Q1 2024 Riskified Ltd Earnings Call
One.
Operator: Good day, and welcome to Riskified's first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Chett Mandel, Head of Investor Relations. Please go ahead. Thank you.
Speaker Change: Good day and welcome to the risk of <unk> first quarter 2024 earnings call. At this time, all participants are in a listen only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star one one on your telephone you will then ear an automated message advising your hand is right.
Speaker Change: Withdraw your question Press Star one again.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. Chat Mandel head of Investor Relations. Please go ahead.
Chett Mandel: Good morning, and thank you for joining us today. My name is Chett Mandel, Riskified's Head of Investor Relations. We are hosting today's call to discuss Riskified's financial results for the first quarter of 2024. Also joining us on the call today are Eido Gal, Riskified's Co-Founder and Chief Executive Officer, and Aglika Dotcheva, Riskified's Chief Financial Officer.
Chett Mandel: Good morning, and thank you for joining US today. My name is Chuck Mandel, Bruce provides head of Investor Relations. We are hosting today's call to discuss <unk> financial results for the first quarter of 2020 for participating on the call. Today are you go golf risk of Heights, co founder and Chief Executive Officer, and argued Toshiba risk attached.
Chett Mandel: We released our results for the first quarter of 2024 earlier today. Our earnings materials, including a replay of today's webcast, will be available on our investor relations website at IR.Riskified.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.
Chief Financial Officer, we released our results for the first quarter of 2024 earlier today, our earnings materials, including a replay of today's webcast will be available on our Investor Relations website at IR got risk of buy Dot com.
Speaker Change: Certain statements made on the call today will be forward looking statements related to our operating performance business and financial goals outlook. After revenues gross profit margin adjusted EBITDA profitability adjusted EBITA margins in expectations as the positive cash flows which reflect management's best judgment based on currently available information.
Speaker Change: 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.
Chett Mandel: 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 revise this information as a result of new developments that may occur after the time of this call. These 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.
Speaker Change: 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 revise this information as a result of new developments that may occur after the time of this call.
Speaker Change: These forward looking statements involve risks uncertainties and other factors some of which are beyond our control that could cause actual results could differ materially from our expectations you.
Chett Mandel: 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 in the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued earlier today and also furnished to the SEC on Form 6K and in the appendix of our Investor Relations presentation, all of which are posted on our Investor Relations website. I will now turn the call over to Eido.
Speaker Change: You should not put undue reliance on any forward looking statements.
Speaker Change: Refer to our annual report on form 20-F for the year ended December 31, 2023, and subsequent reports, we filed or furnished with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations.
Speaker Change: Additionally, we will discuss certain non-GAAP financial measures and key performance indicators in the call reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued earlier today and also furnished with the SEC on form 6K and in the appendix of our Investor Relations presentation, all of which are posted.
Speaker Change: It on our Investor Relations website, I will now turn the call over to readout.
Eido Gal: Thanks, Chett, and hello, everyone. This was truly a quarter of execution. During the first quarter, we achieved revenue growth of 11 percent, non-gap gross profit growth of 18 percent, improved our adjusted EBITDA margin by 1,200 basis points year-over-year, and repurchased approximately 4 percent of our shares outstanding. While it is still very early in the year, we remain confident in executing on our 2024 goals across the organization. Our team is hard at work and focused on driving towards our annual, near, and long-term targets.
Speaker Change: Thanks, Chad and Hello, everyone. This was truly a quarter of execution during the first quarter, we achieved revenue growth of 11% non-GAAP gross profit growth of 18% improved our adjusted EBITDA margin by 200 basis points year over year and repurchased approximately 4% of our shares outstanding.
Speaker Change: While it is still very early in the year, we remain confident in executing on our 2024 goals across the organization. Our team is hard at work and focused on driving towards our annual near and long term targets.
Eido Gal: As discussed in depth on our previous calls, and what remains unchanged today, is our focus on landing new customers to drive vertical depth and geographic diversification, while continuing to upsell to our existing merchants. Allow me to highlight an interesting proof point of how we are successfully executing on this strategy. Historically, we have found that when we are able to onboard a significant number of merchants in a vertical and then perform well with those merchants, we can reach an inflection point where future sales in that vertical become easier, faster, and more streamlined.
Speaker Change: As discussed in depth on our previous calls and what remains unchanged today is our focus on landing new customers to drive vertical depth and geographic diversification, while continuing to up sell to our existing merchants.
Speaker Change: Allow me to highlight an interesting proof point of how we are successfully executing on this strategy.
Speaker Change: Historically, we have found that when we are able to onboard a significant number of merchants in the vertical and then performed well with those merchants, we can reach an inflection point, where future sales in that vertical become easier faster and more streamlined as a result, we ended up owning the category from a competitive standpoint.
Eido Gal: As a result, we end up owning the category from a competitive standpoint. We believe that this is what we have achieved over the last 10 years in our fashion and luxury vertical by working with many of the world's most prestigious brands in this category. Now, I believe that we are building a similar competitive moat in our tickets and live events sub-vertical. We identified the tickets and live event space about five years ago as an opportunity for expansion.
Speaker Change: We believe that this is what we have achieved over the last 10 years in our fashion and luxury vertical through working with many of the world's most prestigious brands in this category now.
Now I believe that we are building, a similar competitive mote and our tickets and live events up vertical.
Speaker Change: We identified the tickets and live event space about five years ago, that's an opportunity for expansion we.
Eido Gal: We have executed on this opportunity, as evidenced by our growth in this category over the last several years. Furthermore, in the first quarter, our top new logo win and our largest upsell were both in the tickets and live event space. Each win involved taking volume from the merchant's incubant vendors, which were newer generation competitors.
Speaker Change: We have executed on this opportunity as evidenced by our growth in this category over the last several years.
Speaker Change: Furthermore, in the first quarter, our top new logo win and our largest upsell where both in the tickets and live events space. Each win involves taking volume from the merchants and incubate vendors, which were newer generation competitors.
