ADYEN and PayPal collaboration ~ 20 August 2024 update
Adyen has become PayPal's first Fastlane distribution partner. Many people shopping on line like to 'check out as guest' without logging in to the vendor's platform. However, doing so typically takes longer, which consumers dislike and often results in the customer failing to complete the purchase, which is bad for the merchant.
Fastlane is designed to tackle this problem. Fastlane is a service offered by PayPal which facilitates a more streamlined guest checkout process, using the PayPal email ID set up, which promises to reduce the time to check out by 32% compared to a traditional guest checkout and to deliver an 80% conversion rate into completed sales, which is a big step up.
Adyen will offer Fastlane to accelerate guest checkout flows for its enterprise and marketplace customers in the U.S., with plans to extend this offering globally in the future.
Adyen and PayPal have collaborated for several years, allowing Adyen's clients to offer PayPal's payment options, including PayPal, Venmo, and PayPal's Buy Now, Pay Later solutions. The Fastlane collaboration is the next step in this journey.
"The expanded partnership with PayPal further strengthens Adyen's ability to provide global enterprises with seamless payment flows and top-quality guest shopping experiences," said Pieter van der Does, co-founder and co-CEO, Adyen. "PayPal is a payment brand name that shoppers trust, and we're excited to take our collaboration another step further in the US, utilizing our combined expertise to raise the bar for our customers.''
It should be remembered that after 15 years of PayPal serving as the eBay payment method, its services were terminated in favour of Adyen. This was driven by a desire for greater control over the checkout experience and the ability to offer more diverse payment options to its global customer base. The move was expected to provide cost savings for sellers, increase revenue for eBay, and simplify the user experience by keeping transactions on-site. Additionally, eBay aimed to gain a competitive advantage in the evolving ecommerce landscape and improve its data collection capabilities, which aligns it to other major online marketplaces like Amazon and Alibaba.
Gracious in defeat, PayPal is now looking to leverage Adyen's superior payments infrastructure to distribute its own niche product offerings. This looks like being a win/win for both parties.
The Adyen investment thesis goes from strength to strength.
“As planned, H2 saw us gradually slow our hiring as we brought the company to its next stage of maturity. We now have the team equipped with the skills required to execute on our key growth ambitions, and to do so at scale....As previously communicated, the tempering of our hiring will allow our operating leverage to again become visible in our financials. Though this process will begin in 2024, the operational impact will be less visible as 2023 hires annualize, followed by more material leverage in 2025 and 2026....Growth is not always linear, and the importance of zooming out to the long-term trajectory cannot be overstated” Peter van der Does, CEO
Adyen publishes H2 2023 financial results. It delivered a period of profitable growth as the company finished its accelerated investment phase of growing its global team.
H2 2023 figures
Processed volume was €544.1 billion, up 29% year-on-year. Of these volumes, total point-of-sale volumes were €92.9 billion, up 37% year-on-year.
Net revenue was €887.0 million, up 23% year-on-year.
EBITDA was €423.0 million, up 14% year-on-year, with EBITDA margin landing at 48%. This figure was primarily impacted by team growth, which tempered as the accelerated investment initiative came to a close.
Free cash flow conversion ratio was 93%, with CapEx at 2% of net revenue.
Full-year 2023 figures
Processed volume was €970.1 billion, up 26% year-on-year. Of these volumes, point-of-sale volumes were €159.9 billion, up 42% for the full year.
Net revenue was €1,626.1 million, up 22% year-on-year.
EBITDA of €743.0 million, up 2% year-on-year.
EBITDA margin was 46% for the full year, compared to 55% in 2022.
CapEx was 4% of net revenue for the full year, compared to 7% in 2022.
Following my analysis a few weeks ago, I enjoyed a very impressive Investor Day on 8th November. If you didn't see it, try to find the recording. The team is very strong. But more than that, the business is run exactly as a business should be (it's rare). Costs are very carefully contained (CAPEX it pegged at 5% of revenue for example). Everything is built in house, so no dependencies on third parties. It is not a managerial bureaucracy, but instead operates on a decentralized basis where employees are empowered to take ownership of their area of responsibility (no micro-management). It has very high operating leverage - should hit 50+% EBITDA margin by 2026 and targets 65% beyond that. It has a very unique offering which is unmatched by anyone else (strong moat). It has an enormous TAM to grow into. Not only does it benefit from recurring revenues, but customers scale up consumption year on year creating a compounding effect. It has a pristine balance sheet with a large cash surplus. It has a banking license which opens doors to all sorts of ancillary services in future.
What's not to like?
No surprise the stock is up 33% at the open.
This is a buy and hold for a very long time. Anyone who saw the success of American Express, MasterCard or Visa will know how these financial businesses can compound at very good rates over the long term.
Very happy to be a shareholder. I'll still be a shareholder in a decade or two for sure!
