Fiverr International Ltd.

Thank you for standing by. At this time, I would like to welcome everyone to the Fiverr Third Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would like to now turn the conference over to Jinjin Shin. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the third quarter that ended September 30, 2025. Joining me on the call today are Miha Kaufman, founder and CEO, and Estee Levy de Don, EVP Finance. 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 Factor section in Fiverr's most recent Form 20F. and other filings with the SEC. During this call, we will 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 measure 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 Mika.

Thank you, Jinjin. Good morning, everyone, and thank you for joining us. We delivered another strong quarter with solid performance across the business. In Q3 25, revenue grew 8% year over year, and we achieved a record high adjusted EBITDA margin of 22%. This is a clear reflection of our disciplined execution and the inherent leverage in our market-based model. Over the past several years, we've consistently prioritizing moving up market and investing in product innovation to support more complex use cases and larger customers. Q3 results clearly demonstrate our success on both fronts. Spend per buyer increased 12% year-over-year our strongest growth rate since the COVID era and of a much higher base. Not only are we seeing wallet share expansion across the broader buyer base, but more importantly, thanks to the adoption of dynamic matching and managed services, we are witnessing strong growth among projects that are significantly larger than the average market-based transaction. In Q3, GMV for dynamic matching grew 22% year over year with 15% of job briefs having a budget of over $1,000 and an average order value of $2,200. Managed services is capturing even larger and more sophisticated engagements with a minimum budget of $3,000. In Q3, managed services GMV grew 65% year over year with average product size reaching $17,000. The success of these offerings marks a meaningful evolution in Fiverr's value proposition. We're no longer just a platform for fast, lightweight freelance tasks. We are increasingly becoming a trusted partner for businesses executing highly specialized, multi-stage projects that often require depth of talent and orchestration. Another area where we are seeing tremendous growth is AI-related services. As AI is increasingly reshaping how work is delivered and being implemented across industries, demand continues to surge in areas such as AI agents, workflow automation, and vibe coding. Fiverr free answers have become an essential partners for SMBs looking to turn AI from potential into performance. This demand is directly reflected in the programming and tech vertical, which grew 14% year over year in Q3. We believe that this AI transformation cycle mirrors an early stage of the digital transformation and could provide a multi-year tailwind for broader tech investment. To lean into this secular tailwind, we are doubling down on our investment in AI-related categories. From growing specialized talent communities and launching tailored AI solutions to expanding our go-to market channels through strategic partnerships, our ambition is to position Fiverr as the go-to destination for finding top-tier AI talent and deploying applied AI solutions. Despite a macro environment that remains uneven, we're seeing positive signals and gaining market share. Labor markets continue to show mixed trends and broader hiring recovery remains elusive. However, our growth strategy which centers around upmarket expansion and AI enablement, is built on long-term macro-agnostic trends. We believe these are the right bets to get us back on track for GMV acceleration, regardless of macroeconomic scenarios. In that context, we announced a strategic restructuring in September to streamline our organization sharpen our product focus, and accelerate our evolution into AI first company. This means accelerating investment in building an AI native team, upgrading our tech infrastructure to drive faster AI integration and operational efficiency, and reimagining our market base with an AI integrated experience. From a product perspective, this transformation is anchored on four key pillars. One, strengthening our go-to-market execution. We're expanding our generative engine optimization, GEO, capabilities, integrating our catalog into native AI channels, and building AI-powered catalog management systems. We're also investing in partnerships that drive growth across AI-related verticals. building the next Gen AI-powered buyer experience. This includes expanding LLM-powered workflows across the buyer journey, advancing our know-your-customer, KYC, capabilities through data and product innovation, and investing in customer success to deepen trust. Three, evolving our matching technology. As we serve more upmarket clients and more complex projects, We're transitioning from traditional search to agentic matching, delivering a recruiting-like experience that surpasses human performance through deeper data, richer context, and advanced reasoning. Four, investing in talent and the talent community. Talent is at the heart of the entire MarketBase experience. In a world where AI is rapidly transforming how work is done, Our priority is to build a high quality trusted talent ecosystem. This means supporting human in the loop workflows, creating pathways for professional growth and deepening our commitment to long-term community engagement. I am truly excited about the opportunities ahead and the strengths of the roadmap we have built. As we enter the final stretch of the year, we remain laser-focused on execution. Our momentum in AI and upmarket expansion gives me confidence in the foundation we build. I look forward to sharing more about our 2026 roadmap in our next call. And with that, I'll turn it over to Esty.

