NYSE:RSKD Riskified Q2 2024 Earnings Report $4.59 -0.08 (-1.71%) Closing price 04/28/2025 03:59 PM EasternExtended Trading$4.61 +0.02 (+0.33%) As of 04/28/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Riskified EPS ResultsActual EPS-$0.04Consensus EPS -$0.06Beat/MissBeat by +$0.02One Year Ago EPSN/ARiskified Revenue ResultsActual Revenue$78.73 millionExpected Revenue$78.33 millionBeat/MissBeat by +$400.00 thousandYoY Revenue GrowthN/ARiskified Announcement DetailsQuarterQ2 2024Date8/14/2024TimeN/AConference Call DateWednesday, August 14, 2024Conference Call Time8:30AM ETUpcoming EarningsRiskified's Q1 2025 earnings is scheduled for Wednesday, May 14, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Riskified Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 14, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to Riskified Second Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would like now to turn the conference over to Chad Mendel, Head of Investor Relations. Operator00:00:37Please go ahead. Speaker 100:00:42Good morning, and thank you for joining us today. My name is Chet Mandel, Riskify's Head of Investor Relations. We are hosting today's call to discuss Riskified's financial results for the Q2 of 2024. Participating on today's call are E. Dohgal, Riskified's Co Founder and Chief Executive Officer and Agi Docheva, Riskified's Chief Financial Officer. Speaker 100:01:02We released our results for the Q2 of 2024 earlier today. Our earnings materials, including a replay of today's webcast, will be available on our Investor Relations website at ir.riskify.com. Certain statements made on the call today will be forward looking statements related to our operating performance, business and financial goals, outlook as to revenues, gross profit margin, adjusted EBITDA profitability, adjusted EBITDA margins and expectations as to positive cash flows, which reflect management's best judgment based on currently available information and are not guarantees of future performance. We intend all forward looking statements to be covered by the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward looking statements reflect our expectations as of the date of this call and except as required by law, we undertake no obligation to this information as a result of new developments that may occur after Speaker 200:01:54the time of this call. Speaker 100:01:56These forward looking statements involve risks, uncertainties and other factors, some of which are beyond our control, that could cause actual results to differ materially from our expectations. You should not put undue reliance on any forward looking statement. Please refer to our annual report on Form 20 F for the year ended December 31, 2023, and subsequent reports we file or furnish with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, we will discuss certain non GAAP financial measures and key performance indicators on the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued early today and also furnished with the SEC on Form 6 ks and in the appendix of our Investor Relations presentation, all of which are posted on our Investor Relations website. Speaker 100:02:44I will now turn the call over to Wigau. Speaker 300:02:46Thanks, Chet, and hello, everyone. I am encouraged by our execution during the 1st 6 months of the year. We are growing profitably on an adjusted EBITDA basis and believe that we are investing in the right people, products and projects to execute for the benefit of our merchants and our shareholders. I remain positive about the trajectory of the company. Once again, our revenue growth during the Q2 was primarily driven by the execution of our go to market strategy, which contributed to 8% year over year growth. Speaker 300:03:17For the first half of twenty twenty four, our revenue increased by 10% and our GMV grew 15% year over year. Our technology platform and differentiated merchant capabilities are resonating within our large addressable market. Our competitive win rates remained high during the quarter and our industry and geographic expansion efforts combined with our product platform sales motion are contributing to a solid pipeline of merchant activity. We had improved performance sequentially with our non chargeback wins and we expect the strong end to the year with further multi product adoption. As we think through the back half of the year, we've begun to see some softness in the 3rd quarter and are anticipating softer 3rd and 4th quarters largely due to certain macro headwinds including worsening consumer spending trends. Speaker 300:04:04This is primarily impacting our high end fashion, tickets and travel and home industries. That being said, we anticipate a strong second half of new business activity which should help to partially offset these macro headwinds. We expect the benefit of this anticipated new business activity to primarily flow through in the Q4. Ajay will walk you through the impact of these factors on our 2024 guidance. We are managing our operational levers to optimize our gross profit and adjusted EBITDA performance across all types of growth environments. Speaker 300:04:35Our non GAAP gross profit growth of 11% in the second quarter and 14% in the first half of the year remained strong and continue to outpace our revenue growth. Combined with ongoing expense discipline, we continue to bring our top line growth to the bottom line. Over each of the last three quarters, we have improved our year over year adjusted EBITDA margin by nearly 1,000 basis points on average and we anticipate generating further adjusted EBITDA margin expansion in the back half of the year. However, we are not just focused on maximizing short term leverage in the business. We maintain a long term view on how to improve our technology, how to expand our TAM and market share and how to convert our single product merchants to multiproduct users. Speaker 300:05:18We believe that the best way to accomplish these goals is by building a market leading platform of products that help to solve real problem for our merchants at all levels of the transaction funnel and to continue penetrating the large e commerce white space in front of us by aligning our go to market sales motion to offer and cross sell this platform. On the chargeback guarantee front, our ability to customize unique merchant specific models to guarantee the highest degree of performance and specificity is why we believe our merchants receive great performance and value. In one recent head to head pilot with a newly onboarded multi billion GMV merchant, we were able to reduce the merchants fraud cost by more than 20%, while simultaneously boosting their approval rate by over 3% when compared to their incubent solution provided by one of our key competitors. This is not an isolated example. Several other recent head to head pilots, we were able to outperform both the merchant's internal teams and other newer generation competitors by delivering superior performance for the merchant. Speaker 300:06:18We believe that these types of results drive expansion opportunities for Riskify. Overall, these data led proof points are a testament to the power of our machine learning factory and the main reason we win in competitive deals. To further broaden our product offerings, we continue to augment our integrations and data sharing capabilities with major global issuing banks. These integrations and partnerships involve sharing enriched order information and other riskified signals with issuing banks in order to enhance our merchants' authorization rates on e commerce transactions reviewed by Riskified. This feature comes baked into chargeback guarantee and has the ability to meaningfully increase bank authorization rates. Speaker 300:06:58Eligible chargeback guarantee merchants can see an increased authorization lift exceeding 100 basis points on segments where Riskified has the ability to influence the issuer's decision. We believe that our privileged access to merchant data puts us in a unique position to further collaborate between parties in the payment ecosystem to help our e commerce merchants grow. I believe that our focus on evolving and investing wisely in our R and D is leading to an overall improvement in our technology offering. This improvement in part was seen in strong performance for our merchants, while we simultaneously were able to achieve a 54% gross profit margin in the first half of the year. I am pleased that we were able to flow this strong margin performance to the annual range, which resulted in an improvement to our adjusted EBITDA guidance for the 2nd consecutive quarter. Speaker 300:07:48Overall, I remain optimistic about our positioning despite the challenging macro environment. We have great demand for our product and by strengthening our machine learning advantage to solve additional use cases beyond chargeback fraud, I am confident that our durable business will continue to perform for merchants and our shareholders. Now over to Agi. Speaker 400:08:08Thank you, Ida, team and everyone for joining today's call. Our GMV for the Q2 was $35,000,000,000 reflecting a 13% increase year over year. We achieved 2nd quarter revenue of $78,700,000 up 8% year over year. Our GMV and revenue category grew 21% year over year. We anticipate a tougher comparison period in the second half of the year as we have now fully lapped a large upsell 1 during the Q2 of 2023. Speaker 400:08:47Our general vertical, which includes both food and general retail merchants grew 7% in the Q2, primarily driven by growth in our food subvertical, offset by weakness in our general retail subvertical. In addition, we saw over 40% growth in our payments and money transfer category driven predominantly by new business activity, a key area of expansion. Our fashion and luxury category grew by 5% in the 2nd quarter, up from low single digits in the 1st quarter, primarily due to new business activity and growth in the fast fashion merchants. This growth was partially offset by continued same store sales pressures within our high end fashion subvertigo consistent with the Q1. We now expect the same store sales pressures to continue in the back half of the year across all geographies. Speaker 400:09:36This is consistent with the outlooks of many of our luxury merchants and broader market commentary regarding discretionary spending. In addition, our tickets and travel vertical grew 8% in the 2nd quarter primarily due to new business activity. We're