Eido Gal: We believe that we are delivering compelling ROI for these. Many of the top merchants in this space are already leveraging the powerful flywheel effect of our network, and we have further opportunities in our pipeline to continue expanding our market. In addition to our network effect, we believe that the merchant level data that we analyze through very deep and robust integrations with our merchants' internal systems and gateways is a core differentiator and a key reason why we win.
We believe that we are delivering compelling ROI for these merchants many of the top merchants in this space are already leveraging the powerful flywheel effect, if our network and we have further opportunities in our pipeline to continue expanding our market share.
Speaker Change: In addition to our network effect, we believe that the merchant level data that we analyze through very deep and robust integrations with our merchants internal systems and gateways is a core differentiator and a key reason why we win.
Eido Gal: Combined with the technology and product advancements that we have made over the past few years, we have built a flexible and dynamic platform designed to utilize domain-specific features tailored to individual industries. We believe that by focusing on improvements to our technological capabilities, we are continuing to strengthen the accuracy and performance of our machine learning factor. Outside of tickets and live events, during Q1, we had key wins in another of our marquee competencies, the Fashion and Luxury Vertical, with notable wins in the United States, EMEA, and Japan. In addition, we onboarded a food merchant, Anemia, a growing vertical forest.
Speaker Change: Combined with the technology and product advancements that we've made over the past few years, we have built a flexible and dynamic platform designed to utilize domain specific features tailored to individual industries, we believe that by focusing on improvements to our technological capabilities. We are continuing to strengthen the accuracy.
Speaker Change: And performance of our machine learning factory.
Speaker Change: Outside of tickets and live events. During Q1, we had key wins in another of our marquee competencies the fashion and luxury vertical with notable wins in the United States EMEA and Japan.
Speaker Change: In addition, we on boarded a food merchant in EMEA, a growing vertical for us.
Eido Gal: To highlight the geographic breadth and success of our go-to-market efforts, seven of our top ten new charge-back guarantee logos closed during the first quarter were outside of the United States. And continuing the momentum from the fourth quarter, our go-to-market team continued to do a great job selling our multi-product platform with important new logo wins in both our Policy Protect and Dispute Resolve products. The top new logos in each of these products were both stand-alone sales to merchants not currently using our core chargeback guarantee products.
Speaker Change: To highlight the geographic breadth and success of our go to market efforts.
Speaker Change: One of our top 10, new chargeback guaranteed logos closed during the first quarter or outside of the United States.
Speaker Change: And continuing the momentum from the fourth quarter. Our go to market team continues to do a great job selling our multi product platform with important new logo wins in both our policy protect and dispute resolved products.
Speaker Change: The top new logos in each of these products were both standalone sales to merchants not currently using our core chargeback guaranteed product.
Eido Gal: Like we have said before, our refined multiproduct platform has unlocked multiple entry points into enterprise e-commerce companies, which helps lead to increased merchant coverage and opportunities to continuously sell our platform. In addition, through focused expense discipline and year-over-year gross margin improvements, we achieved adjusted EBITDA of $2.8 million during the first quarter. This marks consecutive quarters of positive adjusted EB-DOT. We continue to flow the leverage from our top-line performance down to the bottom line, and as we continue to scale and grow revenues, we expect that this will continue to be a powerful driver of further margin expansion.
Speaker Change: Like we have said before our refined multi product platform has unlocked multiple entry points into enterprise E Commerce companies, which helps lead to increased merchant coverage and opportunities to continuously sell our platform.
Speaker Change: In addition through focused expense discipline and year over year gross margin improvements, we achieved adjusted EBITDA of $2 8 million during the first quarter.
Speaker Change: This marks consecutive quarters of positive adjusted EBITDA.
Speaker Change: We continue to flow the leverage from our top line performance down to the bottom line and as we continue to scale and grow revenues. We expect that this will continue to be a powerful driver of further margin expansion.
Eido Gal: To that end, we are improving our bottom-line annual guidance to reflect our strong performance in the first quarter and confidence in our annual gross margin in the face of an uneven but generally resilient spending environment. Agi will touch on this more shortly. In conclusion, I remain optimistic about the trajectory of the business and of our ability to manage the business to deliver value to our shareholders. I am excited about the strong technology that we have built to capture the ever-expanding e-commerce universe and the opportunities that we have in front of us. Now, over to Ag.
Speaker Change: So that and we are improving our bottom line annual guidance to reflect our strong performance in the first quarter and confidence in our annual gross margin in the face of an uneven but generally resilient spending environment.
Speaker Change: I will touch on this more shortly.
Speaker Change: In conclusion, I remain optimistic about the trajectory of the business and if our ability to manage the business to deliver value to our shareholders. I am excited about the starring technology that we have built to capture the ever expanding E Commerce universe and the opportunities we have in front of us now over target.
Aglika Dotcheva: Thank you, EIDL's team and everyone, for joining today's call. Our gain before the first quarter was $32 billion, reflecting a 17% increase year over year. We achieved first quarter revenue of $76.4 million, 11% year over year. Our GNV and revenue growth during this quarter was primarily driven by continuous new merchants and upsell activity. Maintaining the positive momentum from the fourth quarter, in the first quarter of 2024, we achieved 65% year-over-year growth in our home category, primarily driven by upsell activity.
Speaker Change: Thank you leader team and everyone for joining today's call.
Speaker Change: Our G&A for the first quarter was 32 billion, reflecting a 17% increase year over year.
We achieved first quarter revenue of $76 4 million.
Speaker Change: 11% year over year.
Speaker Change: Our J&J and revenue growth. During this quarter was primarily driven by continued new merchant and upsell activity.
Speaker Change: Maintaining the positive momentum from the fourth quarter and the first quarter of 2024, we achieved 65% year over year growth in our home category, primarily driven by upsell activity.
