Fiverr International Ltd. Q2 FY2025 Earnings Call

Thank you for joining us for Fiverr's Second Quarter 2025 Earnings Conference Call. I will now turn the call over to Jinjin Qian, EVP of Strategic Finance. Please proceed.

Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the second quarter that ended June 30, 2025. 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. 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 of our 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. We delivered another strong quarter, building on a solid start to the year with continued momentum across our business. In Q2 2025, we achieved 15% year-over-year revenue growth and a 20% adjusted EBITDA margin as we continue to drive profitable growth with disciplined execution. Within our platform, we are seeing strong signs of durability and growth, including surging demand for AI-related services and the continued momentum of managed services and dynamic matching products. While SMBs continue to take a cautious stance on spending and hiring amidst a volatile economic environment, our success in these efforts contributed to the acceleration in spend per buyer, which grew 10% year-over-year alongside robust growth across key verticals such as programming and tech, digital marketing, and video animation. Additionally, we continue to expand our value-added services across our ecosystem. AutoDS continues to maintain strong growth momentum, and we've made meaningful progress in integrating our platforms to drive adoption and scale. Notable highlights include the launch of an AI-powered Shopify Store builder as well as the development of a deeper integration to enable seamless upselling and cross-selling between AutoDS and Fiverr's Marketplace. The strong performance of the Services segment contributed to the revenue upside this quarter. We are also incredibly excited about how AI is positively impacting every dimension of our business, driving demand through AI-related services, improving discovery and conversion for buyers and sellers on the Marketplace, and unlocking operational efficiencies through AI agents across functions. Today, I want to delve deeper into each of these areas and demonstrate how we are at the forefront of AI adoption with the speed, conviction, and clarity that sets us apart. First, the rapid development of AI technology is giving rise to numerous new skills, and Fiverr's Marketplace is becoming the go-to destination for accessing and engaging with AI experts. Categories such as AI agents, workflow automation, and video coding have experienced 5 to tenfold growth on our market base over the past 6 months. With AI fundamentally changing how humans and machines interact, it allows many non-technical entrepreneurs and professionals to build and leverage the technology. At the same time, we are increasingly seeing the gaps between off-the-shelf AI tools and the real-world problems our customers are trying to solve. This is where Fiverr comes in. Freelancers on our platform are filling the critical first and last mile gaps for our customers. This could involve setting up AI systems, selecting the most efficient AI models, integrating the back end with existing systems, adding functionality, creating custom workflows, or simply debugging when the customer encounters issues. Fiverr's freelancers help our customers turn concepts and prototypes into high-impact solutions and tangible business results. These exciting trends underscore our conviction that human expertise is crucial in unlocking the full potential of AI. With the proliferation of AI tools in the market and the increasingly ubiquitous access to these tools, we believe this represents a long-term tailwind for our business, driven by an increasing number of buyers who are deploying AI and their growing need and budget for tackling AI-related problems. That's why we are not only expanding our catalog to meet this demand but also exploring ways to embed Fiverr's talent network and transaction infrastructure directly into AI-driven workflows. These efforts include several ongoing strategic partnership discussions, the development of targeted fulfillment capabilities, and laying the technical foundations to build scalable AI powered by experts. Our goal is simple. Fiverr freelancers are addressing critical challenges for businesses adopting AI, and we must strive to meet customers where they are and build an integrated experience that makes it seamless for them to leverage our platform. Second, we are shipping at an incredible pace so that we can leverage AI to strengthen our marketplace flywheel. Every transaction in our marketplace involves three core participants: the buyer, the seller, and the platform. Our vision is to create an intelligent agentic experience for each. Two years ago, Fiverr launched Neo, the first-of-its-kind AI matching agent for buyers in a marketplace environment. Since then, Neo has evolved into a powerful AI engine that drives underlying KYC and matching across all of our front-end products. As we continue to build out the agentic experience on the buyer side, we envision a future where each buyer will be accompanied by a recruiting agent who can assist with drafting job briefs, communicating with freelancers, curating candidate lists, and even managing project execution end-to-end. This is the beginning of a search-less vision for the future, at least in the traditional keyword-based sense of search that makes room for a more expressive and nuanced way to address customer needs. One that unleashes the power of the multiple solutions Fiverr has built on the platform to tackle any project from simple tasks to the most complex ones imagined that require multitask and multi-talent orchestration and assembly. On the seller side, we introduced Fiverr Go earlier this year, an AI assistant designed to help freelancers with project discovery, client engagement, and creative ideation. Following the successful launch in February, Fiverr Go continues to drive strong seller engagement and meaningful conversion uplift across the funnel it touches. Similar to the agentic AI experience on the buyer side, we have an extensive roadmap for Fiverr Go that will enable seller agents to provide more sophisticated support and guidance for our sellers, including service listing optimization, lead generation and qualification, and other marketing, analytics, operations, and production capabilities. Last but not least, we are deploying agentic AI across the internal functions to boost platform-level efficiency from automating customer support workflows to enhancing marketplace integrity operations, from improving job post matching algorithms to empowering customer success managers. These systems are designed to enable faster, more seamless orchestration between buyers and sellers while scaling operational productivity behind the scenes. As these agents become more capable over time, we believe they'll increasingly act autonomously, not only to improve individual workflows but ultimately to enable agent-to-agent transactions that reduce friction and eliminate the need for their human counterparts to manually navigate the platform. While this is an ambitious long-term vision, the path is clear. Having this roadmap enables us to make informed architectural and product investments today. And these early bets will position Fiverr at the forefront of market-based innovation, further reinforcing our leadership through AI-powered differentiation. As we wrap up the first half of 2025, I'm incredibly proud of how our team has delivered, and even more excited about our strategy and roadmap for the second half of this year. I look forward to updating you on our continued progress in the months to come. And with that, I will turn the call to Ofer.

