Fiverr International Ltd. Q2 FY2022 Earnings Call

Hello, everyone, and welcome to the Fiverr Q2 Fiscal 2022 Earnings Conference Call. My name is Charlie, and I will be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. I'll now hand over to your host, Jinjin Qian, Head of Investor Relations, to begin. Jinjin, please go ahead.

Thank you, operator, and good morning everyone. Thank you for joining us on Fiverr’s earnings conference call for the second quarter ended June 30, 2022. Joining me today on the call is 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 non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are 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, Jinjin. Good morning everyone and thank you for joining us today. In the second quarter of 2022, Fiverr delivered revenue of $85 million representing a year-over-year growth of 13%. We continue to see a rapid consumer and SMB sentiment shift amidst the challenging global macro environment. Geopolitical volatility, spiking inflation, and elevated energy prices meant that the spending power of consumers and SMBs was impacted more than expected. This trickled through to the overall demand for freelancer spending. We are not immune to these macro trends. We are encouraged, however, that Fiverr continues to serve as a backbone for millions of businesses to connect and engage with freelancers. Active buyers were 4.2 million, up 6% year-over-year and spend per buyer was $259, up 14% year-over-year. Our market base scaled up significantly during the COVID years and most of that gain continues to hold today. We see older cohorts continuing to spend more today versus pre-COVID and we continue to attract a significantly larger amount of new buyers to our market base every quarter compared to our pre-COVID levels. Take rate remained strong at 29.8%, up 200 basis points year-over-year reflecting the tremendous value we provided to our community of buyers and sellers and the continued expansion of value-added products. Our Q2 results also demonstrated our continued discipline and operational efficiency. In Q2 we delivered adjusted EBITDA of $4.6 million representing an adjusted EBITDA margin of 5.4%. Fiverr has always run a lean organization, but the macro environment requires us to recalibrate our growth and profitability profile in investment priorities. Post the quarter, we made a tough decision to reduce our team by 60 members. It is not a decision made lightly. Over the years we have built an incredible team and an amazing culture at Fiverr, where we gather super talented and passionate people together to build towards a common mission. This means we have to part with many teammates we love and value. We have great people leaving and other companies would be lucky to have them. With this, we are putting ourselves in a strong financial position to continue delivering growth with positive adjusted EBITDA and heading towards our long-term target model. Ofer will provide more color on that. Now, I want to spend some time discussing the investments we are focusing on to strengthen our core and position us for long-term success. Fiverr’s buyer base consists of 4.2 million people coming from all types of businesses, from solopreneurs all the way to the largest companies in the world. We know that there are over 30 million SMBs in the U.S. alone and even more in Europe and the rest of the world. Our level of market penetration in the SMB space is impressive, but nowhere near saturation. There is ample addressable market available to grow into and this remains a top priority for us. We are doubling down on building deep technology moats for our core market base. This includes supply, quality, search, and personalization, marketing and growth. Fiverr’s market base is uniquely complex. We have hundreds of thousands of sellers who have created millions of service listings across more than 550 categories. Each of these sellers' listings and categories comes with unique skills, attributes, pricing and scope. Understanding the quality and matching a buyer with a seller is highly complicated, not only due to the diversity of services we cover, but also because quality is subjective depending on the buyer and their specific project. The fact that Fiverr is an end-to-end transaction marketplace gives us not only the ability to track reviews and ratings, but also powerful data to dissect user behavior and user interactions to understand quality and matching. Do they come back and buy more? Did the project deliver on time? Was the communication between the buyer and seller smooth? How many dialogues and revisions were needed before a successful delivery? The recently introduced fast response badge is an example of how unlocking metadata can create a meaningful impact on conversion rates. We have built a lot of deep tech over the years to extract those signals and there is so much more to do. We are also constantly expanding the capabilities of our market base to facilitate larger and more complex projects with longer engagement durations between buyers and sellers. During the quarter, we rolled out project-breaking capabilities to allow buyers to describe projects with complex scope in a structured way. We can then feed the data into the matching engine to provide our best recommendations. This is designed to allow us to understand post-order satisfaction with more context to enrich the data and the outlook. This is the magic of Fiverr. The second area of investment is our upmarket motion. Among our buyers, we have identified tens of thousands with a spending capacity significantly larger than the average spend on our marketplace today. It is mission-critical for us to unlock this potential and that is why we created Fiverr Business. With Fiverr Business, we are a lot better at identifying those customers, understanding their freelance hiring needs, listening to their pain points, and mapping our key product gaps. In the last 12 months, we started to implement a number of initiatives with Fiverr Business in order to land, expand and improve the overall experience for those business buyers. This includes streamlining onboarding flows, creating a talent-focused browsing experience, stepping up the vetting process, and developing new marketing channels. We have seen early success in those initiatives. The number of buyers who spent over $10,000 per year increased over 60% compared to a year ago and Fiverr Business to date already represents over 5% of total marketplace GMV. We have barely scratched the surface. There's so much potential ahead of us. We believe the online freelancing market opportunity is vast and is in the early innings. As freelancing workflows move online from offline, just as eCommerce has over the last two decades, we believe the Fiverr marketplace is ideally positioned to empower this workforce transformation for both businesses and freelancers. While the global economy goes through cycles and so does SMB spending, the consideration of incorporating a freelance workforce as part of the company's strategy talent planning is only going to become more relevant and more urgent. In fact, we see an emerging opportunity for freelancers as a viable alternative to fill talent gaps and provide cost savings for businesses that are cutting costs on full-time employees. A recent survey we conducted in partnership with Census Wide indicates that over 80% of businesses are implementing hiring freezes or layoffs, and around half of them plan to use freelancers to fill these gaps. Fiverr will be in a strong position to capture these opportunities when the time comes. With that, let me turn the call over to Ofer, who will share some financial highlights.

