Profitable growth at scale
Well-diversified volume growth across regions and merchant base
Strong EBITDA margin of 56% amid investments in growth
Spotting exciting new opportunities for future expansion
Gaining momentum in unified commerce
Tangible success in QSR space with McDonald's and Subway wins
Ongoing market-wide shift of shopper expectations
POS volume comprised 13% of total volume
Innovation on the single platform
Our focus remains on incremental product innovation to solve merchants' pain points
Adyen Issuing powers a range of use cases for merchants
Speed of innovation allows us to be at the forefront of industry trends
Growing the team
Higher absorption rate due to improved onboarding process allowed us to ramp up hiring
Global expansion including new offices in Tokyo and Mumbai
Maintaining the Adyen culture at scale
We processed €135 billion in the second half of 2019, up 52% year-on- year. This growth came largely on the back of increased volume from enterprise merchants onboarded in previous periods. With McDonald’s and Subway now on the single platform, we reached a stage with quick- service restaurants (QSRs) where we can report tangible success. Another noteworthy development relevant to the second half of the year is the increasing pervasiveness of merchants adopting a platform business model. We are uniquely equipped to cater to this segment, and view this as a positive for the business. Processed volume for full year 2019 was €240 billion, up 51% year-on-year with 2019 net revenue and EBITDA coming in at €497 million and €279 million, respectively. As in previous periods, volume churn was less than 1%.
Three themes of recent years persisted throughout the second half of 2019: increasing diversification across our merchant portfolio, most of the growth (over 80%) coming from existing merchants and steadily low volume churn. These leave us confident that we are delivering a best- in-class solution to merchants that are looking to future-proof their approach to payments.
Point-of-sale (POS) volume for the second half was €18 billion, comprising 13% of total processed volume compared to 11% in H2 2018. It’s exciting that something we started relatively recently is growing at such a pace. We believe this is due to the convergence of shopping channels and the increasing need for merchants to adopt a unified commerce approach, essential in this age of experiential shopping. We now have a proven track record in helping our merchants in this space.
Full-stack volume share for H2 2019 was 73%. For FY 2019, this was 72%, up from 70% for FY 2018 and 61% for FY 2017. This trend reflects our changing merchant mix, the global roll-out of our acquiring capabilities and an increased share of POS volume as a percentage of total processed volume
The payments space continues to be buoyed by numerous tailwinds — including an increase in cross-border commerce, a continually increasing share of online traffic in global commerce and the continuous shift from cash to cashless payment methods around the world. These are a few of the wider macroeconomic trends that affect the space, and from which we also benefit.
Beyond these tailwinds, we continue to invest in order to maximize long- term value for all of our stakeholders. Retaining the flexibility to invest has always been critical to us, and in line with this philosophy we grew the team at a faster rate in the second half of 2019 — without this new hiring rate being dilutive to culture. This is something we expect to be able to maintain for the foreseeable future.
 POS volume is volume for which we are always the acquirer
Sustained volume growth at scale
We processed €135.0 billion on our platform in the second half of the year, an increase of 52% year-on-year, mainly as a result of the growth of merchants already on our platform.
Full year 2019 processed volume was €239.6 billion. Year-on-year growth for the full year was 51%, mirroring the year-on-year growth of previous years — now at increased scale. POS processed volume totaled €29.2 billion in 2019 and now comprises 12% of total processed volume.
Steady net revenue growth driven by diversification in merchant base and regional footprint
Net revenue was €275.6 million in the second half of 2019, up 43% compared to the second half of 2018. Full year 2019 net revenue was €496.7 million, up 42% compared to full year 2018.
All regions posted double-digit growth, and the trend of increasing regional diversification continued in the second half of 2019. Europe (42% year-on-year growth) and Asia-Pacific (28%) were outpaced by growth in Latin America (55%) and North America (54%).
Despite ongoing global diversification, Europe still contributed over half (65%) of total net revenue for the second half of 2019. North America contributed 15%, Latin America 10%, and Asia-Pacific 9%.