Thank you, Micha, and good morning, everyone. We delivered a strong third quarter, with both top and bottom lines exceeding the midpoint of our guidance. Revenue for the third quarter was $107.9 million, up 8% year-over-year. We also achieved record adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA for Q3 was $24.2 million, representing an adjusted EBITDA margin of 22% and improvement of 260 basis points from year earlier. We continue to generate strong cash flow with free cash flow totaling 29.1 million in Q3. The strategic restructuring combined with our continued discipline in expense management contributed to strong profitability and robust cash flow generation. As always, we remain focused on balancing between growth and profitability while maintaining discipline in capital allocation. Q3 saw solid performance across both marketplace and service segments. Marketplace revenue was 73.6 million, driven by 3.3 million active buyers, $330 in spent per buyer, and 27.6% marketplace stake rate. Within the marketplace segment, we saw strong momentum, driven by the tailwind in AI-related categories, and the success of our expanded managed services and dynamic matching. These channels continue to fuel higher value complex projects, which in turn result in higher average transaction values and increase in share of customer spending. We continue to believe the structural tailwind within the marketplace segment, particularly around AI and upmarket adoption. will help offset broader economic headwinds and serve as a sustained growth driver. Service revenue was $34.3 million, representing a year-over-year growth of 40% and accounting for 32% of total revenue in Q3. The upside was driven by Fiverr Go increasing adoption of Seller Plus, which saw 20% year-over-year growth. Fiverr added maintained double-digit growth as a result of ad load expansion, and AutoDS benefited from enhanced synergies with Fiverr and continued success with the Shopify partnership. Looking ahead, we expect service revenue growth to moderate as we lap one year anniversary of the acquisition, but to maintain healthy double-digit revenue growth. We continue to expect service revenue to represent a little over 30% of total revenue for the full year 2025. Now on to guidance. For the full year 2025, we expect revenue to be in the range of $428 to $436 million, representing a year-over-year growth of 9% to 11%. We are raising our full-year adjusted EBITDA guidance and now expected to be in the range of 88 to 93 million, representing an adjusted EBITDA margin of 21% at midpoint. For the fourth quarter of 2025, revenue is expected to be between 104.3 to 112.3 million, representing a year-over-year growth of 1 to 8%. The wider-than-normal revenue guidance for the fourth quarter reflects elevated uncertainty in macro environment with mixed signals. Adjusted EBITDA is expected to be 23.9 to 27.9 million, representing adjusted EBITDA margin of 24% at the midpoint. During Q3, we announced a strategic restructuring plan, which resulted in a streamlined headcount and enhanced operational efficiency. These efforts contributed to the increased adjusted EBITDA guidance in Q4. While the pace of EBITDA improvement in Q4 should not be viewed as a steady-state cadence, profitability, margin expansion, and cash flow will remain key priorities for us, even as we redeploy some of our cost-based savings into selective, high-impact investment in AI and app market initiatives in 2026. We remain committed to our accelerated schedule to reach the long-term adjusted EBITDA margin of 25% in 2026. With that, we will now turn the call over to the operator for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, Simply press star one again. Your first question comes from Ron Josie with Citi.

Your line is open.

Hey, this is Jake on for Ron. Thanks so much for taking the question. Miha, I wanted to double click on how you're reimagining the marketplace to be AI first, specifically the pillars around evolving the buyer experience and improving matching. Could you just double-click and help us better understand your vision here and why you believe Fiverr is uniquely positioned to be AI first?