Aglika Dotcheva: We also grew approximately 30% in our food category, primarily driven by growth from new merchants added during 2023. In addition, we saw over 30% growth in payments and money transfer, driven by new merchant activity. Our two largest categories, Fashion and Luxury, and Tickets and Travel, each grew by low single digits, primarily due to new and upsell activity, but were partially offset by same-store sales pressures. In particular, we saw continued softness within high-end fashion across all geographies, excluding APAC, and softer than expected performance with travel merchants in AMIA.
Speaker Change: We also grew approximately 30% in our foot category, primarily driven by growth from new merchants added during 2023.
Speaker Change: In addition, we saw over 30% growth in payments and money transfer.
Speaker Change: Or even by new merchant activity.
Speaker Change: Our two largest category, the fashion and luxury and tickets and travel.
Speaker Change: Each grew by low single digits, primarily due to new and upsell activity, which were partially offset by same store sales pressures.
Speaker Change: In particular, we saw continued softness within high end fashion across all geography, excluding APAC and softer than expected performance with travel market in EMEA.
Aglika Dotcheva: This contributed to a minus 4% year-over-year decline in the region in the first quarter, but we're still expecting growth for the year. Outside of EMEA, the United States, which is our largest region, grew by 14% during the first quarter, and AIPAC grew approximately 40%. The Outer Americas, which represents Canada and Latin America, grew approximately 12 percent, primarily due to new and upsell activity, offset by increasing declines in high-end fashion in Canada.
Speaker Change: This contributed to a line of 4% year over year decline in the region in the first quarter, but we're still expecting growth for the year.
Speaker Change: Outside of EMEA, and the United States, which is our largest region grew by 14% during the first quarter and APAC grew approximately 40%.
Speaker Change: <unk> America, which represents Canada, and Latin America grew approximately 12%, primarily due to new and upsell activity offset by increasing declines in client fashion in Canada.
Aglika Dotcheva: Despite this, I remain excited about the Outer Americas region due to our continued growth in LATAM, fueled by market share gains achieved by adding new logos in that region. Moving on to gross margin. Our non-GAAP gross profit margin for the first quarter of 2024 was 56 percent, an improvement from 53 percent in the first quarter of 2023. We continue to benefit from improvements in our core machine learning model and positive impact from new product revenue, offset by the impact of ramping up significant new merchants.
Speaker Change: Despite this I remain excited about the outdoor Americas region due to our continued growth in Latam fueled by market share gains achieved by adding new logos in that region.
Speaker Change: Moving onto gross margin our non-GAAP gross profit margin for the first quarter of 2024 was 56% any colon from 53% in the first quarter of 2023.
Speaker Change: We continue to benefit from improvements in our core machine learning model and positive feedback from new product strategy offset by the impact of ramping a significant margin.
Aglika Dotcheva: As 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.
Speaker Change: As 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 merchant and the risk profile of transactions approach.
Aglika Dotcheva: We're still targeting a non-gap gross profit margin between 62 to 53% for the full year, but we now expect to be at the high end of the range as a result of our strong Q1 margin performance. Directionally, for modeling purposes, we expect our Q2 growth margin to be at the bottom of the range, our Q3 margin to be below the range, and we continue to expect Q4 margin to be above the range.
Speaker Change: We're still targeting our non-GAAP gross profit margin between 50% to 53% for the full year, but now expect to be at the high end of the range as a result of our strong Q1 margin performance.
Speaker Change: Directionally for modeling purposes, we expect our Q2 gross margin to be at the bottom of the range. Our Q3 margin to be below the range and we continue to expect Q4 margins to be above the range.
Aglika Dotcheva: Moving to expenses, we continue to manage the business in a focused and disciplined manner. Total non-GAAP operating expenses were $40.2 million for the first quarter, representing a year-over-year decline of 4%. Our non-GAAP operating expenses as a percentage of revenue declined from 60% to 53%, reflecting ongoing leverage in the business model.
Speaker Change: Moving to expenses, we continue to launch the business in a focused and disciplined manner.
Speaker Change: Total non-GAAP operating expenses were $40 2 million for the first quarter, representing a year over year decline of 4%.
Speaker Change: Our non-GAAP operating expenses as a percentage of revenue declined from 60% to 53%, reflecting ongoing leverage in the business model.
Aglika Dotcheva: We continue to expect our quarterly expenses for the rest of the year to remain similar to the first quarter. We achieved positive adjusted EBITDA of $2.8 million in Q1'24 as compared to negative $5.2 million in Q1'23, an improvement of 153% year-over-year and the seventh consecutive quarter of year-over-year improvement. Overall, this represents two consecutive quarters of positive adjusted EBITDA, with meaningful year-over-year adjusted EBITDA margin improvements of 1,200 basis points achieved in both Q4'23 and in Q1'24.
Speaker Change: We continue to expect our quarterly expenses for the rest of the year to remain similar to the first quarter.
Speaker Change: We achieved positive adjusted EBITDA of $2 eight.
Speaker Change: $8 million in Q1, 24, as compared to negative $5 2 million in Q1, 'twenty three an improvement of 153% year over year and the seventh consecutive quarter of year over year improvement.
Speaker Change: Overall this represents two consecutive quarters of positive adjusted EBITDA with meaningful <unk>.
Speaker Change: For a year adjusted EBITDA margin improvement of 200 basis points at safety in both Q4, 'twenty three and in Q1 24.
Aglika Dotcheva: Moving to the balance sheet, we ended the first quarter with approximately $455 million of cash deposits and investments on the balance sheet, and we carry zero debt. Approximately 95% of our cash is held in accounts located in the United States. In the first quarter, we repurchased 6.4 million shares for a total price of approximately $30.3 million. As a result, total shares outstanding decreased by approximately 4 million shares from the fourth quarter of 2023.
Speaker Change: Moving to the balance sheet, we ended the first quarter with approximately $455 million of cash deposits and investments on the balance sheet and we carry zero debt.
Speaker Change: Approximately 95% of our cash is held in accounts located in the United States.
Speaker Change: In the first quarter, we repurchased six 4 million shares for a total price of approximately $33 million.
Speaker Change: As a result total shares outstanding have decreased by approximately 4 million shares from the fourth quarter of 2023.