Take rate was 20.4 bps in the second half of 2019, compared to 21.6 bps in the second half of 2018. This delta is also reflected in the full year numbers: 20.7 bps for 2019, versus 21.9 bps in 2018. The difference was primarily due to a changing merchant mix and volume tiers kicking in with enterprise merchants. Take rate continues to not be a driver for us, as the lower cost of operating our technology allows us to keep our focus on incremental net revenue.
Investing in global expansion
Total operating expenses were €134.1 million in the second half of 2019, up 57% year-on-year. These represented 49% of H2 2019 net revenue. For the full year, total operating expenses were €239.7 million, up 36% year-on-year, and representing 48% of FY 2019 net revenue. This increase is mainly due to employee benefits.Employee benefits were €67.6 million in the second half of 2019, up 55% from €43.5 million in the second half of 2018. For the full year, employee benefits were €122.4, up 41% from €87.1 million in full year 2018.The larger growth of employee benefits in the second half of the year versus the full year number is due to the ramp up of hiring in H2 2019.Other operating expenses totaled €54.7 million in the second half of 2019, up 47% from €37.3 million in the second half of 2018. Of these, sales and marketing costs made up the largest slice, totaling €18.7 million in the second half of 2019, up 89% from €9.9 million in the second half of 2018.For full year 2019, other operating expenses were €95.1 million, up 19% from €80.0 million for FY 2018. Sales and marketing expenses were €32.3 million for the full year, up 52% from €21.3 million in full year 2018. As we continue to expand into new geographies and extend to new verticals, we feel it is imperative that our efforts in marketing support these initiatives.
EBITDA displaying solid profitability amid investments in growth
H2 2019 EBITDA was €153.5 million, up 37% year-on-year from €111.7 million in H2 2018. Full year EBITDA was €279.3 million in 2019, up €181.9 million from 2018.
EBITDA margin came in at 56% for the full year, as it continued to benefit from the positive impact of the IFRS16 accounting change. Without this impact, the EBITDA margin would have been approximately 2% lower.
Net income mirroring EBITDA
Net income for the second half of 2019 was €111.5 million, up 34% from €83.0 million in the second half of last year.
Full year 2019 net income was €204.0 million, up 56% from €131.1 million in 2018.
Strong free cash flow to close out the decade
Free cash flow was €141.7 million in the second half of 2019, up 34% from €105.4 million in the second half of 2018. Free cash flow was €259.4 million in full year 2019, up 54% from €168.1 million in full year 2018.
Free cash flow conversion ratio was 92% in the second half of 2019, down from 94% in the second half of 2018. Free cash flow conversion ratio was 93% in full year 2019, up from 92% in full year 2018.
CapEx up due to investments in scalability
Investments in the scalability of our data centers drove CapEx slightly up to 4% of net revenue for 2019, up 45% year-on-year from 2018. H2 2019 CapEx were also at 4% of net revenue.
 On a constant currency basis, H2 2019 gross revenue of € 1,512.6 million would have been approximately 2% lower than reported. Please refer to Note 1 of the Interim Condensed Consolidated Financial statements for further detail on revenue breakdown.
H2 2019 Income statement. All amounts in EUR thousands unless otherwise stated
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 3pm CET (9am ET) today (February 27) to discuss these results.
To listen to a live audio webcast, please visit our Investor Relations page at adyen.com/ir, where you can find a link. A recording will be available on the website following the call.
As an addendum to this letter, please find attached three one-page updates on our growth pillars (Enterprise, Unified Commerce and Mid-Market) and our H2 2019 financial statements.
 This objective was set prior to the IFRS16 accounting change
Enterprise volume continues to be our largest growth driver. Solving problems for these merchants is what we do best. Within the enterprise segment, the growing share of platform business models is especially noteworthy.
We are gaining momentum in this space on the back of shifting shopper behavior. Merchants are increasingly adopting a unified commerce approach to adapt to this new environment.
We continue to invest in the mid-market segment for the long term. We have redefined mid-market merchants as those processing up to €25 million annually on our platform. In H2 2019, 3,867 merchants met this definition.
Interim Condensed Consolidated Financial Statements
H2 2019 Adyen N.V
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