Shareholder Letter

This tactic requires long-term thinking and discipline. For reference, our newly obtained India acquiring capabilities – with which we can operate as an Online Payment Aggregator in India for domestic and cross-border payments – were many years in the making. Meanwhile, we made additional strides in APAC this cycle, which grew 15% YOY, with notable wins including MECCA, Australia’s largest prestige beauty retailer, and Decathlon, one of the world’s largest sports goods companies, in Hong Kong. We also utilized our global reach to help local players grow outside of APAC, which further supported our reported growth numbers in other regions. We remain well-positioned in Japan, where incoming 3DS regulation requiring more stringent authentication mirrors similar laws being enacted around the world. Adyen is an industry leader in handling regulatory fragmentation, as demonstrated with PSD2 in Europe, for which we ensure data sharing, fraud prevention, authentication, transaction, and accessibility compliance – alleviating the accompanying operational burden for our customers along the way.

Our growing license portfolio is an advantage that unlocks exciting opportunities for us to work more directly with global enterprises expanding into high-potential regions. Adyen's ongoing investments in LATAM follow this ethos. Though the foundation is being laid brick by brick, we are actively committing to countries like Mexico and Brazil by equipping ourselves with licensing that enables us to participate and grow in the region for the long-term. Receiving our acquiring registration in Mexico means we can better connect businesses to key domestic and international banks, and facilitate card payments with greater speed and insights – an ability that helped us win IKEA Mexico this period. In the coming years, Adyen's recent investments into our local acquiring and product capabilities should position us well to further permeate the region after a few slower growth periods in Brazil. Though there is work to be done, we remain confident and look forward to deepening our ties within LATAM’s financial ecosystem as we drive local innovation and support global customers in this key market.

Yet, even in geographies where our presence is more mature, we similarly see ourselves in the earliest stages of what we aim to achieve. With only single-digit market share in EMEA and North America, there remains extensive ground for us to cover and capitalize on. In H1, we further realized our vast opportunity in these key regions with 25% YOY net revenue growth in EMEA, and commercial wins including Douglas and Tide. North America, meanwhile, grew 30% YOY, making it our fastest-growing region once again. We continued to win and expand with domestic, household-name Unified Commerce customers here including Scheels, Crate & Barrel, CB2, Pet Supplies Plus, and Reitmans, for whom we will provide our suite of services, including e-commerce and in-person payments at their brick-and-mortar locations. As we double-down on our activities in the region, we are propelling our ongoing investments into improving our US Debit capabilities. Furthermore, with our strong momentum in North America, we solidified our local presence with new office spaces in both San Francisco and Toronto, which will host our larger team resulting from our two-year, accelerated hiring phase.

We win where our customers win. While our global presence and licensing capabilities set us apart, they are not the only enablers of our customers’ ambitions. We are also committed to remaining in the technological lead – a pursuit that requires a delicate balance of both reliability and innovation. To promote both tenets, one of Adyen’s focus areas is our platform intelligence, which runs on advanced machine learning. Every transaction we process informs our platform, acting in real time using models we train and deploy on our self-hosted, big data engine. This is a useful way to think about the volumes we process. While the processed volume metric is not what we run the business on, we acutely understand the underlying value of the information transactions contain. This is why our product offering strengthens as it scales – we have created a network effect. Data enables our technology to continually refine its ability to combat fraud, authenticate users, maximize successful payment completion, and ultimately save our customers' costs. We also use data to sharpen our performance using A/B testing on an ongoing basis.

Over the past year, cost optimization was one of the primary needs of our customers. Given Adyen’s services are typically just a fraction of the overall costs businesses incur when transacting payments – which include variable and fixed scheme fees as well as interchange fees – we have the opportunity to help our customers lower their total cost of ownership (TCO), while also providing industry-leading experiences for businesses and their end consumers alike. This commitment and capability is a prevailing asset in the outsized value we provide our customers, and substantiates our premium offering.

One way we work to meet our customers' TCO needs is by leveraging our AI and machine learning capabilities to find optimal avenues to lower the overall cost of a transaction. Drawing from one example from this period, Fubo, a leading sports-first live TV streaming platform, utilized our Digital offering to optimize their TCO. Our RevenueProtect technology better armored their business against fraud, thus reducing chargebacks. Additionally, we used network tokens to better authorize online and recurring payments, driving significant conversion. Fubo's authorization rate has improved 1.5% since working with Adyen.

Our partnership with Indeed is another compelling example of how we drive cost savings for our customers. By conducting extensive analysis into their prior interchange and scheme fee setup, we identified a needle-moving optimization that ultimately helped Indeed exceed their annual cost reduction target by 40%. Our ability to address TCO was further demonstrated in our Unified Commerce pillar. This period, we partnered with Belmond Hotels, a leader in luxury hospitality, and demonstrated how improved TCO and sophisticated experiences can go hand-in-hand. The ability to simultaneously improve both objectives sets us apart: with Adyen, customers do not have to choose between finding avenues for cost-saving or elevating the quality of their back and front-end standards. We partner to enable both. Working with Adyen, Belmond Hotels has improved their full-funnel conversion rate to above 90% across their properties.

When laying out our more detailed expectations in November, we also foresaw benefiting from Adyen’s inherent operating leverage as our accelerated hiring phase began to temper. For H1 2024, EBITDA margin showed YOY expansion, with operating leverage already visible, predominantly stemming from this period’s cooled hiring pace as well as fewer one-off operational expenses. This period, EBITDA margin landed at 46%, compared to 43% in H1 2023 . Thus far, we have hired 37 net-new team members in H1, and expect to bring on the remaining new joiners within our couple of hundred estimate in the second half of the year, while we continue to focus on meeting our high talent standards.

As we look ahead to H2, we feel strongly positioned to continue executing on the expectations we detailed when we came together at our Investor Day in San Francisco. The building blocks we outlined in November remain intact. We aim to grow net revenue annually between the low-twenties and high-twenties percent up to and including 2026. For 2024, we continue to expect to be towards the low end of this range. We aim to improve EBITDA margin to levels above 50% in 2026, and expect to benefit from the operating leverage inherent in our business model. Finally, we aim to maintain a sustainable capital expenditure level of up to 5% of our net revenue, as we did this period, landing at 4.6%.

This is the path we outlined and we’re proud to be progressing on it as planned.

To read the full H1 2024 financial results and accompanying shareholder letter, please download the following document below.

Sincerely,