ADYEN and PayPal collaboration ~ 20 August 2024 update
Adyen has become PayPal's first Fastlane distribution partner. Many people shopping on line like to 'check out as guest' without logging in to the vendor's platform. However, doing so typically takes longer, which consumers dislike and often results in the customer failing to complete the purchase, which is bad for the merchant.
Fastlane is designed to tackle this problem. Fastlane is a service offered by PayPal which facilitates a more streamlined guest checkout process, using the PayPal email ID set up, which promises to reduce the time to check out by 32% compared to a traditional guest checkout and to deliver an 80% conversion rate into completed sales, which is a big step up.
Adyen will offer Fastlane to accelerate guest checkout flows for its enterprise and marketplace customers in the U.S., with plans to extend this offering globally in the future.
Adyen and PayPal have collaborated for several years, allowing Adyen's clients to offer PayPal's payment options, including PayPal, Venmo, and PayPal's Buy Now, Pay Later solutions. The Fastlane collaboration is the next step in this journey.
"The expanded partnership with PayPal further strengthens Adyen's ability to provide global enterprises with seamless payment flows and top-quality guest shopping experiences," said Pieter van der Does, co-founder and co-CEO, Adyen. "PayPal is a payment brand name that shoppers trust, and we're excited to take our collaboration another step further in the US, utilizing our combined expertise to raise the bar for our customers.''
It should be remembered that after 15 years of PayPal serving as the eBay payment method, its services were terminated in favour of Adyen. This was driven by a desire for greater control over the checkout experience and the ability to offer more diverse payment options to its global customer base. The move was expected to provide cost savings for sellers, increase revenue for eBay, and simplify the user experience by keeping transactions on-site. Additionally, eBay aimed to gain a competitive advantage in the evolving ecommerce landscape and improve its data collection capabilities, which aligns it to other major online marketplaces like Amazon and Alibaba.
Gracious in defeat, PayPal is now looking to leverage Adyen's superior payments infrastructure to distribute its own niche product offerings. This looks like being a win/win for both parties.
The Adyen investment thesis goes from strength to strength.
Adyen Investment thesis firmly in tact:
“As planned, H2 saw us gradually slow our hiring as we brought the company to its next stage of maturity. We now have the team equipped with the skills required to execute on our key growth ambitions, and to do so at scale....As previously communicated, the tempering of our hiring will allow our operating leverage to again become visible in our financials. Though this process will begin in 2024, the operational impact will be less visible as 2023 hires annualize, followed by more material leverage in 2025 and 2026....Growth is not always linear, and the importance of zooming out to the long-term trajectory cannot be overstated” Peter van der Does, CEO
Adyen publishes H2 2023 financial results. It delivered a period of profitable growth as the company finished its accelerated investment phase of growing its global team.
H2 2023 figures
Processed volume was €544.1 billion, up 29% year-on-year. Of these volumes, total point-of-sale volumes were €92.9 billion, up 37% year-on-year.
Net revenue was €887.0 million, up 23% year-on-year.
EBITDA was €423.0 million, up 14% year-on-year, with EBITDA margin landing at 48%. This figure was primarily impacted by team growth, which tempered as the accelerated investment initiative came to a close.
Free cash flow conversion ratio was 93%, with CapEx at 2% of net revenue.
Full-year 2023 figures
Processed volume was €970.1 billion, up 26% year-on-year. Of these volumes, point-of-sale volumes were €159.9 billion, up 42% for the full year.
Net revenue was €1,626.1 million, up 22% year-on-year.
EBITDA of €743.0 million, up 2% year-on-year.
EBITDA margin was 46% for the full year, compared to 55% in 2022.
CapEx was 4% of net revenue for the full year, compared to 7% in 2022.
ADYEN
Following my analysis a few weeks ago, I enjoyed a very impressive Investor Day on 8th November. If you didn't see it, try to find the recording. The team is very strong. But more than that, the business is run exactly as a business should be (it's rare). Costs are very carefully contained (CAPEX it pegged at 5% of revenue for example). Everything is built in house, so no dependencies on third parties. It is not a managerial bureaucracy, but instead operates on a decentralized basis where employees are empowered to take ownership of their area of responsibility (no micro-management). It has very high operating leverage - should hit 50+% EBITDA margin by 2026 and targets 65% beyond that. It has a very unique offering which is unmatched by anyone else (strong moat). It has an enormous TAM to grow into. Not only does it benefit from recurring revenues, but customers scale up consumption year on year creating a compounding effect. It has a pristine balance sheet with a large cash surplus. It has a banking license which opens doors to all sorts of ancillary services in future.
What's not to like?
No surprise the stock is up 33% at the open.
This is a buy and hold for a very long time. Anyone who saw the success of American Express, MasterCard or Visa will know how these financial businesses can compound at very good rates over the long term.
Very happy to be a shareholder. I'll still be a shareholder in a decade or two for sure!
thanks a lot for the write up. I am doing my research on Adyen. Your deep dive analysis is really helpful.
please share your findings when they are ready. There is an investor day on 8th November. We should learn more then