Thank you, Micha and good morning everyone. Our Q2 results demonstrated the combination of a challenging macro environment and our ability to deliver strong execution with discipline and efficiency under such an environment. In Q2, revenue was $85 million, up 30%. The recent macro headwinds of increasing inflation, higher energy prices, rising interest rates, and highly uncertain geopolitical risks are having a significant implication on consumers, SMBs, and other world GDPs unexpectedly, and it is being felt not only in Europe, but also in the U.S. and the rest of the world. Fiverr responded quickly to this challenging macro landscape by streamlining our expenses and executing with the highest level of focus and efficiency. This led to Q2 adjusted EBITDA of $4.6 million above the top end of our guidance with an adjusted EBITDA margin of 5.4%. In addition, post the quarter, as Micha mentioned, we further examined and recalibrated our cost structure and investment priorities, which resulted in the reduction of 60 employees. These people did not come from a specific function, but rather across various departments in the company. The process was rigorous and thoughtful to ensure that our long-term roadmap remained intact. In fact, with the completion of this realignment of teams and organization, we expect to be able to strengthen our core focus area, accelerate the pace of execution, maximize team performance, and most importantly, maintain a highly motivated corporate culture. Our underlying business is strong. We continue to drive a significant amount of new buyers to our marketplace every quarter, and we continue to do it super efficiently. In just one quarter, our Q2 cohort already generated revenue equivalent to 85% of our performance marketing dollars spent in the quarter. This highly disciplined data-driven marketing approach will ensure that we only invest in areas where there is efficiency and will put us in a good position to stay agile through this market environment and lean in when opportunities arise. We are also making exciting progress with our upmarket initiative from Fiverr Business that attracts large business buyers to products, therefore encouraging bigger projects and longer engagements. All of that is helping us to continue pushing spend per buyer higher at a fast pace even with the overhang of macro trends. Take rates continue to be strong and sustainable as we grow value-added products such as Promoted Gigs and Seller Plus. Going forward, we expect the take rate to remain stable with a modest upside. Now let's turn to guidance. For the third quarter of 2022, revenue is expected to be $80.5 million to $82.5 million representing year-over-year growth of 8% to 11%. Adjusted EBITDA is expected to be $5 million to $6 million, representing an adjusted EBITDA margin of 6.7% at the midpoint. For the full year of 2022, we now expect revenue to be in the range of $332 million to $340 million representing year-over-year growth of 12% to 14%. Adjusted EBITDA is expected to be in the range of $19.5 million to $21.5 million representing an adjusted EBITDA margin of 6.1% at the midpoint. Our Q3 and updated full-year revenue guidance reflects the most significant and expected macro headwinds that we saw in our marketplace in June. Specifically, European activity levels deteriorated modestly from our previous expectations and the U.S. started to feel meaningful pressure as SMB sentiment grew more strained in the last two months. The extended macro trends are expected to impact both existing cohort spending as well as the acquisition of new buyers. For the full year of 2022, the midpoint of our guidance represents active buyers to be down a few percentage points compared to last year and spend per buyer to grow in the low double digits. With cost reductions and the strengthening focus, we expect to deliver strong adjusted EBITDA for the second half of this year. We are committed to continuing to operate with discipline and efficiency, delivering growth with positive adjusted EBITDA and marching towards our long-term EBITDA target of 25%. Together with a healthy balance sheet, I believe Fiverr is in a strong financial position to navigate through this market with an unwavering focus on investing and building towards our long-term success. With that, we will now turn the call over to the operator for questions.

