Ladies and gentlemen, thank you for standing by. Welcome to Riskified’s Second 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. [Operator Instructions] Please be advised that today’s conference is being recorded. I would like now to turn the conference over to Chett Mandel, Head of Investor Relations. 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 second quarter of 2024. 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 second 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. We intend all forward-looking statements to be covered by the Safe Harbor provision 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. You should not put undue reliance on any forward-looking statement. Please refer to our annual report on Form 20-F for the year ended December 31, 2023, and subsequent reports, we file or furnish with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, we will discuss certain non-GAAP financial measures and key performance indicators on the call. Reconciliation to the most directly comparable GAAP financial measures are available in our earnings release issued early today and also furnished with the SEC on Form 6-K 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. I am encouraged by our execution during the first six months of the year. We are growing profitably on an adjusted EBITDA basis and believe that we are investing in the right people, products and projects to execute for the benefit of our merchants and our shareholders. I remain positive about the trajectory of the company. Once again, our revenue growth during the second quarter was primarily driven by the execution of our go-to-market strategy, which contributed to 8% year-over-year growth. For the first half of 2024, our revenue increased by 10% and our GMV grew 15% year-over-year. Our technology, platform, and differentiated merchant capabilities are resonating within our large addressable market. Our competitive win rates remained high during the quarter and our industry and geographic expansion efforts, combined with our product platform sales motion, are contributing to a solid pipeline of merchant activity. We have improved performance sequentially with our non-chargeback wins and we expect a strong end to the year with further multiproduct adoption. As we think through the back half of the year, we’ve begun to see some softness in the third quarter and are anticipating softer third and fourth quarters, largely due to certain macro headwinds, including worsening consumer spending trends. This is primarily impacting our high-end fashion, tickets and travel, and home industries. That being said, we anticipate a strong second half of new business activity, which would help to partially offset these macro headwinds. We expect the benefit of this anticipated new business activity to primarily flow through in the fourth quarter. Agi will walk you through the impact of these factors on our 2024 guidance. We are managing our operational levers to optimize our gross profit and adjust the EBITDA performance across all types of growth environments. Our…

Thank you, Eido, team and everyone for joining today’s call. Our GMV for the second quarter was $35 billion reflecting a 13% increase year-over-year. We achieved second quarter revenue of $78.7 million up 8% year-over-year. Our GMV and revenue growth during the quarter was primarily driven by continued new merchant and upsell activity. In the second quarter, our home category grew 21% year-over-year. We anticipate a different comparison period in the second half of the year as we have now fully left a large upsell one during the second quarter of 2023. Our general vertical which includes both food and general retail merchants grew 7% in the second quarter primarily driven by growth in our food sub-vertical offset by weakness in our general retail sub-vertical. In addition, we saw over 40% growth in our payments and money transfer category driven predominantly by new business activity, a key area of expansion. Our fashion and luxury category grew by 5% in the second quarter up from low-single digits in the first quarter primarily due to new business activity and growth in the fast fashion merchants. This growth was partially offset by continued same-store sales pressures within our high-end fashion sub-vertical consistent with the first quarter. We now expect the same-store sales pressures to continue in the back half of the year across all geographies. This is consistent with the outlook of many of our luxury merchants and broader market commentary regarding discretionary spending. In addition, our tickets and travel vertical grew 8% in the second quarter primarily due to new business activity. We’re now expecting softer trends in this category in the second half of the year. In particular, we’re anticipating lower travel volumes from our EMEA merchants and as a result currently expect our overall EMEA region to be relatively flat…

Thank you. [Operator Instructions] And the first question will come from Ramsey El-Assal with Barclays. Your line is now open.

Hi. This is Owen on for Ramsey. I appreciate you taking our question this morning. Wanted to check in on the CrowdStrike outage earlier in July. The network had called that out as having an impact on Q3. Wanted to see if any of your merchants had any technical issues. No, you largely operate on AWS, but any kind of insight there on impact on Q3 expectations might be helpful?

Yeah. Thank you for the question. There’s no impact on Riskified or anything related that we understand from our merchants related to the general CrowdStrike issue.

Great. That’s good to hear. And just a quick follow up from me, just on the kind of more platform approach. Seems like you’re making good progress on the cross sale some of those new products. I was just wondering if you could give us an update on the penetration rate potentially of your kind of current client base and some of the kind of longer runway you expect to kind of have there. Any insight there would be helpful. Thanks.

