Hey guys, it's sasha fiverr have just published their results for q3 2021 before trading opens and their share price has exploded. It is up 15 in pre-market trading, as i'm recording this video. So what is happening with fiverr stock? Why is it going up so much and what was in this q3 report? Well, i am going to go through all the numbers, i'm going to share some really interesting insight and tell you my thoughts just so you know, fiverr is my second biggest position in my personal portfolio, so that may well mean that my views are biased, because i Am a shareholder and, as always i am not a financial advisor. This is just my personal view on the numbers.

If you do need financial advice, you'll have to go somewhere else, please go and seek it with a suitably qualified professional anyway. Let's look at the q3 results, so here is fiverr's, p l and when i looked at it i had to do a double take. There was a moment when i literally thought that i accidentally copied and pasted last quarter's data by accident, so i actually had to go and look up the last quarterly p l to compare the two, and here they are. Can you spot the difference? I'll give you a minute, no me neither the results are almost identical to what fiver saw last quarter, and that is actually a very good thing.

I'm going to explain why, in a second q3, this year has been super challenging for a lot of businesses operating online. Specifically, companies like pinterest, facebook and loads of others have really struggled, and there are reasons for that. Because q3, this year saw the relaxation of restrictions around the world, people doing more travel going out and about going back to offices all of that stuff, and that includes both leisure and work and fiverr seems to have consolidated and matched the record numbers that they published. In q2, this year, which, on balance of all of this information, given what everyone else been seeing, is actually pretty good and the market seems to agree.

I do find it hilarious, though, that when they published these exact same results just three months ago, the market went bananas completely overreacted and fiverr got a 25 drop on their share price, and now that pretty much nothing has changed in terms of these numbers. Apparently, these numbers are suddenly now pretty good. I talked in a recent video about investing in stocks that jump and this fiber stock is very much one of those fiverr is a small company. It is not a very popular topic on youtube.

I haven't heard anyone else. Talk about it and it doesn't have a dedicated fan club on twitter, so nobody really cares much about the stock until you know the one day when their earnings show up and then the enders go and spend maybe a couple minutes looking at the numbers, they do. What they need to do to quickly on the calculator do some multiples, and then we have to wait another three months before anything else happens until the next quarterly results. So, let's look at some of these numbers in a bit more detail, because there is a secret source in here that i am pretty excited by in the press.

Release that came out alongside the results fiverr announced that their outlook for q4 is pretty much bang on exactly the same as the last two quarters they're saying their revenue is going to be 74 and a half to 77.5 million dollars, and they expect all the other Results, it seems to be pretty much a copy and paste again, and that means that year on year, that outlook gives them a 54 to 56 percent growth in 2021 compared to 2020 on revenue, which is already amazing. The problem, though, is that if they hit that number in q4, it will kind of look like they have three concept: consecutive quarters of no quarter on quarter growth at all, and some analysts might look at that without understanding. What's underneath that and sort of be concerned because it looks like their stagnation, but if you look at my favorite chart in this report, which you can find in page five, you will actually find some other numbers that would sort of be concerning as well. If you haven't seen it before this chart shows the revenue generated by each quarterly cohort as a function of the marketing spend that it cost to get that cohort, and you can see that fiverr makes up.

The marketing spend every quarter in revenue from the customers that they acquired in that same quarter. That is a phenomenal rate of return and then any revenue that that each of those cohorts generates in subsequent quarters is basically pure gravy. On top and the worrying bit of data that i saw in this report is that in the last two quarters, the first quarter's performance of each of those cohorts has been dropping, we're now below visually that one x mark. Although it says on the right that is still one x, i'm guessing they're rounding and then it's definitely something to keep an eye on now.

Q3 last year was also not that high. So it could well be a seasonal issue, but it's definitely something worth pointing out and something to be aware of on the other thing that doesn't look particularly good in this report are that these most recent circles for the newer cohorts? If you look at the last quarter available performance figures for q1 this year and all of last year, the gap from the previous quarter to the most recent one has shrunk, and you can see it. It's very noticeable even on chart without the numbers being printed, so that sort of indicates that potentially this last quarter we had q3 this year. Those older, not very old cohorts, have not been buying as much on the platform, and that is another one to keep an eye on, because there are reasons that sort of explain it.

The stuff we talked about before the post covered reasons the summer season, when people generally don't spend as much on these kind of platforms. They're definitely possible explanations, but we'll have to wait and see how much this bounces back and what that looks like in further quarterly updates. However, there are two really good things in this report as well. The first one is relatively straightforward, and that is the last quarter on the older cohorts is actually continuing to do really really well.

Those customers that were booked in 2017 2018 are not slowing down in revenue growth at all they're, much smaller cohorts but they're doing very well. Those gaps are looking pretty good, pretty consistent and actually, if you compare the absolute sizes of these steps up from one circle to another, those jumps look very similar to what these recent cohorts have been doing in the same quarter, the latest one available. So that is sort of encouraging as a supporting thesis to what i was saying earlier about being a sort of one-off, temporary, potentially transient issue. That is happening right now, due to postcovid that might eventually resolve, and the other really important point is one that you can't actually see directly on this chart and it is actually a little bit complicated.

