I covered Fiverr here in November 2020 as part of our free newsletter. In this report, I made the case that the trends we were seeing from Fiverr were not dependent on Covid, but rather accelerated by the pandemic.
I argued that these trends would be sustained post-pandemic and that the shift to a more remote and flexible workforce was permanent, especially in younger generations. Six months later, lockdowns have eased amidst the vaccination rollout, but we continue to see positive momentum in Fiverr’s platform.
I/O Fund is looking for signs of high-level business performance among indiscriminate selling in growth tech. When the value rotation ends, I believe FVRR is one of the stocks poised to benefit most. Moving forward, FVRR is unlikely to see triple digit revenue growth again. However, consensus projections show 40% revenue CAGR over the next three years, with tremendous growth on the bottom line as the company improves profitability.
Below I examine Q1 results and guidance, evidence of increased usage and engagement of the platform, and valuation.
Q1 Results and 2021 Guidance
Fiverr announced Q1 results on May 6, comfortably beating top and bottom line estimates while also raising guidance. Revenue came in at $68.3M in the quarter, representing an acceleration to 100% YoY growth. Non-GAAP EPS of -$0.01 beat by $0.10, while adjusted EBITDA improved to ($0.7M) compared to ($2.9M) in Q1 ‘20.
Active buyers grew 56% YoY to 3.8M, an acceleration from the 45% growth rate Fiverr announced last quarter. Spend per buyer came in at $216, representing 22% YoY growth. Take rate improved 10 basis points YoY to 27.2%, while the company also announced an impressive 84.1% gross margin.
Fiverr guided for $74M in revenue for Q2 (+57% YoY) and positive EBITDA of $6M. For the FY 2021, Fiverr raised revenue guidance to $305M at the midpoint. The company is now expecting YoY revenue growth of 61% in 2021 versus previous guidance for a 48% YoY growth rate. The FY outlook came in 6% above consensus estimates. Management also guided for positive adjusted EBITDA of $22M at the midpoint, representing 142% full year EBITDA growth.
Continued Momentum
In the company’s Shareholder Letter, Fiverr management talked about its expectation for continued strength and an elevated spend level that will be sustained well into the future. The platform saw its most ever monthly app downloads in March 2021, reaching 215,000 downloads from US app stores (+57% YoY). US monthly active users grew 40% YoY in March 2021, representing Fiverr’s highest ever monthly growth rate.
The Fiverr app is currently ranked 31st in “Business” on Apple’s app store and 22nd on Google Play. When I covered Fiverr on November 20, 2020, the app had a ranking of 39th in “Business” on Apple’s app store and 26th on Google Play. This data indicates that we are seeing continued strength from Fiverr’s platform into mid-May, even as over 32% of the US population is now fully vaccinated and over 45% of the population has received at least one dose.
We continue to see evidence that Fiverr’s platform is performing better than ever as lockdowns ease. Global internet and engagement trends from Alexa show Fiverr’s site currently ranks 139th in traffic and engagement over the past 90 days.
Source: Alexa
Fiverr’s ranking has improved 79 spots from mid-February, and is currently sitting at peak traffic levels.
Over the last 6 months, total visits to Fiverr have trended upwards and the platform is currently near peak levels with 60.6M average daily visits (+3% from 11/20). Fiverr ranks 530th globally in total visits according to SimilarWeb.
Source: SimilarWeb
In comparison to my coverage of Fiverr in November 2020, we continue to see evidence of increased usage and engagement. The trends towards adaptation of remote work and shifting businesses online are examples of lasting changes brought about by the Covid-19 pandemic. A key component of the “New Economy” includes more remote and flexible work, where Fiverr continues to show it will be a key beneficiary.
Valuation
FVRR stock has historically commanded a premium valuation as the company has an exceptional revenue growth rate, 84.1% gross margins, and is already profitable on the bottom line. FVRR stock currently trades at 16.0x EV/NTM revenue after reaching a peak valuation of above 40x EV/NTM revenue in early 2021.
The sell off in high multiple stocks has hit FVRR hard and the stock is over 50% off all-time-high prices of $336. 16.0x EV/NTM revenue is the lowest forward valuation FVRR stock has traded at in the last 9 months.
Conclusion
We are unlikely to see a triple digit revenue growth rate again from Fiverr as the company now faces tougher comps. But consensus projections show expectations of 62% YoY growth in 2021 and a 40% revenue CAGR over the next 3 years. Analysts are also expecting tremendous growth on the bottom line as Fiverr ramps up profitability, with consensus projections for EPS of $2.09 in FY 2023 compared to the $0.29 FY 2020 EPS Fiverr just announced.
When the value rotation eventually ends and we see a rotation back to high growth tech stocks, FVRR is one of the stocks poised to benefit the most. We are looking for signs of high-level business performance during the indiscriminate selling in tech, and Fiverr continues to show why its business is performing better than ever.
Disclosure: I am long FVRR; I/O Fund is long FVRR