“Our commitment toward profitable growth has yielded exceptional results, as evidenced by two consecutive quarters of positive Adjusted EBITDA. As we look ahead, we remain encouraged by the vast opportunities in front of us, and our ability to help the world’s largest eCommerce companies unlock their business goals in the face of the ever-expanding threats of fraud and policy abuse,” said Eido Gal, Co-Founder and Chief Executive Officer of Riskified.
Q1 2024 Business Highlights
Expanded Leadership Positioning in Tickets and Live Event Sub-Vertical: Our top new logo win, and largest upsell during the first quarter were both in our Ticketing and Live Events sub-vertical. Each win involved taking volume from a competitor. Many of the top merchants in the Tickets and Live Event space are already leveraging the powerful flywheel effect of our network, which is helping us to build a very strong competitive moat in this category.
Further Geographic Diversification with the Addition of New Merchants: We continued to have success landing new merchants on the Riskified network, which in turn deepened our vertical and geographic reach. Our top 10 new logos added during the first quarter of 2024 represented three different verticals across three geographies, with seven of our top 10 new chargeback guarantee logos outside of the United States.
Execution of Platform Sales Motion: Our refined multi-product platform has allowed us to unlock multiple additional entry-points into the eCommerce market, which we believe leads to a more continuous selling cycle and increased merchant coverage. To that end, our largest Policy Protect and Dispute Resolve wins during the first quarter of 2024 were both stand-alone product sales to merchants not currently utilizing our core Chargeback Guarantee product.
Share Repurchase Program Update: We repurchased 6.4 million ordinary shares for $30.3 million during the first quarter. In addition, our Board of Directors authorized the repurchase of an additional $75 million of the Company’s ordinary shares, subject to the completion of required Israeli regulatory procedures. Assuming completion of the required Israeli regulatory procedures, our total outstanding aggregate repurchase authorization is approximately $92 million, as of May 10th. We remain committed to repurchasing our shares at what we continue to believe are attractive valuation levels.
Winner of Several Prestigious Awards: We recently won several awards, including the Best Security Solution, VIP Award (Vendors In Partnership) at the 2024 National Retail Federation (NRF) Conference. The Best Security Solution award is an annual recognition given to an organization that excels in protecting operations, customers and employees from fraud, risk, and interruption.
Q1 2024 Financial Summary & Highlights
Additional Financial Highlights:
Non-GAAP gross profit margin(1) of 56% for the three months ended March, 31, 2024, improved from 53% in the prior year.
GAAP net loss per share was $(0.07) for the three months ended March 31, 2024 compared to a loss of $(0.10) in the prior year. Non-GAAP net profit per share was $0.04 compared to a loss of $(0.00) in the prior year.
Operating cash flow of $10.7 million for the three months ended March 31, 2024, improved from $0.2 million in the prior year. Free cash flow(1) of $10.5 million for the three months ended March 31, 2024, improved from $42 thousand in the prior year.
Ended March 31, 2024 with approximately $455.2 million of cash, deposits and investments on the balance sheet and zero debt.
“Our improved Adjusted EBITDA guidance underscores our confidence in navigating dynamic market conditions while delivering value to our shareholders. Over the past few years we believe that we have become a more agile and efficient company while positioning ourselves for long-term success,” said Aglika Dotcheva, Chief Financial Officer of Riskified.
Financial Outlook:
For the year ending December 31, 2024, we continue to expect:
Revenue between $323 million and $335 million
As a result of our disciplined approach to managing the business, for the year ending December 31, 2024, we now expect:
Adjusted EBITDA(2) between $12 million and $18 million
(1) GMV is a key performance indicator. Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP gross profit margin, non-GAAP net profit (loss) per share, and free cash flow are non-GAAP measures of financial performance. See “Key Performance Indicators and Non-GAAP Measures” for additional information and “Reconciliation of GAAP to Non-GAAP Measures” for a reconciliation to the most directly comparable GAAP measure.
(2) We are not able to provide a reconciliation of Adjusted EBITDA guidance for the fiscal year ending December 31, 2024 to net profit (loss) because certain items that are excluded from Adjusted EBITDA but included in net profit (loss), the most directly comparable GAAP financial measure, cannot be predicted on a forward-looking basis without unreasonable effort or are not within our control. For example, we are unable to forecast the magnitude of foreign currency transaction gains or losses which are subject to many economic and other factors beyond our control. For the same reasons, we are unable to address the probable significance of the unavailable information, which could have a potentially unpredictable and potentially significant impact on our future GAAP financial results.
Authorization to Repurchase Ordinary Shares
On May 13, 2024, the Company’s Board of Directors authorized the repurchase of up to $75 million of the Company’s ordinary shares, subject to the completion of required Israeli regulatory procedures. This authorization is in addition to the Company’s existing $75 million share repurchase authorization, of which approximately $58 million had been utilized as of May 10, 2024. Any share repurchases under the program may be made from time to time in the open market, including through trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in privately negotiated transactions or by other means in accordance with U.S. federal securities laws. The Company intends to fund repurchases from existing cash and cash equivalents. Following, and subject to, completion of the required Israeli regulatory procedures, the timing, as well as the number and value of any shares repurchased under the program, will be determined by the Company at its discretion under the Board authorized program and will depend on a variety of factors, including management’s assessment of the intrinsic value of the Company’s ordinary shares, the market price of the Company’s ordinary shares, general market and economic conditions, available liquidity, alternative investment opportunities, and applicable legal requirements. The Company is not obligated to acquire any particular amount of ordinary shares under the program, and the program may be suspended, modified or discontinued at any time without prior notice. This press release is neither an offer to purchase nor a solicitation of an offer to buy any securities.