Sure. Happy to share an update there. I’ll say, look, as kind of CEO, what gets me most energized is just speaking to our clients, seeing how they react to some of these newer additions and stuff we have in the pipeline and also the ROI and the value that it solves them. I think just from a numbers perspective, what we shared in the previous quarter, we’ve seen sequential improvements then, but we’re still in that zone of kind of 0.5% improvement to the gross profit margin, kind of 3x growth. And we do have a fairly strong pipeline heading into the back half of the year. So I do expect kind of a good end to the year on the new product side.

Great. Very helpful. Thank you.

Our next question comes from Ryan Tomasello with KBW. Your line is open.

Good morning, everyone. Thanks for taking the questions. Agi, regarding the outlook, I was hoping you can put a finer point around what level of net dollar retention the current guidance reflects versus the original expectations at the beginning of the year. And if you can say how that breakdown looks between what you saw in the first half of the year in terms of net dollar retention versus what you’re now looking for in the second half of the year? Thanks.

Yeah. Of course. Thank you for the question. So, while it’s an annual number, at this point, it’s not really a guide, but let me give you some direction. So we previously shared at our kind of Q1 earnings call that we’ve seen some trends kind of leading to a lower dollar retention than what we saw last year. We kind of expected to be closer to 100% than the 105%. Now, because of the macro factors that we kind of shared in our message just earlier, I think that a few percentage points below 100% is probably a fair assumption. And to give you kind of understanding of what are the main drivers, I would say that number one is really the removal of the recovery trends that we kind of were baking in our numbers and we just don’t see that happening anymore. So now at the midpoint, we don’t kind of expect any recovery numbers to the back half of the year and we expect the back half to be kind of similar to the first half of the year. The second factor is probably our annual dollar retention rate. Again, we look at it annually. What -- just again, it’s not a guide, but to give you some perspective, I think that I’m seeing just slight uptick in loss volume. I do expect it to be very much kind of still in the ranges of last year. Last year was 98%. Maybe I do expect to be closer to 97% this year. And the last factor that might be impacting our annual dollar retention rate actually is a positive one. This year, we’ve seen a lot more new revenue coming from new logos, which is great, which is something that we’ve been working kind of to internally to create the right incentive structure to accomplish that and really kind of focusing on increasing our market share and penetrating in different industries. But that has kind of impacted a little bit the upsell and just the -- some effects on the net dollar retention. So, overall, I think this is kind of like a very positive factor overall, but it does impact the net dollar retention.

Great. Appreciate all that color. And then Eido, one for you, as you continue to make progress building out the platform offering beyond just the Chargeback Guarantee, can you say how the sales and go-to-market strategy is evolving at all to help support that initiative? I mean, Agi, I think just alluded to a new incentive structure around new logos. Last quarter, you called out some of these key standalone wins outside the Chargeback Guarantee in Policy Protect and Dispute Resolve. Is there a lot of focus that you’re putting on the sales force to emphasize those types of standalone deals? Just trying to understand how the go-to-market strategy is evolving here in light of the platform evolution. Thanks.

Sure. No. That’s a great question. I would say that at the start of the year, we definitely wanted to put a bigger focus on new logos to have more revenue come from new logos than from us all. We think that’s important just from a market land share perspective and we’re happy to see some of the results there. I think that our platform approach enabled us to sell to more stakeholders and solve more ROI, and the value that we see there is kind of higher win rates and competitive cycles. It means that, like you mentioned, we can sell into merchants that maybe are not looking for a Chargeback solution right now, but they are interested in some of the other parts. But really what we’re seeing is more and more new deals are taking multiple parts of the platform. I think we highlighted that large ticketing merchant that also started with Dispute Resolve. That large marquee client in Japan is actually starting with two clients, but is signed for -- with two products, has already signed for the third one to go live with that early next year. So it’s definitely helping there as well.

Great. Appreciate all the help.

And the next question comes from Cris Kennedy with William Blair. Your line is open.

Great. Thanks for taking the question. You talked about accelerating growth in the fourth quarter. Is there any way to think about or put a framework around 2025 given the new sales activity?