now expecting softer trends in this category in the second half of the year. In particular, we're anticipating lower travel volumes from our EMEA merchants and as a result currently expect our overall EMEA region to be relatively flat for the year. The United States which is our largest region grew by 11% during the Q2 and APAC grew approximately 35%. Speaker 400:10:15The other Americas, which represent Canada and Latin America, were approximately 9%, primarily due to new and upsell activity. I continue to be excited about our growth in other Americas and APAC regions, which were fueled by market share gains achieved through the addition of new logos. We highlighted a large new logo in Japan in our press release in the fashion category during the quarter. This is an exciting cornerstone merchant, which we're hoping helps unlock further growth in the region. Moving to the discussion of our gross profit margin, operating expenses and adjusted EBITDA. Speaker 400:10:50Unless otherwise noted, I will be referencing non GAAP financial measures. We have provided a reconciliation of GAAP to non GAAP financial measures in our earnings release. Moving on to gross profit margin. Our gross profit margin of 53% was up from 52% in the Q2 of the prior year. We continue to benefit from improvements in our overall core machine learning models and the positive impact of new product revenue, offset by the impact of ramping of significant new merchants and quarterly variability in our revenue mix. Speaker 400:11:27As a reminder, I encourage you to continue analyzing our gross margin on an annual basis. Given individual quarters can vary due to many factors, including the ramping of new merchants and the risk profiles of transactions approved. That being said, I do want to note that our first half gross profit margin was approximately 54%, the highest half year period since our IPO. This was driven by truly collaborative efforts across the organization. As a result of our strong start to the year, we're now targeting a gross profit margin between 52.5% to 53.5% for the full year, up from our previous range of 52% to 53 percent. Speaker 400:12:11Directionally, for modeling purposes, we expect our Q3 gross profit margin to be approximately 50% and we continue to expect Q4 margin to be above the range. Moving to our operating expenses. We continue to manage the business in a focused and disciplined manner. Total operating expenses were $39,300,000 for the 2nd quarter, representing a year over year decline of 7%. We saw year over year declines in each of our R and D, sales and marketing and G and A operating expenses. Speaker 400:12:45Our operating expenses as a percentage of revenue declined from 58% in the prior year period to 50% in the Q2 of 2024 reflecting ongoing leverage in the business model. To highlight how much progress we have made in only a few short years, this percentage in the Q2 of 2022 was 75%. For the second half of the year, we now expect approximately CAD 39,000,000 in quarterly expenses, due to a focus on ongoing savings. We achieved positive adjusted EBITDA of CAD 2,300,000 in Q2 of 2024 as compared to negative CAD 4,600,000 in Q2 of 2023 representing the 8th consecutive quarter of year over year improvement. This quarter's positive adjusted EBITDA represents year over year adjusted EBITDA margin improvement of approximately 9 30 basis points on top of the 1100 basis points improvements achieved in both Q4 of 2023 and Q1 of 2024. Speaker 400:13:49We have been generating ongoing margin expansion through the continued growth of the business while managing expenses and we're focused on flowing this leverage to the bottom line. Moving to the balance sheet. We ended the Q1 with approximately $422,000,000 of cash deposits and investments on the balance sheet and we carried 0 debt. In the Q2, we repurchased 6,800,000 shares for a total price of approximately 39,000,000 dollars As a result, our total shares outstanding has decreased sequentially by approximately 4,000,000 shares from the Q1. As a result of our ongoing commitment to dilution management as well as anticipated repurchasing activity in the second half of the year, we expect our year end share count to decline year over year. Speaker 400:14:41We continue to believe that our strong balance sheet and liquidity position are underappreciated assets. We will continue to be thoughtful in how we utilize our capital to drive shareholder value. In addition, we continue to maintain a very healthy cash flow model and achieved free cash flows of $4,100,000 in the second quarter. We continue to expect approximately $30,000,000 of positive free cash flow in 2024. Now turning to our outlook. Speaker 400:15:13We're updating our 2024 guidance that we previously shared on our Q1 call. As we mentioned, we're expecting headwinds in our high end fashion, tickets and travel and home verticals to persist, which we expect will negatively impact our second half revenue. As a result, we now anticipate revenue between CAD 320,000,000 and CAD 325,000,000 for the full year 2024 or $322,500,000 at the midpoint. As Ido mentioned, we remain optimistic that anticipated strong second half of new logo activity should result in an acceleration of growth in the Q4. After previously factoring in some level of macroeconomic recovery in the back half of the year into our guidance, we no longer are including this recovery in our current assumptions at the new midpoint. Speaker 400:16:05As always, we'll continue to monitor the performance and health of our merchants, consumer spending and the broader e commerce landscape and the impact on our results. Moving to our adjusted EBITDA outlook. As a result of our disciplined approach to managing the business and improved gross margin outlook, we now believe that our full year adjusted EBITDA will be between $13,000,000 $19,000,000 or $16,000,000 to the midpoint. This represents an improvement of 7% from our range provided on our Q1 call in May and 19% from our initial guide given on our Q4, 2023 earnings call in March. The new midpoint of our adjusted EBITDA guide represents additional margin expansion of approximately 800 basis points from the prior year, demonstrating leverage in the business model. Speaker 400:16:58Overall, I'm encouraged by the first half of the year. I believe that our leading product platform and disciplined approach in managing the business will allow us to continue to progress towards our long term goals, while delivering value to our merchants and to our shareholders. Operator, we're ready to take the first question please. Thank Operator00:17:36And the first question will come from Ramsey El Assal with Barclays. Your line is now open. Speaker 500:17:45Hi, this is Owen on for Ramsey. I appreciate you taking our question this morning. I want to check-in on the crowd strike outage earlier in July, the networks had called that out as having an impact on Q3. I wanted to see if your merchants had any technical issues. Now you largely operate on AWS, but any kind of insight there on impact on Q3 expectations might be helpful. Speaker 400:18:11Yes. Thank you for the question. There's no impact on liquefied or anything related to that we understand from our merchants related to the general cross strike issue. Speaker 500:18:24Great. That's good to hear. And just a quick follow-up for me, just on the kind of more platform approach, seems like you're making good progress on the cross sell some of those new products. I was just wondering if you could give us an update on the penetration rate potentially of your kind of current client base and some of the kind of longer runway you expect to kind of have there any insight there would be helpful? Thanks. Speaker 300:18:48Sure. Happy to share an update there. I'll say, look, as kind of CEO, what gets me most energized is just speaking to our clients, seeing how they react to some of these newer additions and stuff we have in the pipeline. And also the ROI and the value that it solves them. I think just from a numbers perspective, what we shared kind of previous quarter, we've seen sequential improvements then, but we're still in that zone of kind of 0.5% improvement to the gross profit margin, kind of 3x growth. Speaker 300:19:17And we do have a fairly strong pipeline heading into the back half of the year. So I do expect kind of a good end to the year on the new product side. Great. Very helpful. Thank you. Operator00:19:31Our next question comes from Ryan Tomasello with KBW. Your line is open. Speaker 600:19:39Good morning, everyone. Thanks for taking the questions. Aghi, regarding the outlook, I was hoping you can put a finer point around what level of net dollar retention the current guidance reflects versus the original expectations at the beginning of the year? And if you can say how that breakdown looks between what you saw in the first half of the year in terms of net dollar retention versus what you're now looking for in the second half of the year? Thanks. Speaker 400:20:09Yes, of course. Thank you for the question. So, while it's an annual number at this point, it's not really a guide, but let me give you some direction. So we previously shared at our kind of Q1 earnings call that we've seen some trends kind of leading to a lower retention than what we saw last year. We kind of expect it to be closer than $100,000,000 than $105,000,000 Now because of the macro factors that we kind of shared in our message just earlier, I think that a few percentage points below 100% is probably a fair assumption. Speaker 400:20:47And to give you kind of understanding of what are the main drivers, I would say that number 1 is really the removal of the recovery trends that we kind of were baking in our numbers and we just don't see that happening anymore. So now at the midpoint, we don't kind of expect any recovery numbers in the back half of the year and we expect the back half to be kind of similar to the first half of the year. The second factor is probably our annual dollar retention rate. Again, we look at it annually. Just again, it's not a guide, but to give you some perspective, I think that I'm seeing just slight uptick in loss volume. Speaker 400:21:31I do expect it to be very much kind of still in the ranges of last year. Last year was 98%, maybe I do expect to be closer to 97% this year. And the last factor that might be impacting our retention rate actually is a positive one. This year, we've seen a lot more new revenue coming