Author's note: I present and update my best small-cap Busted IPO stock ideas only to subscribers of my exclusive marketplace, The Busted IPO Forum . Try a free 2-week trial today by clicking on our logo below!Today, I am putting Riskified Ltd. ( NYSE: RSKD ) in the spotlight. I have not looked at this NYC headquartered small cap tech concern since my initial look at this Busted IPO at the beginning of 2023. I concludedThe Busted IPO Forum is an investing group led by Bret Jensen, Chief Investment Strategist ...

Currency and Financial Risks - The company is exposed to fluctuations in currency exchange rates, particularly with a portion of revenue denominated in Euros, which could negatively affect revenues if foreign currencies weaken against the U.S. dollar[116]. - The company may require additional capital in the future, and its ability to obtain financing will depend on various factors, including operating performance and capital market conditions[117]. - The company’s financial position could be negatively impacted if it issues significant credits or refunds to merchants due to performance malfunctions in its platform[127]. - Changes in tax laws and regulations could adversely affect the company's operations and financial condition, potentially leading to increased costs and liabilities[199]. - The company is subject to routine tax audits, which may result in additional tax, interest, or penalties being imposed[200]. - The application of indirect taxes to online transactions is complex and evolving, with potential liabilities exceeding current estimates[201]. - The company may face substantial tax liabilities if required to collect sales or other taxes in jurisdictions where it has not historically done so[201]. Technology and Operational Risks - The company relies on third-party Public Cloud Providers for its cloud-based SaaS products, and any disruption in their operations could adversely affect the company's business and financial condition[119]. - The company faces risks related to interruptions or performance problems with its technology and infrastructure, which could undermine merchant confidence and negatively impact revenues[127]. - The company’s proprietary machine learning models depend on data from merchants and third parties, and any loss of access to this data could adversely affect its ability to evaluate transactions and detect fraud[128]. - The company faces risks related to the accuracy and availability of third-party data used for training machine learning models, which could adversely affect product offerings and merchant relationships[131]. - The company relies on third-party data sources for fraud detection may lead to inaccuracies, affecting its ability to make informed decisions[130]. - The company may incur significant costs for using alternative equipment or services in response to disruptions affecting its Public Cloud Providers[120]. Intellectual Property and Compliance Risks - The company has not registered any copyrights and primarily relies on trade secret protection, which may limit remedies for unauthorized use of its software[122]. - The company’s ability to protect its intellectual property rights is uncertain, particularly in foreign jurisdictions, which may expose it to unauthorized use of its technology[121]. - There is a risk of being sued for alleged infringement of intellectual property rights, which could lead to substantial damages or redesigning of products[179]. - The company does not currently have a patent portfolio, which may hinder its ability to defend against patent infringement claims[179]. - Compliance with evolving privacy laws and regulations may result in significant liabilities and operational costs, impacting revenues and financial condition[132]. Regulatory and Legal Risks - The California Consumer Privacy Act (CCPA) imposes civil penalties for violations, and failure to comply could lead to legal actions against the company[137]. - The General Data Protection Regulation (GDPR) imposes strict obligations on data processing, with potential fines for non-compliance that could significantly impact financial condition[140]. - The company anticipates increased operational costs due to compliance with the Digital Markets Act (DMA) and Digital Services Act (DSA) which require modifications to practices and policies[148]. - The evolving regulatory landscape in the European Economic Area and the UK may lead to increased operational costs and risks associated with data transfers and processing[139]. - The company is subject to complex and rapidly changing U.S. state laws regarding privacy and data security, which could lead to costly compliance efforts[136]. - The introduction of new regulations in China, such as the