Thank you, Micha, and good morning, everyone. We delivered a strong second quarter with both top and bottom-line exceeding expectations. Revenue for the second quarter was $108.6 million, up 15% year-over-year. Adjusted EBITDA for Q2 was $21.4 million, representing an adjusted EBITDA margin of 20%, an improvement of 80 basis points from a year earlier. We continue to generate strong cash flow with free cash flow totaling $25 million, up 21% year-over-year. As always, we remain focused on taking a balanced approach between growth and profitability while maintaining discipline with capital allocation. Q2 saw solid performance across both our Marketplace and Services segments. Marketplace revenue was $74.7 million, driven by 3.4 million active buyers and $318 of spend per buyer and 27.6% of marketplace take rate. Within the Marketplace segment, we saw strong demand for AI-related services and AI category expansion, and managed services remain an important channel for upmarket penetration. We are encouraged by the accelerating growth across several of our core verticals and the steady increase in larger, more complex projects on the platform. In Q2, over 50% of GMV on our marketplace came from transactions over $200, and the higher-value transactions are growing at a double-digit pace year-over-year. This is a strong indicator of our marketplace's ongoing evolution towards serving more sophisticated business needs. While the overall macro conditions do not warrant us to revise our assumption going into the second half of the year, we believe the structural tailwind within the marketplace segment, particularly around AI and upmarket adoption, will continue to help offset broader economic headwinds and serve as a sustained growth driver. Services revenue was $34 million, representing year-over-year growth of 84% and 31% of our total revenue in Q2. The upside was driven by several key initiatives, including the launch of AI-powered Shopify Store Builder, streamlined cross-sell execution between AutoDS and the marketplace, and continued momentum in Seller Plus. We continue to see strong engagement and a positive conversion impact from Fiverr Go, leading to incremental uplift to Seller Plus premium tier subscription in Q2. Looking ahead, we expect services revenue to maintain healthy momentum, and as mentioned previously, we expect it to represent a little over 30% of total revenue for the full year 2025. Now on to guidance. We are reiterating our revenue and adjusted EBITDA guidance for the full year 2025. We expect full-year 2025 revenue to be in the range of $425 million to $438 million, representing year-over-year growth of 9% to 12%. Adjusted EBITDA is expected to be in the range of $84 million to $90 million, representing an adjusted EBITDA margin of 20% at the midpoint. For the third quarter of 2025, revenue is expected to be $105 million to $110 million, representing year-over-year growth of 5% to 10%. Adjusted EBITDA is expected to be $21.5 million to $23.5 million, representing an adjusted EBITDA margin of 21% at the midpoint. We continue to operate with the highest level of discipline and efficiency. We believe we are on track towards our long-term target to reach a 25% adjusted EBITDA target in 2027 and deliver a 40% CAGR in free cash generation for the three years ending in 2027. To close, we continue to execute on the goals and roadmap we set at the beginning of the year and are looking forward to the second half as we remain well-positioned to capture the enormous opportunity ahead of us. With that, we'll now turn the call over to the operator for questions.

Our first question comes from Eric Sheridan of Goldman Sachs.