Thank you. Our first question comes from Bernie McTernan of Needham. Bernie, your line is now open.

Great. Thank you. Good morning. Thanks for taking the questions. Maybe just to start, can you talk about the change in strategy for thinking about growth versus profitability? On the last call and during the quarter, I believe the commentary was largely still investing for growth despite the headwinds, but now pulling back on those investments. So can you talk about the decision or the change in tone or anything to share there?

Sure, good morning, Bernie. So essentially as we said in our opening remarks, what we've seen throughout Q2 was a worse than anticipated headwind during the quarter. And we've seen growth become more expensive. As a result of that macro change and given the fact that from a technical standpoint, we are in a recession. I mean, we have two consecutive quarters of negative GDP. Inflation continues to be high, and there is pressure certainly on small and micro businesses, and we felt that. Because of that change in the environment, we decided that since growth has been more expensive, it doesn't actually constitute or justify growing at any cost. In that situation, we felt that it was a prudent decision to prioritize EBITDA and free cash flow and accelerate the pace toward the long-term target model. I think that this would put us in a strong financial position to double down on growth investments when market conditions improve. So that was the basis for our decision. It doesn't mean that we stopped prioritizing growth. It will always be a priority for us, but we don't think that it should come at any cost.

Understood. Is it possible to put context around that 85% payback for the two cohorts, 85% of the performance marketing spend and how that trended versus other periods of time?

Yes, so this is Ofer, and I think that if you guys track the historical record of the return, in our last quarter it was 1.9 or 90%. I think the quarter before it was approximately three months or one quarter. So all the time there is a kind of fluctuation in the return, but if you track historical numbers, if you go to Q1 2017, the multiple of return is 5x. If you go to Q1 2020, our Q2 2020, two years ago the market base was already 3x and we believe that the cohort that we are acquiring throughout previous periods, but also this period happened to be consistent with a very high multiple. The fact that the headwind that we are seeing barely impacts the return on the new cohort that we acquired gives us high confidence. So our ability to keep acquiring new cohorts there is a high lifetime value to cut with a very short return on investment.

Understood. And then just one last one for me, the opportunity for strategic partnerships to form another funnel for the company, it seems like an intriguing proposition. Just wondering what you're looking for in a partner, how the integration goes between the two products, and how big of an opportunity this is to add another funnel for you guys?

We're working on the partnership channel. We believe that at this point it would be too early to share news about that. But we're seeing very exciting things around partnerships and we'll be happy to share that with the market in the upcoming quarters.

Understood. Thank you both.

Thanks.

