Fiverr (NYSE:FVRR) Misses Q4 Revenue Estimates
Online freelance marketplace Fiverr (NYSE:FVRR) missed analysts' expectations in Q4 FY2023, with revenue up 10.1% year on year to $91.5 million. Next quarter's revenue guidance of $92.5 million also underwhelmed, coming in 5% below analysts' estimates. It made a non-GAAP profit of $0.56 per share, improving from its loss of $0.03 per share in the same quarter last year.
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Fiverr (FVRR) Q4 FY2023 Highlights:
Revenue: $91.5 million vs analyst estimates of $92.55 million (1.1% miss)
EPS (non-GAAP): $0.56 vs analyst estimates of $0.49 (14.7% beat)
Revenue Guidance for Q1 2024 is $92.5 million at the midpoint, below analyst estimates of $97.34 million
Management's revenue guidance for the upcoming financial year 2024 is $383 million at the midpoint, missing analyst estimates by 6.3% and implying 6% growth (vs 7.2% in FY2023)
Free Cash Flow of $27.41 million, up 18.3% from the previous quarter
Gross Margin (GAAP): 83.1%, up from 81% in the same quarter last year
Annual Active Buyers: 4.1 million, down 200,000 year on year
Market Capitalization: $993.6 million
“We are pleased to deliver strong results for 2023 with both revenue and Adjusted EBITDA ahead of our targets set at the beginning of the year. In the face of an uncertain macro environment, we continue to lead through innovation. Our latest Winter Product Release announced on January 30 is jam-packed with new products and features, with AI integrated across the platform,” said Micha Kaufman, Fiverr’s Founder and CEO.
Based in Tel Aviv, Fiverr (NYSE:FVRR) operates a fixed price global freelance marketplace for digital services.
Gig Economy
The iPhone changed the world, ushering in the era of the “always-on” internet and “on-demand” services - anything someone could want is just a few taps away. Likewise, the gig economy sprang up in a similar fashion, with a proliferation of tech-enabled freelance labor marketplaces, which work hand and hand with many on demand services. Individuals can now work on demand too. What began with tech enabled platforms that aggregated riders and drivers has expanded over the past decade to include food delivery, groceries, and now even a plumber or graphic designer are all just a few taps away.
Sales Growth
Fiverr's revenue growth over the last three years has been strong, averaging 27.4% annually. This quarter, Fiverr reported mediocre 10.1% year-on-year revenue growth, missing Wall Street's expectations.
Guidance for the next quarter indicates Fiverr is expecting revenue to grow 5.2% year on year to $92.5 million, improving on the 1.5% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to reach $383 million at the midpoint, representing 6% growth compared to the 7.2% increase in FY2023.
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Usage Growth
As a gig economy marketplace, Fiverr generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Fiverr's active buyers, a key performance metric for the company, grew 2.3% annually to 4.1 million. This is one of the lowest rates of growth in the consumer internet sector.
Unfortunately, Fiverr's active buyers decreased by 200,000 in Q4, a 4.7% drop since last year.
Revenue Per Buyer
Average revenue per buyer (ARPB) is a critical metric to track for consumer internet businesses like Fiverr because it measures how much the company earns in transaction fees from each buyer. This number also informs us about Fiverr's take rate, which represents its pricing leverage over the ecosystem, or "cut" from each transaction.
Fiverr's ARPB growth has been decent over the last two years, averaging 8%. The company's ability to increase prices while growing its active buyers demonstrates the value of its platform. This quarter, ARPB grew 15.4% year on year to $22.32 per buyer.
Key Takeaways from Fiverr's Q4 Results
We struggled to find many strong positives in these results. Its revenue guidance missed analysts' expectations and user growth has stalled. On the other hand, at least free cash flow seems to be heading in the right direction. Overall, we think this was a mixed quarter for Fiverr. The stock is up 3.9% after reporting and currently trades at $26.9 per share.
So should you invest in Fiverr right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