from new logos, which is great, which is something that we've been working kind of to internally to create the right incentive structure to accomplish that and really kind of focusing on increasing our market share and penetrating in different industries. But that has kind of impacted a little bit the upsell and just the some effect on the net dollar retention. Speaker 400:22:14So overall, I think this is kind of like a very positive factor overall, but it does impact the net dollar retention. Speaker 600:22:21Great. Appreciate all that color. And then Itau, one for you. As you continue to make progress building out the platform offering beyond just the chargeback guarantee, can you say how the sales and go to market strategy is evolving at all to help support that initiative? I mean, Augie, I think just alluded to a new incentive structure around new logos. Speaker 600:22:44Last quarter, you called out some of these key standalone wins outside the chargeback guarantee in Policy to Protect and DisputeResolve. Is there a lot of focus that you're putting on the sales force to emphasize those types of standalone deals? Just trying to understand how the go to market strategy is evolving here in light of the platform evolution? Thanks. Speaker 300:23:11Sure. No, that's a great question. I would say that at the start of the year, we definitely wanted to put a bigger focus on new logos to have more revenue come from new logos than from us. So we think that's important just from a market land share perspective and we're happy to see some of the results there. I think that our platform approach enables us to sell to more stakeholders and solve more ROI and the value that we see there is kind of higher win rates and competitive cycles. Speaker 300:23:40It means that like you mentioned, we can sell into merchants that maybe are not looking for a chargeback solution right now, but they are interested in some of the other parts. But really what we're seeing is more and more new deals are taking multiple parts of the platform. I think we highlighted that large ticketing merchant that also started with Dispute Resolve. That large marquee client in Japan is actually starting with 2 clients, but is signed for with 2 products, but is already signed for the 3rd one to go live with that early next year. So it's definitely helping there as well. Speaker 300:24:14Great. Appreciate all the color. Operator00:24:18The next question comes from Chris Kennedy with William Blair. Your line is open. Speaker 700:24:26Great. Thanks for taking the question. You talked about accelerating growth in the Q4. Is there any way to think about or put a framework around 2025 given the new sales activity? Speaker 300:24:42I think it might be still a bit too early for us to really think through and model out 2025. I think the acceleration we're seeing into the Q4 is just based on some of the new business activity and the growth in those areas that are helping accelerate there. But just to recap, kind of what we mentioned based on some of the earnings from some of the clients, the public clients that we work with, everyone's kind of expecting a slower back half of the year, especially around fashion, travel, sneakers, the home category. And we've been seeing that quarter to date as well, right? So that's kind of creating that lower outlook for the back half. Speaker 300:25:20Within the Q4 based on some of those go lives that are already happening right now. And the third, that's going to offset some of that consumer spending weakness. Speaker 700:25:30Great. Okay. Thank you. And then it's great to see the continued expansion of margins. Are you still comfortable with your 2026 EBITDA margin target of 15% to 20%? Speaker 700:25:42And can you just remind us of the roadmap to get there? Thank you. Speaker 300:25:47Yes, sure. We're still fairly in line and very confident in those midterm targets. Like we mentioned, we have various levers that we understand how to pull in order to reach there. And the results of this part of the guidance outstanding is still squarely in line 100%. Speaker 600:26:04Great. Thank you. Operator00:26:08And the next question comes from Terry Tillman with Truist. Your line is open. Speaker 800:26:16Yes. Hey, team. Thanks for taking my questions. Maybe just the first question relates to, if we just take the challenges within the installed base same store sales activity aside and just the macro assumptions in the second half of the year, you are talking about new sales or upselling activity being resilient or relatively strong. I'm just curious what you've been doing internally more recently or over the intermediate term to enhance go to market. Speaker 800:26:41So whether it's field sales or marketing and branding, what are some of the things that you've been doing that you could call out to us that maybe could continue to drive this new business success going forward? And then I had a follow-up. Speaker 300:26:55I think it's a team effort, right? It's having the best product that allows you to show in POCs that you're the most accurate solution. It's having a differentiated product that has certain components around policy and dispute that are not available at competitors, but it's also having the best sales force that's able to explain and tell them the best way, the right marketing collaterals, the right training. So in that sense, it takes a village and I think we continue to see try to have better execution across all aspects. Speaker 800:27:25Yes. And maybe just a follow-up question. The concept of the growth reacceleration, I think you talked about it in the Q4 just based on the book of business you're signing and it's starting to roll out. I'm assuming you're probably not getting a whole full 4th quarter revenue contribution from some of this new business activity recently or in the near term, but maybe you could comment on that. And the second part of that is going forward, assuming there's not a market decline from currently what you're assuming in the macro, Do you think at some point you could grow through the same store sales issues and that could actually help growth reaccelerate just because of the broad book of business that you're bringing on? Speaker 800:28:00Thank you. Speaker 300:28:02Yes, we're definitely happy with the diversity of the book of business. Even in some of the categories that we have, a relatively high concentration in the category, it's across a wide range of merchants, across a very wide range of geographies. And you're right to point out that right now the macro is creating year over year declines. And even if we continue to see the current environment at some point, we would anticipate to stop seeing that. Type of decline effect would positively impact us. Operator00:28:34And the next question comes from Timothy Chiodo with UBS. Your line is open. Speaker 900:28:43Great. Thank you for taking the question. A few years ago with the PSD2 in Europe and the liability shift that was created there, it did create some headwinds and we've lapped that. It's less of a talking point these days. But at the time, there were certainly some transaction exceptions that you could still work on the transaction. Speaker 900:29:03You could still get the chargeback, the full chargeback liability product sold into the customer. There were also some other ways that you could support the merchants, whether it be policy abuse or other products. And at the time, there was also some thought of potentially been working with issuers, some of which sounds like you're doing now. I wanted to shift that same framework or discussion around Apple Pay, Google Pay and other wallets that come with a similar liability shift? And just to talk about some of the other things you could do with merchants, as more and more volume shift to Apple Pay and Google Pay, is it fair to assume that in some cases that kind of takes those transactions out of the TAM for chargeback guarantee? Speaker 900:29:48And are there still ways that you could work with the merchants on Apple Pay and Google Pay transactions? Speaker 300:29:55Hey, Tim, thanks for that question. Happy to explain. We definitely see Apple Pay within our merchants and the amount varies by the category. So for example, when you think about the food category that's been very resilient and growing for us, that probably has a higher concentration of Apple Pay transactions relative to other industries like Luxury Cash. The way we think about it is, A, there's not always a guarantee or liability shift in those instances. Speaker 300:30:26For example, if it's a merchant initiated transaction, there's no liability shift. If you have various geographies or you exceed certain limits, then there's no liability shift. And because of that, some of our merchants would prefer to send us those transactions for the guarantee. And some of our merchants would prefer to send us those transactions under what we call a scoring, a non guaranteed model. We're very open to both of them. Speaker 300:30:52There's less of an impact on the total revenue for us in these scenarios. And let me give you a concrete example that happened a few weeks ago, right? We were in contract negotiations with the merchant and we would either offer them a blended risk adjusted fee of 30 basis points for all the volume, including Apple Pay or there was an alternative offer that said a risk adjusted fee of 35 basis points, right, for all of the credit card volume with a fixed fee of $0.10 for kind of call it Apple Pay transactions. So because our pricing is risk adjusted, we would assume that the comparable of AlphaBay is included or not, nets out to something very, very similar, which is very different than kind of the PSC2 example, which created a loss in volume. On the market side, look, when we think about e commerce, travel, remittance, delivery, ride hailing, that's probably an $8,000,000,000,000 market today. Speaker 300:31:54Obviously, you need to haircut some of those numbers to get to our true Sam. But you are right that the chargeback guarantee aspect of that is going to be a few $1,000,000,000,000 in volume. And there are a few $100,000,000,000 maybe like low $1,000,000,000 right now that's in alternative forms of payments where the liability might sit differently. So that's our kind of overall approach there. Speaker 900:32:18Okay. Thank you. That's really helpful context on the Apple Pay and also the example that you gave. The next question is more of an industry