When you think about services revenue growth building and momentum deeper into the second half of this year, but more on a multiyear view, what do you guys see as some of the key investments you need to make to sort of unlock continued scaling of that service revenue? And maybe honing in a little bit on Seller Plus, understood the goal you have around getting to a certain rate of penetration. But how do we think about maybe over the longer term where that can go in terms of a percentage of the mix?

Eric, thanks for the question. So, for the services, we expect services revenue to continue growing at a healthy double-digit rate exiting this year after we lap both Fiverr adds and AutoDS acquisition in Q. And we believe that services still have a long growth runway ahead of us as we continue to expand value-added services to productivity, financial, and other adjacent tools for our freelancers. In addition, we're seeing opportunities to drive synergies between AutoDS and Fiverr. And as we mentioned this quarter, we unlocked some nice Shopify affiliates revenue through the new AI-powered Shopify Store Builder tool. And we believe that services will continue to be a growth catalyst for our overall revenue growth. As for Seller Plus, it continues to expand value-added services to drive adoption among a wider range of audiences. Fiverr Go is an example of that. And we keep adding tools and the audience of Seller Plus is growing as they see this as a net positive contributor to the growth of their business. And broadly, we are expanding value-added services to a wider range of services for freelancers. We want to empower the entire freelancer career, including those financial tools and benefits. So, there's a lot of growth runway there.

Our next question comes from the line of Ron Josey of Citi.

Micha, I wanted to talk and ask a little bit more about the managed services offering and the broader mix shift to upmarket. And just talk to us a little bit more about the progress here. I know there were some stats in the letter around 50% of marketplace driven by transactions over $200. And so, as we see greater demand for managed services, as we see the mix shift to upmarket, help us understand just the progress overall and maybe the size. And then from an AI or I guess, Fiverr Go perspective, I think we saw and heard a little bit more about conversion rates. Any more insights there would be great.

Thank you for your question. Managed services are essentially part of our strategy to move upmarket. Historically, our company began with services priced at $5, and now over half of our business comes from transactions exceeding $200, which is remarkable. This transition is due to our evolution from merely being a marketplace to becoming a comprehensive platform that offers a wide range of services, enabling us to grow alongside our customers and meet more of their needs. This is evident in the promising growth of our managed services. Our acquisition strategy focuses on attracting customers with larger budgets and more complex needs, ensuring we have the right tools to address those needs. We're witnessing positive outcomes from this approach, and as we expand in this area, we are also reducing our exposure to the more economically sensitive SMB market. We are encouraged by the growth we're experiencing. Regarding Fiverr Go, we provided details in our shareholder letter. The adoption of Go has improved conversion rates, efficiency, and reduced the time it takes for our sellers to convert. This has resulted in a 50% increase in the number of sellers utilizing it, and they appreciate it for allowing them to manage their business smoothly. Our strategy also involves creating advanced tools that not only facilitate communication but also leverage smart AI to help sellers optimize their offerings and enhance their potential for closing deals. We are still in the early stages of developing these tools, but the internal progress is impressive. Being pioneers with Neo has given us a competitive edge, enabling us to establish a strong AI team and develop outstanding tools that we look forward to discussing in the upcoming quarters.

Our next question comes from the line of Doug Anmuth of JPMorgan.

I have two. Maybe just first in terms of supply/demand, just balance on the marketplace. I'm just curious how you're thinking about the supply on the freelancer side with AI expertise and whether that's where you need it to be? And then second, just as you think about the marketplace business, what would it take for the marketplace to return to growth in your view?

Doug, thanks for the question. As for supply and demand, I think we're in a good place there. The one benefit that we have with freelancers is that they are ahead of most full-time employees in terms of embracing new technology and new tools. A lot of them are what we call AI native. And we're seeing how they're actually elevating the outputs of their work in an incredible way. And obviously, when we open new categories, sometimes it takes a little bit of time, a couple of weeks to build new supply. And as we go into the areas of more sophisticated types of services, obviously, we allow more sophisticated types of sellers to join the marketplace. But I think that we're in a very good place. We don't have a category where we don't have the right supply to entertain the needs of the customers. As we think about the marketplace business, we believe that the efforts that we're doing around AI and upmarket will allow us to turn to growth even in the current macro. But given the macro uncertainty, we don't think that we're ready to bake this into guidance yet. As we said a number of times before, and I think I mentioned this in my first answer, the fact that we're going upmarket and actually acquiring high-value buyers, by definition, lowers our exposure to the segments of the buyers that are mostly affected by macroeconomic conditions. And therefore, even without the macro turning, over time, we will continue to turn into growth. And obviously, if the macro turns, it's going to be a further tailwind for us.

