Adyen appears to have succeeded on Wednesday in reassuring investors about how the payments company is doing. In after-hours trading in the United States, the share rose 34 percent. If this continues on Thursday morning, it would mean that the share would become worth 897 euros on the Amsterdam stock exchange, where Adyen has the main listing. Adyen closed on the AEX on Wednesday at 695.70 euros, before the company released a trading update.
Investors also needed some reassurance. After the half-year results in mid-August, Adyen lost 38 percent of its market value in one day, which amounted to 19 billion euros. Shareholders were then extremely shocked that the company grew less rapidly than in previous years, and also had a lower profit margin. Since then, the share has fallen even further, partly due to mediocre reports about the performance of competitors. According to some, the time of growth for payment companies is over and a service from a payment company would become what a telecom company offers. And telecom companies make little profit.
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A drop of 18 billion euros on the stock exchange. What does that say about Adyen?
“Encouraging”
The third-quarter update published on Wednesday showed that Adyen’s turnover in the third quarter grew 22 percent compared to a year earlier, to 413.6 million euros. Without taking into account currency fluctuations – Adyen is active in two hundred countries – turnover increased by 26 percent. An analyst from investment bank Jefferies called these results “encouraging”, writes Reuters news agency.
Furthermore, Adyen reported that it had hired 175 people. Jefferies had expected more new contracts. One of the reasons why investors were so worried about Adyen after the half-year results was the decision to hire more people despite the slower growth in turnover. This depressed the profit margin.
It was striking that analysts – and, given the post-market rise, probably also investors – responded positively to the lowering of expectations for the coming years. Since its IPO in 2018, the payment company had never tinkered with its financial goals: an average of 25 to 35 percent revenue growth in the long term and an operating profit margin (EBITDA) of more than 65 percent.
This Wednesday, Adyen issued more short-term goals for the first time. The company expects to grow between 20 and 30 percent in turnover until 2026. The profit margin must average above 50 percent over the coming years. In the first half of the year, that margin had been a disappointing 43 percent.
According to JP Morgan, this lowering of the targets is positive “because they are more realistic.” “This will be a big relief for investors,” Reuters quotes the analyst from the American investment bank. Jefferies agrees and calls the goals “ambitious” despite the decline.
No dividend
The fact that Adyen is also providing quarterly updates for the time being, as is certainly normal for the financial sector, does not mean that the payment company will suddenly start behaving like a listed bank or insurer in other areas. The company does not plan to pay a dividend, Tandowsky emphasized after a question from an analyst in the audience in San Francisco. And despite the fact that Adyen has a lot of cash on its balance sheet, there is no share buyback program. “We feel good about our current cash position. It ensures that we have the best credit rating of all our competitors. And it ensures significantly fewer time-consuming discussions with the regulator about our finances.”
Also different from other financial institutions was that Adyen’s Investor Day spent most of the three hours not about the financial goals, but about what the company actually does. And that the two chairmen – founder Pieter van der Does and Ingo Uytdehaage have been sharing the gavel since the beginning of this year – barely had a word. Uytdehaage opened the presentation and answered questions at the end, Van der Does did not come on stage at all.
College
The program was filled by, among others, the commercial director, the heads of the American and European divisions and the HR manager, who appeared to give lectures about the Adyen company to the analysts in the room and via the livestream. Partly dressed in worn-out jeans and (worn-off) sneakers, they explained why Adyen is different from other payment companies, and why they are therefore not so concerned about the slower growth of online sales after the corona boom. The belief: by offering more than just a way to pay, Adyen can continue to attract customers and charge higher prices than competitors – and thus prevent it from becoming a ‘telecom company’.
Large companies such as Spotify, Burberry and Dunkin’ Donuts arrange online payments via Adyen with credit cards, deferred payment or local systems such as iDeal. But they can also arrange physical payments via payment terminals and now smartphones. Small and medium-sized businesses are customers through platforms such as Ebay. Adyen also provides customers with information about why consumers drop out and how to prevent this.
All speakers of Adyen used the word ‘unique’ or a synonym several times. “We are the only financial technology provider that manages all channels – online, in-store, mobile and in-app – in a single system built entirely in-house and active in all regions,” said Alexandra von Bismarck, head of Adyen in Europe, the Middle East and Africa. “There is no other company that offers that.”
Despite the board of managers, most of the questions from analysts in the room were about Adyen’s ‘unique’ offer, about the alleged price pressure from competitors. Commercial director Roelant Prins seemed to wink at this when he said a little later that customers sometimes tend to focus on the transaction price. “A low price is easy to explain, it’s a figure. And a number is a number, which you can easily enter in Excel. Our added value is a promise. That’s harder to catch. It is up to us to train our people in such a way that they can convince customers of this.”
Or analysts and investors.