Aglika Dotcheva: I am excited to announce that our Board of Directors has authorized an additional $75 million of share repurchases, subject to the satisfaction of certain Israeli regulatory requirements. When combined with amounts that remain available under our existing share repurchase authorization, our total outstanding authorization is approximately $92 million. As a result of our anticipated continuous buyback activity and commitment to managing dilution to meaningfully lower levels than prior years, we expect our share count to decline year-over-year. We continue to believe that our strong balance sheet and liquidity position are underappreciated assets.
Speaker Change: I'm excited to announce that our report of directors has authorized additional $75 million of share repurchases.
Speaker Change: Next to the satisfaction of certain Israeli regulatory requirement.
Speaker Change: When combined with the amount that remained available under our existing share repurchase authorization. Our total outstanding authorization is approximately $92 million.
Speaker Change: As a result of our anticipated continued buyback activity and commitment from managing dilution to meaningfully lower levels in prior years, we expect our share count to decline year over year.
Speaker Change: We continue to believe that our strong balance sheet and liquidity position are underappreciated assets.
Aglika Dotcheva: 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 a record free cash flow of $10.5 million in the first quarter, which exceeded our previous record by over $3 million. We continue to expect approximately $30 million of positive free cash flow in 2024. Now, turning to our outlook. We're updating and improving our 2024 bottom line guidance that we previously shared on our Q4 call.
Speaker Change: We will continue to be thoughtful in how we utilize our capital to drive shareholder value.
Speaker Change: In addition, we continue to maintain a very healthy cash flow model and achieved record free cash flow of $10 5 million in the first quarter, which exceeded our previous record by over $3 million.
Speaker Change: We continue to expect approximately $30 million of positive free cash flow in 2024.
Speaker Change: Now turning to our outlook.
Speaker Change: We're updating and improving our 2024 bottom line guidance that we previously shared on our Q4 call.
Aglika Dotcheva: Consistent with the past two years, we're maintaining our annual revenue guidance during the first quarter. As such, we continue to anticipate revenue between $323M and $335M for the full year 2024, or $329M at the midpoint. We're seeing a continuation of the high-end fashion trends, and headwinds with travel merchants in EMEA persist in April and early May.
Speaker Change: Consistent with the past two years, we're maintaining our annual revenue guidance during the first quarter.
Speaker Change: We continue to anticipate revenue between $823 million and 335 million for the full year 2024.
$329 million at the midpoint.
Speaker Change: We're seeing a continuation of the high end fashion trends and headwinds with travel margins in EMEA versus in April and early may.
Aglika Dotcheva: As a result, we anticipate softer than expected performance in the second quarter. However, we remain optimistic that a strong summer travel season in the third quarter should stabilize our performance, alongside continued strong new and upsell activity across all regions in the second half of the year, which, together with some anticipated improvements in the macroeconomic landscape by the end of the year, should result in stronger second half growth than the first half.
As a result, we anticipate softer than expected performance in the second quarter.
Speaker Change: We remain optimistic that the strong summer travel season in the third quarter should stabilize our performance.
Speaker Change: <unk> continued strong new and upsell activity across all regions in the second half of the year.
Speaker Change: When you look at it with some anticipated improvements in the macroeconomic landscape by the end of the year should result in a stronger second half growth than the first half.
Aglika Dotcheva: We will continue to monitor the performance and health of our emerging consumer spending and the broader e-commerce landscape and its impact on our results. Moving on to our Adjusted EBITDA Outlook. As a result of our disciplined approach to managing the business and improved cross-margin outlook, we now believe that our full-year adjusted EBITDA was between $12 million and $18 million, or approximately $15 million to the midpoint, which represents an improvement of 11 percent from our initial range provided on our Q4 call.
Speaker Change: We will continue to monitor the performance and health of our merchant consumer spending and the broader e-commerce landscape and the impact on our results.
Speaker Change: Moving to our adjusted EBITDA outlook.
Speaker Change: As a result of our disciplined approach to managing the business any product gross margin outlook. We now believe that our full year adjusted EBITDA between $12 million and $18 million or approximately $15 million at the midpoint, which represents an improvement of 11% from our initial range provided on our Q4 call.
Aglika Dotcheva: The new midpoint of our Adjusted EBITDA guide represents additional margin expansion of approximately 750 basis points from the prior year, demonstrating leverage in the business model. As always, we look to find additional leverage in our business. Overall, I'm encouraged by the start of 2024. I believe that our market positioning and ability to execute on the elements within our operational control position us well to grow and deliver value to shareholders. Operator, we're ready to take the first question, please. Thank you.
Speaker Change: The new midpoint of our adjusted EBITDA Guide represents additional margin expansion of approximately 750 basis points from the prior year demonstrating leverage in our business model.
Speaker Change: As always we look to find additional leverage in our business.
Speaker Change: Overall I'm encouraged by the start for 2024.
Speaker Change: I believe that our market positioning and ability to execute on the elements within our operational control positions us well to grow and deliver value to shareholders.
Speaker Change: Operator, we're ready to take the first question. Please.
Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1 1 again. One moment while we compile the Q&A roster. Our first question will come from the line of Reggie Smith with J.P. Morgan. Your line is open.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question Press Star One again, one moment, while we compile the Q&A roster.
Speaker Change: Our first question will come from the line of Reggie Smith with Jpmorgan. Your line is open.
Eido Gal: Hey, good morning, and congrats on the court. It sounds like you guys are achieving a lot of your goals. My question, you mentioned in the press release The Policy Protect and the Dispute Resolve When Potentially Unlocking New Entry Points in the Organization. A question for you is, the person at the organization or the company that you're working with that you're selling to, is that different than who you typically speak to for those particular products versus the traditional chargeback guarantee? And then also, maybe if you could talk a little bit about the selling cycles for those products. I would imagine that they're shorter, but I just don't want to assume anything.
Speaker Change: Hey, good morning, and congrats on the quarter. It sounds like you guys are.