Regulations on Network Data Security Management, expands obligations for data processors and may require significant adjustments to operations[157]. - The regulatory framework for artificial intelligence (AI) and machine learning (ML) is rapidly evolving, with significant new laws enacted in California, Colorado, and Utah, impacting compliance and operational costs[161]. - The EU AI Act, effective from August 2024, will impose obligations including transparency and risk assessments, with fines for non-compliance reaching up to 7% of worldwide annual turnover[161]. - China has implemented strict regulations governing generative AI and algorithmic technologies, requiring service providers to file algorithms and complete security assessments[161]. Market and Competitive Risks - The market for AI and ML technologies remains unproven, and the company faces challenges in developing and commercializing these technologies effectively[165]. - The company relies on third-party AI technologies, and any changes in availability or pricing could adversely affect its solutions and customer appeal[166]. - The use of open-source software poses risks, including potential litigation and requirements to disclose proprietary code, which could impact revenue generation[171]. - Maintaining and enhancing the company's brand is critical for growth, requiring substantial investments in marketing and product quality[173]. - The company may pursue acquisitions or strategic investments to expand capabilities, but such efforts could face integration challenges and divert management attention[176]. - The company faces challenges in identifying desirable acquisition targets and may incur significant costs if regulatory approvals are not obtained for acquisitions[177]. Governance and Shareholder Risks - The dual class share structure concentrates voting power with management, limiting shareholder influence over important transactions[213]. - The company's Class A ordinary shares have experienced significant price volatility, influenced by various market factors and operational performance[210]. - Future issuances of Class A ordinary shares or convertible securities may result in substantial dilution to existing stockholders[226]. - The dual class share structure allows existing shareholders to significantly influence shareholder approval matters, even with less than a majority of shares[232]. - The company believes it was not classified as a Passive Foreign Investment Company (PFIC) for the year ending December 31, 2024, but this status is subject to annual determination and could change[246]. - Rights and responsibilities of shareholders are governed by Israeli law, differing from U.S. corporations[261]. - Shareholders must act in good faith and refrain from abusing their power within the company[261]. - Controlling shareholders have a duty of fairness toward the company, though the substance of this duty is not defined[262]. Economic and Geopolitical Risks - The ongoing military conflict in Israel has led to a deterioration of certain economic indicators, including a downgrade in Israel's credit rating by agencies such as Moody's, S&P Global, and Fitch[253]. - The company’s commercial insurance does not cover losses from war and terrorism, which could materially affect its business if damages occur[255]. - The ongoing war has resulted in several hundred thousand Israeli military reservists being drafted, potentially disrupting the company's operations due to employee absences[254]. - The company faces risks related to geopolitical instability in Israel, which may adversely affect its revenues and financial condition[249]. - The global perception of Israel may lead to increased sanctions and negative measures against Israeli companies, potentially impacting business operations[257]. - Enforcement of U.S. judgments against the company and its non-U.S. officers may be difficult in Israel[259]. - Israeli courts may refuse to hear claims based on alleged violations of U.S. securities laws[259]. Internal Control and Reporting Risks - The company must maintain effective internal controls over financial reporting to avoid material weaknesses that could affect investor confidence[188]. - Any failure to comply with financial reporting regulations could result in investigations by the SEC and negatively impact the trading price of the company's shares[191]. - The company continues to incur increased costs due to operating as a public entity, particularly after no longer qualifying as an "emerging growth company," leading to significant legal and accounting expenses[236]. - The company is subject to various compliance costs and challenges due to regulations imposed on public companies, which may evolve over time[237].

