Fiverr International Ltd. ($FVRR)

All right. We're going to go ahead and get going. I'm Doug Anmuth, JPMorgan Internet analyst. We're pleased to have with us Fiverr's CFO, Esti Levy Dadon; and Chief Business Officer, Jinjin Qian. Fiverr is a global marketplace that connects freelancers and businesses for digital services in more than 750 skilled categories. In the past 12 months, almost 3 million customers bought a wide range of services from freelancers working in over 150 countries. Esti recently became CFO in March and has been in several finance roles at Fiverr since 2016, most recently as EVP of Finance. And Jinjin recently became Chief Business Officer in March and has been in several roles at Fiverr since 2018, most recently as EVP of Strategic Finance. So welcome.

Thanks for having us.

All right. Maybe we'll start kind of big picture. You talk about the U.S. freelance market is nearly $250 billion of TAM and then including international, it should be much bigger. AI is also reshaping the nature of work as it expands kind of project ambition and compresses task duration. But how do you think about the TAM evolving in an AI-enabled economy?

It's an interesting question because, as you said, AI is really changing the nature of work and the skill landscape across the talent. We see the simple jobs on the marketplaces getting less demand, whereas there's explosive demand in AI-related services and complex projects as human is needed for more sophisticated strategic outcome-based work. I would say from a long-term perspective, there's definitely going to be continued growth in the TAM because the work is going to become more fragmented as human gets plugged into the agentic workflow. And freelancers offer this tremendous amount of flexibility, elasticity and also helping SMBs stay at the forefront of the technology. So we definitely believe there's a significant growth runway for the role of freelancers and the role of Fiverr.

Okay. Great. What are -- when you think about kind of TAM and how that expands and evolves, what are some of the key friction points that remain to unlock this opportunity, particularly as you transition from kind of a transactional marketplace to a more kind of trusted work platform?

I think there are a few things. One is the platform was built like over a decade ago, where it was really optimized for simple like voiceover, blog post writing type of jobs. And as jobs get more complex, we are going through this transformation to really upgrade the underlying data infrastructure and the matching infrastructure to enable a more sophisticated matching between the skills and the talent. That's one. Second is as any technology shift, you are going to see demand of the new skills leads the supply of the skills, especially we're talking about this drastic shift. So we definitely see a lot of AI-related needs there where the freelancers are going through this upskilling, adapting to the new and -- adopting the new workflow, all of that. And as a platform, we're helping them to go through this transition as well. So you are going to see this mismatching timing. But overall, I think it's a huge opportunity because every time you have supply skill gaps and shortage, this is where marketplace really plays a role in empowering both sides.

Okay. Great. So the company has made some key leadership changes as well as undergone a fairly significant restructuring over the past several months. Maybe you can just talk about how the changes sharpen accountability, accelerate decision-making as you execute this transformation.

Yes. I think we've been kind of going through upmarket for a few years now, and we've seen lots of progress in terms of upselling our existing customer base. That said, we realize that the world is changing much faster and to really become more relevant, we have to take a more drastic step and really lean into the opportunity in a more aggressive way. And that's kind of why we did the changes both from the execution standpoint, also from a strategic pivot perspective to really be more focused into empowering the complex projects and the high skill talent.

And how do you think about kind of the right size for the organization?

I think we're in a pretty good spot right now. Obviously, every organization is going through this AI adoption and becoming AI native. I think there's a lot of opportunities as we see it. And I think we're -- we kind of did the right transition, and we are always kind of the first to do these transitions in the market and really very focused on transitioning the workflows internally and also getting the talent that we needed to be there. Yes, very excited.

Yes, we removed some of the management layers so we can move fast. So what we're seeing now that when the team is focused and smaller, we can actually move faster and execute more.

Got it. Okay. So let's just dig into the kind of transformation more, which you've talked about as kind of multiyear and built around like 4 key pillars. And I think those are matching and product and go-to-market and then operational excellence. So maybe you can talk about how we should think about progress here over the next several quarters. And if you could kind of give us an update on where you are on each of those.

Sure. So we are only 2 months into this. We're just getting started. But already, I think we're already seeing a lot of focus and momentum into this transformation. On the matching side, like I said, it's really focused on the underlying brain of the marketplace where we are building a comprehensive knowledge graph to really capture all the data that as a transactional marketplace, the proprietary data we have. Historically, we know we're only scratching the surface of unlocking the potential for data. But now we are extracting the information from those unstructured data to enable the matching algorithms to really increase the conversion and the satisfaction rate from matching both sides. So that's on the matching. On the products, we see a lot of success with the dynamic matching and managed services product. We are doing a lot of the upgrade on the product experience from enabling higher complex jobs to collaboration services to also enable the talent to be able to onboard and manage their business in a more sophisticated way because now when we were talking about high-scale talent, their need is very different from the less sophisticated freelancers. So that's on the product. And on the go-to-market, we are doing many different things, opening new channels that historically we don't do much, things like account-based marketing. We're doing more social listening. We're being more creative, leaning into more targeted efforts to drive high-value projects to Fiverr compared to historically a more broad focused volume-driven business. And then lastly, operational excellence is all about applying AI across org from customer support to production to data. So there's a lot of projects there to unlock productivity.

