H1 2019

Shareholder Letter

Merchant-driven innovation on the single platform

  • Ongoing expansion of product suite

  • Turning regulatory shifts into opportunities

  • Continuing to build based on merchant needs

New avenues for growth in an increasingly global economy

  • Applications of the single platform in evolving business models

  • Increased complexity in payment landscape proving to be a tailwind

  • Continued to follow our merchants’ geographical expansion

Key contributions from each growth pillar

  • Strong growth of existing enterprise merchants in H1 2019

  • Expansion to new verticals in unified commerce

  • Plugins and partnerships focus paying off in mid-market segment

Sustained profitable growth across regions and merchant base

  • Exceeded €100 billion in processed volume in H1 2019

  • Net revenue growth well-diversified geographically and across merchant portfolio

  • Increasing operational leverage due to low cost base associated with single platform

Sustained profitable growth and evolving applications of the single platform

August 22, 2019

Dear shareholders,

In a continuation of historical trends, we saw strong profitable growth in the first half of 2019, predominantly due to enterprise merchants already on our platform. This growth came in the form of the organic growth of these merchants, as well as through winning additional volume with them in new geographies, channels, and product lines. While existing merchants were the main contributors to growth in the first half of 2019, we also added a number of household names to the platform, including Postmates, Muji and OYO Rooms.

We processed €104.6 billion in the first half of the year, as we continued to benefit from several secular tailwinds, including the increased digitalization and internationalization of commerce. As in previous periods, volume churn was <1%.

We continued to follow our merchants’ expansion into new regions in the first half of the year – notably adding capabilities in Africa. We view the build-out of our global payment processing capabilities as an ongoing process, led by the needs of our merchants. Our innovation is always aimed at solving their pain points. Following this merchant-led approach, we also added key local payment methods to our platform in the first half of 2019 – including Open Banking in the UK, M-Pesa in Kenya, and several local partnerships with Apple Pay and Google Pay. These local payment methods are essential to increasing conversion and authorization rates, especially in markets with lower credit card penetration.

In a reflection of our changing merchant mix and maturing acquiring capabilities, full-stack volume share (volume for which we earn both a processing and settlement fee) increased to 71%, up from 70% for full year 2018 and 61% for full year 2017. This full-stack, or end-to-end, solution delivers most value for merchants, so we are excited to see this trend continue.

Over the past 18 months, we saw increased traction in the domain of marketplaces. This business model evolved rapidly over the past decade with the development of large marketplaces empowering smaller sellers on their platforms. Never before has global commerce been so readily available to so many buyers and sellers. Catering to the increasingly complex needs of these marketplaces requires a unique combination of expertise in payments, regulatory environments and technology – all capabilities we have proven to possess. To help these marketplaces grow, we launched our MarketPay product, and have been able to land leading companies, including eBay and Etsy.

As a result of our philosophy of building to benefit all merchants - and iterating based on merchant needs - we are now seeing new applications of our MarketPay product, beyond the realm of online marketplaces. Across many geographies and industries, commerce platforms are emerging that cater to a large number of smaller businesses. These platforms often have vertical-specific capabilities (e.g. Teesnap for golf courses) and include payments in their service offering. In the first half of the year, we adapted the MarketPay product to also support these platforms – even including in-store payments. This marks a real shift in the space – as small business owners now have access to the full Adyen solution through these platforms, allowing them to offer their shoppers a unified commerce experience.

These enterprise-level partnerships with marketplaces and platforms allow us to empower smaller sellers without running into the scalability issues that building out an SME-focused support organization would bring about. 

We believe that our success in this arena is due to our speed of innovation, facilitated by our flat organizational structure. In this environment the best ideas gain traction quickly and development is fast. This allows us to react to market developments – like the evolution of new business models – with more speed and more deliberately than others in the industry.

Our speed of innovation is also a strength when dealing with shifting regulatory environments, such as the upcoming introduction of PSD2 (Payment Services Directive 2) in Europe and the associated SCA (Strong Customer Authentication), a source of much consternation in the industry. This speed is illustrated by our first-to-market 3D Secure 2 product; an expansion of our product suite which has seen impressive early traction. Uber, Match.com and Zalando are among the leading names deploying it globally. Our speed, combined with our merchant-focused development philosophy, allows us to turn regulatory shifts like PSD2 into an opportunity. Preemptively clearing potential hurdles like these is a crucial part of the membership to innovation that we offer our merchants. 

People shopping

Key contributions to volume growth from each growth pillar

Consistent with previous periods, over 80% of processed volume growth came from existing merchants. We continued to benefit from macro trends, including global digitalization, an increase in cross-border commerce, the ongoing global shift from cash to cashless payment methods, as well as increasing internet adoption. In the enterprise segment, we are keeping our focus on short- and long-term merchant needs, proving ourselves to be the optimal partner for growth. Solving problems for enterprise-level merchants, primarily in ecommerce, is still core to our operations as we expand into other channels and verticals.