Financial Data and Key Metrics Changes - The company achieved fourth-quarter revenue of $93.5 million and full-year revenue of $327.5 million, representing year-over-year increases of 11% and 10% respectively [44][9] - Gross profit margin for the full year was 53%, up from 52% in 2023, with expectations for 2025 to be between 52% and 53.5% [53][54] - Adjusted EBITDA for the year was positive $17.2 million, a year-over-year increase of over 300%, with the fourth quarter achieving the highest quarterly adjusted EBITDA of $11.2 million [58][44] Business Line Data and Key Metrics Changes - The company grew its GMV by 15% for the full year, reaching $141.2 billion, with significant contributions from the Tickets & Travel vertical, which generated over $111 million in revenue [9][49] - The Food category saw a 40% year-over-year growth, while the Money Transfer & Payments category grew by 66% [49] - The Fashion & Luxury category grew by low single digits, representing approximately one-third of the portfolio, with early signs of stabilization in high-end fashion [46][47] Market Data and Key Metrics Changes - The United States, the largest region, grew by 9%, while EMEA grew by 4%, with the Americas and APAC regions growing approximately 10% and 33% respectively [51] - The company reported growth across all geographies year-over-year, indicating continued market share gains outside the United States [50] Company Strategy and Development Direction - The company aims to expand its multi-product platform to diversify revenue streams and enhance market share, with a focus on increasing top-of-funnel opportunities [14][15] - A key strategy for 2025 includes shifting many merchants to multiyear contracts to increase committed revenue, with over 70% of the 2025 book of business already committed [19][20] - The company is investing in AI capabilities to improve product performance and customer service, aiming for adjusted EBITDA margins between 15% to 20% by the end of 2026 [29][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improved net dollar retention in 2025, driven by stabilization in challenged verticals and ongoing retention initiatives [21][66] - The company anticipates revenue for 2025 to be between $333 million and $346 million, with growth primarily driven by new business activity [65] - Management highlighted the importance of monitoring the performance of merchants and consumer spending in the broader e-commerce landscape [67] Other Important Information - The company ended 2024 with approximately $376 million in cash and deposits, carrying zero debt, and generated nearly $40 million in positive free cash flow [59][60] - The company repurchased over $140 million of its stock during 2024, reflecting a commitment to driving shareholder value [41][60] Q&A Session Summary Question: What are the strategies to maximize top-of-funnel activity? - Management highlighted three strategies: expanding platform capabilities through R&D, geographical expansion, and focusing on mid-tier market approaches [75][76][77] Question: What is the exposure to larger-than-average renewals in 2025? - Management expressed high confidence in multiyear renewals, with 70% of the book of business already renewed and only 10% of renewals requiring discounts [79][80] Question: Can you provide context around standalone non-chargeback deals like PolicyProtect? - Management indicated significant growth potential, projecting revenue from these products to increase from $4.5 million in 2024 to low double-digit millions [86] Question: What are the dynamics affecting net dollar retention (NDR)? - Management noted that NDR decreased to 96% due to churn events and a focus on new logo generation over upsells, but expressed optimism for improvement in 2025 [92][94][96] Question: How does the company view alternative payment methods? - Management acknowledged ongoing fraud challenges in alternative payment methods and emphasized the company's capability to identify fraud in these areas [98][100] Question: What insights were gained from the review of pricing strategies? - Management noted that accuracy and strategic product growth are key factors in maintaining high win rates against competitors [108][110]

Group 1: Earnings Performance - Riskified reported quarterly earnings of $0.06 per share, missing the Zacks Consensus Estimate of $0.08 per share, and down from $0.07 per share a year ago, representing an earnings surprise of -25% [1] - The company posted revenues of $93.53 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 3.71%, compared to year-ago revenues of $84.07 million [2] - Over the last four quarters, Riskified has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Group 2: Stock Performance and Outlook - Riskified shares have increased by approximately 7% since the beginning of the year, while the S&P 500 has declined by -1.8% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.04 on revenues of $77.29 million, and for the current fiscal year, it is $0.22 on revenues of $336.61 million [7] Group 3: Industry Context - The Internet - Software industry, to which Riskified belongs, is currently ranked in the bottom 48% of over 250 Zacks industries, indicating potential challenges [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5]

