Adyen Gains Traction With Mid-Market Firms

Adyen, the Dutch payments processor, posted first-half results on Thursday (Aug. 22) that showed double-digit percentage gains in volumes, driven by online commerce and increased traction among mid-market firms doing business and taking payments across the globe.

In terms of the headline numbers, net income was up 92 percent to 92.5 million euros.  That growth outpaced the top-line momentum, which was up 41 percent to 221.1 million euros.

Overall value of payments processed was up 49 percent to 104.6 billion euros, up from the 70 billion euros seen in the first half of the year.

In remarks delivered via shareholder letter, CEO Pieter van der Does and CFO Ingo Uytdehaage said that secular tailwinds included the increased digitization and internalization of commerce.

Continuing a trend seen in past quarters, volume churn was less than 1 percent, said management.

Full-stack volume share (volume for which Adyen earns both a processing and settlement fee) increased to 71 percent in the first half of 2019, up from 70 percent for full-year 2018 and up from 61 percent for full-year 2017.

MarketPay, which debuted in October 2017 as a way for online marketplaces to own the full payments stack, has been gaining traction among other online models, and small businesses have been offering end users what the firm has called a “unified commerce experience.”

During the conference call with analysts after the earnings release, CEO van der Does said the changing regulatory environment also has been boosting momentum. Management pointed to the recent introduction of the 3D Secure 2 product, now deployed by Uber, Match.com and other firms.

Eighty percent of the volume growth logged in the period, said management on the call, came from existing merchants. Macro trends continue to benefit the company, especially cross-border commerce, noted the CEO.

“Shopping is changing,” he told analysts, “and we are at the forefront of helping merchants adapt.”

Drilling down a bit, verticals that have seen noticeably positive trends include hospitality and quick-service restaurants. By enterprise size, the company noted, mid-market firms – with 1 million euros a month in processing volume – are also seeing significant growth. Mid-market grew in line with total processed volume, now at 2.3 percent of total processed volume in the first half of the year. In a nod to the pact signed last year with eBay to become the eCommerce giant’s primary payments processor, management said significant volume should begin in the back half of 2020.

In granular detail on the processed volume, first-half point of sale volume was 11 billion euros at 11 percent of total volume, up 67 percent year on year.

Management said growth was logged across all regions, and termed that growth “well-diversified” as merchant concentration has been decreasing. In North America growth was at 46 percent, followed by Asia-Pacific at 43 percent and Europe at 41 percent. Revenue concentration was highest in Europe at 65 percent, trailed by North America at 15 percent.

Looking ahead, management guided to net revenue growth at a CAGR between the mid-twenties and low-thirties percentage rate through the medium term. Management also said the pipeline conversions, where merchants are converted into customers on Adyen’s platforms, remains healthy.