Fiverr International Ltd.

Good day, and thank you for standing by. Welcome to the Fiverr Q4 and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jingjing Qian, EVP, Strategic Finance.

Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the fourth quarter that ended December 31st, 2023. Joining me on the call today are Miha Kaufman, founder and CEO, and Ofer Katz, president and CFO. Before we start, I'd like to remind you that during this call, we may make forward-looking statements and that these statements are based on our current expectations and assumptions as of today. and Fiverr assumes no obligation to update or revise them. A discussion of some of the important risk factors that could cause actual results to differ materially from any forward-looking statements can be found under the risk factors section in Fiverr's most recent Form 20F and other findings with the SEC. During this call, we'll be referring to some key performance metrics and non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. 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 issue today in our shareholder letter, each of which is available on our website at investors.fiber.com. And now I'll turn the call over to Miha.

Thank you, Jinjin. Good morning, everyone, and thank you for joining us. We entered 2023 with a backdrop of challenging macroeconomic environment, weak SMB sentiment, and waves of layoffs and hiring freezes across industries. It was also a year of increasing geopolitical uncertainties with the ongoing war in Ukraine and the onset of war in the Middle East. The entire Fiverr team showed extraordinary resilience against these tough conditions and delivered strong execution towards the strategic priorities set at the beginning of the year. For 2023, revenue grew 7% to 361 million, and adjusted EBITDA was 59 million, representing adjusted EBITDA margin of 16%, both ahead of the targets we set at the beginning of the year. Fiverr continues to operate one of the best-in-class business models and expands its market share in freelancer industry. Overall, GMV on the platform grew 1% year-over-year at a time when U.S. job openings are down 19% and professional staffing is down 6% year-over-year. We continue to focus on upmarket initiatives in both acquisition and product, resulting in 4% year-over-year growth in buyers with over $500 annual spend and 6% year-over-year growth in overall spend per buyer. We also expanded our take rate by 160 basis points, reaching an overall take rate of 31.8%, as both seller monetization programs experienced significant growth. Our strategy of going upmarket, investing in AI and complex services, and expanding value-added products really paid off and helped us drive growth in this macro environment. 2023 was also an exciting year as GenAI pushed artificial intelligence to new fronts. Early in January last year, we were the first in the market to launch a dedicated AI services vertical, creating a hub of businesses to hire AI talent. Throughout the year, we continue to see tremendous demand for those services, with searches that contain AI-related keywords on our marketplace growing seven-fold, in 2023 compared to 2022. Overall, we estimate AI created a net positive impact of 4% to our business in 2023 as we see a category mix shift from simple services such as translation and voiceover to more complex services such as mobile app development, e-commerce management, or financial consulting. In 2023, complex services represented nearly one third of our market base, a significant step up from 2022. Moreover, they are typically larger projects in longer duration with an average transaction size 30% higher than those of simple services. Double clicking on these numbers, we believe that the opportunities created by emerging technologies far outweigh the jobs they replace. Human talent continues to be an essential part of unlocking the potential of new technologies. We are also seeing a shift into more sophisticated, highly skilled and longer duration categories with bigger addressable markets. As the data shows, our market base is built to benefit from these technologies and labor market changes. Unlike single vertical solutions with higher exposure to disruptive technologies and trend changes, Fiverr has developed a proprietary horizontal platform with hundreds of verticals quickly leaning into the ever-changing industry demand needs and trends. All in all, we believe AI will be a multi-year tailwind for us to drive growth and innovation. In 2023, we also made significant investments in AI that drove improvements in our overall platform. We optimized our product and R&D organization and changed to a biannual product release cycle in order to significantly accelerate product velocity and focus on strategic priorities rather than incremental features. Our recent winter product release in January culminated these efforts in the second half of 2023 and revamped almost every part of our platform with an AI first approach from search to personalization, from supply quality to seller engagement. We believe these projects not only helped us drive growth last year, but also laid the foundation for future growth. As we enter 2024, We will build upon the progress we have made in 2023 and focus on investing in driving growth acceleration of the underlying business. The strategic priorities for 2024 are, first, continue growing our market share into complex service categories. In 2023, complex services were growing at 29% year over year, significantly faster than the overall market and a big acceleration from 12% in 2022. This year, we are doubling down on this opportunity and have identified a number of verticals with high growth potential. We will build experiences tailored to these verticals and deploy more targeted go-to-market strategies for them. The second priority is to continue pushing up market by further expanding offerings in Fiverr business solutions. On Fiverr Pro, our flagship business product, we are opening ways for clients to match with talent, whether it's through high touch point of contact from a customer success manager or AI assisted brief and match functionality or manage services through initiatives such as project partner. For Fiverr Enterprise, we have redesigned our pricing and go-to-market strategy to drive more talent sourcing and engagement volume. We believe helping businesses with skill gaps and their hiring needs is a much stronger value proposition and creates more durable, longer-term relationships than the talent management software alone. Early signals in December and January already show encouraging logo acquisitions, and we are aggressively working to complete onboarding and ramp-up usage. Last but not least, Fiverr Certified now has dozens of partners, and we are working closely with them to integrate our solutions into their client flows. While the Fiverr Marketplace is built as a standardized catalog business to drive speed and cost efficiency, Five-year business solutions is built as a suite of offerings to meet any needs of large customers. We believe this two-pronged approach gives us tremendous competitive leverage in growing market share across the spectrum of the addressable market. Our third strategic priority is to continue developing proprietary AI applications unique to our market base to enhance the overall customer experience. The winter product release we discussed just now gives you a flavor of that, but there is so much more to do. We are barely scratching the surface here. And the beauty is that all three priorities will drive a positive flywheel among each other to propel our business into the future. I'm very excited about our 2024 roadmap and firmly believe there's a significant growth runway ahead of us. With that, I'll turn the call to Ofer, who will walk you through some financial highlights.