Key Performance Indicators and Non-GAAP Measures
This press release and the accompanying tables contain references to Gross Merchandise Volume (“GMV”), which is a key performance indicator, and to certain non-GAAP measures which include non-GAAP measures of financial performance, including Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP cost of revenue, non-GAAP operating expenses by line item, non-GAAP net profit (loss), and non-GAAP net profit (loss) per share, and non-GAAP measures of liquidity, including Free Cash Flow. Management and our Board of Directors use key performance indicators and non-GAAP measures as supplemental measures of performance and liquidity because they assist us in comparing our operating performance on a consistent basis, as they remove the impact of items that we believe do not directly reflect our core operations. We also use Adjusted EBITDA for planning purposes, including the preparation of our internal annual operating budget and financial projections, to evaluate the performance and effectiveness of our strategic initiatives, and to evaluate our capacity to expand our business. Free Cash Flow provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet.
These non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or other items. Non-GAAP measures of financial performance have limitations as analytical tools in that these measures do not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments; these measures do not reflect changes in, or cash requirements for, our working capital needs; these measures do not reflect our tax expense or the cash requirements to pay our taxes, and assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements. Free Cash Flow is limited because it does not represent the residual cash flow available for discretionary expenditures. Free Cash Flow is not necessarily a measure of our ability to fund our cash needs.
In light of these limitations, management uses these non-GAAP measures to supplement, not replace, our GAAP results. The non-GAAP measures used herein are not necessarily comparable to similarly titled captions of other companies due to different calculation methods. Non-GAAP financial measures should not be considered in isolation, as an alternative to, or superior to information prepared and presented in accordance with GAAP. These measures are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. By providing these non-GAAP measures together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.
We define GMV as the gross total dollar value of orders reviewed through our ecommerce risk intelligence platform during the period indicated, including the value of orders that we did not approve.
We define each of our non-GAAP measures of financial performance, as the respective GAAP balances shown in the below tables, adjusted for, as applicable, depreciation and amortization (including amortization of capitalized internal-use software as presented in our statement of cash flows), share-based compensation expense, payroll taxes related to share-based compensation, litigation-related expenses, restructuring costs, provision for (benefit from) income taxes, other income (expense) including foreign currency transaction gains and losses and gains and losses on non-designated hedges, and interest income (expense). Adjusted EBITDA margin represents Adjusted EBITDA expressed as a percentage of revenue. Non-GAAP Gross Profit Margin represents Non-GAAP Gross Profit expressed as a percentage of revenue. We define non-GAAP net profit (loss) per share as non-GAAP net profit (loss) divided by non-GAAP weighted-average shares. We define non-GAAP weighted-average shares, as GAAP weighted average shares, adjusted to reflect any dilutive ordinary share equivalents resulting from non-GAAP net profit (loss), if applicable.
We define Free Cash Flow as net cash provided by (used in) operating activities, less cash purchases of property and equipment.
Management believes that by excluding certain items from the associated GAAP measure, these non-GAAP measures are useful in assessing our performance and provide meaningful supplemental information due to the following factors:
Depreciation and amortization: We exclude depreciation and amortization (including amortization of capitalized internal-use software) because we believe that these costs are not core to the performance of our business and the utilization of the underlying assets being depreciated and amortized can change without a corresponding impact on the operating performance of our business. Management believes that excluding depreciation and amortization facilitates comparability with other companies in our industry.
Share-based compensation expense: We exclude share-based compensation expense primarily because it is a non-cash expense that does not directly correlate to the current performance of our business. This is because the expense is calculated based on the grant date fair value of an award which may vary significantly from the current fair market value of the award based on factors outside of our control. Share-based compensation expense is principally aimed at aligning our employees’ interests with those of our shareholders and at long-term retention, rather than to address operational performance for any particular period.
Payroll taxes related to share-based compensation: We exclude employer payroll tax expense related to share-based compensation in order to see the full effect that excluding that share-based compensation expense had on our operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of our business.
Litigation-related expenses: We exclude costs associated with the legal matter previously disclosed under the caption “Legal Proceedings” in our Form 6-K furnished with the Securities and Exchange Commission (“SEC”) on August 15, 2023, because such costs are not reflective of costs associated with our ongoing business and operating results and are viewed as unusual and infrequent.
Restructuring costs: We exclude costs associated with the reduction in force previously disclosed in our Form 6-K furnished with the Securities and Exchange Commission (“SEC”) on February 13, 2024, because these costs are related to one-time severance and benefit payments and are not reflective of costs associated with our ongoing business and operating results and are viewed as unusual and infrequent.
We are not able to provide a reconciliation of Adjusted EBITDA, non-GAAP gross profit, and free cash flow guidance for the fiscal year ending December 31, 2024 to net profit (loss), gross profit, and net cash provided by (used in) operating activities, because certain items that are excluded from these non-GAAP metrics but included in the most directly comparable GAAP financial measures, cannot be predicted on a forward-looking basis without unreasonable effort or are not within our control. For example, we are unable to forecast the magnitude of foreign currency transaction gains or losses which are subject to many economic and other factors beyond our control. For the same reasons, we are unable to address the probable significance of the unavailable information, which could have a potentially unpredictable and potentially significant impact on our future GAAP financial results.