Got it. Okay. Let's dig into a few of those a little more. Just on matching, you kind of talked about transitioning from traditional search to agentic matching. What does that mean? How far along are you in that vision?

It's all about ultra personalization, right? Think about the traditional search is a pretty average experience and you optimize based on keywords and impressions. Now in the agentic workflow, you almost have this one-on-one kind of chat with ChatGPT where every conversation is contextual, every conversation is personalized. And we are trying to leverage that LLM capability into the matching because if you think about it, the amount of unlock you can do with the service marketplace is significantly larger with the physical goods because when you're trying to hire someone, it's very subjective. It's very contextual versus if you're buying iPhone, it's a standardized product. So we do see that LLM is a huge enabler for a service marketplace for us to really take it to the next level.

And because we have the -- so the transactions are happening in our platform. So we have a lot of data now. And now with agentic, you can actually better understand and do the right matching because you really know the buyer from past experience if you had and the TAM definitely from past experience that you have. So together with agentic, the matching is much better.

Okay. And then on go-to-market, you've talked about expanding into more AI-native distribution channels and enterprise partnerships. Maybe you can just talk about how you're thinking about integrations with LLM platforms? And is there anything meaningful coming out of that LLM source traffic kind of contributing at the top of the funnel today?

Yes. We are investing a lot into the Geo technologies. And we've seen kind of really encouraging results in the last few months where like there's a lot of know-how into how to impact LLM organic search to really increase the relevancy and increase the brand awareness in the LLM channel. So this is one area of investment. Second is we are one of the first partners to kind of participate in the ChatGPT like paid programs. So we're also testing. And obviously, I think it's very early for OpenAI. A lot of the infrastructure is in the process of getting built out. But like I said, we want to be kind of ahead of the curve and really be there. And from an integration perspective, there's a lot of ongoing dialogue. I think this is a space where it's very dynamic. I would say most players, we haven't seen like significant traffic coming from these channels yet just because everything is so new and early. But down the road, definitely, it will be a very important kind of channel.

Okay. All right. Let's shift gears a little bit. Marketplace revenue has remained under some pressure, right, broader softness just in the SMB -- with SMB sentiment. And competition has recently called out some slowdown just around tariffs, energy prices, high interest rates. What are you seeing just in terms of macro kind of year-to-date?

Yes. I think definitely both SMB and macro has been under pressure. We kind of called this out last quarter. I think we kind of always see this a little ahead of other players in the market. So nothing kind of new to call out since the beginning of the year. I think we've -- it stayed relatively stable, and we're kind of executing according to the plan laid out from the beginning of the year. But definitely, we saw similar trends kind of earlier.

Okay. And then when you think about kind of how you're projecting revenue growth for '26 or revenue, which is down some. How do we think about how much is kind of more self-imposed from the transformation that you're undergoing and like deprioritization of low-end work versus some of those macro characteristics?

I think we're trying to be very disciplined on the transformation. I think part of the deprioritization is investing less into kind of the local optimization of the low end, but doesn't mean we're doing things to hurt the existing business. Quite the contrary, we're trying to be very disciplined and let the -- what works continue to work and drive majority of the company efforts into developing and investing into the future opportunity. We -- when we gave the guidance at the beginning of the year, we kind of factor in kind of a wider range of the guide to factor in the uncertainty in the macro. But overall, I think the guidance methodology and kind of the visibility we have into the year remains pretty consistent to what we did in prior years.

Okay. Let's talk more about AI. Just obviously, the impact remains kind of just key debate for investors. How are you seeing clients engage in terms of AI-related work? And any color just on how AI-related GMV is trending?

It's trending really healthily. I think after the initial AI, I would say, craze, I think we're seeing more and more customers realize that the human talent is needed for them to implement AI and really unlock the business impact of AI. And we see customers take what they did on AI platforms and come to Fiverr to find experts to finish -- get them to the finish line. So across the board, from AI development to automation workflows, all of that is like very popular, triple-digit growth, high double-digit growth.

Okay. And are there particular categories or services where you're seeing overall traction stand out more?

Yes. I think AI development is kind of one of the bigger categories within AI. Automation, all the Zapier, Make very popular. A lot of the content creation, also popular. marketing, another area, SEO, GEO, marketing copies and marketing automation, all very popular.

