Business context and reporting period
Riskified Ltd. filed this annual report on Form 20-F for the fiscal year ended December 31, 2022, prepared under U.S. GAAP. It is not a standalone Q4 earnings filing; the filing does not provide a clear standalone Q4 revenue or profit figure. Riskified provides machine-learning-based eCommerce fraud review and chargeback guarantees, with revenue primarily tied to approved transaction volume.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $261.2 million | $229.1 million |
| Gross profit / margin | $135.1 million / 52% | $123.0 million / 54% |
| Operating loss | $108.6 million | $55.4 million |
| Net loss | $104.0 million | $178.9 million |
| Adjusted EBITDA (non-GAAP) | $(36.4) million | $(19.5) million |
| Free cash flow (non-GAAP) | $(34.3) million | $(33.8) million |
| GMV reviewed | $105.6 billion | $89.1 billion |
| Annual chargebacks-to-billings ratio | 39% | 37% |
| Cash, cash equivalents and short-term deposits | $475.7 million | $503.3 million |
| Total debt | None reported | None reported |
Operating cash outflow was $26.3 million in 2022, versus $20.3 million in 2021. Investing cash outflow was $210.0 million, largely reflecting purchases of short-term deposits; financing cash inflow was $3.9 million. Year-end current assets were $529.9 million and current liabilities were $72.6 million. The company reported $50.1 billion of outstanding indemnification guarantees, a gross exposure measure rather than an expected payment amount.
Material changes versus the prior comparable period
- Revenue increased 14%, while GMV increased 18%. Growth reflected new merchants, upsells and strength in tickets and travel, partly offset by declines in the existing merchant cohort.
- Gross margin declined from 54% to 52%; the CTB ratio rose from 37% to 39%, with management citing new merchant onboarding and changes in industry mix. Net chargeback expenses increased $17.7 million.
- Operating expenses rose 37% to $243.7 million, including higher research and development, sales and marketing, and general and administrative costs. Share-based compensation rose to $67.5 million from $33.4 million, including expense related to the CEO’s multi-year award.
- Net loss narrowed year over year, but mainly because 2021 included $122.7 million of remeasurement losses on convertible preferred share warrants and tranche rights before IPO conversion. Operating loss and Adjusted EBITDA loss both increased.
- Cash, cash equivalents and short-term deposits fell by $27.6 million. The 2021 IPO had provided approximately $392.3 million in net proceeds.
- Fourth-quarter revenue was approximately 30% of annual revenue in both 2022 and 2021; the filing does not state the exact Q4 revenue amount.
Outlook, commentary, risks and unusual items
- Management said 2022 cost-reduction measures were expected to drive overall operating expense decreases in 2023, while noting expenses may fluctuate quarterly. Separately, it anticipated non-GAAP operating expenses could increase modestly over the following several years as it invests in hiring, products, sales and infrastructure. The filing gives no numerical revenue or earnings guidance.
- Management expects the financial impact of PSD2 to decline and to be unlikely to be significant in 2023. It also described macroeconomic uncertainty, inflation, interest rates, changing consumer spending and the post-pandemic shift back toward physical retail as potential growth headwinds.
- Riskified has a history of losses and stated there is no assurance it will achieve or sustain profitability. Results also depend on merchant retention and concentration, transaction volumes, fraud-model accuracy, chargeback costs, and seasonal peak-period performance.
- The company decided to pause investment in its Deco consumer-credit product and wind it down, with no anticipated offering to new or existing merchants beyond March 31, 2023. It recorded an immaterial impairment related to Deco.
- A putative securities class action relating to IPO disclosures was pending. The company intended to defend the case, but could not estimate a loss range and recorded no liability.
- Other notable exposures include evolving privacy and AI regulation, cybersecurity and cloud-provider dependence, foreign-exchange movements, and geopolitical and operating risks in Israel. Management reported no debt and said available liquidity plus expected operating cash flows should cover working capital and capital expenditures for at least 12 months from the report date.
Most important facts for investors to verify
- Review the audited statements and reconciliations, especially the distinction between GAAP losses, Adjusted EBITDA and free cash flow.
- Track chargeback costs, the CTB ratio, gross margin and merchant/industry mix; management says these measures can fluctuate by quarter and are best assessed annually.
- Confirm whether expense reductions and the stated path toward profitability are achieved, while accounting for substantial share-based compensation.
- Assess liquidity and cash use alongside lease and purchase commitments, including $44.0 million of undiscounted lease payments and $22.0 million of non-cancelable purchase obligations at year-end.
- Monitor the IPO-related securities litigation, Deco wind-down, and the effects of PSD2, macroeconomic conditions and merchant concentration.
- For U.S. tax considerations, note that the company believed it was not a PFIC for 2022 under an alternative asset valuation method, but disclosed that the IRS could challenge that conclusion.