Good day and thank you for standing by. Welcome to the Riskified Fourth Quarter 2022 Earnings Call Conference. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Chett Mandel. Please go ahead.

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 fourth quarter and full year 2022. Participating on today’s call are Eido Gal, Riskified’s Co-Founder and Chief Executive Officer; and Aglika Dotcheva, Riskified’s Chief Financial Officer. We released our results for the fourth quarter and full year 2022 earlier today. Our earnings materials, including a replay of today’s webcast are 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, financial goals and business outlook, 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, and are including these statements for purposes of invoking these Safe Harbor provisions. Please note that these forward-looking statements reflect our opinions as of the date of this call and except as required by applicable 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. You should not put undue reliance on any forward-looking statement. Please refer to our periodic and other SEC filings for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, non-GAAP financial measures and key performance indicators will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued and furnished with the SEC on Form 6-K today and our prior filings with the SEC 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.

Thanks, Chett, and hello, everyone. 2022 is an important year for Riskified in terms of executing and long-term positioning. During the year, we thoughtfully expanded our global footprint, grew our coverage in select existing and emerging verticals, and enhanced our product reach. We achieved the annual 2022 revenue growth of 14%. Let me unpack this growth in further detail. Our growth in full year 2022 was driven primarily by new customer wins and upsells from existing customers, and highlighted by strong performance in our tickets and travel vertical, which grew approximately 150% year-over-year. I am encouraged that our topline growth continues to outpace overall eCommerce growth, despite headwinds in certain verticals such as home and general retail, resulting primarily from a more challenging macro environment compared to 2021. While macroeconomic factors may impact certain parts of our business from time-to-time, we believe that the diversification of our portfolio across merchants, industries and geographies positions us for growth regardless of the macro environment in which we are operating. We believe that our financial results highlight the resilience of our business and underscore the value that we believe we are able to provide to some of the world’s largest online merchants. We believe that we remain the best at annualizing an eCommerce transaction and determining whether or not it’s fraudulent. This is a testament to the differentiated and proprietary technology that we have built. The accuracy of our models and our positioning as one of the largest fraud-related guarantors of eCommerce transactions in the world has created a distinct competitive advantage for us. This is a key reason why we have disproportionate success during competitive processes in which we win more often than our competitors. By helping to solve a fundamental need for our merchants, we believe we have become essential to…

Thank you Eido, team and everyone for joining today’s call. We achieved fourth quarter revenue of $79.3 million and $261.2 million for the full year, both up 14% year-over-year. Our GMV for the fourth quarter was $32.2 billion, up 16%. For the full year, our GMV eclipsed the $100 billion milestone for the first time to be $105.6 billion, reflecting an 18% increase year-over-year. Our full year growth in GMV and revenue was primarily driven by strong tickets and travel performance, new merchants and upsells, and revenue growth across all geographies. Our organic or same cohort growth, which is a reminder that doesn’t include upsell activity from existing merchants, remains well below historical norms and declined by mid-single digits during the year. Looking at our overall growth, during the year, we continue to benefit from sustained growth in our largest industry, fashion and luxury goods, which alone contributed over $100 million in annual billings. As expected, tickets and travel was the most meaningful area of growth for us in 2022, as we benefited from the addition of large new customers, as well as the return to in-person events and increased travel following COVID. We more than doubled our billings, within tickets and travel and it is now larger than our home vertical at almost 30% of total billings. One of our newer verticals, money transfer experienced triple-digit growth and we saw stable year-over-year performance in our food vertical. The combination of these four verticals represented approximately 75% of our billings for 2022 and I am encouraged that a substantial portion of our portfolio performed strongly and grew during the year. This was offset by significant decline primarily related to the macroeconomic environment in our home, electronics and general retail verticals. From a geographic standpoint, we experienced growth across all our…

Thank you so much presenters. [Operator Instructions] Our first question comes from the line of Terry Tillman of Truist Securities. Please ask your question.

Hi. Good morning Eido, Agi and Chett. Thanks for taking my questions. I had a question and then a follow-up question. Maybe just a little bit more Agi, in terms of the macro and how that’s impacting the business and the puts and takes and informing the guidance. So whether it’s impacting more around organic business and further declines, the -- some of your traditional industry is being more impacted or just slower new logo activity falling into the model. Just would love to learn a little bit more about this concept of the macro and informing the guidance? And then I had a follow-up. Thank you.