question. Just given the data that you have and my understanding is the integrations are extremely thorough with your merchants and therefore you get to see a lot of information that maybe others in the payments ecosystem don't see. Speaker 900:32:41But this topic or category of autofill platforms, whether it be PayPal's Fastlane or Stripe Blank or the Shop Anywhere offering, it's gaining attention within the investment community. And what does to see from your seat if you had any thoughts on either uptick or advantage or conversion or if there's any liability shift that's involved with any of those Speaker 300:33:13offerings? I'm sorry, I would have to say that I'm generally familiar, but it's definitely not something that I have kind of any numbers or analysis that I would feel comfortable in sharing right now just without digging a bit deeper into that. Speaker 900:33:28Okay. Not a problem. That was worth asking, but thank you for taking the other. I'll drop back. Thanks. Operator00:33:38And the next question comes from Reggie Smith with JPM. Your line is open. Speaker 200:33:45Hey, good morning and thanks for taking the question. Congrats on the Japan retailer win. I guess this is going to be probably a tough question, but I'm curious if you can contextualize or quantify, provide a little more color around your implementation pipeline, I guess, for the back half of the year this year versus last year, and maybe talk about that like on a volume, expected volume basis. Just curious and trying to better understand like what the growth stats kind of look like. So any color you can provide there would be helpful. Speaker 300:34:25I think the trend is definitely seeing more diversification across products and geographies, which again is anticipated and makes sense. We have more mature products. We have more success and better presentation in some of the near geographies and more marquee clients using that Japan example, being able to onboard one of those top 10 merchants that's an extremely well known brand really helps us in the domestic Japan market to have more success there. So I'm seeing that. I think, Agi mentioned that we're seeing more new business wins, new logo activity as compared to upsell. Speaker 300:35:02So that was a big focus for us. So that's definitely something that you can feel within the pipeline. I think that's kind of good color on how I would characterize it. Speaker 100:35:14Got it. And I guess following up on Speaker 200:35:16that, I mean, when I think about the holiday season, I generally think and I could be totally off base here that merchants don't want to do much before the holidays. These signings that you're talking about, are they expected to be implemented in the back half of this year or is that more of a 2025 type of thing? Speaker 300:35:35No, we definitely have a robust pipeline that we anticipate to go live between now and the end of the year. You're right that definitely some merchants, especially ones that have seasonality built into them, they have code freezes at some point and that's taken into account. Other merchants by the way in different categories are less impacted by that. Speaker 200:35:55And then one last question, maybe you can help me understand. Looking at the comparisons from last year, you're stepping into optically easier compares in the back half of the year. I can appreciate the macro is getting sensitive, but maybe help us kind of put all of that together. My math and there may be some noise in here is that sequential compare for growth in the back half of the year is probably 10 points easier. So I'm just trying to square that. Speaker 200:36:26I know if we had the Beyonce and Taylor Swift thing last year, what more can you kind of tell us in terms of comparison to kind of square those numbers a little bit? That's all I have. Thank you. Speaker 400:36:40Yes, sure. So if I think about you're right, the back half of the year last year, we saw some softness already starting to emerge, especially in high fashion and just fashion and the overall holiday seasons were more muted. So it should be a better and easier comparable this year. And maybe the other factor as well is like, the home industry last year, as a home industry, we were kind of going through a very large upsell. So home was very potentially this should be easier as well in terms of effect on Q4. Operator00:37:33And the next question comes from Clark Wright with D. A. Davidson. Your line is open. Speaker 1000:37:42Thank you. I appreciate the update around the new logo trends. So I wanted to understand some of the feedback you got from the Ascend Conference this year, if that translated to any of the new business momentum you noted this quarter? Speaker 300:37:56Sure. Thanks for that. So let me just recap what Ascend is in case not everyone is familiar. It's the annual Riskified User Conference. We just had it this past quarter, best Ascend we've ever had more merchants, more prospects, more industry partners. Speaker 300:38:14And the feedback was really outstanding. That was a great learning experience and networking experience for our merchants. For us, it was a great way to receive some of this feedback. And it definitely was a catalyst for a lot of new business conversations. I think people came out with a different appreciation on the depth and scope of the offering and the ultimate value. Speaker 300:38:38So we do see great ROI for that and we look forward to continuing with this event and other regional events in the future. Speaker 1000:38:47Thank you for that. And then I guess lastly, you mentioned Speaker 200:38:50I think it was Agnes Speaker 1000:38:51you mentioned you're excited about some of the Americas in the APAC growth where the company is gaining share. Could you maybe explain what you mean by gaining share? I mean, who is this coming from greenfield opportunities from home grown solutions or this is more competitive displacement? Speaker 400:39:09I would say that I'm very happy with some of the growth that we've seen in these regions. So again, these are kind of smaller categories compared to some of the U. S. Region, which is the largest category for us. But being able to show destruction and continued growth is something that is significant. Speaker 300:39:29No. And I would just highlight, I think there might be some slight nuances between geographies on who the exact competitor set is. But the overall thesis is the same. We work with large enterprises, large enterprises have internal teams to manage this process. These internal teams use a variety of solutions, some of them more modern, some of them kind of more legacy, and we see that across all geographies. Speaker 1000:39:54Thank you. Appreciate it. Operator00:39:58And our next question comes from Clark Jefferies with Piper Sandler. Your line is open. Speaker 1000:40:07Hello. Thank you for taking the question. First question is clarification, given the disparity in the growth rates that you're seeing in the region, I wanted to clarify the softness that you saw in Q3 and the sort of reflected change in the full year guidance. Were there specific regions that stuck out in terms of softness? Is it heavily weighted to say North America or a certain region? Speaker 1000:40:34Or was there assumption change across all regions in the back half? And then one follow-up. Speaker 400:40:41Yes. Thank you for the question. So I would say that we called out EMEA as being softer. We kind of like previously projected that it's going to grow slightly. Now we project that it's going to be kind of flattish for the year. Speaker 400:40:54And the primary reason for this category compared to for this deal compared to other deals is really the weighting of the industries of some of the merchants there. Like we do have composition of merchants in EMEA with a high weighting from fashion, from travel and these are the categories that I called out as being softer and impacting kind of the numbers. Speaker 1000:41:20Perfect. And then a follow-up is just, some of those product announcements that came out of Ascend, Policy Decisions and Decision Studio. If we get the timing of GA, if they're not already GA and maybe some of the benefits of that more self serve functionality and how explicit were some of these product innovations from the sort of recommendation of customers or you sort of pushing the envelope of where you want to take the solution long term? Thank you. Speaker 300:41:53No problem. So the policy standard that you're mentioning is part of our overall policy product, which enables merchants to individually tailor their policy decisions, but also leverage some of our network and machine learning capabilities in order to do that. That product has not been kind of officially as a GA yet, but we're definitely looking forward based on the feedback to release it soon. And some of the other parts that we have launched, I think we mentioned on the release today, the operate in hand, some of the value that we've been seeing there. We also mentioned that in Ascend, which is where we can package and share enriched information with the card issuing bank, seeing over 100 basis points in improvements on participating merchants and banks. Speaker 300:42:33So there's definitely kind of a mix there of stuff that's already been released and providing value and stuff that's kind of coming up soon. Speaker 100:42:42Thank you. Operator00:42:44I show no further questions at this time. I would now like to turn the call back to Ito Gal for closing remarks. Speaker 300:42:53Thank you everyone for joining our call. We look forward to updating you in the quarters ahead.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRiskified Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Riskified Earnings HeadlinesCritical Contrast: Society Pass (NASDAQ:SOPA) vs. Riskified (NYSE:RSKD)April 25, 2025 | americanbankingnews.comRiskified To Report First Quarter 2025 Financial Results on Wednesday, May 14April 23, 2025 | finance.yahoo.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 29, 2025 | Porter & Company (Ad)Riskified price target lowered to $6 from $7 at DA DavidsonApril 15, 2025 | markets.businessinsider.comIs Riskified Ltd. (RSKD) the Best Technology Penny Stock to Buy Right Now?March 31, 2025 | insidermonkey.comRiskified Ltd.: Free Cash Flow And Balance Sheet Are The Best Part Of The StoryMarch 28, 2025 | seekingalpha.comSee More Riskified Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Riskified? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Riskified and other key companies, straight to your email. Email Address About RiskifiedRiskified (NYSE:RSKD), together with its subsidiaries, develops and offers an e-commerce risk management platform that allows online merchants to create trusted relationships with consumers in the United States, Europe, the Middle East, Africa, the Asia-Pacific, and the Americas. It offers Chargeback Guarantee that ensures the legitimacy of merchants' online orders; Policy Protect, a machine learning solution designed to detect and prevent refund and returns policy abuse in real-time; Account Secure, a solution that cross-checks every login attempt; Dispute Resolve, which is used to compile submissions for fraud and non-fraud related chargeback issues; and PSD2 Optimize that helps merchants avoid bank authorization failures and abandoned shopping carts. The company serves direct-to-consumer brands, online-only retailers, omnichannel retailers, online marketplaces, and e-commerce service providers in various industries, such as payments, money transfer and crypto, tickets and travel, electronics, home, and fashion and luxury goods. Riskified Ltd. was incorporated in 2012 and is headquartered in Tel Aviv, Israel.View Riskified ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings QUALCOMM (4/30/2025)Automatic Data Processing (4/30/2025)Microsoft (4/30/2025)Meta Platforms (4/30/2025)KLA (4/30/2025)Equinix (4/30/2025)Lloyds Banking Group (4/30/2025)Itaú Unibanco (4/30/2025)Banco Santander (4/30/2025)Equinor ASA (4/30/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 11 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to Riskified Second Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would like now to turn the conference over to Chad Mendel, Head of Investor Relations. Operator00:00:37Please go ahead. Speaker 100:00:42Good morning, and thank you for joining us today. My name is Chet Mandel, Riskify's Head of Investor Relations. We are hosting today's call to discuss Riskified's financial results for the Q2 of 2024. Participating on today's call are E. Dohgal, Riskified's Co Founder and Chief Executive Officer and Agi Docheva, Riskified's Chief Financial Officer. Speaker 100:01:02We released our results for the Q2 of 2024 earlier today. Our earnings materials, including a replay of today's webcast, will be available on our Investor Relations website at ir.riskify.com. Certain statements made on the call today will be forward looking statements related to our operating performance, business and financial goals, outlook as to revenues, gross profit margin, adjusted EBITDA profitability, adjusted EBITDA margins and expectations as to positive cash flows, which reflect management's best judgment based on currently available information and are not guarantees of future performance. We intend all forward looking statements to be covered by the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward looking statements reflect our expectations as of the date of this call and except as required by law, we undertake no obligation to this information as a result of new developments that may occur after Speaker 200:01:54the time of this call. Speaker 100:01:56These forward looking statements involve risks, uncertainties and other factors, some of which are beyond our control, that could cause actual results to differ materially from our expectations. You should not put undue reliance on any forward looking statement. Please refer to our annual report on Form 20 F for the year ended December 31, 2023, and subsequent reports we file or furnish with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, we will discuss certain non GAAP financial measures and key performance indicators on the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued early today and also furnished with the SEC on Form 6 ks and in the appendix of our Investor Relations presentation, all of which are posted on our Investor Relations website. Speaker 100:02:44I will now turn the call over to Wigau. Speaker 300:02:46Thanks, Chet, and hello, everyone. I am encouraged by our execution during the 1st 6 months of the year. We are growing profitably on an adjusted EBITDA basis and believe that we are investing in the right people, products and projects to execute for the benefit of our merchants and our shareholders. I remain positive about the trajectory of the company. Once again, our revenue growth during the Q2 was primarily driven by the execution of our go to market strategy, which contributed to 8% year over year growth. Speaker 300:03:17For the first half of twenty twenty four, our revenue increased by 10% and our GMV grew 15% year over year. Our technology platform and differentiated merchant capabilities are resonating within our large addressable market. Our competitive win rates remained high during the quarter and our industry and geographic expansion efforts combined with our product platform sales motion are contributing to a solid pipeline of merchant activity. We had improved performance sequentially with our non chargeback wins and we expect the strong end to the year with further multi product adoption. As we think through the back half of the year, we've begun to see some softness in the 3rd quarter and are anticipating softer 3rd and 4th quarters largely due to certain macro headwinds including worsening consumer spending trends. Speaker 300:04:04This is primarily impacting our high end fashion, tickets and travel and home industries. That being said, we anticipate a strong second half of new business activity which should help to partially offset these macro headwinds. We expect the benefit of this anticipated new business activity to primarily flow through in the Q4. Ajay will walk you through the impact of these factors on our 2024 guidance. We are managing our operational levers to optimize our gross profit and adjusted EBITDA performance across all types of growth environments. Speaker 300:04:35Our non GAAP gross profit growth of 11% in the second quarter and 14% in the first half of the year remained strong and continue to outpace our revenue growth. Combined with ongoing expense discipline, we continue to bring our top line growth to the bottom line. Over each of the last three quarters, we have improved our year over year adjusted EBITDA margin by nearly 1,000 basis points on average and we anticipate generating further adjusted EBITDA margin expansion in the back half of the year. However, we are not just focused on maximizing short term leverage in the business. We maintain a long term view on how to improve our technology, how to expand our TAM and market share and how to convert our single product merchants to multiproduct users. Speaker 300:05:18We believe that the best way to accomplish these goals is by building a market leading platform of products that help to solve real problem for our merchants at all levels of the transaction funnel and to continue penetrating the large e commerce white space in front of us by aligning our go to market sales motion to offer and cross sell this platform. On the chargeback guarantee front, our ability to customize unique merchant specific models to guarantee the highest degree of performance and specificity is why we believe our merchants receive great performance and value. In one recent head to head pilot with a newly onboarded multi billion GMV merchant, we were able to reduce the merchants fraud cost by more than 20%, while simultaneously boosting their approval rate by over 3% when compared to their incubent solution provided by one of our key competitors. This is not an isolated example. Several other recent head to head pilots, we were able to outperform both the merchant's internal teams and other newer generation competitors by delivering superior performance for the merchant. Speaker 300:06:18We believe that these types of results drive expansion opportunities for Riskify. Overall, these data led proof points are a testament to the power of our machine learning factory and the main reason we win in competitive deals. To further broaden our product offerings, we continue to augment our integrations and data sharing capabilities with major global issuing banks. These integrations and partnerships involve sharing enriched order information and other riskified signals with issuing banks in order to enhance our merchants' authorization rates on e commerce transactions reviewed by Riskified. This feature comes baked into chargeback guarantee and has the ability to meaningfully increase bank authorization rates. Speaker 300:06:58Eligible chargeback guarantee merchants can see an increased authorization lift exceeding 100 basis points on segments where Riskified has the ability to influence the issuer's decision. We believe that our privileged access to merchant data puts us in a unique position to further collaborate between parties in the payment ecosystem to help our e commerce merchants grow. I believe that our focus on evolving and investing wisely in our R and D is leading to an overall improvement in our technology offering. This improvement in part was seen in strong performance for our merchants, while we simultaneously were able to achieve a 54% gross profit margin in the first half of the year. I am pleased that we were able to flow this strong margin performance to the annual range, which resulted in an improvement to our adjusted EBITDA guidance for the 2nd consecutive quarter. Speaker 300:07:48Overall, I remain optimistic about our positioning despite the challenging macro environment. We have great demand for our product and by strengthening our machine learning advantage to solve additional use cases beyond chargeback fraud, I am confident that our durable business will continue to perform for merchants and our shareholders. Now over to Agi. Speaker 400:08:08Thank you, Ida, team and everyone for joining today's call. Our GMV for the Q2 was $35,000,000,000 reflecting a 13% increase year over year. We achieved 2nd quarter revenue of $78,700,000 up 8% year over year. Our GMV and revenue category grew 21% year over year. We anticipate a tougher comparison period in the second half of the year as we have now fully lapped a large upsell 1 during the Q2 of 2023. Speaker 400:08:47Our general vertical, which includes both food and general retail merchants grew 7% in the Q2, primarily driven by growth in our food subvertical, offset by weakness in our general retail subvertical. In