So let me try and explain it. These cohorts on this chart are not all equal. Over the last few years, fiverr's marketing budget has been growing quite substantially in the last two quarters. They spent 38 million dollars in marketing to attract those two cohorts each.

So, let's break it down. That means that last quarter they made a bit under 38 million dollars in revenue from customers that they booked in of that quarter and remember the total revenue for the quarter was 74 million. So that means the most recent quarter earned maybe about 45 to 48 percent of the revenue from the customers that they booked in that quarter, then the next quarter - marketing spend was also 38 million. Remember one quarter ago.

So it's hard to say exactly, but it looks like that second dot in q2, maybe is up about 0.35 x on the graph, so that's 38 million times 0.35 about 13 million. Now a quick point, the marketing spend that is being printed in the p. L may well not be exactly the same number that they are using to work out this graph. There might be some numbers that they strip out uh.

It is not 100 clear, but i am not doing a very precise or very accurate numbers based thing uh in terms of the relative point, i'm making. The point will stand regardless of this. Anyway. Q1, this year, marketing spend was 42.6 million even more than the last quarter in the quarter before that they had super bowl ads during that quarter, so they spent more than usual and that cohort made about 0.25 times extra on top of what they've already earned.

So that's another about 10 to 11 million, or so so. The three quarters they booked this year generated somewhere in the region of 58 to 60 million dollars out of the 74 million dollars total that the company earned this quarter. And this is the critical bit because this is where the numbers get really interesting, even if it's a little bit complicated all right. One year ago, in q3 last year the marketing spend was only 25 million dollars and the year before that in q3 2019 the marketing spend was 15 million dollars.

So you can see that these new cohorts are much much larger in size. They have acquired a lot more customers by spending a lot more money, so on the chart, the stuff on the left is much bigger than the stuff on the right and fiverr is continuing to do the exact same thing. They've been doing for quite a while. Now they spend all the money possible, all the money coming in and then and then some on acquiring new customers now just think about what these numbers will look like in q1 next year, because this is how i'm thinking about it - and this is how these numbers Add up - and this is why the sort of stagnation this year is not really stagnation because of that reinvestment cumulative effect, so we'll probably have more super bowl ads and maybe an increase in marketing spend on top of that.

So it's pretty likely that we're going to be seeing marketing spend in the region of 45 to 50 million dollars in q1, and let's say that we revert to the 1x multiplier, as most of the recent quarters have been doing for that first quarter. So we would be on route to collecting about 45 to 50 million dollars in revenue just from those guys just from the q1 next year, acquisitions, then the q4 cohort from this year, the q4 that we're in right now will be at that point. In its second quarter, and if it does the same as all the old ones before that we should be looking at somewhere around the 0.4 to 0.5 x of the 38 million dollars that they should be spending. Because next quarter's numbers are likely to be the same.

As this quarters, so that's another 19 million dollars. If you like, then look at the third circle up on the recent cohorts - maybe another 0.25 x or so maybe not 0.3 on there on another 38 million dollars worth of marketing, which is what they've just spent. So that's another 10 million dollars or so and the fourth circle up for q2 this year, that's another 38 million worth of marketing budget and multiply it by about what 0.2 x on the chart and that's another somewhere like seven million dollars. So if we add all of that up for q1 next year, the four most recent cohorts at that point should be adding about 80 to 85 million dollars in revenue, and then you have to add all the other cohorts.

On top of that, including you know, q1. This year, that had 42 million dollars worth of customers in it and so on. This is the non-linear growth that i previously talked about, and this is why i invested in the first place: we're not seeing it in the revenue numbers just yet, but the company is in this very early growth stage, where they're reinvesting absolutely everything. As a result, we're not even seeing any profit because they're spending everything on getting these new customers that then once they're acquired they collect revenue that quarter, but then the next quarter and so on and so on.

Quarter after quarter and the more money that the company spends on buying them, the more you then collect back in those subsequent quarters and years. I still see a massive, a significant upside on fifa. I actually think that potentially this one will be a long term play because the market, the analysts, may not see the impact of how this is working out. Until maybe you know a year two years, five years, who knows, i have a relatively complicated model that will probably bore you to death.

If i tried to go through it in a youtube video, i basically model out these individual cohorts into the future and what that might mean for their p l at the different points and how much they're gon na be spending on marketing, etc. I basically modeled that whole thing out bottom up, but anyway remember. I am just a random guy on youtube. So please take this for what it's worth a random opinion by somebody.

You don't know, but i am seeing a ridiculously huge upside on fiverr stock. It looks absolutely stupid in my model because i am seeing something i don't see very often in these kinds of models at 200 upside on the current share price and who knows maybe i'm completely wrong. Maybe i am done. Maybe i got it completely wrong.

Uh is possible. Maybe the market will never catch up to that valuation, even if it is accurate, but it's good enough for me, and these latest results are just continuing to support my numbers. If you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching and as always i'll see you guys later,.