So, look, overall, when we think about our revenue growth and the guide. It really comes down to two main categories, right? Number one, the things within our control and that’s the new, the upsell, the cross-sell and we feel really good about that. We are coming in with a great pipeline. The team is executing very well and we think that’s going to contribute most of the growth in 2023. When I think about the other category stuffs more outside our control, mostly organic or kind of same-store sales, we think that is going to be macro influence and that’s going to be a headwind of mid-single digits throughout 203. Now as eCommerce reverts in more historical to normalized growth rates, that’s going to move from becoming a headwind to a tailwind. We don’t know exactly when that’s going to happen. So the guide assumes that the macro challenge remains for all of 2023. With that said, I am still happy that we are outpacing overall eComm growth and when I just look around at some of the numbers from our peer set whether that’s eComm enablement or just straight eCommerce company. I think our macro perspective kind of makes sense.

Thank you, Eido.

I will give you a little bit more…

Yeah. Go ahead. Sorry about that. Yeah go ahead, Agi

Yeah. Thank you, Terry. So just to give you a little bit more detail on the organic front. Most of the categories that we cite is being like in a tougher environment in 2022. So I do expect that we should hopefully see an improvement in 2023. But still the way I see it, just the positives are not as high and the categories like home and general, retail the negatives not going to be as low. So that’s how we are resulting in the same range. Obviously our chargeback, tickets and travel will continue to grow triple digits, but as we are going through kind of lapping COVID trends, I think, that just kind of be like a -- the effect and ultimately these are verticals that will be really strong and will remain strong. And one more thing, I think, that it’s kind of new and is reflected in our guide, we did factor a possible bankruptcy from a large client of ours and if this doesn’t materialize that can potentially beat an upside, but it’s too early to say right now.

Okay. Thanks for that from both you. And then just as my follow-up question, just relates to this concept of the Chargeback Guarantee kind of being the wedge historically and really just synonymous with your business, you are talking about some other models and I do get lots of questions about are they going to become a platform business. So love to learn a little bit more even though it’s early days about like the impact to take rate from these newer products and do you have the go-to-market kind of DNA to be more of a platform sell? Thank you.

Sure, Terry. So 2022 was definitely a build year for these products and why the ROI was kind of a handful of merchants and we do have significantly higher expectations for them from 2023. Ravi who we previously shared joined us as President of the Field Organization has a lot of experience building these types of kind of platform and go-to-market motion. I think maybe the best indicator is that, when we think about the targets for the sales team for this year, 10% plus is coming from some of these newer products. So we definitely think we are seeing a significant increase there.

Great. Thank you.

Thank you so much. Please hold one moment for the next question. And your next question comes from the line of Ramsey El-Assal of Barclays. Please go ahead. Ramsey your line is now open. You can now ask your question.

Hi, guys. This is Owen on for Ramsey. Appreciate you taking our question. I wanted to ask a little bit more about what you are seeing in tickets and travel. I was wondering if you could give us any more color on the sustainability of the growth in this vertical and if we might see any strength sort of subside at all. And in addition, is there any new vertical you guys are seeing with any more growth potential. Any color there would be super helpful. Thank you.

Hi, Owen. Thank you for the question. So I will take the first one regarding tickets and travel. It’s been a very strong industry, it’s our strongest growing industry in 2022 and I do expect that will continue to be strong in 2023, probably, not in the three digits that we saw in 2022, but still relatively strong. And some more nuance, we -- it’s early in the year, but seems like some of the positive impact from tickets and travel was strong in Q4, it’s continuing to be strong in Q1 and we are just kind of factoring that to persist in a more normalized manner of 2023.

Yeah. And for the categories, I would say, we have seen the highest growth rates in newer categories would be money transfer and food. But we still have significant whitespace in all other categories and continuing to see strength there as well.

Got it. Thank you, guys.

Thank you so much. And our next question comes from the line of Will Nance of Goldman Sachs. Please go ahead.

Hey, guys. Good morning. I appreciate you taking the question. I wanted to ask on some of the commentary on new verticals that you guys called out. You guys sound pretty positive on the new product cycle. I am just wondering if you could kind of talk around your expectations for how meaningful new products could be over time as a percentage of revenue and what’s kind of a reasonable timeframe for investors to think about that? Thanks.