Thank you. Next question comes from Doug Anmuth of JPMorgan. Doug, your line is now open. Please go ahead.

Thanks for taking questions. Just a couple on kind of mix. I’m just trying to understand, I guess across categories, perhaps if there are some things that are holding up a little bit better than others? And then Micha, I know you talked about going upmarket with Fiverr Business and I recognize it's still early there. But just curious in this kind of environment, if you just talk about the traction that you're getting there and how those businesses might be behaving a little bit differently perhaps than the SMBs? Thanks.

Thank you, Doug. Good morning. So for the first question on categories, our category mix is doing pretty stable. We see small trends and some of these trends indicate that there's a slight less interest in categories that are related to very young businesses. And there are periods of start and there are categories that are related to more mature businesses that are seeing a slight increase in trend, but these are not very significant. Over the year and across the years, we've been seeing those trends shift across different months of the year and different years. So we didn't record anything unusual across those categories. And I think we’ve provided some color in the shareholder letter on specific categories. Again, the mix remains very healthy and stable. On the upmarket, the signals that we're seeing from Fiverr Business are very, very strong. It's a fast-growing product and we continue to double down our investments into Fiverr Business. The improvements that we've made in Fiverr Business, in adding tens of thousands of vetted sellers or top 1% of sellers, upgrading the experience on listings and sellers' pages, putting talent in the forefront, and adding decision indicators, all of these contribute to the growing activity of our Fiverr Business customers. We're also building marketing muscle for larger customers and optimizing the funnels for Fiverr for Business, and also increasing our category coverage within Fiverr Business. So we're streamlining the onboarding funnel, and now we see that attracting more large customers from Fiverr into Fiverr Business, where we can increase their activity and spending over time and maximize their spending capacity with Fiverr. So, all-in-all, very good signals and we're doubling down on Fiverr Business.

Great. Thank you, Micha.

Thank you.

Thank you. Our next question comes from Brad Erickson of RBC Capital Markets. Brad, your line is now open.

Hi, just a few from me. So I guess first, when you speak to this SMB weakness, just to clarify, do you think this is more of a funnel issue and maybe a function of fewer small businesses, or is it more of just an existing cohort issue and some of the spending headwinds you called out just to clarify first?

Hey, this is Ofer. Brad, I think that it's an issue across the board. It's not about the funnel. It goes both for new cohorts, and it goes for existing cohorts, whether it's a very old cohort or a new cohort, whether it is a U.S. or European. This headwind goes across all dimensions, that’s how we see it.

Got it. And then I guess the guide maybe seems to reflect active buyers looking to be down again sequentially in Q3. Just curious how we should think about maybe the timeframe in getting back to the sort of sequential active buyer growth?

Yes, so when you look at active buyers, I think that what we’ve seen are really three things. The first is a worse than anticipated market that created this headwind. So macro is influencing that. The second is that growth has been more expensive, which meant that we need to make changes to our growth investments. And the third is a more focus on the quality of buyers, which is well reflected in our spend per buyer being up 14% year-over-year. So all-in-all that has been the factors that have influenced active buyers and certainly our focus continues to be on the quality of our buyers over time as we can focus on those who have their spending capacity that is much larger than the average spend per buyer on our market base.

Got it. That's great. Thank you.

Thank you. Our next question comes from Matt Farrell of Piper Sandler. Matt, your line is now open.

Thanks for letting me ask a question. I was wondering if you could help quantify the cost streamlining efforts in order to look at it from an impact on adjusted EBITDA as we go forward. And then you've been able to expand adjusted EBITDA margin as we've moved through 2022 despite the lower revenue levels. I just wanted to understand is that something that we should expect moving forward? Is continued leverage in the model through 2023? And if not what could be the factors there? Thank you.