I think it might be still a bit too early for us to really think through and model out 2025. I think the acceleration we’re seeing into the fourth quarter is just based on some of the new business activity and the growth in those areas that are helping accelerate there. But just to recap kind of what we mentioned, based on some of the earnings from some of the clients, the public clients that we work with, everyone’s kind of expecting a slower back half of the year, especially around fashion, travel, sneakers, the home category and we’ve been seeing that quarter to-date as well, right? So that’s kind of creating that lower outlook for the back half. Within the fourth quarter, based on some of those goal lines that are already happening right now in the third, that’s going to offset some of that consumer spending weakness.

Great. Okay. Thank you. And then it’s great to see the continued expansion of margins. Are you still comfortable with your 2026 EBITDA margin target of 15% to 20%, and can you just remind us of the roadmap to get there? Thank you.

Yeah. Sure. We’re still fairly in line and very confident in those midterm targets. Like we mentioned, we have various levers that we understand how to pull in order to reach there. And the results of this quarter and the guideline I’m standing still squarely in line, 100%.

Great. Thank you.

And the next question comes from Terry Tillman with Truist. Your line is open.

Yeah. Hey, team. Thanks for taking my questions. Maybe just the first question relates to if we just take the challenges within the installed basing store sales activity aside and just the macro assumptions in the second half of the year, you are talking about new sales that were upselling activity being resilient or relatively strong. I’m just curious what you’ve been doing internally more recently or over the intermediate-term to enhance go-to-market. So whether it’s field sales or marketing and branding, what are some of the things that you’ve been doing that you could call out to us that maybe could continue to drive this new business success going forward? And then add a follow up.

Yeah. I think it’s a team effort, right? It’s having the best product that allows you to show in POCs that you’re the most accurate solution. It’s having a differentiated product that has certain components around policy and dispute that are not available at competitors, but it’s also having the best sales force that’s able to explain and sell in the best way, the right marketing collateral, the right training. So in that sense, it takes a village and I think we continuously try to have better execution across all aspects.

Yeah. And maybe just a follow up question. The concept of the growth reacceleration, I think you talked about it in the fourth quarter just based on the book of business you’re signing and it’s starting to roll out. I’m assuming you’re probably not getting a whole full fourth quarter revenue contribution from some of this new business activity recently or in the near-term, but maybe you could comment on that? And then the second part of that is, going forward, assuming there’s not a market decline from currently what you’re assuming in the macro, do you think at some point you could grow through the same-store sales issues and that could actually help growth reaccelerate just because of the broad book of business that you’re bringing on? Thank you.

Yeah. We’re definitely happy with the diversity of the book of business, even in some of the categories that we have a relatively high concentration in the category, it’s across a wide range of merchants, across a very wide range of geographies. And you’re right to point out that right now, the macro is creating year-over-year declines and even if we continue to see the current environment at some point, we would anticipate to stop seeing that, that type of decline effect would positively impact us.

And the next question comes from Timothy Chiodo with UBS. Your line is open.

Great. Thank you for taking the question. A few years ago with the PSD2 in Europe and the liability ship that was created there, it did create some headwinds and we lapped that. It’s less of a talking point these days. But at the time, there were certainly some transaction exceptions that you could still work on the transaction. You could still get the Chargeback, the full Chargeback liability products sold into the to the customer. There were also some other ways that you could support the merchants, whether it be policy abuse or other products. And at the time, there was also some thought of potentially even working with issuers, some of which sounds like you’re doing now. I wanted to shift that same framework or discussion around Apple Pay, Google Pay and other wallets that come with a similar liability shift. And just to talk about some of the other things you could do with merchants as more and more volumes shift to Apple Pay and Google Pay. Is it fair to assume that in in some cases that kind of takes those transactions out of the TAM for Chargeback Guarantee and are there still ways that you could work with the merchants on Apple Pay and Google Pay transactions?