Yeah. I mean I think the start for this year is definitely making sure that as a percentage of the new revenue is becoming an increasing share. So we think going from basically zero last year 10% plus now. It’s a great first step. We are certainly happy that these products have a higher margin profile than our traditional chargeback product, which will help over the long-term and we will definitely kind of update on progress in the quarters ahead.

Got it. That’s helpful. And then just maybe a question on the outlook, particularly in the second half…

Yeah.

I think you mentioned having a little bit lower visibility than normal around client go-lives. I am just wondering if you could maybe double click on that, what do you think is driving that, are you kind of making more conservative assumptions around go-lives embedded in the outlook? Thanks.

I don’t think there is just one element to kind of to create a conservative assumption. So just thinking about the macro environment that we are in right now and what’s our merchants are reporting and just the general kind of volatility that we are seeing. It’s more prudent to continue to think about before ability persisting and we monitor these factors across all of the kind of like the possible opportunities in the second half of the year. I am overall optimistic. However, it is early on and there are opportunities later on as we continue to progress. We will continue to update.

Yeah. I would say that, there’s just more uncertainty. So as we get further out that uncertainty creates a wider range of outcomes. So we need to take that into account within the guide. And we are definitely much more in tune and positive around the first half, which we have better visibility into.

Understood. I appreciate you taking the questions. Nice results this morning.

Thank you so much. Our next question comes from the line of Bob Napoli of William Blair. Please go ahead.

Good morning, everybody. So question just on the long-term target operating model, Eido and Agi, just your confidence having been public now for well over a year, just could you like review those targets and are you still confident in the targets that you had when you went public over the long-term?

Yeah. Sure. Nothing has changed in any way around those targets. We still think we are on track.

Yeah. Nothing has changed the way we think about the business in general, so there are different levers to pull and if we think about our adjusted EBITDA, which is in our control and we are continuing to move towards profitability. Obviously, there are some areas that are now not in our control, but I am confident the eCommerce environment at some point improve, that will positively impact us as well.

Thank you. And then just, I guess, to me it seems like the fraud market itself is not slowing down and I know eCommerce is volatile and a big part of your business. But what is -- what are you seeing from the competitive environment, your chargeback model versus other models. Just maybe are you competing more with chargeback models or other models or internal. Are you seeing more competitors in RFPs than you have in the past or different types of competitors? So just some thoughts around the competitive environment and what should still -- it still seems like a massive market opportunity, well, above -- your growth rate should be well above eCommerce I would think?

Yeah. Hey, Bob. So Q4 was definitely the best performance from the sales team on the competitive set that we have had historically. So we absolutely love that trend and we think it’s becoming clear at the enterprise, at the Chargeback Guarantee, which we believe provides more value than an uncovered decision and a better overall lower cost of ownership, like, we are seeing predominantly Riskified win. So we are very happy with that positioning. And I think to your point, there’s definitely a lot of whitespace and opportunity. What levers do we have to pull? How do we accelerate that growth within things within our control? We are definitely thinking and focusing on that.

Great. Thank you.

Thanks.

Thank you so much. Our next question comes from the line of Tim Chiodo of Credit Suisse. Please go ahead.

Great. Thank you. So a similar question to what Bob was just mentioning there, but I wanted to dig in a little bit more to the specific new wins that you mentioned and a strong sales team result during Q4. The RFPs that you are going into, are these customers coming in definitively deciding that they want to go the Chargeback Guarantee route or are they coming in more open minded, meaning they would consider chargeback-as-a-service or decision-as-a-service and Chargeback Guarantee. In other words, when you are winning these RFPs, is it up against someone else also offering Chargeback Guarantee or is it against a number of different alternatives and services?

No one offers Chargeback Guarantee at the scale that we provide, okay. So it’s much harder for any other company to compete in that category within the enterprise, because there’s clearly an inherent advantage. Within -- are the RFPs coming in advance than chargeback? I think, I’d say, it’s a mix, right? Some of our wins are non-RFP. We just come and help with the smaller segments and then expand over time. Some of them are more general, hey, I have an issue within my fraud and abuse, right, and fraud and abuse and not just fraud. Hey, what model can help provide me the best guaranteed ROI.