Unified commerce continues to develop positively, growing in tandem with total processed volume in the first half of the year. Merchants’ increasing need to cater to shifting shopper behavior and demands remains an important contributor to the increase of unified commerce volume. Where we initially focused on high-end retail and then on retail more broadly, we now see signs of traction in the quick-service restaurant (QSR) industry, with wins including Wagamama, TimeOutMarket and Joe & The Juice. Much like in retail, this is a vertical wherein shopper journeys (e.g. in-store pick-ups for mobile orders) are evolving rapidly. Quick-service restaurants were traditionally single channel outlets without payment capabilities beyond a counter-based terminal. Now, kiosk- and app-based journeys are increasingly becoming the norm. In order not to get left behind, keeping up with these developments and new shopper expectations is crucial for QSR businesses. To accelerate their growth, QSR merchants require a tech-first payment partner. 

In the retail segment too, complexity is increasing for merchants in the face of evolving shopper behavior. On the back of this, we landed several new merchants in the first half, including The North Face and Timberland. Due to these shifting shopper demands, and merchants’ need to adapt to this new environment, we are now seeing that we have been able to win business in areas that have not historically been a strength. One example of this is Restoration Hardware, a leading US-only retailer that chose us for our ability to provide their shoppers with a unified commerce experience. Historically, domestic US-only volume has not been the most logical fit for us, or where we would have been able to add the most value. We are now seeing that change, which underscores both merchants’ increasingly complex needs and the growing strength of our global offering.

Our success in the mid-market segment has accelerated in the first half of the year, primarily due to an increased focus on plugins and partnerships. Ambitious companies are choosing us as their growth partner because of the global plug-and-play solution that we provide. Volume-wise, mid-market grew in line with total processed volume (comprising 2.3% of total processed volume) in the first half of the year, but that does not tell the whole story. We also saw positive contributions from our mid-market approach in the form of enterprise volume, from merchants outgrowing the €1 million per month in processed volume limit that we have in place to denote mid-market merchants. This mechanism has resulted in an organic widening of our enterprise funnel. 

We also continued to innovate on the product side for mid-market, simplifying the integration process with our Checkout product. Moreover, we are building out a Customer Success team, which focuses on educating mid-market merchants and guiding them through the onboarding process and beyond. On the back of these investments, we have seen our NPS score for mid-market managed accounts increase by 11 in the first half of the year.


Merchant-driven innovation on the single platform

Our promise of a membership to ongoing innovation means that there is something new on the single platform every week. A natural result of this is that a lot of our innovation is incremental and serves to solve immediate merchant needs. An example of iterative innovation is Auto Rescue, an expansion of our RevenueAccelerate product. It aids in the recovery of transactions in subscription payments – helping to uplift authorization rates. Subscription merchants continue to comprise a significant part of our merchant portfolio, so incremental innovation in this segment can have a significant impact.

We also launched the Experiments platform in our risk product, RevenueProtect. For each merchant, their fraud problems are unique. That means that to fight fraudsters, constantly recalibrating their risk system is key. Because we are aware of this, we have always used A/B testing internally to optimize our risk product. Now we have made this functionality available to merchants too. This allows them to combine machine learning and rule-based algorithms and to test the true impact of new settings on actual traffic. As a result, merchants are able to find constantly optimal risk settings and thus reduce false positives, lower fraud and boost authorization rates.

Lastly, on an industry level, it is worth highlighting that we are engaged with EMVCo as a technical and business associate. EMVCo is responsible for secure in-store checkouts through EMV chips and contactless payments, and in the first half of 2019 this cooperation has gained significant depth. EMVCo is constantly looking to add functionality to its schemes, and we can help them bring this to market at an industry-leading pace – exemplified by our earlier first-to-market Real Time Account Updater launches with Visa and Mastercard.

EMVCo is now looking to create a common standard for ecommerce transactions too – and we believe we will be instrumental in its implementation. Already live with two of the three components of Secure Remote Commerce (SRC), we have ensured that our merchants are fully prepared for the new age of ecommerce.

Growing the Adyen team

While we continue to grow the business, we believe that maintaining our culture is critical to our success. We only hire up to our rate of absorption. Following this approach of measured growth, we added 114 FTE in the first half of 2019, to a new total of 987, which is consistent with earlier half-year periods. For reference, end of year 2018 was 873, and end of year 2017 668 FTE.

Our new hires in the first half of the year were mostly in tech (41%) and commercial (39%) roles. Senior management continued to invest significant time and energy into our rigorous hiring process, ensuring every prospective Adyen employee meets with at least one board member prior to being hired.

With our June 2018 IPO now in the rear-view mirror, we see that going public did not markedly impact the way in which we work together at Adyen. We are delighted to see our focus paying off here. This is a company that we want to build for the long term.

Discussion of financial results

Robust volume growth primarily due to existing merchants

We processed €104.6 billion on our platform in the first half of the year, an increase of 49% year-on-year, mainly as a result of the growth of merchants already on our platform. This growth mirrors the 50% year-on-year processed volume growth we saw in the second half of 2018. As mentioned previously, settled volume (i.e. ‘full-stack’ volume for which we earn both a processing and settlement fee) was up to 71% in the first half, reflecting our merchant mix and growing acquiring footprint.