Thank you, Micha, and good morning, everyone. We finished the year with a strong execution as we strengthened our marketplace and invested heavily into AI and moving up market while successfully maintaining our operational excellence. Revenue for the fourth quarter of 2023 was 91.5 million, representing a year-over-year growth of 10.1%. Adjusted EBITDA was 16.1 million or 17.6% in adjusted EBITDA margin. Both were in line with our expectations. For the full year, our revenue increased 7.1% to 361.4 million. We also doubled our adjusted EBITDA to 59.2 million, or 16.4% in adjusted EBITDA margin, and we are pleased to have achieved annual gap profitability for the first time in the company's history. Our strong free cash flow generation, together with a healthy balance sheet, puts us in a great financial trend to navigate this macro environment, continue pursuing growth and maximize long-term shareholders' value. Our annual active buyers were at 4.1 million, and spent per buyer improved to 278, up 6% year-over-year, as we ramped up our marketing efforts on targeting higher-value buyers and accelerating our upmarket investment. We continue to make significant progress this quarter in our Fiverr business solution, as we added new features to Fiverr Pro, signed up several new partners to our Fiverr certified solution, and onboarded over a dozen new clients to Fiverr Enterprise. We saw the effort we made last year pay off, as the average spent per buyer for 2023 cohort was 13% higher than the 2022 cohort in its first year. Our unit economics remains strong, as the ROI for performance marketing was slightly over three months, while our three-year lifetime value to CAC exceeded over 3x. We expect to maintain strong market efficiency as we focus on investing in higher-value buyers with large spend capacity. Take rate for the fourth quarter was 31.8%, representing a year-over-year expansion of 160 basis points driven by significant growth in our seller monetization programs, Promoted Gigs and Seller Plus. Our expansion efforts in these programs have led revenues from Promoted Gigs to increase 80% year-over-year and revenue from Seller Plus to climb over 2.5x in 2023 compared to 2022. We believe both programs have plenty of growth runways ahead. Now on to guidance. For the full year of 2024, we expect revenue to be in the range of 379 to 387 million, representing a year-over-year growth of 5 to 7%. Adjusted EBITDA is expected to be in the range of 65 to 73 million, representing an adjusted EBITDA margin of 18% at the midpoint. For the first quarter of 2024, revenue is expected to be 91.5 to 93.5 million, representing year-over-year growth of 4 to 6%. Adjusted EBITDA is expected to be 12.5 to 14.5 million, representing an adjusted EBITDA margin of 15% at the midpoint. I'd like to provide some additional color and context behind this guide for Q1 and for the full year. Unpacking the revenue guidance, we expect the revenue growth in 2024 will be driven by accelerating GMV growth, accompanied by a moderate expansion of take rate. GMV is expected to accelerate by 1% to 2% in 2024 compared to 2023, primarily driven by market share expansion in complex services, going up market, and investment in AI. We also expect our central buyers to accelerate, while active buyers to continue similar trends as in 2023. We will take a balanced approach in driving profitable growth and expect adjusted EBITDA to continue progress toward our long-term target of 25%. It is important to note that revenue growth remains our top priority. At the same time, we expect to make steady, measurable annual growth in driving adjusted EBITDA expansion for the next several years. We remain confident in our strategic priority and financial fortitude. The best market opportunity ahead fuels our optimism and we are primed to emerge from this challenging economic period as an even stronger and more profitable company. With that, we will now turn the call over to the operator for questions.