addition, we saw over 40% growth in our payments and money transfer category driven predominantly by new business activity, a key area of expansion. Our fashion and luxury category grew by 5% in the 2nd quarter, up from low single digits in the 1st quarter, primarily due to new business activity and growth in the fast fashion merchants. This growth was partially offset by continued same store sales pressures within our high end fashion subvertigo consistent with the Q1. We now expect the same store sales pressures to continue in the back half of the year across all geographies. Speaker 400:09:36This is consistent with the outlooks of many of our luxury merchants and broader market commentary regarding discretionary spending. In addition, our tickets and travel vertical grew 8% in the 2nd quarter primarily due to new business activity. We're now expecting softer trends in this category in the second half of the year. In particular, we're anticipating lower travel volumes from our EMEA merchants and as a result currently expect our overall EMEA region to be relatively flat for the year. The United States which is our largest region grew by 11% during the Q2 and APAC grew approximately 35%. Speaker 400:10:15The other Americas, which represent Canada and Latin America, were approximately 9%, primarily due to new and upsell activity. I continue to be excited about our growth in other Americas and APAC regions, which were fueled by market share gains achieved through the addition of new logos. We highlighted a large new logo in Japan in our press release in the fashion category during the quarter. This is an exciting cornerstone merchant, which we're hoping helps unlock further growth in the region. Moving to the discussion of our gross profit margin, operating expenses and adjusted EBITDA. Speaker 400:10:50Unless otherwise noted, I will be referencing non GAAP financial measures. We have provided a reconciliation of GAAP to non GAAP financial measures in our earnings release. Moving on to gross profit margin. Our gross profit margin of 53% was up from 52% in the Q2 of the prior year. We continue to benefit from improvements in our overall core machine learning models and the positive impact of new product revenue, offset by the impact of ramping of significant new merchants and quarterly variability in our revenue mix. Speaker 400:11:27As a reminder, I encourage you to continue analyzing our gross margin on an annual basis. Given individual quarters can vary due to many factors, including the ramping of new merchants and the risk profiles of transactions approved. That being said, I do want to note that our first half gross profit margin was approximately 54%, the highest half year period since our IPO. This was driven by truly collaborative efforts across the organization. As a result of our strong start to the year, we're now targeting a gross profit margin between 52.5% to 53.5% for the full year, up from our previous range of 52% to 53 percent. Speaker 400:12:11Directionally, for modeling purposes, we expect our Q3 gross profit margin to be approximately 50% and we continue to expect Q4 margin to be above the range. Moving to our operating expenses. We continue to manage the business in a focused and disciplined manner. Total operating expenses were $39,300,000 for the 2nd quarter, representing a year over year decline of 7%. We saw year over year declines in each of our R and D, sales and marketing and G and A operating expenses. Speaker 400:12:45Our operating expenses as a percentage of revenue declined from 58% in the prior year period to 50% in the Q2 of 2024 reflecting ongoing leverage in the business model. To highlight how much progress we have made in only a few short years, this percentage in the Q2 of 2022 was 75%. For the second half of the year, we now expect approximately CAD 39,000,000 in quarterly expenses, due to a focus on ongoing savings. We achieved positive adjusted EBITDA of CAD 2,300,000 in Q2 of 2024 as compared to negative CAD 4,600,000 in Q2 of 2023 representing the 8th consecutive quarter of year over year improvement. This quarter's positive adjusted EBITDA represents year over year adjusted EBITDA margin improvement of approximately 9 30 basis points on top of the 1100 basis points improvements achieved in both Q4 of 2023 and Q1 of 2024. Speaker 400:13:49We have been generating ongoing margin expansion through the continued growth of the business while managing expenses and we're focused on flowing this leverage to the bottom line. Moving to the balance sheet. We ended the Q1 with approximately $422,000,000 of cash deposits and investments on the balance sheet and we carried 0 debt. In the Q2, we repurchased 6,800,000 shares for a total price of approximately 39,000,000 dollars As a result, our total shares outstanding has decreased sequentially by approximately 4,000,000 shares from the Q1. As a result of our ongoing commitment to dilution management as well as anticipated repurchasing activity in the second half of the year, we expect our year end share count to decline year over year. Speaker 400:14:41We continue to believe that our strong balance sheet and liquidity position are underappreciated assets. We will continue to be thoughtful in how we utilize our capital to drive shareholder value. In addition, we continue to maintain a very healthy cash flow model and achieved free cash flows of $4,100,000 in the second quarter. We continue to expect approximately $30,000,000 of positive free cash flow in 2024. Now turning to our outlook. Speaker 400:15:13We're updating our 2024 guidance that we previously shared on our Q1 call. As we mentioned, we're expecting headwinds in our high end fashion, tickets and travel and home verticals to persist, which we expect will negatively impact our second half revenue. As a result, we now anticipate revenue between CAD 320,000,000 and CAD 325,000,000 for the full year 2024 or $322,500,000 at the midpoint. As Ido mentioned, we remain optimistic that anticipated strong second half of new logo activity should result in an acceleration of growth in the Q4. After previously factoring in some level of macroeconomic recovery in the back half of the year into our guidance, we no longer are including this recovery in our current assumptions at the new midpoint. Speaker 400:16:05As always, we'll continue to monitor the performance and health of our merchants, consumer spending and the broader e commerce landscape and the impact on our results. Moving to our adjusted EBITDA outlook. As a result of our disciplined approach to managing the business and improved gross margin outlook, we now believe that our full year adjusted EBITDA will be between $13,000,000 $19,000,000 or $16,000,000 to the midpoint. This represents an improvement of 7% from our range provided on our Q1 call in May and 19% from our initial guide given on our Q4, 2023 earnings call in March. The new midpoint of our adjusted EBITDA guide represents additional margin expansion of approximately 800 basis points from the prior year, demonstrating leverage in the business model. Speaker 400:16:58Overall, I'm encouraged by the first half of the year. I believe that our leading product platform and disciplined approach in managing the business will allow us to continue to progress towards our long term goals, while delivering value to our merchants and to our shareholders. Operator, we're ready to take the first question please. Thank Operator00:17:36And the first question will come from Ramsey El Assal with Barclays. Your line is now open. Speaker 500:17:45Hi, this is Owen on for Ramsey. I appreciate you taking our question this morning. I want to check-in on the crowd strike outage earlier in July, the networks had called that out as having an impact on Q3. I wanted to see if your merchants had any technical issues. Now you largely operate on AWS, but any kind of insight there on impact on Q3 expectations might be helpful. Speaker 400:18:11Yes. Thank you for the question. There's no impact on liquefied or anything related to that we understand from our merchants related to the general cross strike issue. Speaker 500:18:24Great. That's good to hear. And just a quick follow-up for me, just on the kind of more platform approach, seems like you're making good progress on the cross sell some of those new products. I was just wondering if you could give us an update on the penetration rate potentially of your kind of current client base and some of the kind of longer runway you expect to kind of have there any insight there would be helpful? Thanks. Speaker 300:18:48Sure. Happy to share an update there. I'll say, look, as kind of CEO, what gets me most energized is just speaking to our clients, seeing how they react to some of these newer additions and stuff we have in the pipeline. And also the ROI and the value that it solves them. I think just from a numbers perspective, what we shared kind of previous quarter, we've seen sequential improvements then, but we're still in that zone of kind of 0.5% improvement to the gross profit margin, kind of 3x growth. Speaker 300:19:17And we do have a fairly strong pipeline heading into the back half of the year. So I do expect kind of a good end to the year on the new product side. Great. Very helpful. Thank you. Operator00:19:31Our next question comes from Ryan Tomasello with KBW. Your line is open. Speaker 600:19:39Good morning, everyone. Thanks for taking the questions. Aghi, regarding the outlook, I was hoping you can put a finer point around what level of net dollar retention the current guidance reflects versus the original expectations at the beginning of the year? And if you can say how that breakdown looks between what you saw in the first half of the year in terms of net dollar retention versus what you're now looking for in the second half of the year? Thanks. Speaker 400:20:09Yes, of course. Thank you for the question. So, while it's an annual number at this point, it's not really a guide, but let me give you some direction. So we previously shared at our kind of Q1 earnings call that we've seen some trends kind of leading to a lower retention than what we saw last year. We kind of expect it to be closer than $100,000,000 than $105,000,000 Now because of the macro factors that we kind of shared in our message just earlier, I think that a few percentage points below 100% is probably a fair assumption. Speaker 400:20:47And to give you kind of understanding of what are the main drivers, I would say that