Our next question comes from the line of Jason Helfstein of Oppenheimer & Company.

This is Steve Hromin on for Jason. So, two questions from us. One is, have you seen any specific categories relating to AI? And second, if more entry-level jobs are going to be replaced with or by AI, how does that affect demand for Fiverr services?

Thank you for the question. We haven't observed any accelerated decline. As we've mentioned previously, there's a distinction between simple and complex types of services. The simpler services, typically associated with very low prices, are experiencing displacement. However, there are many new categories and needs emerging that we can address. This is beneficial for us because we are focusing less on the simpler services and more on the complex, nuanced services required by our larger customers. Regarding entry-level jobs, I believe the definition is evolving. The expectation is for everyone to do more, largely due to technology. Similar to freelancers, those starting their careers are becoming AI natives, allowing them to accomplish significantly more in entry-level positions. I've mentioned this before, and I will say it again: AI has raised the baseline for everyone, providing exceptional tools and capabilities that are accessible to all, meaning no one has an advantage due to AI. While the starting point has changed, the upper limits have not. Therefore, all jobs, including entry-level roles, have been elevated, and this is what we are observing.

Our next question comes from the line of Brad Erickson of RBC Capital Markets.

I have two. First, on the services revenue. Can you just update us on the mix within that line item between what you might regard as sort of recurring revenue versus more transactional and then kind of how you think about the general visibility level? And then I have a follow-up.

So essentially, when you look at the services side, it is mostly made out of Promoted Gigs, Seller Plus, and AutoDS. And all of them are continuing their momentum. There is nothing specifically to call out there. Was there a second part to your question?

It just kind of general visibility related to obviously, some of the revenue being sort of what might look like recurring versus purely transactional.

To provide some additional insight, Promoted Gigs is intentionally not recurring but it is effectively an ongoing initiative, and we observe a very high retention rate among sellers using this product. It correlates with GMV, and there is significant potential for growth as we have more untapped inventory. One area where we have yet to introduce Promoted Gigs is within the Fiverr Pro segment, which is currently expanding at a quicker pace than the Marketplace. Moving on to Seller Plus, which is inherently a subscription model, it comes with various tiers for different services that are bundled together. Over time, we will broaden these offerings by adding more features and introducing more tiers. Seller Plus also has the potential for us to provide additional services and adjust our pricing accordingly, while also reaching out to sellers who weren't previously eligible for this program, offering them new tools to enhance their businesses. Lastly, AutoDS, which operates on a subscription basis, has been performing well and exceeded expectations in the second quarter. We see this segment progressing positively as we have just completed the integration with the Fiverr ecosystem, and we are optimistic about its future development. While we don't plan to break down each of these revenue streams into line items, I hope this gives you a clearer understanding of this revenue segment.

Yes, it is very helpful color. And then just second one, maybe following on to a few of the questions around Marketplace growth. You've talked for a while about this whole mix shift between complex services and simple services. I guess, do you feel like you have visibility to when that mix shift might become a tailwind? I know you just said you're not ready to guide to that because of macro. So, I guess the question is like do we need to see macro ultimately improve? Or do we reach a point maybe at some point soon where that mix shift is enough to push the Marketplace back to growth? How to think about that?

Yes. Thank you. Look, I said it before, we don't know exactly when this is going to be the case given the volatility of the market. That said, we do believe that by going upmarket and enjoying the tailwinds that AI is giving us, over time, this is going to bring us back into growth on the marketplace side, even without the macro economy taking a turn.

Our next question comes from the line of Bernie McTernan of Needham & Company.

I wanted to follow up on a comment you made in your prepared remarks about your discussions with several companies regarding potential partnerships in AI. While I understand it's too early to disclose the specifics, what do you envision those partnerships looking like? Could they involve better integration of technology into your marketplace or perhaps Fiverr’s marketplace being featured on other AI platforms? How should we consider the potential for these partnerships evolving?

Thank you for the question, Bernie. What I was referring to is our internal approach to scaled AI using experts. We are observing that technology enables significant advancements for everyone. However, leveraging these technologies to create a complete product or gain a competitive advantage typically necessitates the involvement of experts at various stages. While these tools are user-friendly, they do have technical limitations. This highlights the importance of collaborating with those who can help you reach your goals or give you the edge needed for success. Without diving into specifics, our initiatives with certified provide insight into how we're focusing on empowering our customers as they navigate these AI tools.