Thank you. And as a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question will come from Eric Sheridan from Goldman Sachs. Your line is open.

Thanks so much for taking the question. Maybe if I could just ask one. big picture one, obviously very clear on the current macro environment. Talk a little bit about how you plan on balancing incremental profitability and managing through this macro environment in the short term, but not sort of missing the longer term dynamic of wanting to capture growth and being ready to pivot and capitalize on the opportunity when and if the macro environment does get better. So just better color on sort of striking that balance in terms of the way you frame this year and the way you're executing in the early part of 2024? Thanks so much, guys.

Yeah, good morning, Eric. Thanks for the question. So yes, growth does remain a top priority for us. And I think that what we've been demonstrating is that when macro is challenging um we're able to continue growing while optimizing our efficiency uh and and create a very strong cash position and being remaining very opportunistic about the possibility of growth in the future so doubling down on those on those opportunities is also is always something that we do it is it is important to say as well that we're investing in acquiring high value buyers those buyers spend more with us and remain longer with us and support the expansion in categories, what we call the more complex categories that are outgrowing the more simpler categories. And I think that when the market rebounds and you're going to see more engagement also coming from lower market segments like micro-businesses, will be there to capitalize on that growth and be able to double down and grow faster on them. In the meantime, we're improving every aspect of our business throughout, and I think that we've demonstrated that we've been doing that very steadily.

Great. Thank you. Thank you.

Thank you. And our next question will come from Ron Josie from Citi. Your line is open.

Great. Thanks for taking the questions. Maybe to build off of Eric's questions, Miha, you know, we definitely saw relatively stable cohort behavior, I think, from existing buyers in 23 and certainly strength in more complex projects and AI as a talent. Maybe dig down a little bit more on just that top line growth. I understand you balance top line with profitability, but Would love to hear more about your plans around verticals and products just to grow newer cohort spend and to build up that upmarket sort of muscle based on all these new products that are being launched. And then, Ofer, I did have a question. With guidance calling for just continued strong margins, talk just about how you view Fiverr's balance sheet here. Any update on capital allocation plans? Thank you.

