LONDON, Feb 8 (Reuters Breakingviews) - It’s painful to swim against the tide. Just ask Pieter van der Does, the boss of $40 billion Dutch payments group Adyen , who is hiring more staff while rivals like Stripe and other large technology firms are doing the opposite. His company’s share price fell 12% on Wednesday after full-year results spooked the market. But the investments could be worthwhile over time.
Adyen, which processes payments on behalf of Netflix , Meta Platforms and others, on Wednesday said that its EBITDA in the second half of 2022 grew by a measly 4% year-on-year to 372 million euros. That’s well below the average analysts’ forecast of 464 million euros, according to Refinitiv data. The company’s EBITDA margin of 52% in the same six-month period looks disappointing relative to the 64% it clocked up a year earlier.
The culprit is a hiring and investment spree. Van der Does has boosted the company’s headcount to 3,332, which is almost triple its pre-pandemic level, and he plans to continue hiring in 2023. Compare that with U.S. payments giant Stripe, whose Chief Executive Patrick Collison in November admitted that he had over-hired and would shrink staff numbers by 14%. Other technology groups like Spotify , Alphabet and Microsoft are also laying off staff, helping to unwind a recent recruitment binge.
Van der Does has good reasons to buck the trend. First, he can afford to because his margins are still chunky by any normal standard. European payments peers like Nexi and Worldline convert less than 30% of net revenue into EBITDA, compared with over 50% for Adyen. In other words, the company is anything but flabby.
Second, van der Does must move into newer markets to make up for a slowdown in its core business of handling online transactions. Global e-commerce sales growth will slow to 12% next year, compared with around 16% in 2022, according to Morgan Stanley analysts. And Adyen seems to be earning a smaller fee on each payment. Its take rate, or revenue as a percentage of processed transactions, fell to 17.1 basis points in the second half of last year, compared with 18.6 basis points during the same period of 2021.
The answer, according to van der Does, is to get physical. He’s increasingly pushing into in-store transactions for merchants like H&M . The theory is that Adyen can provide these customers with a single suite of services handling both online and offline payments, making it easier to see the data and spot trends in one place. It’s catching on, albeit slowly: in-store payment volumes, known as “point of sale” transactions, grew by 62% year-on-year to almost 70 billion euros in the second half of 2022. They made up 16% of Adyen’s total volume. Keeping that number growing requires more staff like engineers, even if investors don’t like it.
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CONTEXT NEWS
Adyen on Feb. 8 reported 372 million euros of EBITDA for the six months ending in December 2022, missing analysts’ expectations of 464 million euros, according to Refinitiv data. The EBITDA margin fell to 52% from 64% in the same period a year earlier.
Net revenue in the second half of 2022 rose 30% year-on-year to 721 million euros, in line with the company’s medium-term growth target “between the mid-twenties and low-thirties”. Adyen said it saw no reason to change that target.
The company maintained its EBITDA margin target of 65% in the long term.
Separately, Chief Financial Officer Ingo Uytdehaage will join founder Pieter van der Does as co-chief executive, the company said.
Adyen’s share price fell by 12% to 1,351.8 euros as of 0902 GMT on Feb. 8