Our next question comes from the line of Josh Chan of UBS.

I guess two questions for me. One, on your AI capabilities. I know that because they're more complex, you're getting higher ASP from your AI type of services. I guess I'm wondering, are you also attracting new and different customers that weren't part of the Fiverr platform before that are attractive to your AI capabilities? And then I guess my second question is on the margin front. As you think about the path to targets, how dependent on GMV improvement will your margin trajectory be?

Josh, thanks for the question. The answer for your first question is yes. Given the fact that it's more complex types of projects, it allows us to actually get the types of customers that we're very much focused on, which are customers that are able to actually pay and fund these types of expertise. And again, having these experts on our platform is something that we've been working on for a while. And it's definitely paying off. We called out the positive and accelerated growth around programming and tech and video and animation verticals as an example. And obviously, we're seeing that also accelerating our growth in the spend per buyer in a very nice way, actually putting us in a great position where I don't think that there is any company in our space that delivers the performance at our level with double-digit growth and a 20% EBITDA. And so, investing in these areas allows us to deliver one of the best performing businesses in our space.

On the second part regarding margin and its dependence on GMV improvement, I believe we are committed to a long-term margin of 25% by 2027. We are progressing toward that goal step by step and have full confidence in our ability to achieve margin improvement. This outlook accounts for various scenarios of GMV growth or stability. Therefore, I don't see a dependency; we possess the flexibility, as well as the confidence and capability to succeed regardless of the scenario.

Our next question comes from the line of Matt Condon of Citizens.

My first one is just on marketplace revenue in the quarter. It looks like trends on a year-over-year basis deteriorated in the second quarter, and that's just in the backdrop of a stable macro environment and the AI tailwinds that you guys are seeing. Can you just elaborate just on what you're seeing, I guess, real-time, if there's anything to call out there? And then my second question is just on marketing spend. Specifically, as you guys move upmarket, are you seeing any changes in your return on marketing spend or any changes in your TROI framework, specifically as you move upmarket?

Yes, I believe the response to both questions is that the quarter performed as anticipated. We had projected the marketplace to remain flat or possibly decline by a low single digit, and that is precisely where we are. Looking ahead to the second half of the year, we expect a similar trend. Regarding the marketing trend, we provide ROI data that can be tracked, and I think those results align with our expectations without notable deviations.

Our next question comes from the line of Rohit Kulkarni of ROTH Capital Partners.

You've mentioned AI agents and workflow automation in your letter. Can you discuss the demand you're observing, particularly the types of customers and use cases where Fiverr is positioned to meet the needs in AI agents and robotic process automation in the evolving AI landscape? Additionally, from our calculations, it seems that GMV has accelerated for three or four consecutive quarters. Could you elaborate on your assumptions for the second half of the year, especially since the guidance remains unchanged? I'm curious about your thoughts on the sustainability of GMV acceleration, even though it's fluctuating between minus 1% and plus 2%, which I still find encouraging.

Rohit, thanks for the questions. I'll start with the first one. AI-related services are booming, and the demand is surging, especially around AI agents, workflow automation, and vibe coding. For instance, AI agents have experienced 35% growth quarter-over-quarter and 10x growth in the last six months. Workflow automation and vibe coding have also grown by 10x in the same timeframe, as customers utilize platforms like Meg.com and GoHighLevel to create those workflows. AI development is up 137% year-over-year, mobile app growth is at 47% year-over-year, and AI consulting has risen by 37% year-over-year. Additionally, we see some peripheral categories benefiting, such as data governance and protection with 58% growth and crowdfunding with 51% growth, where AI is now driving millions of startups. AI experts on Fiverr play a vital role in helping customers navigate the quickly changing AI landscape and connect technology with real business impact. We're excited about this and believe it's just the beginning, with more categories expected to be influenced and experience accelerated growth.

Regarding the second part of the question, we are observing a very stable macro environment. We don't see any significant trends of deceleration or acceleration. This leads us to anticipate for the second half of the year what we mentioned earlier: unless there are material changes in the macro environment, we expect stability with GMV being flat or possibly experiencing a slight low single-digit decrease. That is our forecast for the latter half of the year.

I would now like to turn the conference back to Micha Kaufman for closing remarks. Sir?

Thank you, Latif, for moderating the call today and to everyone who dialed in this morning. I look forward to speaking to all of you very soon. Have a great day.

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