Thanks so much, Ron. Just a quick note on Ofer Adda. an unplanned dental treatment this morning. So we had him for the opening comments, but I think I'll spare him from having to talk further. We obviously have Jinjin with me to answer with a question. So for your first question on cohort. So as we said in the opening comment, you know, we are seeing a mixed shift on simple categories where there's more impact of macro coming from less spend from smaller businesses and slightly impact from technological shifts and automations, while at the same time, we have cohorts that are coming to us for the more complex categories that are spending significantly more and are engaging more with us. So we do see some softness in cohorts that we called out as of the second half of 2022, and that lasted throughout 2023. And actually, macro isn't changing. So we're not calling any change to macro. At the same time, we have identified a number of categories that are growing much, much faster. And therefore, we're doubling down on these categories. And that with the focus on high value buyers, those who have the spend capacity and are interested in our onboarding into Fiverr into these categories allows us to actually improve cohort behavior And you see that from the numbers of 13% increase in spend in the last year by these cohorts. As to your second question on capital allocation, look, we've generated over $80 million of free cash flow this year. And obviously, we have a very strong balance sheet. Financially, we are in a very well position. As we continue to generate free cash flow and increase cash on our balance sheet, we are having active discussions with the board on our capital allocation, including the use of excess cash for equity buybacks. It is worth reiterating that growth continues to be a top priority for us, and we see opportunities for both organic and inorganic in our top of mind is to be very disciplined in making these decisions and really focus on delivering returns to our shareholders and maximizing long-term shareholder value.

Great. Thank you, Micha.

Thank you, Ron.

Thank you. And our next question will come from Doug Anmuth from J.P. Morgan. Your line is open.

Great. Thanks for taking the question. It's Wes. I'm for Doug. It's good to see AI already contributing to growth, even though it's really early. You mentioned just kind of scratching the surface. Just kind of where do you see some of the longer-term opportunities or maybe places in the business you can really lean in a lot further with AI and drive positive impacts?

Hey, good morning. Thanks for the question.

So as we made clear, both in the shareholder letter and our opening comments, AI is a net positive for us. And I think that what we've identified is there is a difference between what we call simple categories or tasks and more complex ones. And in the complex group, it's really those categories that require human intervention and human input in order to produce a satisfactory result for the customer. And in these categories, we're seeing growth that goes well beyond the overall growth that we're seeing. And really the simple ones are such where technology can actually do pretty much the entire work. which in those cases, they're usually associated with lower prices and shorter term engagements. So essentially, we're really focusing on these more complex services, doubling down on these categories. We think that these categories have the potential of driving very nice growth, and the larger they become, the more growth they'll push. At the same time, we're using AI across the entire marketplace, the entire experience. The searching experience, matching, personalization, the way our customers are doing briefing, the way Our sellers are attending to customer needs. So essentially powering every aspect of the experience and making it better and more efficient. And what we've done with the winter product release is just a first step. It's a big step, but it's a first step in pretty much integrating AI in every aspect of the experience and the product. And we'll continue doing so throughout the year and probably in the next years to come. Again, it is presenting with some superpowers that didn't exist before and allow us to really turbocharge the experience. And so I think that both from a product standpoint, but also from a market-based standpoint, AI is going to be a multi-year tailwind for us.

Great. Thanks so much.

Thank you. And our next question will come from Andrew Boone from JMP Securities. Your line is open.

Thanks so much for taking my questions. I wanted to ask specifically about the simple services GMB and the fact that it was down 28% in 2023. Can we tie that into the 2024 guide and just talk about your expectation for these simplest services and the ability for them to stay on the platform?

Hey, Andrew. Thanks for the question. So just as a correction, the simple services are down in teens, not 28%. Um, so, so it's, it's, uh, it is, it is, uh, smaller than, than you indicated. Um, everything that we've put in the model is tied into the guidance. So, so whatever we see, including those, uh, uh, that, uh, decrease in, uh, in simple services, um, is, um, is, is definitely in Thursday. There's a mix shift, right? And so as we've demonstrated, the increase in the complex categories far outweigh the decrease in simple services. And so as we think about the guidance and as we think about AI becoming a multi-year tailwind, all of that is being tied into the guidance.

