Business Context and Reporting Period
Fiverr International Ltd. is an Israeli-operated online marketplace connecting buyers with freelancers offering digital services across more than 500 categories. This Form 20-F covers the fiscal year ended December 31, 2020, rather than a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP in U.S. dollars.
Fiverr generated revenue primarily from transaction fees and service fees. It operated as an agent for marketplace services and recognized revenue mainly when completed services were transferred to buyers.
Key Financial and Operating Metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $189.5 million | $107.1 million | 77% increase |
| GMV | $699.3 million | $401.0 million | 74% increase |
| Take rate | 27.1% | 26.7% | 40 basis-point increase |
| Gross profit | $156.3 million | $84.8 million | 84% increase |
| Gross margin | 82.5% | 79.2% | 330 basis-point increase |
| Operating loss | $11.8 million | $34.8 million | Improved by $22.9 million |
| Net loss | $14.8 million | $33.5 million | Improved by $18.7 million |
| Net loss margin | 7.8% | 31.3% | Improved materially |
| Active buyers | 3.4 million | 2.4 million | 45% increase |
| Spend per buyer | $205 | $170 | 20% increase |
Operating expenses were $168.1 million, or 88.7% of revenue, compared with $119.6 million, or 111.7% of revenue, in 2019. Research and development expense was $45.7 million, sales and marketing expense was $94.4 million, and general and administrative expense was $28.0 million.
Transaction fees represented approximately 73% of revenue and service fees approximately 27% in both years. No single marketplace category contributed more than 15% of core marketplace revenue, and approximately 70% of core marketplace revenue came from buyers in the United States, United Kingdom, Canada, Australia and New Zealand.
Cash Flow, Liquidity and Capital Structure
| Metric | 2020 | 2019 |
|---|---|---|
| Operating cash flow | $17.1 million provided | $13.9 million used |
| Investing cash flow | $326.4 million used | $136.1 million used |
| Financing cash flow | $551.8 million provided | $118.0 million provided |
| Cash, cash equivalents, bank deposits and marketable securities | $715.5 million | $149.5 million cash and equivalents disclosed |
| Working capital | $445.3 million | $105.2 million |
| Marketable securities | $357.4 million | $110.4 million |
Liquidity increased primarily because Fiverr raised approximately $129.9 million net in a June 2020 follow-on offering and received approximately $447.3 million net from issuing convertible notes. The company stated that available liquidity was sufficient to meet business needs for at least the next 12 months.
In October 2020, Fiverr issued $460.0 million principal amount of 0% senior unsecured convertible notes due 2025. The initial conversion price was approximately $213.57 per share. The notes had a $352.0 million carrying amount at year-end after debt discounts and issuance costs. Fiverr paid $43.2 million for capped call transactions intended to reduce potential dilution, subject to a cap price initially set at approximately $305.10 per share.
Total assets were $861.2 million and shareholders’ equity was $345.4 million at December 31, 2020. The company had no material legal proceedings requiring accrual. It does not expect to pay dividends in the foreseeable future.
Material Changes Versus the Prior Comparable Period
- Revenue increased 77%, driven by 45% growth in active buyers, 20% growth in spend per buyer, a higher take rate and contributions from And.Co, Fiverr Learn and ClearVoice.
- GMV increased 74%, while active buyers rose from 2.4 million to 3.4 million.
- Gross margin expanded by 330 basis points, partly reflecting operating leverage as revenue grew faster than cost of revenue.
- Operating and net losses narrowed substantially despite increased investment in marketing, research and development and public-company costs.
- Operating cash flow turned positive from negative in 2019.
- Fiverr significantly strengthened its balance sheet through the follow-on equity offering and convertible-note issuance, while investing heavily in marketable securities.
- Operating lease right-of-use assets and lease liabilities were recognized upon adoption of the new lease accounting standard in 2020.
- Fiverr acquired Sharon Lee Thony Consulting LLC in August 2020 for $1.25 million, primarily recording a workforce intangible asset.
Guidance, Outlook, Management Commentary and Risks
The filing does not provide a clear quantitative revenue or earnings guidance range for 2021. Management stated that digital transformation and remote work created significant demand tailwinds in 2020 and believed the marketplace was positioned for long-term growth. Management also noted that COVID-19 caused volatility in March 2020, followed by a rebound within weeks, and that the pandemic had not adversely affected full-year 2020 results.
Management cautioned that the duration and severity of COVID-19 and its effects on buyer and seller activity, consumer spending, employees, business partners, payment processors, investments and the broader economy remained uncertain. Many employees shifted to remote work with little reported productivity disruption.
- Fiverr expects continued operating losses for the foreseeable future and may never achieve or sustain profitability.
- Growth depends on attracting and retaining buyers and freelancers, maintaining marketplace liquidity and increasing user engagement.
- Competition is substantial, including freelancer platforms, staffing providers, social networks, recruiting businesses and specialized professional-service providers.
- Cybersecurity incidents, fraud, payment failures, data privacy requirements and cross-border data-transfer restrictions could increase costs or create regulatory and litigation exposure. The filing disclosed unauthorized access to several thousand user accounts in May 2020 and a separate incident in November 2018; the company stated that the Israeli Privacy Protection Authority closed both related administrative supervision procedures without determining a violation.
- Worker-classification, indirect-tax, money-transmission, consumer-protection and other regulatory developments could materially affect the business model.
- The company relies on Amazon Web Services and third-party payment and disbursement providers, creating concentration and continuity risks.
- Fiverr is exposed to NIS, euro and GBP expenses against primarily U.S.-dollar revenue. A 5% decrease in the U.S. dollar/NIS exchange rate would have increased cost of revenue and operating expenses by approximately 1% and 2%, respectively, in 2020.
- Convertible-note holders may require cash settlement upon conversion or a fundamental change, which could adversely affect liquidity and increase dilution or refinancing risk.
- The company has a substantial liquid investment portfolio that is exposed to interest-rate, credit and market-value fluctuations.
Important Facts for Investors to Verify
- Confirm the filing is an annual 2020 Form 20-F, not a separate Q4 2020 report, and review quarterly filings for fourth-quarter-specific results.
- Reconcile the reported $715.5 million liquidity figure to cash, bank deposits, current and long-term marketable securities and restricted deposits.
- Review the convertible-note indenture, conversion triggers, capped-call terms, potential dilution and any subsequent repurchases or conversions.
- Assess whether buyer growth, spend per buyer and the 27.1% take rate remained durable after pandemic-related demand effects.
- Monitor the path toward profitability, including sales and marketing efficiency, share-based compensation and operating-expense growth.
- Review subsequent events, including the January 2021 acquisition of Working Not Working, Inc., for purchase price, contingent consideration and integration risks.
- Evaluate exposure to privacy, cybersecurity, worker classification, payment regulation, indirect taxes and international data-transfer rules.