to just naturally become a large distribution channel for you?

Thank you. The reason why we didn't call out specifics was deliberate. But it's -- the expectation is based on existing proof of concepts that we're having with AI model companies and enterprises, and we believe that when the product can deliver their needs at scale, this could be a very strong contributor for the growth. And so when we think about in the same aspect on our enterprise. And we've given some qualitative examples, again, both in the shareholder letter and in the opening remarks, and I've called out the example of the partnership that we have with an AI model safety company to provide domain experts who help identify vulnerabilities in foundational models. And in another partnership, enabling enterprise to build AI workflow automation through white label solutions that allow them to deploy AI agents quickly and cost effectively. And again, this is all a part of the fact that AI enables many more businesses to build more and to build more ambitiously. Along with that building, there's a lot of support that they need. There's a lot of calibration and fine-tuning. There's very specific types of expertise that are required to take those products and those solutions and make sure that their integrity is high. They're coming to us with it, and we believe that we can create meaningful flywheel around these opportunities.

The next question comes from Nat Schindler with Scotiabank.

Yes, Micha and Ofer, can you help me understand -- I'm a little confused. I understand deprioritizing the lower end of the market. But I'm trying to figure out, is there any products you're not going to actually even be selling, any services from your service business that you're just not going to sell to them anymore? Because I'm trying to understand why you think revenue will get worse as the year progresses. So your revenue declines exceed as you go down as you go forward. I understand investing it might take a little while to turn -- to really build the enterprise business further. But I'm trying to understand what you're seeing in quarters 2, 3 and 4 that make them worse than quarter 1 on revenue.

Essentially, we're not killing any of our products. It's -- what we're mostly deprioritizing is the continuing optimization of these products in favor of developing the types of product experiences and the underlying technologies and infrastructure to address the higher-end project. So this in and of itself should not be a driver for decline. And it's not about the types of services or products that we're discontinuing because we're not discontinuing anything. We're just making sure that after the restructure, we have the vast majority of our resources to invest in the higher end and higher skilled types of services for the larger types of customers that are spending more with us and accelerate the growth that we're seeing there even further.

Okay. I still am a little unclear on them what signal you're reading that things are going to decline more in the back half of the year than in the front half.

So we've seen some decline in simple services across the board. There are areas where we're seeing slightly higher decrease than others. For example, within programming, we're seeing the simple side of programming, things like simple website building, accelerating the decline as a result of vibe coding and simplistic types of coding-related solution. But on the same side, we are seeing areas where we're seeing growth, like digital marketing is one of them where we're seeing nice growth in services. So the idea is not to discontinue anything. And by the way, we've called out these changes over the past few quarters. As an example, writing and translation was heavily impacted by AI, down 20% over the year. And we've seen this for a while. We've seen the same under the vertical music and audio is also impacted, but slightly less in the teens range, primarily because voice over is a meaningful portion of the music and audio vertical. So there's anecdotal areas. Again, the decline that we're seeing there is mostly in the very simplistic low skill related types of services. And this is not our focus now. That transformation is going to continue happening, and that's fine. The function that we're focusing on is the one-of-a-kind way for us to deal with high-end, high-value transactions, utilizing all the data that we've collected over the past 16 years and the incredible talent bench that we have with us today.

The next question comes from Josh Chan with UBS.

Sorry about that. Apologies for that. I guess maybe following up on the prior question a little. I guess if you take your full year guidance, it's less than 4x your Q1 revenue guidance. And so I guess what's the -- conceptually, why does the rest of the year kind of step down from Q1, I guess? What are you seeing that's worse? And then my second question is, is there a way for you to frame for us what free cash flow can be in 2026, maybe from a conversion perspective versus EBITDA, something like that?

I think on the first part, I think the combination of the trends we are seeing in Q4, together with the transformation that has been discussed is creating some uncertainty in terms of the 2026. And under those circumstances, we are guiding for a wider range.