Hey, Tim. Thanks for that question. Happy to explain. We definitely see Apple Pay within our merchants and the amount varies by the category. So, for example, when you think about the food category, that’s been very resilient and growing for us. I probably have a higher concentration of Apple Pay transactions relative to other industries like luxury fashion. The way we think about it is, hey, there’s not always a guarantee or liability shift in those instances. For example, if it’s a merchant initiated transaction, there’s no liability shift. If you have various geographies or you exceed certain limits, then there’s no liability shift. And because of that, some of our merchants would prefer to send us those transactions for the guarantee. And some of our merchants would prefer to send us those transactions under what we call a scoring, a non-guaranteed model. We’re very open to both of them. There’s less of an impact on the total revenue for us in these scenarios. And let me give you a concrete example that happened a few weeks ago. We were in contract negotiations with a merchant and we would either offer them a blended risk-adjusted fee of 30 basis points for all the volume, including Apple Pay, or there was an alternative offer that said a risk-adjusted fee of 35 basis points, right, for all of the credit card volume with a fixed fee of $0.10 for, kind of call it, Apple Pay transactions. So because our pricing is risk-adjusted, we would assume that the comparable of Apple Pay is included or not nets out to something very, very similar, which is very different than kind of the PSD2 example, which created the loss in volume. On the market size, look, when we think about, e-commerce, travel, remittance, delivery, ride-hailing, that’s probably an $8 trillion market today. Obviously, you need to, haircut some of those numbers to get to our true TAM. But you are right that the Chargeback Guarantee aspect of that is going to be a few trillion in volume. And there are a few hundred billion, maybe like low trillions right now that’s in alternative forms of payments where the liability might fit differently. So that’s our kind of overall approach there.

Okay. Thank you. That’s really helpful context on the Apple Pay, also the example that you gave. The next question is more of an industry question. Just given the data that you have and my understanding is the integrations are extremely thorough with your merchants and therefore you get to see a lot of information that maybe others in the payment ecosystem don’t see. But this topic or category of autofill platforms, whether it be PayPal’s Fastlane or Stripe Link or the Shop Anywhere offering, it’s gaining attention within the investment community. And what did you see from your seat if you had any thoughts on either uptick or advantage or conversion or if there’s any liability or shift that’s involved with any of those offerings?

I’m sorry, I would have to say that I’m tangentially familiar, but it’s definitely not something that I have kind of any numbers or analysis that I would feel comfortable in sharing right now, just without digging a bit deeper into that.

Okay. Not a problem. I thought it was worth asking, but thank you for taking the other. I’ll drop back. Thanks.

And the next question comes from Reggie Smith with JPM. Your line is open.

Hey. Good morning and thanks for taking the question. Congrats on the Japan retailer win. I guess this is going to be probably a tough question, but I’m curious if you can contextualize or quantify, provide a little more color around your implementation pipeline, I guess, for the back half of the year, this year versus last year. Maybe talk about that, like on a volume -- expected volume basis. Just curious and trying to better understand like what the growth stats kind of look like. So any color you could provide there would be helpful?

I think the trend is definitely seeing more diversification across products and geographies, which again is anticipated and makes sense. We have more mature products. We have more success and better representation in some of the near geographies and more marquee clients. Using that Japan example, being able to onboard one of those top 10 merchants that’s an extremely well-known brand really helps us in the domestic Japan market to have more success there. So I’m seeing that. I think Agi mentioned that we’re seeing more new business wins, new logo activity as compared to upsell. So that was a big focus for us. So that’s definitely something that you can feel within the pipeline and I think that’s kind of good color and how I would characterize it.

Yeah. And I guess following up on that, I mean, when I think about, the holiday season, I generally think, and I could be totally off base here, that merchants don’t want to do much before the holidays. These signings that you’re talking about, are they expected to be implemented in the back half of this year or is that more of a 2025 type thing?

Yeah. We definitely have a robust pipeline that we anticipate to go live between now and the end of the year. You’re right, there are definitely some merchants, especially ones that have seasonality built into them. They have code freezes at some point and that’s taken into account. Other merchants, by the way, in different categories are less impacted by that.

And then one last question, maybe you can help me understand, looking at the comparisons from last year, you’re stepping into optically easier compares in the back half of the year. I can appreciate that the macro is getting sensitive, but maybe help us kind of put all of that together. My math and there may be some noise in here, is that the sequential compare for growth in the back half of the year is probably 10 points easier. So I’m just trying to square that. I know we had the Beyonce and Taylor Swift thing last year. Is -- what more can you kind of tell us in terms of comparison to kind of square those numbers a little bit? That’s all I have. Thank you.