Sorry about that, I misread it, apologies. And then I wanted to ask about the changes in enterprise that you're making. How is the change in enterprise changing how you interact with business and how is that relating back to increased usage of the platform?

Thanks so much. Thank you.

So essentially what we've done with enterprises, we've created a new pricing package that really emphasizes the value we provide on talent sourcing and are built for encouraging long-term engagement. So under this new pricing package, clients do not pay additional fees to have access to talent management system if they source and hire a certain number of freelancers. If they don't use enough, then the minimum fee will kick in. So these changes have allowed us to really expand and onboard more customers into it. That's a much quicker onboarding time.

Thank you.

Thank you. And our next question will come from Matt Farrell from Piper Sandler. Your line is open.

Hey guys, thanks for letting me ask a question. My first one is a bit more near term. You know, Q1 here is a little softer compared to normal seasonality, but you called out the macro really not changing in any material way. We'd love just to hear kind of what's been going on in Q1 from, you know, a puts and takes perspective that kind of drove the initial guide for the quarters.

Hey, Matt, this is Jingjing. I'll take this question. Yeah, so nothing specific to call out for Q1. Like we mentioned earlier, we have not really seen a rebound in the macro. That said, you know, we do believe that we can drive growth even under this macro. This is why, you know, for you see for the full year guidance, we are expecting to accelerate our GMV growth you know, this year. And Miha has talked, you know, when you look at the strategic priorities we set for 2024, you know, we noticed a few big areas and that is really, you know, going to help us drive GMV acceleration. And on the take rate side, you know, we already command, you know, over 30% take rate, which is really industry leading and speaks to the unique value proposition we provide. For 2024, we expect to continue expanding take rate, but at a more moderate pace compared to 23. Mainly due to 23, we had a pretty substantial expansion for the two monetization programs. So for 24, we expect to continue to grow take rate, but could be more moderated. So these two pieces kind of go together into kind of the guide for Q1 and 24.

Thanks. And then, you know, you hit on kind of continuing to be on path for that long-term 25% adjusted EBITDA margin, obviously kind of optimizing here in the near term, but would love just any more insight, you know, as we maybe, you know, is that a couple more year timeline? How should we be thinking that? And what are the major levers from here, you know, from the 2024 guide to get to that 25% number? Thanks.

Yeah, so I think for us, growth continues to be the priority. So we are going to continue to drive growth while managing expense very diligently and making very steady and consistent progress towards this long term. So we're not giving a specific timeline for reaching 25% at this time, but you can see we're not you know far away from it and we are going to you know continue making you know steady annual progress towards it thanks thank you and our next question will come from jason helstein from oppenheimer and co your line is open um thanks it's kind of like a two-part question but on the same theme so you've given us

you know, data showing the TROI marketing efficiency still remains healthy. When we look at the cohort data, just maybe help us, how do you think about it? How much is we're looking at like, obviously it's visual, right? But the kind of, you know, cohort change from kind of running off the COVID benefit to just, you know, general weak macro weakness among certain customers. And then as you're thinking about the guide, you know, I think most of us sit here and say, okay, you know, a good, a large percent of your business is smaller businesses that are interest rate sensitive. As interest rates come down, they should be willing to spend more. Like, how do you just think about that dynamic as you're thinking about your guide, you know, relative to the other things that are in your control, right? Moving up market, new products, take rate, et cetera. So just maybe unpack that. So kind of the, the burn off of the COVID benefit, and then kind of how you're thinking about particularly sales, smaller business customers who are probably more directly impacted by changing interest rates.

