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Adyen’s Revenue Miss Wipes Out $13 Billion of Market Value
Revenue growth was hurt by pricing competition, inflation
Net sales rose 21% to €739.1 million, missing estimates
By Sarah Jacob
17 augustus 2023 at 07:46 CEST
Updated on 17 augustus 2023 at 12:18 CEST
Adyen NV’s shares plunged after increased competition in North America contributed to the slowest revenue growth since its initial public offering, wiping out more than €12 billion ($13.1 billion) of its market value in a single day.
Shares of the Dutch payment processing company fell a record 27% to €1,081.40 at 11:40 a.m. in Amsterdam, the lowest since May 2020. Trading was temporary halted due to volatility earlier in the day.
Revenue growth in the first half was impacted by pricing competition, as well as higher inflation and interest rates, the Amsterdam-based fintech firm said on Thursday. Net sales rose 21% to €739.1 million in the period, compared to an estimate of €776.5 million in a Bloomberg survey of analysts.
Adyen has been a reliable growth stock, with revenue rising by at least 26% in every half since its listing in 2018 until the latest period. The disappointing results, which were also hurt by inflation and rising interest rates, suggest maintaining such momentum will be a challenge.
Adyen's Growth Has Never Been So Slow
Net revenue increased by 21% in first half, lowest rate since IPO
Source: Bloomberg
Revenue growth in North America, which accounted for a quarter of the company’s sales in the period, more than halved to 23%. Adyen’s digital customers have been focusing on profitability more so than on growth in the US, Chief Financial Officer Ethan Tandowsky said in a phone interview.
“That did have some impact on the growth that we saw,” he said. “In a market like this, some customers choose to see if they can find a lower cost provider who could offer the similar functionality.”
It “will be difficult for Adyen to accelerate growth” in the second half as competition and currency headwinds will remain a factor, Jefferies analyst Hannes Leitner said in a note.
What Bloomberg Intelligence says:
Adyen’s disappointing 1H net revenue — a 5% miss vs. the MODL consensus — along with a slowing North America segment (25% of the total) and digital volume, add to concerns of the Ebitda margin not achieving estimates again (a 6 percentage-point miss) as the hiring push continues. This suggests the reiterated long-term goal 65% Ebitda-margin goal will face greater skepticism, making analysts’ estimate of 49% this year and 28% net revenue growth look steep.
Tomasz Noetzel, BI Financials analyst
Adyen’s profit margin missed expectations due to its industry-defying hiring push and inflationary pressures. Margin on earnings before interest, taxes, depreciation and amortization - a measure of profitability - was 43% in the first six months of the year. That compared with an average estimate of 48.6% among analysts surveyed by Bloomberg.
Adyen added about 1,150 employees last year and has said it will hire a similar number in 2023 as it prepares for its next growth phase. Hiring at the payments firm sets it apart from larger peers that have announced job cuts to lower costs amid rising interest rates and economic uncertainty.
Adyen, whose rivals include Stripe Inc. and PayPal Holdings Inc., is “building the team that can realize the long-term potential” rather than optimizing profitability, it said in the statement. The company expects to slow hiring at the start of next year.
PayPal said January it will cut 2,000 employees and Stripe announced a 14% cut in workforce late last year.
Adyen, which handles transactions for companies such as McDonald’s Corp. and Hennes & Mauritz AB, reaffirmed its guidance for Ebitda margin at above 65% in the long term. It continues to expect net revenue growth at a rate between the mid-20s and low-30s in the medium term.
— With Henry Ren
(Updates with shares in second paragraph and additional details starting in the fourth paragraph.)