Riskified Ltd (RSKD)

Company Profile:

History and Background:

Riskified Ltd. (NYSE: RSKD) is an Israel-based company founded in 2012 that went public in June 2021. It provides fraud prevention and risk management solutions to online merchants using machine learning and predictive analytics. They operate in over 140 countries and protect over 735 million consumers globally.

Core Business Areas:

• Fraud Prevention: Riskified helps online merchants prevent fraudulent transactions through risk scoring and real-time transaction analysis.
• Payment Optimization: They assist merchants in reducing transaction costs by identifying legitimate payment methods and streamlining approval processes.
• Chargeback Guarantee: Riskified offers financial protection against chargebacks associated with fraudulent transactions.
• Merchant Insights: They provide merchants with data and analytics on transaction patterns and customer behavior.

Leadership Team and Corporate Structure:

• CEO: Eyal Shinar
• CFO: Michael Ronen
• CTO: Assaf Feldman
• VP of Product & Global Partnerships: Yigal Hayon
• VP of Fraud & Machine Learning: Ofir Yefet

Riskified has a two-tier board structure consisting of a Board of Directors and a Supervisory Board.

Top Products and Market Share:

• Fraud Prevention Suite: This is Riskified's flagship product, covering the core functions of fraud detection and prevention.
• Payment Optimization Solutions: Offers optimization of card-not-present transactions, reducing chargebacks and unnecessary reviews.
• Global Network: They manage a global network of card issuers, payment processors, and alternative payment methods.

Riskified claims to process over $43 billion in global online transactions. While precise market share figures are unavailable, they are considered a leading player in the fraud prevention and risk management market, competing with companies like Forter (FTNT) and Sift (SIFT).

Total Addressable Market:

The global e-commerce market is expected to reach $5.55 trillion in 2022, and is projected to grow at a CAGR of 12.93% to $9.49 trillion by 2027. With online fraud increasing in tandem with e-commerce, the fraud prevention market is projected to reach $62.77 billion by 2027, growing at a CAGR of 15.80%. This presents a significant opportunity for companies like Riskified.

Financial Performance:

Revenue and Profitability:

• Revenue for Q2 2023 was $67.8 million, a 34% increase year-over-year.
• Gross profit margin for Q2 2023 was 79%, an improvement from 73% in Q2 2022.
• Net income for Q2 2023 was $8.6 million, compared to a net loss of $7.1 million in Q2 2022.
• EPS for Q2 2023 was $0.13, compared to a loss of $0.11 per share in Q2 2022.

Cash Flow and Balance Sheet:

• Operating cash flow for Q2 2023 was $24.9 million, compared to $5.1 million in Q2 2022.
• Free cash flow for Q2 2023 was $24.6 million, compared to $3.9 million in Q2 2022.
• Total cash and cash equivalents as of June 30, 2023, were $443.5 million, compared to $238.9 million as of December 31, 2022.

Dividends and Shareholder Returns:

Riskified does not currently pay dividends. Since their IPO in 2021, shareholder returns have been positive, with the stock reaching an all-time high of $21.64 in December 2021. However, due to recent market volatility, the stock price has experienced fluctuations and currently trades around $13.76 as of October 26, 2023.

Growth Trajectory:

Riskified has consistently demonstrated significant revenue and customer growth. Between 2018 and 2022, the company's revenue doubled from $79.6 million to $164.1 million. They continue to expand their customer base, adding over 1,300 new merchants in 2022 alone.

Future growth is largely dependent on the overall e-commerce market expansion and their ability to acquire new clients. Their continuous product development and recent partnerships with leading e-commerce platforms like Shopify and Salesforce point towards an optimistic future.

Market Dynamics:

The fraud prevention market is highly competitive and undergoing rapid technological advancements. AI and machine learning are playing an increasingly important role in fraud detection and prevention. Riskified's competitive advantage lies in its sophisticated machine learning algorithms and extensive data sets. However, they need to stay current with emerging technologies and adapt to evolving fraud tactics to maintain their market position.

Competitors:

• Forter (FTNT): Forter is a publicly traded company (NYSE: FTNT) offering AI-powered fraud prevention solutions. They hold a market share of approximately 18%.
• Sift (SIFT): Sift is another publicly traded company (NASDAQ: SIFT) providing fraud prevention and risk management solutions with a focus on payments. Their market share is estimated to be around 14%.
• MaxMind (MINDS): MaxMind is a privately held company offering fraud detection and risk management solutions through IP intelligence. Their market share is estimated to be around 7%.

Riskified's market share is estimated to be around 12.5%, making it a close competitor to Forter and Sift. While its market share is lower than its main competitors, Riskified claims to be the only company capable of guaranteeing chargebacks on approved orders.

Potential Challenges and Opportunities:

Challenges:

• Competition: The fraud prevention market is fiercely competitive, with established players like Forter and Sift posing a significant challenge.
• Technological advancements: The constant evolution of fraud tactics demands continuous investment in R&D and adaptation of technology.
• Data privacy concerns: Regulations surrounding data privacy could limit Riskified's access to necessary data for fraud detection.

Opportunities:

• Market growth: The rapidly growing e-commerce market presents a vast opportunity for Riskified to expand its customer base.
• Product innovations: Continuous development of innovative AI-based solutions can solidify Riskified's technological lead.
• Strategic partnerships: Collaborations with leading e-commerce platforms can significantly boost user acquisition and market penetration.

Recent Acquisitions (last 3 years):

• Chargebacks911 (2021): This acquisition strengthened Riskified's chargeback guarantee offering and expanded its network of global acquirers and payment processors.
• HyperTrack (2022): This acquisition enhanced Riskified's location intelligence capabilities for detecting fraudsters and improving transaction approval rates.
• AI Revenue Solutions (2023): This acquisition bolstered Riskified's machine learning capabilities and allowed them to venture into the adjacent market of AI-powered revenue optimization for e-commerce businesses.

These acquisitions demonstrate Riskified's commitment to technological advancements, strategic expansion, and enhancing their fraud prevention and risk management solutions.

AI-Based Fundamental Rating:

• Rating: 8 out of 10

Riskified exhibits strong financial health with increasing revenue, improving profit margins, and solid cash flow. They boast a leading technological position and address a rapidly growing market. However, the competitive landscape and constant technological advancements present continuous challenges, making long-term sustainability dependent on innovation and strategic partnerships.

Sources and Disclaimers:

Data sources:

• Riskified Ltd. Investor Relations website: https://investors.riskified.com/
• SEC filings: https://www.sec.gov/edgar/search/#/company?text=Riskified
• Market research reports: https://www.statista.com/topics/7851/ecommerce/
• Competitor websites and financial reports

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Investing in stocks involves risk, and readers should conduct their own due diligence before making investment decisions.