Thanks, Jason. Good morning. So essentially, I think we mentioned this a few times. Right now, we're not seeing any macro change. And obviously, when it does change, there is going to be an upside. And we're going to be there to capture it. And the incredibly powerful marketing machine that we've developed over the years is ready and fire up. So capturing that opportunity is not going to be an issue. That said, since we're not seeing any of these changes as of now, and we'll be super happy to share it with all of you once we do see it, we're focusing on the things that we can control. Which is why we've been focusing more on high value buyers, those who spend more on spend per buyer in general, knowing that in active buyers, as an example, we're not going to see the same type of growth. In an easier macro environment, usually if you look historically, what you see is you see a more balanced growth between active buyer and spend per buyer. because we're able to grow both of them. Right now, we're obviously focusing on the things that we can control, which is really focusing on the more complex services, the higher value customers, and optimizing to acquire as effective as possible in those areas. I think, again, from a brand perspective, Fiverr is the leading brand in the world in this space. So once the sentiment is going to change, I think that this is just going to add to the great tailwind that we're experiencing from AI right now.

And just to be clear, your guys assume there's no pickup in macro through the entire year or there's some pickup at some point?

No, no, no, correct. It does not factor in any... hopefulness around macro rebound. Thank you. Thank you.

Thank you. Our next question will come from Kunal Madukar from UBS. Your line is open.

Hi, thank you for taking my questions. A couple if I could. One on the complex services side. Wanted to understand buyer behavior and seller behavior in terms of repeats and where you're seeing the demand from and are the sellers that are supplying the complex services are these new to the platform are they people that have retooled their their skill set and are now supplying complex services and then on the on the take rate side for these complex services uh you know with with the uh asp kind of increasing you're probably going up more uh head to head with upwork So can you talk about take rate trends and pricing? Thank you.

Yeah, thanks for the question.

So first of all, to touch on complex services, complex services are really categorized where human skills are essential to deliver a satisfactory outcome. You know, even when AI can be used to improve the efficiency of some aspects of these projects. So essentially what we're seeing there is by definition, the buyers who come to purchase these customers have a typically longer duration of projects. So in essence, the type of relationship that they develop with our platform is longer. And that also influenced their repeat and their retention over time. Now, as to the sellers, a lot of them are existing. Some are new. I mean, we're adding tremendous amount of talent to our platform every month, every quarter. But as you can imagine, these sellers are mostly relevant for higher quality Uh, so, so, uh, you know, you can see segments like pro sellers. Um, so, so I think that this, this is, you know, really helpful for these sellers to really expand their earnings on fiber, which also creates, uh, you know, uh, retention of, of talent as well and their engagement. So, um, so I think that from, from, uh, those two aspects, um, you know, it's, it's definitely a, a move into the right direction. I think the way we look at competition is really that most of the competition is offline. We're not focusing on any specific company. Each company in the space has its own way of doing business. Ours is really to try to to do more of the transformation from the offline activity, the work that companies are doing with talent, with agencies, and really transform it to the online. And we're really confident with the approach of tackle the entire addressable market with both the marketplace and the Fiverr business solutions. Thanks for the question.

Thank you. And our next question will come from Brad Erickson from RBC Capital Markets. Your line is open.

Hey, guys. Thanks. I guess first, you mentioned your outperformance relative to job openings and staffing and stuff like that. Mihal, maybe just remind us, if you could, what are the kind of key types of capacity you think Fiverr is really replacing here, augmenting or supplementing? You think about the secular aspect of the digital freelancer opportunity. And I guess, like, what should investors focus on as kind of the more acute drivers, whether it's like business formation, just kind of general health of the SMB, job openings, et cetera? That's the first one. And then second, just the housekeeping for Sorry about Ofer's teeth. Just stock-based comp, what's embedded in the guidance? And just generally how to think about stock-based comp, I guess maybe it's like a percentage of revenue, for example, going forward.