So, I saw the quantified cost streamline. I don't think we share the specific numbers, but the guidance definitely reflects this adjustment that we did a few weeks ago. Then I looked at the – I’ll give you a hint, look at the adjustment of the revenue and bear in mind that we have increased the EBITDA target for the remainder of the year. This would give you pretty good indication as to the overall cost streamline and the expected margin. I think it's too early to discuss the expected margins for next year, both because it's the middle of the year, but there is a lot of uncertainty and volatility that we are experiencing as we speak, yet to be said. And I think it's mentioned in the shareholder letter and the prepared remarks. We do plan to accelerate the pace towards its long-term target.

And maybe as a follow-up, could you give any more color here on just kind of the strong growth that you're seeing in Promoted Gigs and kind of the success that's having here as of late, you mentioned in the shareholder letter and just any more clarity would be great? Thank you.

Yes. So as I think we mentioned in previous quarters, there's a continued expansion of Promoted Gigs across more categories and more assets within our market base and also with additional cohorts of sellers that can benefit and enjoy this product. So what we're seeing in that growth is just a very healthy, steady growth of this product. And I think it's reflected in the continued expansion in our take rate as demonstrated.

Thanks for taking my questions.

Thank you.

Thank you, Matt. Our next question comes from Andrew Boone of JMP Securities. Andrew, your line is now open.

Great, good morning and then thanks for taking my questions. I'd like to start on June in the letter. It talked about U.S. demand slowing in the month. As we think about July and just the guide for Q3, does Q3 imply a further step down from where you guys were in June? Are you seeing any stabilization as we get into Q3 or kind of what's the trajectory? And then secondly, as we think about more disciplined OpEx, can we just go back and revisit tROI? Should we expect levels that have been consistent as we as kind of the earlier question mentioned or is there a chance that you guys would step that up and then how do we think about brand spend? Thanks so much.

Thank you. So, as for what we're seeing in July in the past few weeks in July, we've seen activity better than June. It's been slightly better and definitely stabilizing, but it is too soon to call it a trend, but this is what we've seen from it. I think that is reflected in the range of our guidance, meaning that on the midpoint, what we're assuming is that the current situation or level of headwind will continue to be as we're seeing it right now on the lower end a deterioration or a more, a stronger headwind, and on the upside an improvement in the current macro environment and headwind that we're seeing.

And the second part of the question I think that the restructuring or the streamlining of the expenses that we discussed earlier brought us to a position of super-efficient operation in the company. We were lean even before, and yet to be said, if needed we can send the company further to make sure that we meet the EBITDA target and secure the accelerated pace towards long-term. In terms of brand spend, we keep spending on brands as previously. You know we always monitor this investment as compared to PPC. We haven't made changes to these strategies of investments; we used to be lean, and we continue to believe to make sure that the marketing is being spent in a very efficient manner. Thank you.

Thank you.

Thank you, Andrew. Our next question comes from Eric Sheridan of Goldman Sachs. Eric, your line is now open.

Thanks so much for taking the questions, maybe two if I can. Can you help us understand a little bit better how Fiverr Business, as an initiative will ramp over the next couple of years? You are putting in place the pieces to go to market, and then the time it might take to sort of execute on the go-to-market strategy. So we could better understand a little bit of how the revenue cadence around Fiverr Business can build over the next few years? That would be number one. And number two, maybe just philosophically, I think there's this debate among investors about as you know, workers continue to look for balance in their life, and now employers might be looking for cost flexibility in their business models, how you think the opportunity set might shift and create different opportunities or challenges for you as a platform when you look at this environment over the next maybe 12 months or so? Thanks so much.

Thank you, Eric. So as for Fiverr Business, Fiverr Business is really a transformational move for Fiverr, and we anticipated, and we said that when we launched Fiverr Business, that this is going to be a motion that will start being very impactful within two or three years, and it's a multi-year investment. The size of it right now, we haven't been recording it separately or guiding for it, but as we've said many times, it is growing faster than the marketplace, and we're very happy with what we're seeing there. It allows us to engage with customers that have a much larger spend capacity and maximize their spending capacity with our product. We've done so by improving our catalog and the quality of supply and adding functionality to the product that is sought after by larger customers. We see tremendous success by doing so, by optimizing the funnels of entry into Fiverr Business; we optimize the move of the right customers from Fiverr into Fiverr Business, where we can also use Fiverr Business as a channel of acquisition, and that is thanks to the improvements in the funnel. Eric, sorry, can you repeat the second question, please?

