Company: RSKD
Filing Date: 2025-03-06
Form Type: 20-F
Source: 0001851112-25-000006
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Company: RISKIFIED LTD.
Filing Date: 2025-03-06
Form: 20-F
Item: Item 5
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Gross Profit and Gross Profit Margin

As our business continues to grow, we expect our gross profit will increase while our gross profit margin may fluctuate from period to period. Our gross profit margin is highly dependent on our risk-based pricing model which determines the fee we charge our merchants, our approval rate thresholds, the merchant mix of our revenue, new geographies and industries into which we may enter, the risk profile of orders approved in the period, technological improvements in the performance of our models, and seasonality. During periods where we approve a higher percentage of legitimate orders, our CTB ratio is lower and our gross margins are higher. Further, as the merchant mix of our revenues shifts towards industries with historically higher chargeback rates, such as tickets and travel, our CTB ratio may be higher and our gross margins may be lower. We control the decision to approve a particular transaction and continuously monitor our approval rate thresholds to ensure we are not exposed to higher amounts of chargeback risk, and we structure our pricing in a way to mitigate this risk.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Compensation and benefits related costs are the most significant component of operating expenses and consists of salaries and benefits, share-based compensation expense, sales commissions, and other employee benefit costs. Operating expenses also primarily include third-party hosting fees and software costs, professional service fees, overhead costs including rent and utilities, marketing and advertising related costs, and depreciation expense. For 2025, we expect that our cost reduction efforts will drive decreases in operating expenses as a percent of revenue, however there may be fluctuations on a quarterly basis.

Research and Development

Research and development expenses primarily consist of compensation and benefits related costs, including share-based compensation expense associated with research and development teams that are responsible for the design, development, and testing of our AI-powered ecommerce risk intelligence platform infrastructure, including expenses associated with adding new features, increasing the functionality, and enhancing the usability of our platform. Research and development expenses also include investments we are making in new products, as well as third-party hosting fees and software costs used by our research and development teams, allocated overhead costs, and depreciation expense.

Sales and Marketing

Sales and marketing expenses primarily consist of compensation and benefits related costs, including share-based compensation expense directly associated with our sales and marketing teams. Sales and marketing costs also consists of costs associated with conferences, events, digital marketing and advertising programs, commissions, depreciation expense, and allocated overhead.

General and Administrative

General and administrative expenses