Thanks so much.

Hey, good morning, and thank you for the question. I should clarify that Ofer is with us on the line. He's having a sore throat, so this is why Esty was coming with the opening remarks. But in case we have questions, he will be happy to answer them. As to your question, look, I think what AI is giving us is the ability to change the way people express themselves. And you see that in the market, the way search is being augmented or replaced by prompting, it gives us an opportunity to extract a more accurate representation of of the actual need from the customer, which in turn gives us better tools to be able to accurately match in a very precise manner the right expert to the right mission. The same applies for more complex projects that sometimes require multi-talent and sometimes require an orchestration of those multi-talent into the end result. So this is just one example, which is very robust because the primary function that customers are using is the browsing and searching. And this is the most fundamental thing that we can use AI for. The same applies for the rest of our solutions, like the dynamic matching, as an example. project management, and so forth. And I've alluded to it in my opening remarks with everything I said about the matching capabilities that know your customer aspects. And we're already ripping the benefits or starting to rip the benefits of this being able to deliver much better matching to our customers that in turn result in larger types of projects

and with higher satisfaction.

Thanks. Thanks so much. And Ofer, I hope you feel better. Just one quick follow-up for you or Esty. Kind of given the wider 4Q revenue guidance, could you just touch on the key assumptions that would get you to the low end versus the high end, maybe specifically around GMV trends? Thanks a lot.

So, this is Ofer, and thank you for the concern.

The assumptions for the reminder of the year is that the revenue coming from services will continue to grow, while the revenue coming from marketplace will be dependent on GMV trend. The currency seems to be flat. might decline by a single digit. The assumption is that the trend that we have been seeing in the last quarter will continue into the fourth quarter. And based on the high volatility of the market in the last few quarters, we kept the guidance range wide to take into consideration that.

Thanks again.

Your next question comes from Jason Helfstein with Oppenheimer. Your line is open.

Thanks. Obviously, the spend per buyer increase was nice. I think you highlighted that this really wasn't from the SMB, but just the ability to move into more advanced projects and does show you're more from the company. I guess How does the reorganization tie into the ability to ever get back the SMB opportunity? Is the assumption now that you've reorganized the business to focus on higher value jobs and, hey, if SMBs ever come back, that's great, but there's no assumption? Do you think there's just... It's been so long since we've seen SMB demand that we just shouldn't assume that it ever comes back or any broad thoughts about that.

Thank you.

Right now, since the dynamics in the macro economy that we've seen hasn't changed materially, then we don't assume those changes. And, you know, while we see the Fed has started to lower interest rates, which could be constructive for SMBs. We also continue to see weak job data across both full-time and staffing sectors. So the macroeconomic conditions are still highly uncertain, to say the least. So when we think about our guidance or how it's being made off, it really assumes no change in the macro front. We talked about it in the full year basis that services will be a little over 30% of the 2025 revenue. So that will give you some idea of how we think about the market base versus services revenue. But overall, we continue to expect the market base revenue to be flat or low single. digit decline, and services revenue to exit the year with double-digit growth. And that assumes no improvement in the S&P side. That said, when we look at everything that has to do with the upmarket, meaning the larger types of customers and the larger types of projects, this is where we do see an improvement, absolutely. And that contribution is very noticeable. And as As much as that portion of the business becomes larger, the contribution is going to be larger, which means that by definition, the return to growth in active buyers is going to happen, period. We've been saying that for multiple quarters, and we're seeing this. So it converges to that point. That is the assumption. That's the framework, and this is what we're seeing happening in reality.

Thank you. Thanks.

Your next question comes from Doug Anmuth with JP Morgan. Your line is open.