Okay. And then just in terms of agents, how do you think about implementing agents on both the buyer side and then also for freelancers to improve the overall experience?

I think agents are -- today, it's everywhere. We haven't really done a lot of integrations, but we know both sides are deeply plugging into all these agent tools. For us, I think agent is what I call in the collaboration product pillars, right, where it is an important layer to enable workflows and enable our buyers and sellers to work with each other more efficiently. But it's not the core moat of the marketplace, which lies within the human connections and then agent could be useful top-of-the-funnel tools. It could be useful retention and monetization tools. But we have to -- it has to anchor around the core human connection, which is Fiverr's core proposition in the AI world.

Okay. All right. Let's talk about just top line drivers a little bit. We talked a little bit just about GMV. We are seeing active buyers decline, but offset by strong growth in spend per buyer. And I know the transactions above $1,000 grew double digits in 1Q. Maybe you can just talk about kind of what that path looks like for high-value work to become a larger portion of GMV.

Yes. We are already seeing GMV from over $1,000 growing double digit year-over-year. And the goal is through this transformation, they are going to become a majority part of the business. From a buyer perspective, I think the metrics will be under pressure in the near term just because from a buyer count perspective, we've got substantially -- we're carrying kind of a large population who's kind of focused on the smaller side. That said, I think as we go through this journey, we will provide more clarity on what we're seeing in terms of the larger buyers and larger projects that will hopefully give more color to investors on kind of the trends and the trajectory we're seeing there.

Okay. And what are some of the key investments that are required? Just when you think about kind of increasing that mix of $1,000-plus jobs, what are the key investments you need to make on your side?

I think it's around the core pillars we talk about, the underlying brain, which is the matching, the experience layer, which is the product and then the go-to-market, which is how do we scale with strong unit economics. I think these 3 layers will together get us there.

Okay. Services revenue grew north of 50% last year, but we know it's going to exit at a low single-digit growth rate in '26. Maybe you can just talk about that path and kind of trajectory through the course of the year.

Yes. We do expect the services revenue growth rate to come down Q2 and then continue into second half of the year, largely because of the lapping of the acquisitions and also just the lapping of some of the investment we did last year around the modernization programs, which we did a lot of expansion last year. And this year, this is not going to be the core of the transformation. Yes, I think overall, really focused on driving GMV reacceleration and high-value projects acceleration with the plan.

Okay. And then can you just talk about current Seller Plus subscription penetration, how you think about kind of where you are today? How much room there could be as you drive more value for sellers?

It's a really healthy program. I think it's kind of -- we had a really nice ramp in the last 2 years. I would say it's at a good spot where we've got a very core strategic seller pools who are very active in the program. Now I think it's kind of into a more relatively mature and stable growth at this stage compared to the previous kind of early expansion period. So expect the program to continue to be healthy and -- but it wouldn't kind of ramp at the same rate compared to previous years.

Okay. All right. And then I guess just as we think about '26, we know this kind of transformational year, positioning for growth in '27. I know it's early, but any kind of view on what normalized growth looks like on the other side?

I wish I can give you a golden number. But obviously, you've known us for a long time and you've known me for a long time. I think growth is always top priority and us, really driving growth is top of mind. And I think labor market is an area where the TAM is so large, and we're going through the shift. So we really believe we're -- we have a unique right to win here and kind of really investing into that. So definitely not going to grow at the current rate.

Okay. Let's talk about profitability a little bit. So you've guided to 18% EBITDA margins at the midpoint for '26, the core business at around 20% and then a couple of points of drag just around transformation investments. Maybe you can just talk more about some of those investment areas and kind of how you think about overall margin trajectory.

Yes. So I think in 2026, as you said, this is the transformational year. So investing on all of the pillars that Jinjin said, it's -- so it's mainly about hiring that will pick up during the year. Generally speaking, the marketplace is healthy, is generating healthy cash flow. Now as for the future, we plan to invest in the transformation, but also to be very cautious on the bottom line. So not to sacrifice the bottom line in the future, but -- and invest in the top line, as I said, very disciplined.

Okay. You've previously talked about -- you kind of previously targeted 25% margins in '27, but I know that was a little while ago. I guess just any -- again, kind of early, but any view on just how you think about what the right long-term margin framework is?

So 25% is still the long-term EBITDA target. But given the transformation that we're going through, it will take us more time to get there, but it's still definitely the target.

Okay. All right. And then just thinking about capital allocation, I think you have about $60 million remaining on the buyback authorization. You have been active in different quarters recently, but maybe you can talk about kind of thought process there.

