Hi, all, and welcome to our H1 2022 Earnings Call. I'm here live from our Amsterdam office together with Ingo Uytdehaage, our CFO; and Ethan Tandowsky, our Head of Group Finance, who will later on talk you through our results and key developments from the first half of the year.

[Operator Instructions]

Before we dive into a conversation with Ethan and Ingo, the team has prepared a video for you that will show how we've been back here in the office and the results and key developments from the first half of the year. I hope you enjoy it as much as we did.

Thank you. Hello, and welcome to our H1 2022 earnings call.

We're excited to share the key developments from the first half of 2022. So let's get started.

The highlight of the first half of 2022 was meeting with the Adyen team and our customers in person after connecting virtually for much of the last 2 years. The relationships we foster face-to-face are vital to is scaling our culture and founding principles of speed, flexibility and innovation.

Coming back together and into the office created an incredible buzz throughout the company. Our team and culture remain our focus, and we were able to accelerate our hiring pace.

The Adyen team totaled 2,575 FTE at the end of H1 2022.

On the product side, there were several exciting launches during the first half of the year. We made multiple investments in the Unified Commerce space to enable the most forward-thinking in-store customer journeys.

We seized the opportunity to speed up innovation on the hardware side by releasing the first Adyen-designed terminals.

Another launch was rolling out tap to pay on iPhone in collaboration with Apple, enabling businesses to accept contactless payments on an iPhone. While digital transformation was once a priority for select industries, the trend is quickly spreading.

Seamless Unified Commerce journeys are a need to have across industries. With our advanced offering, we continue to service today's and tomorrow's most innovative brands.

Another product innovation was expanding our offering for platforms by building an embedded financial product suite encompassing bank accounts, business financing and card issuing. The opportunity in financial services is significant, and we find ourselves uniquely well positioned to capitalize on it due to historical investments in our global licensing, product offering and strong team.

This is an end-to-end solution accessible via a single integration and which leverages our own licensing framework.

Within a shifting macroeconomic landscape, we saw multiple longer-term trends persist and are posting a strong set of results, underscoring the resilience of our business model. On these trends, in line with previous periods, customers already on the platform contributed over 80% of volume growth.

Volume churn remained below 1%. And we saw net revenue contributions continue to diversify across industries and regions as we successfully execute our land-and-expand strategy for a more global business every cycle.

Now let's dive into the financials. In H1 2022, we processed EUR 345.8 billion on a single platform, growing 60% year-on-year.

Of these, point-of-sale volumes were EUR 44.9 billion and up 97% year-on-year, making up 13% of total process volumes. These numbers are a testament to the continued traction and increasing relevance of our unified commerce offering.

Net revenue was EUR 608.5 million, up 37% year-on-year. EBITDA was EUR 356.3 million, up 31% year-on-year.

EBITDA margin was 59% for the period. With travel restrictions lifted, travel and event costs return as we were able to meet our customers and colleagues in person again.

In addition, our commitment of 1% to the United Nations sustainable development goals impacted our EBITDA margin. This pledge enables us to scale our impact, technology and social responsibility programs in line with the business' growth.

We continue to build Adyen for the long term. We have a significant opportunity to capitalize on and a talented team in place.

Our gaze is ahead, and the time to execute is now.

Yes. I think for all of us, this video just puts an instant smile on our face.

It's -- I might be slightly biased, but looking at that video, Ingo, for an opening comment, what would you start with when you reflect on the first half of 2022?

Yes, I think it's the whole atmosphere in the video. Like being together in the office again in the first half year is really special to us.

The fact that we have worked together face-to-face, visiting our merchants face-to-face, that's a unique thing in our company. We make sure that by working together, you get a lot of creativity in the team.

And we have always focused on being an office-first culture, and we continue to do that. So that's, I think, a great achievement of the first half year.

We also experienced this when we had our company event again for the first time in 3 years, the whole company here in Amsterdam, seeing each other, speaking to each other, working together. It gave so much energy to the team.

And of course, that's crucial in building a company, and that's, of course, something I'm very proud of.