Thanks. Morning, Brad. Thanks for the question. So as for the first one, I think first what we're really optimizing for is this offline to online. So freelancers, in general, are addressing things like skill gaps, cost efficiency, issues of scaling up or down very rapidly without the complexities that comes with full-time hiring. And what we're doing is we're really doing this, but in a hyper-efficient model So we make the actual process that is taking, on average, many, many weeks for companies, we're changing that to a really simple interaction that takes minutes. So I think that by really covering this entire spectrum from the small needs of micro-businesses to very sophisticated needs, for more sophisticated and large customers, we're actually helping to transform this offline to online. Now, in terms of what investors should focus on, we're trying ourselves to look for proxies. And one of the interesting things that we saw is that it is hard to find a proxy other than the actual numbers that we're seeing on our platform. Meaning new business formation is not necessarily an indication that those businesses have the spend capacity. Sometimes new business formation is tied with job cuts or people that need to replace or create new businesses. It doesn't mean that this is going to immediately lead to more spending. I think that if anything, cost of borrow is probably a decent proxy. Because when you think about that, smaller businesses who need to borrow money to invest in growth have a harder time in this economy. And if you're a business that is already generating capital, then you can reinvest without borrowing money. So this is why I think we called out pretty much in the past year and a half, the fact that we're seeing parity between mid-size, large-size enterprise business and small and micro businesses. And those lower cohorts of smaller businesses have a harder time than the large one. As we've demonstrated, the fact that there is a pretty massive decrease in job openings doesn't mean that we're not growing. So we're seeing and we're showing, we're demonstrating an opposite trend. So it's really hard to find these proxies. Jingjing, you want to take the?

Yeah, so SBC, you know, we, SBC is an elevated level, as we mentioned before, because of the accounting treatments. that is booked at cost, and it's tied with a high stock price during COVID. And so from a modeling perspective, you know, this is going to take, you know, four years to vet those, you know, RSUs and options. And so for modeling this year, it'll be, you know, similar to last year's level from $1 So as a percentage of revenue, it'll come down slightly. And as we finish the four-year vesting, you know, we do expect, you know, that percentage of revenue will, you know, more substantially stepping down. Great. Thank you.

Thank you. And our next question will come from Bernie McTernan from Needham & Company. Your line is open.

Great. Thanks for taking the questions. Really appreciate all the color and data on the complex for simple declines or growth. Wanted to follow up on it. Just what was the shape of complex growth and simple declines throughout the year? Just wanted to get a sense in terms of if trends were stabilizing or accelerating in any direction just as we use that to forecast 24. And then on the third bucket, the neutral, Any specific examples you could provide in terms of what those gigs are predominantly? And over time, do you think the growth will move more like simple or complex or really stay kind of flat?

Thanks, Bernie. Nothing really specific to comment on Shake, right? We're not... We can't call any difference across the year, and it seems to be steady. We have a full year of analysis that is showing that. Obviously, we'll need to see how the future shapes up, but this is what we can call for now. In terms of the neutral bucket, essentially, These are categories that are not being affected. So essentially, their trends have nothing to do with the AI impact. So we don't see any material trend changes due to AI, whether because AI is not involved in it or because it's just not impacting it.

Yeah.

So as to your second part of the question, will growth move to simple or complex? I think that at some point, every transformation, every technological transformation may plateau at some point, but we don't think that this is going to happen anytime soon. So our assumption is that some of the simple paths are going to continue to be automated, which, by the way, is nothing new. I mean, it happened before AI. Automation has been a part of our lives. And definitely, the more complex services is where I think the growth potential definitely lies. This is why we called out the fact that we're going to double down on these categories and services.

Understood. Thank you.

Thank you. And our next question will come from Marvin Fong from BTIG. Your line is now open.

Great. Good morning. Thanks for taking my question. So two for me. So first, that's on enterprise. Great to see adding over a dozen clients there. Just be interested if there was any additional color you could add about you know, the pipeline that you see for this cohort? And can you speak to any, you know, what's kind of the size of the clients that are adopting this? Are they, you know, 500-plus employees or, you know, thousands-plus employee kind of organizations, the very large organizations? And then second question, just more of a housekeeping question, but, you know, love to see the disclosure about AI being 4% of employees. But just curious if, you know, since AI didn't really manifest itself until sort of, let's call it May or June, you know, was the percentage in the back half of the year actually higher? And, you know, or maybe you could kind of speak to, you know, fourth quarter, you know, what was the impact just in that quarter? Just trying to get a sense of, you know, maybe what we're seeing currently. So thanks a lot.

