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Business Context and Reporting Period

Company: Riskified Ltd. (NYSE: RSKD)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: Riskified operates an AI-powered ecommerce risk intelligence platform that helps online merchants eliminate fraud and uncertainty. Its core product, the Chargeback Guarantee, automatically approves or declines transactions and assumes the cost of fraud for approved orders. The company serves enterprise merchants globally, with a focus on those generating over $75 million in annual online sales.

Key Financial Metrics (Year Ended Dec 31, 2024)

Key Performance Indicators:

• Gross Merchandise Volume (GMV): $141.2 billion (up 15% YoY).
• Chargebacks-to-Billings (CTB) Ratio: 40% (improved from 41% in 2023).
• Net Dollar Retention Rate: 96%.

Material Changes vs. Prior Period

• Revenue Growth: Driven by a 15% increase in GMV and new merchant onboarding in the tickets/travel, food, and money transfer verticals. This was partially offset by a net decrease in revenue from existing merchants due to attrition in general retail and home verticals.
• Profitability Improvement: Net loss narrowed significantly to $34.9 million from $59.0 million. Adjusted EBITDA turned positive ($17.2 million) from a loss of $8.5 million, driven by improved CTB ratios and expense discipline.
• Cost of Revenue: Increased 8% primarily due to higher net chargeback expenses ($9.9 million increase) associated with GMV growth and new merchant onboarding, partially offset by improved model performance.
• Operating Expenses: Total operating expenses decreased 5% to $218.8 million. Reductions were seen across R&D (-5%), Sales & Marketing (-2%), and G&A (-7%), driven by headcount reductions and lower share-based compensation.
• Share Repurchases: The company repurchased 27.0 million Class A shares for approximately $140.5 million under its $225 million program.

Guidance, Outlook, and Risks

Management Commentary & Outlook:

• Management expects cost reduction efforts to drive decreases in operating expenses as a percentage of revenue in 2025, though quarterly fluctuations are possible.
• The company maintains a focus on expense discipline, dilution management, and a path to profitability.
• Seasonality remains a factor, with Q4 typically representing approximately 29% of annual revenue.

Key Risks & Contingencies:

• Geopolitical Instability: Ongoing conflicts in Israel (Hamas, Hezbollah, Iran) pose risks to operations, employee safety, and infrastructure, though facilities have not been damaged to date.
• Machine Learning Accuracy: Reliance on AI models to detect fraud; errors or "model drift" could lead to higher chargeback expenses and margin compression.
• Merchant Concentration: The top five merchants accounted for 34% of revenue in 2024. Loss of a significant merchant could materially impact results.
• Regulatory Environment: Evolving regulations regarding AI (EU AI Act), data privacy (GDPR, CCPA), and cross-border data transfers could increase compliance costs.
• Macroeconomic Conditions: Recessionary pressures or reduced consumer spending could lower merchant transaction volumes.

Unusual Items:

• Wayfair Warrant: Revenue was reduced by $2.5 million in Q4 2024 due to the termination of a SaaS agreement with Wayfair, requiring the recognition of the remaining unrecognized fair value of a warrant issued to the customer.
• Restructuring: In February 2025, the company initiated a workforce restructuring (relocating positions and reducing headcount) with expected costs of approximately $5.0 million to be incurred in the first nine months of 2025.

Investor Verification Checklist

• Chargeback Exposure: Verify the stability of the CTB Ratio (40%) and the adequacy of the provision for chargebacks ($9.4 million liability) given the $46.7 billion in outstanding guarantees.
• Merchant Churn: Investigate the drivers behind the 96% Net Dollar Retention Rate and the specific attrition in the general retail and home verticals.
• Share Repurchase Impact: Assess the remaining capacity of the share repurchase program ($71.4 million remaining) and its impact on future liquidity.
• Geopolitical Resilience: Review business continuity plans regarding the ongoing conflict in Israel and the potential for employee mobilization or infrastructure disruption.
• AI Model Performance: Monitor for any significant deviations in fraud detection accuracy that could spike chargeback expenses and compress gross margins.