Thanks for taking the questions. I have two. Micha, can you just talk, I guess, first just about the key investments you need to make in 26 to transform into an AI-first company? And how should we think about timing, you know, as you kind of progress along this journey? this shift? And then I guess secondly, can you talk more about the drivers of spend per buyer and the 12% growth kind of like beneath the hood? What are you seeing in terms of changes in types of projects and how buyers are really engaging with the platform?

Thanks. So thanks for the questions, Doug.

Good morning. So the investment that we're doing is one on talent. And I think that this is true for everyone. Finding AI natives on the talent side within the companies is one area of focus. The second is the improvements that we're introducing to our infrastructure. So some of the benefits of being able to use new development, coding, design, marketing, allows us not to just put more people on problems or building things on our infrastructure, but actually finding new ways of moving much, much faster without paying the price of working on a 15-year-old infrastructure. The third is the marketplace experience. on everything we do. And we've highlighted things like dynamic matching and project management and orchestration. And we've highlighted also the aspects of having a much more nuanced and much more accurate matching technology and KYC. And I've mentioned you know, those four pillars, which is the go-to market with the investment in LLM engines, GEO and partnerships, the buyer experience, the matching and the talent. So across all of these areas that I've mentioned, these are the areas that we're putting focus. And the approach is AI first mentality. meaning we want to make sure that we maximize the new possibilities that AI gives us, both internally in how we work and how we develop and how we execute, but both in how we can make AI more involved in our core business to make that core business better. As to your second question about the spend per buyer, I think that this is, when we think about spend per buyer, there are catalysts for it. And some of it is the ability to identify categories that are now growing, some of which, thanks to our move-up market, and some of which is because of the technological transformation of AI. And I've given some examples for it. Programming and tech vertical is one of them, which has a much, much higher project size. Dynamic matching and its contribution and the fact that 15% of them are from briefs that are above $1,000. Managed services that have grown 65% over the year. with an average size of $17,000. So these are very, very different from our average transaction size of services. And we continue to drive very healthy deal flow on managed services. So the nature of these projects is very strategic, not just tactical. And there are a few examples if you are interested in more examples in the shareholder letter.

Great. Thank you.

Once again, if you would like to ask a question at this time, please press star then the number one on your telephone keypad to raise your hand and join the queue. Our next question comes from Matt Condon with Citizens. Your line is open.

Thank you so much for taking my questions. Just with these product catalysts across AI and moving up market, potentially decoupling you from the macro environment, just what is your confidence level that these products can actually return the marketplace business to growth in 2026 as you just more deeply integrate them? And then my second question is just on AI displacing some of the commoditized jobs at the lower end of the market. Have we seen those plateau at this point and become less of a headwind? going forward, and it's just the placement of those types of jobs. Is it less today than it was, say, a year ago?

Thank you. Thank you for the question.

So, as these AI-driven products or needs grow, they grow much faster than the average. And the more they become a bigger portion of the total, they are driving us to change direction and go back to growth. We're seeing that. Still, it takes time for those types of customers and those types of projects to become the majority of our business. But as they grow, we are, by definition, going back to growth. And we see that on a constant basis, and you're seeing the numbers grow every time we meet here, every quarter, and they become larger and larger. Today, transactions over $200 is already the majority. They're over 50% of our marketplace, and they're growing double-digit. And transactions over $1,000... is growing in the 20 year over year, and more than 10% of the market base already. So this gives you some idea that they are already meaningful in the market base, and they continue growing, and this is where we draw our confidence from. The second part of your question about the job displacing, I've addressed that many times. The jobs that are being displaced are the very, very simplistic types of jobs. All of us are using AI for two years plus. We know its limitations. There's a lot of limitations to what AI can do, to its accuracy, and to its quality.

Customers understand that as well.

And they are, we've seen a lot of our customers, and talent by the way, using AI, but the more they use it, the more they understand its limitations and their ability to trust the outcome to be production ready and business ready. And so the things that we have seen being displaced are very, low skill types of services. Those types of services have been very small in size anyway. So the fact that they are being displaced is not a big deal. The more we invest in larger projects, the more we grow. That's the bottom line. And this is where AI doesn't replace human beings, doesn't replace human talent and high skills.