Yes. I think, Ethan, we can both only fully subscribe to that.

But if you'd have to add anything else to the second -- first half of this year, what would it be for you?

Yes. Well, while that's certainly an interesting change that Ingo mentioned, what's actually really interesting to me is that a lot of the longer-term historical trends that we've seen on the platform continued.

So things like over 80% of our growth coming from our existing merchant base, less than 1% volume churn, continued diversification of our net revenues across regions, all continued even during what was a pretty dynamic macroeconomic situation. So I think that's really impressive for this business and shows the resiliency.

And I think you can see the resiliency in the numbers, where we grew volumes over 60 -- or at 60%, as you saw in the video. Net revenues grew at 37%, and we got to EUR 608.5 million.

And EBITDA margins were at 59% with the reference to the travel that we've been able to do as a team to see each other but also to see our customers and, of course, the pledge to the UN sustainable development goals.

So we're really happy and pleased with the numbers. And I think especially if you dive into those numbers, you'll also see that our point-of-sale volume especially was significant.

It almost doubled this year, and we're seeing a lot of traction in many use cases. And I think that's a real testament to the success of Unified Commerce and how important it is to our customers.

And so we'll continue to focus there. And I think especially on the hardware side, we spent a lot of time getting out a new terminal set, a terminal range developed by us and designed by us.

So I think that's a great development together with the tap to pay on iPhone, which we also launched in this half year. So a lot of exciting things happening on the Unified Commerce side.

Yes. So indeed, it really sounds like a strong set of results.

And true to our formula point, we have been launching fast. And I think there's even more to add on that front certainly from a product perspective.

Ingo, what would you add?

Yes. The other focus has been on building out our platform offering.

Over the recent years, we've focused very much on helping platforms to offer payments. Of course, that started off with eBay, but also other software as service providers, offering payments in their mix.

And we have now gone one step beyond that.

We strongly believe that a lot of SMBs are underserved by the traditional financial institutions. And those platforms are often the trusted partner for those SMBs.

And what we can do is power them with other financial products, other financial products like capital, bank accounts, but also issuing. And we see this as an opportunity to serve the SMB market.

So we're in a really good place there. We've just started that.

It's a long-term investment in this portfolio. So it's going to take a couple of years to really see the revenues.

But also if you look at the investments that we in the past years have made in Unified Commerce, you see that it actually is going to pay off.

So we have a very similar expectation here to platform. So that's where I'm very much excited about and really pleased that we're live with a couple of pilots in this in this area.

I think we're all very excited, and as the movie said too, the time to execute is now. And executing is what we do with the team.

Before we dive into Q&A, any final notes on how we're building the team?

Yes. Building the team is crucial to us.

We've added close to 400 people in the first half of this year. Very pleased to see those new people.

I think we found ways to further scale up the business. That's also something that we want to do in the rest of this year.

We have a huge opportunity, and it's indeed all about now executing it with the team. And I'm really happy to see the team further growing as of now.

I think that's the best comment to close off this conversation on key developments and results for the first half of this year. I see that there are already quite some questions coming in.

So over to Q&A.

The first question that came in is from Mohammed Moawalla from Goldman Sachs.

Great. I had 2 from my end.

Firstly, you talked on building the team out, and we saw the big step-up in headcount. Can you help us sort of understand the pace of the investments?

Are we going through a kind of significant investment cycle? And when would you expect sort of operating leverage to return because you've obviously reiterated your long-term guidance?

And then secondly, how do you measure the payback on sort of those investments? And how should we think of the kind of revenue trajectory?

Linked to that, I guess, are you seeing any sort of slowdown? Clearly, the numbers don't demonstrate it.

Just curious to get your sense from a macro standpoint how your business is getting impacted and how you're offsetting that with the share gains and some of the other structural initiatives.

Thanks for your questions, Mo. Ingo, if you could take the first 2 on our investments and how we're expecting those to result into operating leverage over time.

And then, Ethan, if you can take the macro note afterwards.

Yes. So indeed, Mo, those investments are for the longer term.