Yes. And on the second one, the free cash flow, it largely follows EBITDA. And we've guided for a midpoint EBITDA of 18%, 20% plus on the core business and 200 basis point impact from the investment that we're doing in the restructuring.

The next question comes from Matt Condon with Citizens.

First is just on, I think you said in the shareholder letter, you're building the marketplace for more reoccurring work. Can you just talk about the products and functionalities that you need to launch to enable this reoccurring nature of work? And then I wanted to ask a follow-up on an earlier question is just given where the stock is trading, just can you talk about the prioritization of buybacks versus M&A?

Thanks for the question. So essentially, it's all about putting trust and quality at the forefront. And we're meaningfully upgrade our data infrastructure, matching algo product in order to achieve that. And those are the most important components of being able to optimize for recurring work. And also the fact that we're modernizing our platform allows the usage, as I said, of not just human customers, but also agents within the platform. A lot of it is about how we build this infrastructure and how we ensure the quality and the happiness of the entire fulfillment cycle, which have been one of our biggest moats. The fact that the work actually happens on the platform is being documented and being tracked, allows us to understand the right path or route in which work is done to be able to actively intervene in cases where it's less than great. All of these are indicators from our data for recurring usage of our platform. The second one was on buyback. We have a continued disciplined and balanced capital allocation, investing growth while continuing to utilize our buyback authorization to return capital to shareholders. As of December, there's $67.5 million left on our authorization. And as Ofer mentioned earlier, we'll continue to be optimistic on M&A -- opportunistic, I'm sorry.

The next question comes from Brad Erickson with RBC.

This is Audrey, on for Brad. First, new business formations has been growing pretty solidly, but that doesn't seem to be lining up with parts of your business. Is that just because there's really no connection there? Or what is the disconnect you would say if there is one? And then second, in the new world of changes at the top of funnel, how big should SMB as a percentage of revenue or marketplace GMV relative to where it's been in the past? Any reasons why it should be structurally higher or lower?

Thank you for the question. Business formation only impacts a small part of our catalog that's focused on the very early-stage companies. So I wouldn't read too much into that aspect or the correlation between the 2.

I think that regarding the second part -- don't anticipate any change -- SMB is part of the GMV.

The next question comes from Rohit Kulkarni with ROTH Capital Partners.

A couple of questions. One is just on this doubling down on high-value things that you'll be doing going forward. Where do you see the heaviest lift next 12, 18 months? Is it you need to attract more supply where that is capable of doing these high-value things? Do you think you already have the supply? Or is this a function of building the product and then getting more and more high-value buyers? And then kind of as you do this transition into more higher value and better matching, is there a scenario where the services revenue or the attach rate of services to marketplace has a different algorithm given higher-value gigs may not need as much ads or there may not be any need for as many subscriptions to sellers who are trying to get signed up for more long-term contracts as such. So how do you feel longer term that mix between the core marketplace and value-added services could look like versus where we are today?

Thanks for the questions. So on the first one, it's really very much around the data infrastructure, the matching algorithm that prioritizes quality and trust. And it's really all about the customer satisfaction and retention. In terms of talent, it differs between categories, and it changes over time because we see more and more types of skills coming in demand. In most cases, it's very easy for us because we've been doing this for 16 years to make sure that we have the right talent. We haven't seen any pockets of shortage in talent. But in any case, we're always equipped to fill any shortage in a very short amount of time. As the go-to-market, we see that an opportunity, expanding channels from existing channels into AI native channels, building the enterprise partnerships, as we've talked earlier in the call and targeted growth loops for specific use cases. As to your second part of the question, services revenue will continue to be a growth driver for us this year. That said, the pace of growth will be more moderated this year because most of the efforts this year will be foundational to improve the marketplace moat and enable high-end flywheel. That said, service revenue has a long growth runway long term as we enable every aspect of the talent need and lots of service expansion opportunities down the road.

This concludes our question-and-answer session. I would like to turn the conference back over to Micha Kaufman for any closing remarks.

Thanks, Megan, for moderating the call today and for everyone who has joined us this morning. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.