Thank you so much.

Your next question comes from Josh Chan with UBS. Your line is open.

Thanks for taking my questions. I just have two questions today. The first one is on your comment about macro uncertainty. I was just wondering, the macro has obviously been choppy for a while, so are you seeing anything different now than before that kind of led you to make that comment and that wider guidance. And then the second question is on, could you just talk about the phasing of the restructuring benefits? You know, to what extent some of the benefits are coming into Q4 and how that kind of layers into the rest of 2026? Thank you.

This is Ofer. On the first question, on the contrary, there is no change in micro. which is why we have kept the guidance pretty wide. And the second question, definitely there will be a bigger impact after start chain into Q4. But as we look into next year, we do plan to fill up the lines with some of the needed talent so that I would expect next year to improve in terms of EBITDA, but not to the same cadence as we are expected to see as of Q4.

Great. Thank you for the color.

Your last question comes from Marvin Fong with BTIG. Your line is open.

Good morning. Thanks for taking my questions. Also, I hope you feel better as well. Question, you know, I don't want to be cover ground that we previously did, but I think I'd like to ask it just kind of on a category basis. You called out the 14% growth in programming and tech. I would like to know, you know, other major categories are, you know, how are they – you know, benefiting from AI? Are you seeing the same trends? So perhaps you could comment on like design, creative, I think that's another large category for you, but any other major categories you'd like to kind of call out and how AI might be a tail end for that. And then second question, just on, you know, the move up market, obviously really great traction there. And I was wondering if there were other unlocks that you can do. Are you satisfied with the product suite? Or in the next 12 months, what are some new features that you might be able to launch to address other parts of the ecosystem? So for example, 1099 versus W2, anything along those lines would be great.

Thanks for the questions. So to highlight some of the areas where we're seeing growth, programming and tech is growing fast, and it's becoming a very meaningful category with about 20% of our business. Alongside programming and tech, we have digital marketing, video, and animation, which are also growing very strongly. Some of it is due to AI and the possibility of bringing highly skilled people that know how to extract the most out of AI, which is kind of the case I mentioned where you have customers sometimes trying to use AI, understanding its limitations, and their limitations as not being experts in how to make the most out of it. And they come to us in these cases, and we're seeing this as a very prominent case in these verticals. And also the nature of how customers come to us is very different from two years ago or even a year ago. So in many cases, they come more educated. They do a little bit of work on their own. They're not clueless. they can better express their needs, which also changes the basic function of what we do, which is less of explaining them what they need, but more trying to address that need by giving them a really strong and very accurate high-quality match. As we think about the move-up market, there is a lot to do, and I've already highlighted both in my opening remarks and in some of the answers and in the shareable letter some of these areas. But just to reiterate some of them, today many customers are already enjoying dynamic matching and managed services. But many more don't yet know that Fiverr can do these projects that are in the tens of thousands of dollars. So there is a lot of opportunity that we can unlock there. At the same time, there is the LLM channels, which are another example of areas to invest in, where the traditional search or the fact that Google was the internet up until a few years ago, and now they're not playing there alone. There are also other ways to explore the internet, and a lot of it is going to LLMs, creates a challenge which we prefer to look at an opportunity. And we're seeing how the LLM channels as a top of funnel is contributing more and more into the top of funnel traffic, which also makes us more motivated to continue investing along those areas. And last, I would say that maybe to reiterate what I said before, which is Customers are more authorate in how they share their needs. They're more explicit, which is good news for us because now we have more to work with and be able to match them with this incredible base of unbelievable talent that we have on our platform so that we can address their needs.

That's super helpful. Thank you, Mihal. That concludes our Q&A session.

I would like to now turn the call back over to Miha Kaufman for closing remarks.

Thank you, Morgan, for moderating this conference. And thank you, everyone, for participating. Wishing you a great day and talk to all of you soon.

This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.