Speaker Change: Achieving a lot of your goals. My question you mentioned in the press release.
Speaker Change: The policy protecting the dispute resolved when potentially unlocking new entry points into our organization.
Speaker Change: A question for you is the person at the organization of the company that Youre working with that you sell into is that different than what you typically speak to for those products.
Speaker Change: Versus the traditional chargeback guarantee and then also maybe if you could talk a little bit about the selling cycles for those.
Speaker Change: Those products I would imagine that they're shorter but.
Speaker Change: Hi.
Speaker Change: Yeah, I, just don't want to assume anything there.
Eido Gal: Hi Reggie. Thanks for the question. So, on Dispute Resolve, it's usually similar people within the organization, and the sales process there is pretty straightforward and shorter with less integration complexity. But when you think about policy, that usually involves more people within the organization. So, a wider spectrum of decision makers because you are making pretty critical decisions around the consumer. And there we see the sales cycle be at a similar length to the chargeback guarantee, and I guess implicit in that is usually
Speaker Change: Yeah.
Speaker Change: Hello, Roderick Thanks for the question so on dispute resolve its usually similar people in the organization and the sales process, there is pretty straightforward and shorter with less integration complexity.
Speaker Change: When you think about policy that usually incorporates more people within the organization or a wider spectrum of decision makers, because you are making pretty critical decisions around the consumer.
Speaker Change: And there we see the sales cycle will be at a similar language.
Speaker Change: To the chargeback guarantee.
Eido Gal: And I guess implicit in that, there's usually very little pushback or hesitancy on the dispute resolution result. Is that fair to say?
Speaker Change: Got it and I guess implicit in that is usually very little pushback or hesitancy on beer on the debt.
Speaker Change: Get resolved is that fair.
Speaker Change: Okay.
Speaker Change: That's correct.
Speaker Change: Perfect. Thank you.
Operator: One moment for our next question, and that will come from the line of Will Nance with Goldman Sachs. Your line is open.
Speaker Change: Thank you.
Speaker Change: Our next question.
Eido Gal: Hey guys, good morning. I appreciate you taking the time to answer the question.
Speaker Change: And that will come from the line of will Nance with Goldman Sachs. Your line is open.
Eido Gal: I wonder if you could talk a little bit about, I guess, the linearity of some of the ongoing macro impacts that you discussed in the quarter and then it sounds like are also continuing into April and May. I guess, you know, I know you guys have been flagging kind of macro headwinds for a while in some of these verticals, and, you know, we've seen that elsewhere, but I'm just wondering if you could talk about, you know, just what you're seeing in the most recent quarter and into April and May.
William Alfred Nance: Hey, guys. Good morning. Appreciate you taking the question wondering if you could talk a little bit about I guess, the linearity of some of.
Speaker Change: The ongoing macro impacts that you've discussed in the quarter and then.
Speaker Change: It sounds like are also continuing into into April and May I guess I know you guys have been flagging.
Speaker Change: Kind of macro headwinds for a while and some of these verticals and we've seen that elsewhere, but I'm just wondering if you could talk about.
Eido Gal: Is it worse than what you have been seeing in the past, particularly in areas like luxury and apparel? And if you could talk about any notable geographic trends that you observed during the quarter, that would be great.
Speaker Change: Yes.
What youre seeing in the most recent quarter and into April and May is it worse than what you have been seeing in the past, particularly in areas like luxury apparel and.
Speaker Change: And if you could talk about any notable geographic trends that you observed during the quarter that would be great.
Eido Gal: Yeah, sure. Well, thank you for the question. So, let me break this down.
Speaker Change: Yes, sorry, well. Thank you for the question. So let me break it down if I think about some of the strength in the quarter as we mentioned we see very good performance from our column Gordon payments category, primarily driven by continued execution about adding new business there.
Eido Gal: If I think about some of the strengths in the quarter, as we mentioned, we see very good performance from our home, food, and payments category, just primarily driven by continued execution about adding new business there. Related to fashion and travel, tickets, and travel, these are our largest categories. They grew in Q1, and this is kind of positive and encouraging. I would say that maybe some of the growth or recovery there was a little bit weaker than we thought, especially in luxury fashion.
Speaker Change: It relates to fashion and travel tickets and travel it is our largest category.
Speaker Change: As they grow.
Speaker Change: In Q1, and this is kind of positive and encouraging.
Speaker Change: Say, that's what it was a little bit different than what we expected is maybe some of the kind of the growth of recovery there.
Speaker Change: A little bit weaker than we thought, especially in luxury fashion I would say that sequentially things improved there, but what do we start seeing the back half of March.
Eido Gal: I would say that sequentially, things improved there, but what we start seeing at the end of March and kind of through April is more volatile. And there are a lot of nuances around different merchants. Some merchants are recovering and doing well, but some of them are continuing to decline. But all I know, I still expect this category to kind of recover through the back half of the year while there's still kind of different movements in the quarter.
Yes.
Speaker Change: And kind of through April is more volatile.
Speaker Change: And Theres a lot of nuances around different merchants merchants are recovering and doing well some of them are continuing the declines.
Speaker Change: But all in all I still expect this category to kind of recover through the back half of the year, while they're still kind of different movements in the quarter.
Eido Gal: And regarding geos, I think we mentioned the particular kind of growth trajectory overall, happy with the performance. We still expect, kind of, overall for the year, all of these geos to be growing. So that's kind of in a nutshell.
Speaker Change: And.
Speaker Change: Regarding deals.
Speaker Change: I think we mentioned.
Speaker Change: The particular kind of.
Speaker Change: Our growth trajectory overall happy with the performance, we still expect to kind of like overall for the year all of these deals to be growing so.
Speaker Change: That's kind of in a nutshell.
Eido Gal: Got it. Appreciate the call there.
Speaker Change: Got it I appreciate the color there and then just.
Speaker Change: You mentioned I think in the prepared remarks, and also just now that you're expecting kind of a gradual recovery into the second half of the year and then I heard you on some of the commentary on <unk> being a bit softer than expectations I guess, what's driving the confidence in the reacceleration in the back half of the year is it just comps getting easier or is there.