If you look at where those investments go right now, it's in building out the teams. Most of our new staff is on the tech side of the business.

And over the past half year, 50% of the new joiners were in those tech roles.

But it's going to take a couple of years before we see it back. So it's more like a long-term multiple year investment.

At the same time, if you look at the cost increase right now, it's not just the people, it's also the fact that people travel again, meet merchants, which is very much important and also the 1% to the UN pledge. These all result in higher costs.

Of course, if we would slow down the hiring, and we would fairly easily get to the 65%. So there is strong operating leverage in the business.

So it's not that we need a lot of operational staff to keep the business running. This is all about investing in the future.

And it is a longer time horizon before you see a product like the embedded financial products turning into significant revenues. But that's an investment that we want to make because we have also seen in the past with Unified Commerce that, that really pays off.

So that's why we strongly believe this is the right thing to do at the moment.

So to recap, our long-term view remains intact moving back from the long term to today. Ethan, the macro impact on e-commerce?

Yes. So in general, our growth comes both from the growth of our customers, of course, but also from doing more business together with our customers.

And because of that mix, we haven't seen an impact in our numbers in the first half. We're very much focused on the long-term opportunity like Ingo referenced.

And we're very, very excited about that opportunity, and therefore, we continue to hire at a fast rate.

Of course, on the short term, we're focused on the same things that we've been focused on in the past, which is how can we do more projects, how can we work together more with our customers and help them solve more of their pain points, more of their problems. And that's where we'll continue to focus on the short term, especially with the confidence we have in the long-term opportunity.

That should answer your questions, Mo. On to the next question from Adam Wood at Morgan Stanley.

I've got 2, please. The first one is just digging a little bit into Europe.

The 30% growth there is obviously very strong. That suggests that maybe you're not taking share at quite the pace that you were in previous periods.

Appreciate there's lots of differences in your business mix versus the other acquirers in terms of the mix of e-com versus point of sale. But I wonder if you could just dig in a little bit in Europe and talk about how much of that is a weaker e-commerce market generally?

Whether you're seeing more competition in Europe? And whether there is any incremental difficulty in taking share of the existing merchants because you've already got a stronger market presence in that market?

And then secondly, just maybe digging in a little bit further on those question on margins. I guess we're all trying to kind of reestablish with costs you've avoided during COVID coming back in whether this is kind of now a rebased level of margins that we should expect some operating leverage off?

Or whether you do see any need for kind of incremental larger investments because you're targeting a much broader set of products than you were when you were just focused on merchant acquiring?

Thanks, Adam. Ethan, could you take Adam's first question on growth in Europe?

Yes, sure.

And then we'll move to Ingo afterwards for Adam's question on EBITDA margins.

Yes, sure. So I guess, first, as a starting point, we typically look at our customers globally because often, we work with them across the world.

And so there are times when one region goes faster than another based on the projects we're working on with those global customers. In this case, I would say also Europe, we've been here the longest.

So also, we're working from the biggest base.

In general, we're really happy with the growth numbers that we're seeing in Europe. We're still taking market share.

We're still seeing that we win from the incumbents from the traditional players and also from the newer players. So we're really confident in our performance in Europe as well, and we continue to hire here, too, to support that.

Yes. And from an area where we've been present for a long time to also newer plans that Adam pointed out in our current investments.

Ingo, could you shed a bit more light on our EBITDA margins, and why we decided to invest in the areas we did?

Yes, sure. So we still see a lot of future potential, and that's where we're investing in.

I think it's important to highlight that EBITDA margin is still 59%. So it has not dropped dramatically.

That's also why we strongly believe that we can keep the guidance intact. There is a lot of operating leverage in the platform.

And for us, it's always been the question like, how can we build this company for the long run.

If you want to make certain investments, we want to do that right now. And then that has some impact on the short-term margins, but it will really lead to a bigger business over time.

And that's what we're focused on. So that's why we've made this decision.

And yes, we're actually quite pleased with -- that we have this opportunity to invest.

So true to style, we remain our long-term view. Adam, I think that should answer your questions, too.

Up next is James Goodman from Barclays.