Great. That’s in line with what we were expecting that it’s kind of the mix of the two. Okay. Great. That’s really helpful. I appreciate that. The brief out would be on the travel and tickets vertical, clearly the growth was very strong during 2022. Could you disclose what the growth for GMV was on an ex-tickets and travel vertical basis for 2022?

Yeah. Tim, I don’t think we kind of broke this down. But if I think about the three top contributors to our growth, tickets and travel, both of the newer and just on the organic side. Also just continuing to expand with existing merchants and to add new logos, and we also mentioned, kind of strength within a few other industries. All in all, 75% of our business grew in 2022 and I am very optimistic about that continuing to happen in 2023.

Okay. Great. Thank you for the context. Appreciate you taking the questions.

Thank you so much. And our last question comes from the line of Brent Bracelin of Piper Sandler. Please go ahead and ask your question.

Good morning. Eido. A question for you here, I am curious to hear more about the economics of the new Policy Protect Product for returns. Why does this product have higher gross margin profile than fraud, are you using the same data and just retraining the algorithm for a different use case? And then could you maybe talk a little bit about not only the higher gross margin, but also what it does to uplift an existing customer. Could it expand your revenue existing customer by 10% by 30%, any color on what the revenue uplift might be when you actually go in and sell fraud and Policy Protect to merchants? Thanks.

Sure. Great question. So I -- let’s start with the gross margin piece, right? Obviously, a significant portion of the gross -- of our cost of goods would be the chargebacks, when we think about the policy product, it’s not guaranteeing anything. So we don’t have that line item. So in that sense it’s just how the more traditional cost structure like any other SaaS component. You are also right that policy work on the billions of transactions that we have in our network and the network effect and the value that it can provide merchants, just to highlight some of the use cases, okay, that when a customer creates a return request, a refund request, says, that they never received the package, we can actually use that amazing network to give our merchants smarter decisions. Is that a legitimate claim? Is that a false claim? And merchants are understanding more and more of that within this kind of return and policy bucket, there is a lot of room for optimization and the ROI there is exceedingly significant. We definitely feel that it’s something that we can cross-sell and we have cross-sell. That’s a lot of the go-to-market motion to our existing clients. But it’s also very top of mind for merchants in your conversations as well, right, and it’s definitely kind of us can be a significant portion relative to chargeback growth.

And then what’s the revenue potential uplift, if you think about cross-selling Policy Protect into the installed base. Could this lift the revenue per customer by 10%, 20% uplift, any color on the cross-sell uplift by selling policy and fraud?

I think we are in the zone right now. We definitely want to create more use cases that would help pricing over the long-term, but that’s within the zone.

Okay. Perfect. And then, Agi, just for you here, as we think about that outlook, we can get to close to 20% growth in the first half of the year and then, obviously, that growth moderates in the second half, is that just a function of you have really strong visibility, you got good merchant momentum going into the first half and you are factoring in just less visibility in the second half or what does that tale of two halves kind of imply here or is it just tough compares, just trying to think through what’s baked into that second half growth assumption, which is a little slower than the first half?

Yeah. That’s one -- that will be one of the reasons, visibility is one of the reasons, but we also have a few others. As I mentioned, tickets and travel has a different kind of lapping environment versus last year. We are seeing Q1 to be strong, but it’s also strong on top of Q1 from last year which was relatively slow. So I think it’s disproportionate it’s kind of effect on the year-over-year growth rate and that will be kind of shown in the numbers. And then, general categories, as I said, general retail when compared, I am hoping that they are overall improving compared to 2022, but they will continue to kind of persist in some of the declines that we are seeing more recently. And if you have seasonality in some of the quarters, especially Q4 being the largest kind of shopping retail holiday season that can be more pronounced there.

Okay. Great. Thank you. That’s all I had.

Thank you so much. And we have a question from the line of Josh Beck of KeyBanc Capital Markets. Your line is now open. Hello Josh? Go ahead.

Hi. Are you able to hear -- are you able to hear me?

Yes.

I apologize for that [Technical Difficulty]

Hey, Josh. We can’t hear you.

[Technical Difficulty]

All right. Apologies for that. So we don’t have any more questions. I would now like to turn the conference back to Eido Gal. Please go ahead.

Yeah. Thanks everyone for participating. We look forward to updating you on our progress in 2023.

And thank you so much presenters. This will conclude…

Good bye.

… today’s conference call. Thank you.