Eido Gal: And then just, you mentioned, I think, in the prepared remarks and also just now that you're expecting kind of a gradual recovery into the second half of the year. And then I heard you on some of the commentary on 2Q being a bit softer than expectations. I guess what's driving the confidence in the re-acceleration in the back half of the year? Is it just comps getting easier, or is there an explicit line of sight towards things improving?
Speaker Change: Explicit line of sight towards thank you Brittany.
Eido Gal: Yeah, I mean, if we kind of think about tickets and travel, I think there's kind of different trends there. Exiting Q4 travel had a great performance, industry reports are kind of really pointing to another 2024, another record year, industry reports, and just in general, it's still showing like a strong expected summer travel backup of the year. In addition, we're continuing to add new merchants in all of these categories. So, I mean, there are a few nuances in the quarterly numbers that are announced, but overall, nothing has changed the way we see this category for us.
Speaker Change: Yeah.
Speaker Change: If we kind of think about.
Speaker Change: Tickets on travel I think there's kind of different transfer exiting Q4 travel had a great performance industry reports kind of pointing.
Speaker Change: Pointing to on our 2020 for another record year industry report them.
Speaker Change: <unk> is still showing like that song.
Speaker Change: Expected summer travel back half of the year. In addition, we're continuing to add new merchants and all of these categories. So I mean, there is a little bit nuanced and requires ups and downs, but overall nothing has changed all of our all the way we see this category for us.
Eido Gal: Okay, got it. I appreciate you taking the questions.
Speaker Change: Okay got it I appreciate you taking the questions.
Operator: Thank you. One moment for our next question, and that will come from the line of Terry Tillman with Truist Securities. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of Terry Tillman with Jewish Securities. Your line is open.
Eido Gal: Great. Good morning, team. This is Connor Besser, all on for Terry.
Scott: Great. Good morning, Dan This is Scott across all on for Terry I. Appreciate you taking the questions.
Eido Gal: I appreciate you taking the questions. First one, just another strong quarter of growth in the food category. It seems like your platform is really resonating with merchants there. I'm just kind of curious about the momentum continuing in this category throughout the year and maybe how it kind of stack ranks against some of the other ones as more of an up and comer.
Scott: First one just another strong quarter of growth in the food category. It seems like your platform is really resonating with merchants. There just kind of curious on how youre thinking about momentum continuing in this category throughout the year and maybe how would you kind of stack rank against some of the other one is more of an up and comer.
Eido Gal: Sure, happy to take that. We do find continued success, and I think, like we highlighted on the call, what we see happening is once we start seeing traction in a specific category, we end up building more specific features and technology that are customized for that category. That helps us attract some additional merchants because we have some of the better brand names and superior technology, which kind leads to continued strength and growth.
Speaker Change: Sure happy to take that.
Speaker Change: We do find continued success and I think like we highlighted on the call. What we see happening is once we start seeing traction in specific category.
Speaker Change: We ended up building more specific features and technology that are customized for that category that helps us achieve some additional merchants because we have some of the better brand names and superior technology, which kind of leads to continued strength and growth.
Eido Gal: So we are seeing that in the food category, and I think we highlighted that in the live events category. I'm not sure the exact breakdown, you know, kind of quarter by quarter on the upcoming when exactly we'll lap some of these larger merchants or not, but it is an area of focus, and we are very happy with the performance there.
Speaker Change: So we are seeing that in the food category I think we highlighted that in the live events category.
Speaker Change: I'm not sure the exact breakdown kind of on a quarter by quarter on the upcoming when exactly we'll lap some of these larger merchants or not but it is an area of focus and we are very happy with the performance there.
Eido Gal: Great, helpful. And then just a quick follow-up: the balance sheet remains really strong. Just with respect to capital allocation, how are we going to think about M&A and evaluating potential acquisition targets there? You know, maybe as you move to more of this platform-focused selling opportunity, could it make sense to, I guess, acquire new capabilities that could, you know, maybe enhance this even further? It does make sense.
Speaker Change: Great that's helpful.
Speaker Change: Just a quick follow up balance sheet remains really strong just to check with respect to capital allocation. How are we going to thinking about M&A and evaluating potential acquisition targets. There maybe as you move towards this platform focused selling opportunity could it makes sense to acquire new capabilities that could maybe enhance us even further.
Eido Gal: It does make sense, and we're continuously looking, but at the end of the day, we're also trying to allocate capital and, you know, make the best use of that. And when we look at the cost and the opportunities out there, relative to the cost and opportunity within Riskified, so far, Riskified has been the clear winner. But we are continuing to look, although we have a high bar to get something across the finish line.
Speaker Change: It does make sense and we're continuously looking.
Speaker Change: But at the end of the day, we're also trying to allocate capital in.
Speaker Change: It makes the best use of that and when we're looking at the cost and the opportunities out there relative to the cost and opportunity within risk if I. So far that's been the clear winner, but we are continuing to look although we have a high bar to get something across the finish line.
Speaker Change: Got it thank you.
Operator: Thank you. One moment for our next question, and that will come from the line of Ryan Tomasello with KBW. Your line is open.
Thank you one moment for our next question.
Speaker Change: And that will come from the line of Ryan Tomasello with <unk>. Your line is open.
Eido Gal: Hi everyone. Thanks for taking the question. The callout on the large standalone policy protects and dispute resolve deals in the quarter seems notable for these non-chargeback guarantee merchants. So, just dovetailing on some of the earlier comments and questions, in general, how much of a focus are you placing on your go-to-market strategy for winning these new products without the chargeback guarantee? And if you can just elaborate on how the platform architecture and pricing and sales strategy have been evolving, particularly the latter two, to make standalone deals more seamless than before. Thanks.
Speaker Change: Hi, everyone. Thanks for taking the questions.