Just curious on the broader environment you're seeing because I think there's sort of a push and pull between your workers that still want flexibility, and you increasingly could find employers who want cost flexibility and how, even though there might be some headwinds you're seeing from the macro environment, maybe there's a broader theme around aligning flexibility with your platform that could offset some of it. So I was just kind of curious philosophically how you thought about the evolution of the long-term secular theme versus some of the macro headwinds. Thanks.

Thanks, Eric. So definitely when we think about the way we market Fiverr and that has been in our brand for many years. It is all about flexibility and I’ve spoken in previous quarters about the fact that companies need more control over the balance between fixed expenses and variable expenses. Using talent from the Fiverr marketplace gives that flexibility. It allows you to hire people per project, and that allows you to scale up or down as needed. I think that if anything, the remote work or the work from home for a certain amount of time opened the eyes of all employees and employers to the option of actually enjoying the fact that not all of their employees need to be on location and not all of them need to be full-timers. We're definitely seeing that, and we think that in the current environment, where a lot of companies are also doing cost reductions are thinking about how to lower their fixed expenses, they're using variable expenses or flexible talent as a way to close talent gaps and make sure that their performance doesn't decrease while their cost structure needs to improve over time.

Thank you.

Thank you. Our next question comes from Jason Helfstein of Oppenheimer. Jason, your line is now open.

Guys, I have two questions. So maybe talk a bit more about how you think about the puts and takes as we kind of enter what’s probably going to be a worsening environment for at least a few quarters or so. So as you think about buyer spending cost to attract a new buyer, seller pricing, like what they choose to price themselves, and take rates, just how do you think of kind of those all fluctuate as you go into a weak environment and kind of what you can do that maybe favors Fiverr? And then the second question, can you rank what features or capabilities drive conversion and you talked a little in the letter about it, but where do you think you have upside or the ability to roll out new features or geographies in the next 12 to 18 months? Thanks.

Thank you, Jason. Good morning. So on the puts and takes, I think what we're seeing right now is definitely pressure, mostly on small and micro businesses to be more cautious on how they spend their budget. I think that if we look at public data from public search engines, we're seeing that there's a decrease in searches for keywords that are related to our industry, because of that, that decreases or shrinks the top of the funnel, which makes the acquisition or adding new customers more expensive. If that continues to be the case, then we'll continue to opt based on our current strategy, which is to optimize our EBITDA and maximize our free cash flow, so that when the market improves, we can invest that free cash flow again and double down on growth. In terms of features that drive conversions, now it’s all about being able to do the right segmentation of our customers and talent and do great matching. It sounds very simple. In reality, it's extremely complex. We've been talking about our technology and how we create our technology moats to make that magic happen. It's not getting simpler. The more we go upmarket and the more we entertain larger types of customers, that matching becomes more challenging, but with a larger reward. This is why we continue to invest in our search technology, recommendation technology, algorithms, matching segmentation, and there's also opportunities to do that from the top of the funnel. We continue to invest in search engine optimization and so forth. We're seeing good results on conversion improvement. The more we use the metadata that we collect, being a transactional database to improve our algorithms, the better our matching is and the higher the satisfaction of our customers, which means that we can maximize their spend with us over time.

Perfect. Thank you. We have a follow-up question from Brad Erickson of RBC Capital Markets. Brad, your line is now open.

Yes, thanks. Just a quick follow-up. Just on how quickly things changed after you guided in May kind of like last year, I guess, just curious, is there any aspect of that hyper-seasonality we saw last year that’s maybe going on here alongside just pure macro? Just curious. Thanks.