number 1 is really the removal of the recovery trends that we kind of were baking in our numbers and we just don't see that happening anymore. So now at the midpoint, we don't kind of expect any recovery numbers in the back half of the year and we expect the back half to be kind of similar to the first half of the year. The second factor is probably our annual dollar retention rate. Again, we look at it annually. Just again, it's not a guide, but to give you some perspective, I think that I'm seeing just slight uptick in loss volume. Speaker 400:21:31I do expect it to be very much kind of still in the ranges of last year. Last year was 98%, maybe I do expect to be closer to 97% this year. And the last factor that might be impacting our retention rate actually is a positive one. This year, we've seen a lot more new revenue coming from new logos, which is great, which is something that we've been working kind of to internally to create the right incentive structure to accomplish that and really kind of focusing on increasing our market share and penetrating in different industries. But that has kind of impacted a little bit the upsell and just the some effect on the net dollar retention. Speaker 400:22:14So overall, I think this is kind of like a very positive factor overall, but it does impact the net dollar retention. Speaker 600:22:21Great. Appreciate all that color. And then Itau, one for you. As you continue to make progress building out the platform offering beyond just the chargeback guarantee, can you say how the sales and go to market strategy is evolving at all to help support that initiative? I mean, Augie, I think just alluded to a new incentive structure around new logos. Speaker 600:22:44Last quarter, you called out some of these key standalone wins outside the chargeback guarantee in Policy to Protect and DisputeResolve. Is there a lot of focus that you're putting on the sales force to emphasize those types of standalone deals? Just trying to understand how the go to market strategy is evolving here in light of the platform evolution? Thanks. Speaker 300:23:11Sure. No, that's a great question. I would say that at the start of the year, we definitely wanted to put a bigger focus on new logos to have more revenue come from new logos than from us. So we think that's important just from a market land share perspective and we're happy to see some of the results there. I think that our platform approach enables us to sell to more stakeholders and solve more ROI and the value that we see there is kind of higher win rates and competitive cycles. Speaker 300:23:40It means that like you mentioned, we can sell into merchants that maybe are not looking for a chargeback solution right now, but they are interested in some of the other parts. But really what we're seeing is more and more new deals are taking multiple parts of the platform. I think we highlighted that large ticketing merchant that also started with Dispute Resolve. That large marquee client in Japan is actually starting with 2 clients, but is signed for with 2 products, but is already signed for the 3rd one to go live with that early next year. So it's definitely helping there as well. Speaker 300:24:14Great. Appreciate all the color. Operator00:24:18The next question comes from Chris Kennedy with William Blair. Your line is open. Speaker 700:24:26Great. Thanks for taking the question. You talked about accelerating growth in the Q4. Is there any way to think about or put a framework around 2025 given the new sales activity? Speaker 300:24:42I think it might be still a bit too early for us to really think through and model out 2025. I think the acceleration we're seeing into the Q4 is just based on some of the new business activity and the growth in those areas that are helping accelerate there. But just to recap, kind of what we mentioned based on some of the earnings from some of the clients, the public clients that we work with, everyone's kind of expecting a slower back half of the year, especially around fashion, travel, sneakers, the home category. And we've been seeing that quarter to date as well, right? So that's kind of creating that lower outlook for the back half. Speaker 300:25:20Within the Q4 based on some of those go lives that are already happening right now. And the third, that's going to offset some of that consumer spending weakness. Speaker 700:25:30Great. Okay. Thank you. And then it's great to see the continued expansion of margins. Are you still comfortable with your 2026 EBITDA margin target of 15% to 20%? Speaker 700:25:42And can you just remind us of the roadmap to get there? Thank you. Speaker 300:25:47Yes, sure. We're still fairly in line and very confident in those midterm targets. Like we mentioned, we have various levers that we understand how to pull in order to reach there. And the results of this part of the guidance outstanding is still squarely in line 100%. Speaker 600:26:04Great. Thank you. Operator00:26:08And the next question comes from Terry Tillman with Truist. Your line is open. Speaker 800:26:16Yes. Hey, team. Thanks for taking my questions. Maybe just the first question relates to, if we just take the challenges within the installed base same store sales activity aside and just the macro assumptions in the second half of the year, you are talking about new sales or upselling activity being resilient or relatively strong. I'm just curious what you've been doing internally more recently or over the intermediate term to enhance go to market. Speaker 800:26:41So whether it's field sales or marketing and branding, what are some of the things that you've been doing that you could call out to us that maybe could continue to drive this new business success going forward? And then I had a follow-up. Speaker 300:26:55I think it's a team effort, right? It's having the best product that allows you to show in POCs that you're the most accurate solution. It's having a differentiated product that has certain components around policy and dispute that are not available at competitors, but it's also having the best sales force that's able to explain and tell them the best way, the right marketing collaterals, the right training. So in that sense, it takes a village and I think we continue to see try to have better execution across all aspects. Speaker 800:27:25Yes. And maybe just a follow-up question. The concept of the growth reacceleration, I think you talked about it in the Q4 just based on the book of business you're signing and it's starting to roll out. I'm assuming you're probably not getting a whole full 4th quarter revenue contribution from some of this new business activity recently or in the near term, but maybe you could comment on that. And the second part of that is going forward, assuming there's not a market decline from currently what you're assuming in the macro, Do you think at some point you could grow through the same store sales issues and that could actually help growth reaccelerate just because of the broad book of business that you're bringing on? Speaker 800:28:00Thank you. Speaker 300:28:02Yes, we're definitely happy with the diversity of the book of business. Even in some of the categories that we have, a relatively high concentration in the category, it's across a wide range of merchants, across a very wide range of geographies. And you're right to point out that right now the macro is creating year over year declines. And even if we continue to see the current environment at some point, we would anticipate to stop seeing that. Type of decline effect would positively impact us. Operator00:28:34And the next question comes from Timothy Chiodo with UBS. Your line is open. Speaker 900:28:43Great. Thank you for taking the question. A few years ago with the PSD2 in Europe and the liability shift that was created there, it did create some headwinds and we've lapped that. It's less of a talking point these days. But at the time, there were certainly some transaction exceptions that you could still work on the transaction. Speaker 900:29:03You could still get the chargeback, the full chargeback liability product sold into the customer. There were also some other ways that you could support the merchants, whether it be policy abuse or other products. And at the time, there was also some thought of potentially been working with issuers, some of which sounds like you're doing now. I wanted to shift that same framework or discussion around Apple Pay, Google Pay and other wallets that come with a similar liability shift? And just to talk about some of the other things you could do with merchants, as more and more volume shift to Apple Pay and Google Pay, is it fair to assume that in some cases that kind of takes those transactions out of the TAM for chargeback guarantee? Speaker 900:29:48And are there still ways that you could work with the merchants on Apple Pay and Google Pay transactions? Speaker 300:29:55Hey, Tim, thanks for that question. Happy to explain. We definitely see Apple Pay within our merchants and the amount varies by the category. So for example, when you think about the food category that's been very resilient and growing for us, that probably has a higher concentration of Apple Pay transactions relative to other industries like Luxury Cash. The way we think about it is, A, there's not always a guarantee or liability shift in those instances. Speaker 300:30:26For example, if it's a merchant initiated transaction, there's no liability shift. If you have various geographies or you exceed certain limits, then there's no liability shift. And because of that, some of our merchants would prefer to send us those transactions for the guarantee. And some of our merchants would prefer to send us those transactions under what we call a scoring, a non guaranteed model. We're very open to both of them. Speaker 300:30:52There's less of an impact on the total revenue for us in these scenarios. And let me give you a concrete example that happened a few weeks ago, right? We were in contract negotiations with the merchant and we would either offer them a blended risk adjusted fee of 30 basis points for all the volume, including Apple Pay or there was an alternative offer that said a risk adjusted fee of 35 basis points, right, for all of the credit card volume with a fixed fee of $0.10 for kind of call it Apple Pay transactions. So because our pricing is risk adjusted, we would assume that the comparable of AlphaBay is included or not, nets out to something