Yes. So from a capital allocation perspective, so #1 priority is growth of the business and investment in the business and being able to execute the transformation. We believe this would really bring the highest value in the long term. We've been doing buyback in the past. We have an authorization, as you said, $60 million. So we'll continue to do that, but in a thoughtful manner. And then on the M&A side, from a capital allocation perspective, we're always opportunistic, but nothing currently to call out. Only if something makes sense to us and support the strategy, we'll go for it.

Okay. And then just on -- going back to AI for a minute. Just when you think about how AI is changing how companies work, what stands out to you just in terms of some of the limitations around traditional staffing and hiring models that you're kind of ultimately much better equipped to handle?

Yes. I think we kind of pioneered this outcome-based, project-based hiring many years ago. And in some argument, like we're kind of ahead of the market. Now with agentic, I think everyone has talked about this outcome-based and which is really fitting into kind of Fiverr's model. And if you think about the future agentic workflow, you're going to have agents doing 80% of the work and human gets plugged into the 20%. You have agent, agent and a human comes in and then agent continues. So the outcome-based like model that Fiverr has is much more seamlessly can get plugged into this agentic workflow, where we see the scope of work, we see the price, we see the efficiency and the quality. And that gets us really aligned with agentic workflow, which is very hard if you think about job board or the traditional hiring process. Yes, that's definitely -- and then the data we have is -- we kind of build this wealth of transaction data is almost the training data with evaluation with it. So like this is part of what we are investing with this transformation is to unlock that potential.

And to create the upmarket flywheel that worked for us for the low transactions, so to recreate that in more complex work.

Okay. Got it. Okay. And then maybe just last one. Anything that you think is maybe misunderstood or kind of underappreciated either about the company or the opportunity in the industry?

I think there's this general fear about AI is going to take over all of our jobs and you don't need human anymore. I think this is probably overdone in my opinion, because at the end of the day, for any business to succeed, if everyone have the same access to the same AI models and human is still the differentiation. So we really hold that view, and we are starting to really see it from the activities on the marketplace. So I think this is a part that market doesn't fully give us credit for.

Thank you to JPM for the forum. I've looked at the sector quite a bit. I have a number of questions, one of which is we're living now in a siloed world where countries are putting up borders. It seems to me it might make -- increase the value of accessing labor markets synthetically through marketplaces like yours where we can find specialist pools of labor around the world. So I was wondering whether that's -- it seems to me that would be probably a net positive rather than a net negative in a siloed world. And then I was also interested in -- so that's the first question. The second question was interested in how you add value to the labor pools that you address. So whether you offer them services, benefits, other things that they need, particularly in the independent employment market as well as getting people paid, whether you link in with good companies like Wise, Revolut, so in order to efficiently pay people in different currencies as you're, I would assume, inherently sort of a multicurrency, multi-country business model.

Yes, definitely. I think Doug said in the introduction, so we are global marketplace. We cover almost every corner of the world. And over half of our transactions are cross-border. And it's not always from developing -- developed countries higher in developing. There's the other way around as well, depending on the use cases. So we do see a very dynamic cross-border kind of a marketplace. On the payment side, I think we cover a basket of currencies, and we really enable both the customers to pay in their local dollars -- local currency and also the freelancers to get paid in their local currencies. And we provide quite a few range of like financial products to help them manage their business better. We've also done a lot of learning and education for the community. I think community is a big part of how Fiverr is different. We have local communities in, I think, dozens of cities who runs like hundreds of events annually to -- especially at a confusing time like now, like we -- freelancers are very lonely professionals, right? They don't really have a company. They don't have teams. So Fiverr is kind of their "home" like we help them navigate the current environment. We have on the benefit side, I think we -- there's a lot of future opportunities. We do some partnerships and providing like insurance benefits. But I think this is an opportunity where the whole industry really is going through. There's a lot of opportunity to do more for the freelancers. I think especially in the U.S., I think not much. It's hard to be a freelancer. So...

Would you consider dealing with private company like Deel where you bolt on with them or [indiscernible] partner?

We -- Deel is not super relevant for us because they do more EOR, like long-term contractors, EOR, like helping right enterprises to set up like external offices. Our freelancer engagement are more on demand. So they actually directly pay through Fiverr, like we don't necessarily need Deel because we don't issue kind of payrolls. Deel is more like a payroll provider.

PEO.

Right. Like we don't -- like for our use cases, we don't necessarily need PEO.

Why not the micro...

It's a long question. So right now, we don't help -- we don't do long-term contractors currently. The most use case on Fiverr is very on-demand project-based, few weeks kind of -- think about Uber. You can plug in, plug out any week of the -- day of the week. So this is the primary use case.

All right. I think we're going to wrap up there. Thank you, Jinjin. Thank you, Esti.

Thank you for having us.