Group 1 - The previous investment thought on Riskified (NYSE: RSKD) was a buy rating due to the potential for long-term growth given the large addressable market [1] - The focus is on long-term investments while incorporating short-term shorts to uncover alpha opportunities [1] - The investment approach revolves around bottom-up analysis, examining the fundamental strengths and weaknesses of individual companies [1] Group 2 - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Financial Data and Key Metrics Changes - The company achieved record third quarter revenue of $78.8 million, reflecting a 10% year-over-year increase [19] - Gross merchandise volume (GMV) for the third quarter was $34.7 billion, representing a 17% increase year-over-year [19] - Adjusted EBITDA was positive at $0.9 million in Q3 2024, compared to negative $8.4 million in Q3 2023, marking the ninth consecutive quarter of year-over-year improvement [27] - The company ended the third quarter with approximately $390 million in cash and no debt [28] Business Line Data and Key Metrics Changes - The Fashion & Luxury vertical grew by low-single-digits, driven by new business activity but offset by same-store sales pressures [20] - The Tickets & Travel vertical grew over 20%, benefiting from new business activity and strong seasonal performance [21] - The General vertical, including Food and General Retail, grew 15%, primarily due to growth in the Food sub-vertical [22] - The Payments and Money Transfer category saw over 70% growth, driven by new business activity [22] Market Data and Key Metrics Changes - Revenue in the United States, the largest region, grew by 14% year-over-year [23] - EMEA region experienced 9% year-over-year growth, exceeding expectations [23] - The APAC region grew by 25%, fueled by market share gains through new logos [23] Company Strategy and Development Direction - The company is focused on expanding its merchant base through new logo wins and diversifying revenue across verticals and geographies [6][9] - There is an emphasis on enhancing pricing and product bundling strategies in response to competitive pressures [10] - The company plans to assess product bolt-on M&A to accelerate growth and expand its platform [16] Management's Comments on Operating Environment and Future Outlook - Management noted a recent uptick in competitive pressure and a significant merchant leaving the network, which will impact future revenue [10][19] - The company anticipates a healthy holiday season, although not extraordinarily strong [51] - The outlook for 2024 revenue has been raised to between $322 million and $327 million, driven by anticipated outperformance in new business activity [31] Other Important Information - The company achieved a 100% renewal rate across its top 20 contracts up for renewal during the third quarter [11] - The company has authorized an additional $75 million for share repurchases, aiming to reduce shares outstanding by 10% to 15% annually [17][29] - The company expects to exceed $35 million in positive free cash flow for 2024, up from a previous estimate of $30 million [30] Q&A Session Summary Question: Impact of churn in the Home category - Management indicated that the churn will have a $5 million impact in Q4 and approximately $18 million in 2025 [39] Question: Insights on the large upsell for Policy Protect - The specific deal represented a larger uplift than previously expected, indicating strong potential for future bundling opportunities [41] Question: Growth capacity in new logo verticals - Management expressed confidence in growing wallet share in faster-growing categories like groceries and remittances [44] Question: Strength of the holiday season - Management expects a healthy holiday season, with positive trends in travel and live events [51] Question: Future applications of AI capabilities - Management sees potential for expanding AI capabilities beyond retail, focusing on building self-service tools for merchants [58]

Company Performance - Riskified reported quarterly earnings of $0.03 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, compared to a loss of $0.02 per share a year ago, representing an earnings surprise of 50% [1] - The company posted revenues of $78.85 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 5.28%, and showing an increase from year-ago revenues of $71.87 million [2] - Over the last four quarters, Riskified has consistently surpassed consensus EPS and revenue estimates [2] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and the earnings outlook [3][4] - Current consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $92.01 million, and for the current fiscal year, it is $0.18 on revenues of $322.05 million [7] - The estimate revisions trend for Riskified is currently mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Internet - Software industry, to which Riskified belongs, is currently ranked in the top 18% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Gross Merchandise Volume (GMV) for Q3 2024 reached $34,706 million, a 17% increase year-over-year[4] - Revenue for Q3 2024 was $78,849 million, reflecting a 10% year-over-year growth[4] - GAAP Gross Profit for Q3 2024 was $38,956 million, with a gross profit margin of 49%, up from 43% in the prior year[4] - Net loss for Q3 2024 was $(9,699) million, improving from a net loss of $(20,925) million in Q3 2023[4] - Adjusted EBITDA for Q3 2024 was $899 million, compared to a loss of $(8,448) million in the same quarter last year[4] - Revenue for Q3 2024 was $78.849 million, a 9.7% increase from $71.872 million in Q3 2023[33] - Gross profit for Q3 2024 reached $38.956 million, compared to $31.140 million in Q3 2023, reflecting a 25.2% year-over-year