We haven't seen any unusual seasonality. Obviously, there's more leisure, you see much more travel than usual, and you see people taking long, extended vacations, but we haven't seen that impacting as much as the macro environment. We believe that this is the macro environment being worse than anticipated, by the way, not just anticipated by us. I think that in general, as I said, technically we're in a de facto recession and inflation continues to be very high. Fiverr is just more sensitive because it's more focused on small and micro businesses, and they are the first to respond to it, much like they were the first to jump up during COVID and show triple-digit growth. They're now being more cautious, and this is why we're feeling it a little bit more, and we're responding to it.

Got it, thanks.

Thank you. Our next question comes from Daniel Shahrabani of Fard Investments. Daniel, your line is now open.

Yes, hi. Thanks for taking my question. Two questions. First of all, in your last quarter, you said that a lot of the marketing expenses were preloaded in the first quarter. So is that, do you see that giving benefits going forward for the next three quarters? And second question, in terms of macro, like in how are you guys doing with the other languages like Spanish, German? Is that a source of growth for you and how are you expanding in other markets besides English? Thank you.

Good morning, Daniel, thank you. On the marketing expense in the first quarter, from a seasonality standpoint, Q1 is our strongest quarter, and this is why we invest more in that quarter because that investment is extremely efficient and that creates a new baseline for us for the rest of the year, and that is why we made that comment on Q1. That has been the case ever since we started the company.

Okay, thanks.

Thank you, Daniel. Our next question comes from Nat Schindler of Bank of America. Nat, your line is now open.

Yes, hi guys. Just a couple things. One on the upmarket approach, are you seeing this as more an approach to get the higher spend provider, or are you suggesting larger enterprises do more purchases of similar sized things? Call it the $50 logo that people buy on traditionally small businesses buy on your service, or are you, or, and is your market developing into larger enterprise purchasing bigger projects, longer-term projects through your system, or is it still same with the same basic world that you have been in the overnight largely?

Hey, good morning, Nat. Thanks for the questions. So I would say on your first question, the answer is probably both. We're definitely creating a catalog where larger customer can achieve more and acquire more complex types of projects if that is what they desire, but it is also built to offer best-in-class, vetted supply to allow for the small projects to be done very effectively. But we think that the profile of customers is such where their spend capacity is higher. Their needs are higher. Sometimes it manifests in more frequent purchases that are not necessarily very large, and sometimes it's less frequent and much larger types of projects depending on their complexity, and within that, within Fiverr Business also the ability to use not just individual talent but also agencies that have higher capacity and multiple talents to accommodate for more complex projects.

Does this move put you on more of a collision course? You've been kind of free from any substantive competition in these kind of fast, quick catalog projects that you have been traditionally doing these, again, the $50 logo. In that area you have owned and been free from competition. As you get into the larger projects, there are a lot of other players, particularly Upwork, which has kind of tried to come down to your world and not really done very well, and now are you going into its world?

So when you think about the roots of where Fiverr started, we started from the SMB world with maybe a focus on micro and small types of businesses. If you look at our current user base, we have 4.2 million active buyers on our platform. Half of them are from the U.S. So let's call it 2 million or 2.1 million out of 31.7 million. In that market, there's endless space to grow into. Now, as we move now, we're not moving into the enterprise space. We're moving more into the mid-market, more into the mid-size and sometimes large. It doesn't mean that we don't have enterprise customers, but we're not marketing for them. In that space, there's tremendous space to grow into and I don't think that the majority of competition is going to be there. Again, I think that the majority of activity anyway happens offline, happens from direct connections with talent or direct connections with agencies. We have the ability to actually move that from the offline to the online, without much interruption. So I don't think that this will increase our competition that much.

Great, thank you.

At this time, we currently have no further questions. So I’ll hand back over to Micha Kaufman, CEO for any closing remarks.

Thank you, Charlie. And thank you everyone for joining the call today. Have a great rest of the day and we’ll see you at the upcoming investor events.

Ladies and gentlemen, this concludes today’s call. Thank you so much for joining. You may disconnect your lines.