Yeah. Sure. So if I think about, you’re right, the back half of the year, last year, we saw some softness already starting to emerge, especially in high fashion and just fashion and the overall holiday seasons were more muted. So it should be a better and easier comparable this year. And maybe the other factor as well is like it’s the home industry. Last year, the home industry, we were kind of going through a very large upsell. So home was very strong, but in Q4 specifically, home doesn’t have like this uptick as in it’s some of the kind of the other industry. So potentially they should be easier as well in terms of effect on Q4.

And the next question comes from Clark Wright with D.A. Davidson. Your line is open.

Thank you. Appreciate the update around the new logo trend. So wanted to understand some of the feedback you got from the Ascend conference this year, if that translated to any of the new business momentum you noted this quarter.

Sure. Thanks for that. So let me just recap what Ascend is in case not everyone is familiar. It’s the annual Riskified User Conference. We just had it this past quarter. Best Ascend we’ve ever had, more merchants, more prospects, more industry partners and the feedback was really outstanding. That was a great learning experience, a networking experience for our merchants. For us, it was a great way to receive some of this feedback. And it definitely was a catalyst for a lot of new business conversations. I think people way -- people came out with a different appreciation on the depth and scope of the offering and the ultimate value. So we do see great ROI for that and we look forward to continuing with this event and other regional events in the future.

Thank you for that. And then I guess lastly, you mentioned, I think it was Agi who mentioned, you’re excited about some of the Americans and the APAC growth where the company is gaining share. Could you maybe explain, what you mean by gaining share? I mean, who is this coming from green shoot opportunities, from homegrown solutions or this is more competitive displacement?

I’ll say that I’m very happy with some of the growth that we’re seeing in this region. So, again, these are kind of smaller categories compared to some of the U.S. region, which is the largest category for us. But being able to show this traction and continue growth is something that is significant.

No. And I would just highlight, I think there might be some slight nuances between geographies and who the exact competitor set is. But the overall thesis is the same. We work with large enterprises. Large enterprises have internal teams to manage this process. These internal teams use a variety of solutions, some of them more modern, some of them kind of more legacy and we see that across all geographies.

Thank you. Appreciate it.

And our next question comes from Clarke Jeffries with Piper Sandler. Your line is open.

Hello. Thank you for taking the question. First question is, clarification, given the disparity and the growth rates that you’re seeing in the region, I wanted to clarify the softness that you saw in Q3 and the sort of reflected change in the full year guidance. Were there specific regions that stuck out in terms of softness? Is it heavily weighted to say North America or a certain region or was there assumption change across all regions in the back half? And then one follow-up.

Yeah. Thank you for the question. So I’ll say that we called out EMEA as being softer. We kind of like previously projected that it’s going to grow slightly. Now we project that it’s going to be kind of flattish for the year. And the primary reason for this category compared to -- for this geo compared to other geos is really the weighting of the industries of some of the merchants there. Like we do have a composition of merchants in EMEA with a high weighting from fashion, from travel and these are the categories that I called out as being softer and impacting kind of the numbers.

Perfect. And then a follow-up is just, some of those products that came out of Ascend, Policy Decisions and Decision Studio. Can we get the timing of GA if they’re not already GA and maybe some of the benefits of that more self-serve functionality and how explicit were some of these product innovations from the sort of recommendation of customers or you sort of pushing the envelope of where you want to take the solution long-term? Thank you.

No. No problem. So the Policy Studio that you’re mentioning is part of our overall policy product which enables merchants to individually tailor their Policy Decisions, but also leverage some of our network and machine learning capabilities in order to do that. That product has not been kind of officially as a GA yet, but we’re definitely looking forward based on the feedback to release it soon. And some of the other parts that we have launched, I think we mentioned on the release today, the Auth Rate Enhance and it’s the value that we’ve been seeing there and we also mentioned that in Ascend, which is where we can package and share enriched information with the card issuing bank, seeing over 100 basis points and improvements on participating merchants and banks. So there’s definitely kind of a mix there of stuff that’s already been released and providing value and stuff that’s kind of coming up soon.

Thank you.

I show no further questions at this time. I would now like to turn the call back to Eido Gal for closing remarks.

Thank you everyone for joining our call. We look forward to updating you in the quarters ahead.

This does conclude today’s conference call. Thank you for participating. You may now disconnect.