growth[33] - Operating loss for Q3 2024 was $(14.330) million, an improvement from $(25.210) million in Q3 2023[33] - Net profit for Q3 2024 was $(9,699) million, an improvement from $(20,925) million in Q3 2023, while the net profit for the nine months ended September 30, 2024, was $(30,838) million compared to $(55,770) million in the same period last year[35] - Adjusted EBITDA for Q3 2024 was $899 million, a significant recovery from $(8,448) million in Q3 2023, with a nine-month adjusted EBITDA of $5,990 million compared to $(18,203) million in the prior year[37] Cash Flow and Assets - Free cash flow for Q3 2024 was $13.9 million, significantly improved from $3.7 million in Q3 2023[7] - Cash provided by operating activities for Q3 2024 was $14,012 million, a substantial increase from $4,493 million in Q3 2023, with a nine-month total of $29,005 million compared to $(144) million in the same period last year[38] - Free cash flow for Q3 2024 was $13,907 million, compared to $3,667 million in Q3 2023, with a nine-month free cash flow of $28,498 million compared to $(1,218) million in the prior year[38] - The total cash, cash equivalents, and restricted cash at the end of Q3 2024 was $356,398 million, down from $435,473 million at the end of Q3 2023[35] - Total current assets decreased to $433.756 million as of September 30, 2024, down from $532.299 million as of December 31, 2023[31] - Total liabilities decreased to $101.290 million as of September 30, 2024, compared to $110.211 million as of December 31, 2023[31] - Shareholders' equity as of September 30, 2024, was $393.548 million, down from $491.721 million as of December 31, 2023[31] Expenses and Costs - Research and development expenses for Q3 2024 were $16.671 million, slightly down from $17.397 million in Q3 2023[33] - Research and development expenses for Q3 2024 were $16,671 million, slightly down from $17,397 million in Q3 2023, with nine-month expenses totaling $51,522 million compared to $54,455 million last year[38] - Total share-based compensation expense for the three months ended September 30, 2024, was $13,905 million, down from $15,330 million in the same period of 2023[39] - Depreciation and amortization for the three months ended September 30, 2024, was $1,189 million, slightly down from $1,275 million in the same period of 2023[39] - Restructuring costs for the nine months ended September 30, 2024, amounted to $1,770 million, with no costs reported in the same period of 2023[39] - Litigation-related expenses for the three months ended September 30, 2024, were $0 million, compared to $48 million in the same period of 2023[39] Shareholder Information - The Board of Directors authorized an additional $75 million share repurchase program, bringing total repurchase authorization to approximately $85 million[3] - GAAP net loss per share for Q3 2024 was $(0.06), an improvement from $(0.12) in the prior year[7] - Non-GAAP net profit for the three months ended September 30, 2024, was $5,530 million, an improvement from $(4,163) million in the same period of 2023[39] - Basic and diluted net loss per share attributable to Class A and B ordinary shareholders for the three months ended September 30, 2024, was $(0.06), compared to $(0.12) in the same period of 2023[39] - Non-GAAP net profit per share attributable to Class A and B ordinary shareholders for the three months ended September 30, 2024, was $0.03, compared to $(0.02) in the same period of 2023[39] - Weighted-average shares used in computing net profit per share for the three months ended September 30, 2024, was 168,649,496, compared to 178,360,665 in the same period of 2023[39] Strategic Initiatives - The company expects revenue for FY 2024 to be between $322 million and $327 million[8] - The company onboarded a multi-billion dollar global money transfer company, expanding its reach in the Money Transfer & Remittance category[3] - The company anticipates continued margin expansion and growth potential in new verticals and geographies for fiscal year 2024[25] - The company is focused on enhancing its AI-powered products and capabilities to improve performance and customer retention[25] - The company reported a provision for income taxes of $639 million in Q3 2024, compared to $1,239 million in Q3 2023, indicating a decrease in tax burden[37] Cash Flow Changes - The company experienced a net increase in cash and cash equivalents of $(32,296) million in Q3 2024, compared to an increase of $49,378 million in Q3 2023[35]

Group 1 - Riskified (NYSE: RSKD) is positioned uniquely in online fraud management for e-commerce merchants, leveraging a strong technology platform and significant network effects [1] - The company is focused on identifying asymmetric investment opportunities within the technology, software, electronics, and energy transition sectors [1] - The analyst has a background in Electrical Engineering and experience in automotive battery R&D, which supports the analysis of small to mid-cap companies [1] Group 2 - The article emphasizes the importance of thorough research in uncovering potential investment opportunities that are often overlooked by others [1] - The analyst has been investing personal capital for over 7 years, indicating a long-term commitment to understanding market dynamics [1]

✔ rıskıfied August 2024 Investor Presentation Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the U.S. Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the U.S. Securities Exchange Act of 1934, a ...