very, very similar, which is very different than kind of the PSC2 example, which created a loss in volume. On the market side, look, when we think about e commerce, travel, remittance, delivery, ride hailing, that's probably an $8,000,000,000,000 market today. Speaker 300:31:54Obviously, you need to haircut some of those numbers to get to our true Sam. But you are right that the chargeback guarantee aspect of that is going to be a few $1,000,000,000,000 in volume. And there are a few $100,000,000,000 maybe like low $1,000,000,000 right now that's in alternative forms of payments where the liability might sit differently. So that's our kind of overall approach there. Speaker 900:32:18Okay. Thank you. That's really helpful context on the Apple Pay and also the example that you gave. The next question is more of an industry question. Just given the data that you have and my understanding is the integrations are extremely thorough with your merchants and therefore you get to see a lot of information that maybe others in the payments ecosystem don't see. Speaker 900:32:41But this topic or category of autofill platforms, whether it be PayPal's Fastlane or Stripe Blank or the Shop Anywhere offering, it's gaining attention within the investment community. And what does to see from your seat if you had any thoughts on either uptick or advantage or conversion or if there's any liability shift that's involved with any of those Speaker 300:33:13offerings? I'm sorry, I would have to say that I'm generally familiar, but it's definitely not something that I have kind of any numbers or analysis that I would feel comfortable in sharing right now just without digging a bit deeper into that. Speaker 900:33:28Okay. Not a problem. That was worth asking, but thank you for taking the other. I'll drop back. Thanks. Operator00:33:38And the next question comes from Reggie Smith with JPM. Your line is open. Speaker 200:33:45Hey, good morning and thanks for taking the question. Congrats on the Japan retailer win. I guess this is going to be probably a tough question, but I'm curious if you can contextualize or quantify, provide a little more color around your implementation pipeline, I guess, for the back half of the year this year versus last year, and maybe talk about that like on a volume, expected volume basis. Just curious and trying to better understand like what the growth stats kind of look like. So any color you can provide there would be helpful. Speaker 300:34:25I think the trend is definitely seeing more diversification across products and geographies, which again is anticipated and makes sense. We have more mature products. We have more success and better presentation in some of the near geographies and more marquee clients using that Japan example, being able to onboard one of those top 10 merchants that's an extremely well known brand really helps us in the domestic Japan market to have more success there. So I'm seeing that. I think, Agi mentioned that we're seeing more new business wins, new logo activity as compared to upsell. Speaker 300:35:02So that was a big focus for us. So that's definitely something that you can feel within the pipeline. I think that's kind of good color on how I would characterize it. Speaker 100:35:14Got it. And I guess following up on Speaker 200:35:16that, I mean, when I think about the holiday season, I generally think and I could be totally off base here that merchants don't want to do much before the holidays. These signings that you're talking about, are they expected to be implemented in the back half of this year or is that more of a 2025 type of thing? Speaker 300:35:35No, we definitely have a robust pipeline that we anticipate to go live between now and the end of the year. You're right that definitely some merchants, especially ones that have seasonality built into them, they have code freezes at some point and that's taken into account. Other merchants by the way in different categories are less impacted by that. Speaker 200:35:55And then one last question, maybe you can help me understand. Looking at the comparisons from last year, you're stepping into optically easier compares in the back half of the year. I can appreciate the macro is getting sensitive, but maybe help us kind of put all of that together. My math and there may be some noise in here is that sequential compare for growth in the back half of the year is probably 10 points easier. So I'm just trying to square that. Speaker 200:36:26I know if we had the Beyonce and Taylor Swift thing last year, what more can you kind of tell us in terms of comparison to kind of square those numbers a little bit? That's all I have. Thank you. Speaker 400:36:40Yes, sure. So if I think about you're right, the back half of the year last year, we saw some softness already starting to emerge, especially in high fashion and just fashion and the overall holiday seasons were more muted. So it should be a better and easier comparable this year. And maybe the other factor as well is like, the home industry last year, as a home industry, we were kind of going through a very large upsell. So home was very potentially this should be easier as well in terms of effect on Q4. Operator00:37:33And the next question comes from Clark Wright with D. A. Davidson. Your line is open. Speaker 1000:37:42Thank you. I appreciate the update around the new logo trends. So I wanted to understand some of the feedback you got from the Ascend Conference this year, if that translated to any of the new business momentum you noted this quarter? Speaker 300:37:56Sure. Thanks for that. So let me just recap what Ascend is in case not everyone is familiar. It's the annual Riskified User Conference. We just had it this past quarter, best Ascend we've ever had more merchants, more prospects, more industry partners. Speaker 300:38:14And the feedback was really outstanding. That was a great learning experience and networking experience for our merchants. For us, it was a great way to receive some of this feedback. And it definitely was a catalyst for a lot of new business conversations. I think people came out with a different appreciation on the depth and scope of the offering and the ultimate value. Speaker 300:38:38So we do see great ROI for that and we look forward to continuing with this event and other regional events in the future. Speaker 1000:38:47Thank you for that. And then I guess lastly, you mentioned Speaker 200:38:50I think it was Agnes Speaker 1000:38:51you mentioned you're excited about some of the Americas in the APAC growth where the company is gaining share. Could you maybe explain what you mean by gaining share? I mean, who is this coming from greenfield opportunities from home grown solutions or this is more competitive displacement? Speaker 400:39:09I would say that I'm very happy with some of the growth that we've seen in these regions. So again, these are kind of smaller categories compared to some of the U. S. Region, which is the largest category for us. But being able to show destruction and continued growth is something that is significant. Speaker 300:39:29No. And I would just highlight, I think there might be some slight nuances between geographies on who the exact competitor set is. But the overall thesis is the same. We work with large enterprises, large enterprises have internal teams to manage this process. These internal teams use a variety of solutions, some of them more modern, some of them kind of more legacy, and we see that across all geographies. Speaker 1000:39:54Thank you. Appreciate it. Operator00:39:58And our next question comes from Clark Jefferies with Piper Sandler. Your line is open. Speaker 1000:40:07Hello. Thank you for taking the question. First question is clarification, given the disparity in the growth rates that you're seeing in the region, I wanted to clarify the softness that you saw in Q3 and the sort of reflected change in the full year guidance. Were there specific regions that stuck out in terms of softness? Is it heavily weighted to say North America or a certain region? Speaker 1000:40:34Or was there assumption change across all regions in the back half? And then one follow-up. Speaker 400:40:41Yes. Thank you for the question. So I would say that we called out EMEA as being softer. We kind of like previously projected that it's going to grow slightly. Now we project that it's going to be kind of flattish for the year. Speaker 400:40:54And the primary reason for this category compared to for this deal compared to other deals is really the weighting of the industries of some of the merchants there. Like we do have composition of merchants in EMEA with a high weighting from fashion, from travel and these are the categories that I called out as being softer and impacting kind of the numbers. Speaker 1000:41:20Perfect. And then a follow-up is just, some of those product announcements that came out of Ascend, Policy Decisions and Decision Studio. If we get the timing of GA, if they're not already GA and maybe some of the benefits of that more self serve functionality and how explicit were some of these product innovations from the sort of recommendation of customers or you sort of pushing the envelope of where you want to take the solution long term? Thank you. Speaker 300:41:53No problem. So the policy standard that you're mentioning is part of our overall policy product, which enables merchants to individually tailor their policy decisions, but also leverage some of our network and machine learning capabilities in order to do that. That product has not been kind of officially as a GA yet, but we're definitely looking forward based on the feedback to release it soon. And some of the other parts that we have launched, I think we mentioned on the release today, the operate in hand, some of the value that we've been seeing there. We also mentioned that in Ascend, which is where we can package and share enriched information with the card issuing bank, seeing over 100 basis points in improvements on participating merchants and banks. Speaker 300:42:33So there's definitely kind of a mix there of stuff that's already been released and providing value and stuff that's kind of coming up soon. Speaker 100:42:42Thank you. Operator00:42:44I show no further questions at this time. I would now like to turn the call back to Ito Gal for closing remarks. Speaker 300:42:53Thank you everyone for joining our call. We look forward to updating you in the quarters ahead.Read morePowered by