Ryan Tomasello: The color on the large standalone policy protect and dispute resolved deals in the quarter. It seems notable for these non chargeback guaranty merchant. So just dovetailing on some of the earlier comments and questions in general how much of a focus are you placing in your go to market strategy for <unk>.
Speaker Change: Winning these new products without the charge back guarantee and if you can just elaborate on how the platform architecture and pricing and sales strategy.
Speaker Change: Been evolving, particularly the latter too to.
Speaker Change: To make these standalone deals more seamless than before thanks.
Eido Gal: Hey, Ryan, thanks for the question. I'll be happy to elaborate.
Speaker Change: Hey, Ryan Thanks for the question I'm happy to elaborate.
Speaker Change: So look I think what we tried to do with the product organization is to build capabilities that will enable our sales team to sell better to sell no more continuous motion.
Eido Gal: So, look, I think what we try to do as a product organization is to build capabilities that will enable our sales team, you know, to sell better, to sell in a more continuous motion. So, we see ourselves as creating these capabilities for them, and they're kind of coming out and saying, hey, this is helping me, you know, in these two specific instances. The merchant said, "Your chargeback guarantee product is really interesting, but actually, my biggest pain point and priority right now is different. It's around, you know, some kind of dispute resolution, or it was around the policy product." So, let's integrate that first.
Speaker Change: So we see ourselves as creating these capabilities for them and they're kind of coming out and saying Hey. This is helping me in these two specific instances the merchant side Youre charged about guaranteed product is really interesting, but actually my biggest pain point and priority right now is different it's around kind of dispute resolved or it was around the policy prop.
Eido Gal: And obviously, having the understanding about how they can strategically expand with us over the next few quarters and what further sets of capabilities we have really helps them in, you know, choosing Riskified as their preferred vendor. Okay, so that's how it's been helping in our go-to-market motion; just gives them a wider set of tools and capabilities in front of the merchant. When we think about revenue and the attach rates, I would say that recently on policy, where we've been successful, we've probably been able to generate 10 to 20% of the chargeback deals.
Speaker Change: And so let's integrate that first and obviously, having the understanding about how they can strategically expand with us over the next few quarters and what further sets of capabilities we have.
Speaker Change: Really helps them in choosing risk at five as their preferred vendor base. So that's how it's been helping in our go to market motion just gives them a wider set of tools and capabilities in front of the merchants. When we think about the revenue and the attach rates I would say that recently on.
Speaker Change: Policy, where we've been successful, we've probably been able to generate 10% to 20% of the chargeback deals and obviously that's at a higher gross margin point.
Eido Gal: And obviously, that's at a higher gross margin point. Dispute resolve is probably lower than that, I would say in the range of 5%. But they do help, you know, kind of make the overall package a more differentiated story. And we're looking forward to expanding the platform capabilities further in the years ahead.
Dispute resolve is probably lower than that I would say in the range of 5%, but they do help young kind of overall package are more differentiated story and we're looking forward to expanding the platform capabilities further in the years ahead.
Eido Gal: Great, appreciate that color. And then, as a follow-up here, piecing together the comments you provided around the quarter-to-date trends, any early guideposts you can provide around revenue and GMV growth in 2Q relative to 1Q? Sounds like growth rates in the second quarter might be tracking lower than what you put up this past quarter, but any hand-holding from a modeling perspective would be helpful, especially as we look to gain conviction in that second half ramp that you seem to be baking in. Thanks. Yeah, of course.
Speaker Change: Great I appreciate that color and then as a follow up here.
Speaker Change: Together the comments you provided around the quarter to date trends.
Speaker Change: Early guidepost, you can provide around revenue and <unk> growth in Q2 relative to <unk>.
Speaker Change: It sounds like growth rates in the second quarter might be tracking lower than what you put up this past quarter, but any handholding from a modeling perspective.
Speaker Change: It would be helpful, just especially as we as we look to gain conviction in that second half ramp that you've seen to be faking it. Thanks.
Eido Gal: Yeah, of course. So I would think that some of the kind of delta between revenue growth and GNV growth will persist throughout the year. And as I mentioned, we are kind of seeing some softer months now, back half of March, April, but overall still aligned for the annual guide.
Speaker Change: Yes of course.
Speaker Change: Thing that some of the kind of the delta between the revenue growth and <unk> growth will persist throughout the year.
Speaker Change: <unk>.
Speaker Change: <unk>.
As I mentioned, we are kind of.
Speaker Change: But seeing some softer.
Speaker Change: Months now back half of March April but overall.
Speaker Change: Still lines are the annual guide.
Eido Gal: Great, thanks for taking the question.
Speaker Change: Great. Thanks for taking the questions.
Operator: Thank you. One moment for our next question, and that will come from the line of Timothy Chiodo with UBS. Your line is open.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of Timothy Chiodo with UBS. Your line is open.
Eido Gal: Great, thank you for taking the question. I know that you gave some good regional kind of color around the various regions during the prepared remarks. I wanted to dig in a little bit to some of the European trends. I ask only because PayPal had a slight acceleration in their brand to check out in Q1, and in part of their prepared remarks mentioned strength in continental Europe. However, Shopify, who when giving their 2Q guidance did mention a little bit of macro concern in Europe and specifically called out the UK.
Speaker Change: Great. Thank you for taking my question I know that you gave some good regional kind of around the various regions color. During the prepared remarks I wanted to dig in a little bit to some of the European trends.
Speaker Change: I ask only because Paypal had a slight acceleration in their branded checkout in Q1 and in part of their prepared remarks mentioned strength in Continental Europe.
Speaker Change: However, shopify, who who when giving their <unk> guidance did mentioned a little bit of macro concerns in Europe, and specifically called out the U K. So just putting those two together I was hoping you could give a little bit of your context on what youre seeing within e-commerce trends in Europe less so about your underlying.
Eido Gal: So just putting those two together, I was hoping you could give a little bit of your context on what you're seeing in eCommerce trends in Europe, less so about your underlying share gain or loss, but what your customers are seeing in the broader market, given your position in the market.
Speaker Change: Share gain share loss, but what your customers are seeing in the broader market given your position in the market.