First half point-of-sale (POS) volume totaled €11.0 billion – accounting for 11% of total first half processed volume, and up 67% year-on-year.

Net revenue growth stable regionally and across width of merchant base

Net revenue was €221.1 million in the first half of 2019*, up 41% from the first half of 2018. Illustrative of the strong net revenue growth over the past years, first half net revenue was higher than full year 2017 net revenue of €218.3 million.

Net revenue growth was again well-diversified across regions, with double digit year-on-year growth across North America (46%), Asia-Pacific (43%), Europe (41%) and Latin America (36%).

Europe remains the largest contributor to net revenue, comprising 65% of total net revenue for the first half of 2019, followed by North America (15%), Latin America (10 %) and Asia-Pacific (9%). 

We saw a continuation of the trend of decreasing merchant concentration on the single platform in the first half of 2019. This evolution underscores the strength of our global offering, and the quality of the merchants we have continued to board onto the platform over the past years.

Adyen shareholder letter H1 2019


Figure 5 or something else

all amounts in EUR thousands unless other stated

Investments in growth driving increased OpEx

Total operating expenses were €105.6 million in the first half of 2019, up 17% year-on-year. These represented 48% of H1 2019 net revenue. Employee benefits were €54.8 million in the first half of the year – up 26% from €43.6 million in the first half of 2018 – as we continue to invest in the growth of the team.

Other operating expenses totaled €40.5 million in the first half of 2019, down 5% from €42.7 million in the first half of last year. This was mainly due to the adoption of IFRS 16, an accounting standard in which costs related to lease contracts were previously included in other operating expenses and are now primarily included in depreciation and amortization expenses*. As previously disclosed, there was also a contribution from higher housing costs associated to our Amsterdam office and costs associated with the IPO in the first half of 2018.

Sales and marketing expenses in the first half of 2019 were €13.5 million, up 18% from €11.4 million in the first half of 2018 – as we continue to invest in increased brand awareness, especially in regions outside of Europe.

Significant EBITDA growth driven by operational leverage

EBITDA for the first half of the year was €125.8 million, up from €70.3 million in the first half of 2018. This is an increase of 79% year-on-year on the back of operational efficiency and the accounting change resulting from IFRS 16 explained above. EBITDA margin was 57% for the period.

Higher net income growth on the back of increased EBITDA 

Net income for the first half of 2019 was €92.5 million, up 92% from €48.2 million in the first half of last year. This trend mirrors the 90% year-on-year net income growth we saw in H2 2018. 

Robust free cash flow conversion

Free cash flow was €117.6 million in the first half of 2019, up 88% from €62.7 million in the first half of 2018. Free cash flow conversion ratio ((EBITDA-CapEx)/EBITDA) was 93% in the first half of 2019, in line with what we reported for the second half of 2018.

Stable and low CapEx  

Capital expenditure remained stable at 4% of net revenue, primarily due to the scalability of the single platform.

Financial objectives

We have set the following financial objectives, which remain unchanged from our IPO prospectus.

Net revenue growth: We aim to continue to grow net revenue and achieve a CAGR between the mid-twenties and low-thirties in the medium term by executing our sales strategy.

EBITDA margin: We aim to improve EBITDA margin, and expect this margin to benefit from our operational leverage going forward and increase to levels above 55% in the long term.

Capital expenditure: We aim to maintain a sustainable capital expenditure level of up to 5% of our net revenue.

We will host our earnings call at 15.00 CEST (09.00 ET) today (August 22) to discuss these results.

To listen to a live audio webcast, please visit our Investor Relations page at adyen.com/ir. A recording will be available on the website following the call.

As an addendum to this letter, please find attached our H1 2019 financial statements and three one-page updates on our growth pillars (enterprise, unified commerce, mid-market).


Pieter van der Does


Ingo Uytdehaage


* Due to the effects of IFRS 16, EBITDA margin is 3% higher than it would have been without the adoption of this new accounting standard.

** Please refer to Note 13 of the Interim Condensed Consolidated Financial statements for further detail.


Solving problems for enterprise merchants continues to be our bread and butter. We have seen this segment develop positively in the first half of 2019.

Enterprise volume evolution, including share of total processed volume on the platform (%) in EUR billions.

Postmates logoMuji logoOYO logoSoulcycle logo

Unified commerce

Shopper behavior is evolving, and new shopper expectations are pushing merchants to new frontiers. We are at the vanguard of this shift – helping merchants navigate the new age of retail.

POS volume evolution, including share of total processed volume on the platform (%) in EUR billions

Restauration Hardware logoVans logoTimberland logoThe North Face logo


Access to the full Adyen solution is now available to more businesses and sellers than ever before. We have simplified the integration process and we are focusing on educating merchants to get the most out of our platform.

Mid-market volume evolution, including share of total processed volume on the platform (%) in EUR billions.

Chilly's logoHawes and Curtis logoCaudalie logoHeineken Experience logoRated People logo

Interim Condensed Consolidated Financial Statements
H1 2019 Adyen N.V

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