Thanks for the questions. So on the first one, on the dozen clients we've added to enterprise. So in Q4, we acquired three multinational enterprise clients, including two in the tech space and one in the manufacturing industry. And we also added about 10 mid-sized enterprises uh including a few uh media companies um and and just to give you a color on on size when you know when when we talk about uh large you know versus mid-size uh we categorize it below or above 3 000 employees that that hopefully um is giving you uh is giving you color um On the second part of your question, well, we've been responding to the changes or the announcements of AI. I mean, ChatGPT was announced November of 2022. So as far as we've seen, the impact have started at the back end of 2022. In the beginning of 2023, we were already with about 20 or 30 categories that were dealing with AI-related services. So for us, it's really a full-year effect. That said, obviously, categories are very dynamic on the market base and outside of the market base that demand for those, and they've been developing throughout the year. But we have been talking about the net positive impact of AI throughout the year. And this is just our opportunity to wrap up on 2023 from a full year perspective and really calling and putting an actual number on it.

Okay, that's fair. Thanks so much, Miha. Appreciate it. Thanks, everyone. Thank you.

Thank you. And our next question will come from Rohit Kulkarni from Ross MKM. Your line is open.

Hey, thank you. Thank you for the extra color on GMV growth and the underlying layers. I guess just on metrics and how they affect your guidance for GMV, anything you could provide to unpack a little bit more with regards to kind of trend in active buyers and spend per buyer as we think ahead, how that stacks up to help you accelerate GMV?

Yeah, thanks for the question.

So essentially, I think as to active buyers, what we're seeing is what we've seen so far, meaning because of macro, there isn't any noticeable improvements in terms of our ability to increase those numbers in terms of quantity. And therefore, we are focused on the quality of those active buyers, which is everything we said about the high value buyers. And obviously, if you continue to track those numbers, you see that the percentage that they contribute continues to increase steadily. So active buyer is going to be a similar trend as in 2023. And spend per buyer will accelerate in year over year growth in comparison to 2023. So really, our focus on it is going to continue. If you're just calling out the contribution of higher value buyers, those who spend more than $500 with us, that cohort grew 4% year over year in 2023, which is significantly higher than the overall active buyer growth. Yeah, so that's how we view 2023, 2024, sorry.

Okay, okay, that's very helpful, Kalar. Thank you very much. And then I guess I know there were a bunch of questions on this new disclosure around simple versus complex versus marketplace mix that you have. I think just on that, probably like Kalar, As far as the mix going forward, anything noteworthy that you're assuming with regards to complex services that probably could be a bigger proportion of GMB going forward? And as a sub-question to that would be, are there any pricing or take rate differences, as in material differences across those three categories of GMB?

Hey, Rohit, this is Jingjing. Yeah, so I think definitely, I think we mentioned in the shareholder letter as well, you know, complex services in 23 is already almost a third of our marketplace in terms of GME contribution and much higher than, you know, the simple services, which is around 23%. And, yeah, given the growth rate, right, 29% year-over-year growth, you know, it is, a big step up in terms of the overall percentage of GME coming from those complex services. And we do expect that contribution continue to grow, you know, in the coming year.

And any noticeable differences in take rate, Jinjin, or anything?

Yeah, so take rate, nothing really, you know, are different. Our entire marketplace takes very consistent, just uniform take rates across the board. So 20% from the center side and then 5.5% from the buyer side.

There's no difference in terms of the transaction. Okay. Thank you very much.

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Miha Kaufman for any closing remarks.

Thank you, Crystal, and thank you, everyone, for joining us today. We look forward to an exciting and successful year and hope to see you in person soon. Thank you. Have a great day.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.