Eido Gal: Hey, Tim, I'll actually start with that, and then I'll hand it over to Aghi. I want to highlight that I'm not 100% certain that we define those regions the same. So, for us, it's where the merchant is headquartered because we service the merchants, and sometimes when it's more, you know, kind of consumer-oriented, like a PayPal-branded checkout, it might be where the checkout is happening, right?
Speaker Change: Hey, Tim I'll actually start with that and then I'll hand, it over to Augie.
Speaker Change: I want to highlight that.
Speaker Change: I'm not 100% certain that we define those.
Augie: The regions the same so for us, it's where the merchant is headquarter because we service the merchants and sometimes when it's more.
The kind of consumer oriented like Paypal branded checkout or it might be worthy.
Eido Gal: So, for us, the merchant is headquartered in Europe but sells globally, and that's how we define it. So, I'm not sure that's an apples-to-apples comparison. So, just wanted to give that disclaimer before handing it over to Aghi.
Augie: Check out has happened right. So for us the merchant is headquartered in Europe. It sells globally.
Speaker Change: That's how we define it so im not sure Thats, an apples to apples comparison, so just wanted to give that disclaimer before handing it over to argue.
Aglika Dotcheva: Yeah, so overall, we've seen kind of Europe being softer compared to the rest of the regions. As Eidol mentioned, we're looking at where the merchants have started, but we've seen this across kind of a number of areas, a number of merchants, specifically kind of like the two areas that are highlighted around travel and high-end fashion. This is where we've kind of seen some softness.
Speaker Change: Yes, so overall, we've seen kind of.
Speaker Change: We're being softer compared to the rest of the regions.
Speaker Change: I imagine it's we're looking at is where the merchandise <unk>.
Speaker Change: <unk> basically seen based across kind of a number of areas the number of merchants.
Speaker Change: It typically kind of like the two areas I highlighted around travel and a <unk> session.
Speaker Change: Is where we've kind of seen some softness.
Speaker Change: <unk>.
Aglika Dotcheva: Excellent. Thank you for taking the question.
Speaker Change: Yes.
Speaker Change: Excellent. Thank you for taking the question.
Operator: Thank you. One moment for our next question, and that will come from the line of Chris Kennedy with William Blair. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of Chris Kennedy with William Blair. Your line is open.
Eido Gal: Thanks for taking the question. You mentioned tickets and travel becoming a much bigger piece of the business. Can you just talk a little bit about the economics of that vertical relative to kind of your core fashion and luxury vertical?
Chris Kennedy: Thanks for taking my question, you mentioned tickets and travel becoming a much bigger piece of the business can you just talk a little bit about the economics of that vertical relative to kind of your core fashion and luxury vertical.
Eido Gal: Sure, I'm happy to take that. So, I think travel has always been a large industry for us, but we have seen continued growth, especially in the live event space over the past few quarters. And that's been continuing to grow and shows great signs of continuing to grow. At this point, we're kind of similar. We're seeing a similar margin profile to the rest of the book of business.
Speaker Change: Sure I'm happy to take that so I think travel has always been a large industry for us but.
Speaker Change: But we have seen continued growth, especially in the live events space over the past few quarters and that's been continuing to grow and shows great signs of continuing to continuing growth.
Speaker Change: At this point, we're kind of similar we're seeing similar margin profile to the rest of the book of business nothing unique to call out.
Eido Gal: Nothing unique to call out. I know that coming out of coven, maybe we highlighted that. That was kind of different. Maybe a different profile for some travel merchants. We don't believe that to be significant anymore, especially as we think about the live events.
Speaker Change: I know that coming out of Covid, maybe we highlighted that that was kind of a different.
Speaker Change: Maybe a different profile for some travel merchants.
Speaker Change: We don't believe that to be significant anymore, especially in as we think about the live event space.
Eido Gal: Okay, thank you for that. And then, just more broadly, charge back to billing trends, if you can just talk about the trends by cohort and what you're seeing in the observations over the last couple of years. Thank you.
Okay. Thank you for that and then just more broadly charged back to billing trends. If you can just talk about kind of the trends by cohort.
Speaker Change: What you are seeing any observations over the last couple of years. Thank you.
Speaker Change: No.
Eido Gal: [inaudible] Similar to what we mentioned on the previous call, we're really happy with the improvements, both in the core modeling, whether it's the level of automation, autonomous training, ability to deploy more models, and general features that are integrated into the system. And I think we see it in the margin of performance this quarter and the previous quarter. We're also starting to see, you know, some helpful increases in the margin based on the new products.
Speaker Change: Okay.
Similar to what we mentioned on the previous call, we're really happy with the improvements both in the core modeling whether its the level of automation autonomous training ability to deploy more models general features that are integrated into the system and I think we see it in the margin outperformance this quarter and previous quarter.
Eido Gal: So, while they're kind of still small from a revenue perspective, they've already contributed, I think, slightly over half a percent to this quarter's margin. And again, the offsets continue to be the ramping of new merchants, newer geographies, but overall, happy with the performance and trajectory.
We're also starting to see some.
Speaker Change: Helpful increase in margin based on the new products.
Speaker Change: So while their trend is still small on a revenue perspective, they've already contributed I think slightly over half a percent.
Speaker Change: To this quarter's margin.
Speaker Change: And again be offsets continued to be the ramping of new merchants newer geographies, but overall happy with the performance and trajectory.
Eido Gal: Great. Thanks for taking the questions.
Speaker Change: Great. Thanks for taking my questions.
Eido Gal: Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Eido Gal for any closing remarks.
Speaker Change: Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to <unk> for any closing remarks.
Eido Gal: Thank you very much for joining our Q1 call. We look forward to continuing to update you on our progress in the quarters ahead.
Speaker Change: Thank you very much for joining our Q1 call. We look forward to continue updating you on our progress in the quarters ahead.
Operator: Thank you all for participating. This concludes today's program. You may now disconnect.
Speaker Change: Thank you all for participating. This concludes today's program you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].