Riskified Ltd. Q1 FY2025 earnings call

Key Focus Areas for 2025 and Beyond - Expanding top-of-funnel efforts to generate more pipeline, converting pipeline into new business at high rates, and retaining and growing with merchants once onboarded. ### Pipeline and Renewals - Pipeline has grown substantially both year-over-year and sequentially. Achieved a 100% renewal rate across top 20 contracts up for renewal during the first quarter, with nearly half extended as multiyear agreements. ### Product Portfolio and AI - Expanded product portfolio powered by proprietary AI decisioning engine to solve wider range of use cases beyond chargeback fraud. New product revenue growth up approximately 190% year-over-year. Strategically investing in machine learning capabilities through R&D team expansion. ### Macro Environment and Diversification - Global backdrop remains fluid and uncertain, but consumer has remained resilient. Diversified business across verticals and geographies. Top new logo wins include remittance merchant in money transfer and payments category, with eight of top 10 new logos headquartered outside US.

GMV for the first quarter was $34.2 billion, reflecting a 7% increase year-over-year. First quarter revenue was $82.4 million, up 8% year-over-year. The two largest categories, Tickets and Travel and Fashion and Luxury, each grew in the mid-teens range year-over-year. Money transfer and payments category achieved approximately 90% year-over-year growth. The home category contracted by 74% driving a 5% year-over-year decline in the United States. APAC grew approximately 70% and Outer Americas (Canada and Latin America) grew approximately 13% during the first quarter. EMEA delivered approximately 15% growth. Non-GAAP gross profit margin for the first quarter of 2025 was approximately 50%, with the full-year target between 52% and 53.5%. Total non-GAAP operating expenses were $39.8 million for the first quarter, with non-GAAP operating expenses as a percentage of revenue declining from 53% to 48% year-over-year. Positive adjusted EBITDA of $1.3 million was achieved in the first quarter, the sixth consecutive quarter of positive adjusted EBITDA.

Maintain revenue guidance between $333 million and $346 million or $339.5 million to the midpoint. Adjusted EBITDA guidance remains between $18 million and $26 million or approximately $22 million to the midpoint. Expect slightly higher second-quarter expenses compared to first quarter and expenses in the second half of the year to be lower than the first half by approximately $2 million. Expect approximately $30 million of positive free cash flow in 2025, with majority expected in the second half.

Macro Uncertainty - Global backdrop, particularly around tariffs and international trade, remains fluid and uncertain, which could impact merchants and overall spending activity. ### New Merchant Ramping - Ramping up significant new merchants in newer categories and geographies can impact gross margins in the short term as it takes time to reach steady state.

Q: How do you think about the factors related to execution on the product roadmap, increasing pipeline build, and multiyear contracts and their impact on the confidence for growth picking up into next year and beyond?

A: Ido Gal says it's because of the platform and wider value proposition with more touchpoints, global go-to-market motion starting to pay off, and merchants seeing increased sophisticated fraud and Riskified being better equipped to handle it.

Q: Can you give an update on the strategy for moving more down market and the opportunity there?

A: Ido Gal says the pipeline seen year to date is still in core focus of enterprise very large, and mid-market channel and further downstream activation is later in the year.

Q: How does Riskified's offering compare and contrast to Stripe Radar?

A: Ido Gal says gateway solutions have more limited capabilities. Riskified receives three times the level of data per transaction, enabling more features and capabilities, with granular data including from various transaction lifecycle points and merchant-specific data points.

Q: If you have to look across core verticals on a blended average riskified-specific industry growth rate, do you think the growth rate across your categories would have been well below that 7% number indicative of share gains or more similar to that 7%?

A: Aghi Doceva says categories don't always align with external e-comm growth metrics. For example, travel was strong despite some industry challenges, and fashion and luxury had same-store sales weakness but trend better than prior year.

Q: What's resonating in the market between Policy Protect, policy decisions, etc.?

A: Ido Gal says the platform resonates with merchants. For example, one merchant blocked 10% of refund and return requests without incremental false positives, and another saw decreased refunds issued with increased customer satisfaction.

Q: Is the long-term target of generating 15% to 20% EBITDA margins by the end of 2026 still in your plan?

A: Ido Gal says they're excited by the start of the year and looking forward to continuing to execute on it.

Q: How much of the 2025 growth is attributed to new logo growth versus expansion within the base?

A: Aghi Doceva says new revenue is a little bit higher than expected and macro uncertainty may make projection slightly worse, with new logo maybe slightly higher and dollar retention rate close to 100.