Yes. A couple from me as well then, please.

So just firstly, one effect that's slightly difficult to disentangle from the numbers is just the strong travel rebound that we've seen. Obviously, that's shown in the full stack percentage going back down.

Can you just talk a little bit about where we are now in terms of travel as a percentage of the business, given how much the rest of the business has grown since pre-COVID? And to help us get a sense of whether we're seeing maturity maybe or at least a stabilization in the full stack percentage and its effect on the net take?

That's the first question.

The second one was if you could talk a little bit more about the rationale to launching your own point of sale. I noticed that you're working with third-party hardware providers.

So to what extent is the hardware you're offering fully differentiated? And how does that allow you to compete?

And what sort of subset of your merchants is that going to be relevant to?

Thank you, James, for your questions. Ingo, if you could take the first one on travel and impact on our volumes.

And Ethan, if you can then afterwards speak to the rationale behind the lines of our terminals today.

Yes, sure. So if you look at the full stack volumes, we are at 78% this half versus 83% last year.

So that's, I think, sort of a proxy for the impact of travel. The travel rebound has been indeed very strong.

So you see that the world has opened again. That also impacted the take rate on our platform.

There is some pressure on the take rate as a result of this.

But at the same time, yes, it's part of having this type of verticals on our platform. So very much in line with the expectations that we had when the travel indeed rebounded.

So...

Yes. And on our own terminals, we indeed don't manufacture them, but we did design them.

And that was through feedback together with our customers about how they would best want to use our terminals and how we could make journey as seamless and easy for them as possible. And so we took their feedback into our own design.

And we've worked hard to create our own Adyen-designed terminals, which now help especially with use cases like mobile. So being able to have a store clerk go out and meet the customer away from the desk, which really helps with certain customer journeys as well as in add-on to an iPhone or an iPad, a smartphone, which also makes some of those journeys easier.

So it was really listening to our customers, identifying what the use cases where that -- we could help them solve. And then yes, taking it into our own control to design it the way we felt could best solve their problems.

Thank you. Clear.

James, thank you for your question. It's now time for our next question.

Up next is Sandeep Deshpande from JPMorgan.

My first question is on the take rate. I mean, because of the return of travel and various other factors that you've mentioned, you've seen this take rate decline quite a lot in the half.

I mean, your process volume was impressive really in the first half as such really, given how the market behaves.

So I have 2 questions associated with that. The first one is, I mean, given that you are exposed to a very large enterprise customer base, should we be essentially looking at in the long term that your take rate over time will essentially keep declining over time, given that these customers will keep growing?

And hopefully, if you are successful, you will keep expanding your footprint within these customers?

And then secondly, regarding the take rate, I mean, how should we look at travel as -- in terms of the take rate because there are 2 aspects of travel airlines, right, which is that they are not full stacked for you. And then secondly, it is gateway only.

And that inflation, which is occurring in the travel market, may not be helping you as much. So I try to understand how we look at this travel because travel probably will remain a strong growth driver for you for another year at least?

Thank you for your questions, Sandeep. Ingo, if you could start and highlight how we continue to grow with our customers, what our strategy is in that front and also what it does to our take rates.

I think Ethan then can take over for further take rate dynamics.

Yes, sure. So if you indeed look at our customer base, it's mostly enterprise merchants.

And the take rate is indeed -- or the declining take rate is a result of the business model because we've always had tiered pricing. So if a merchant brings more volume over time, you get lower prices per transaction, so a decline in take rate.

And that's still the case. So that's a real driver in combination with the fact that the full stack percentage has gone down.

So these are the drivers. It's also the reason why we don't really manage on take rate.

We manage on absolute margins. And indeed, if we continue to grow large enterprises on our platform, then there will be some pressure on take rates, which we think is a positive because then we're growing the business.

And that's eventually what we want to achieve.

I can only agree. Ethan, the follow-up question on more detailed take rate dynamics also around travel?

Yes. So travel has a couple of impacts.

One is the full stack percentage that was referenced as well that typically for airlines, we do just do gateway volume. So that has an impact on the full stack percentage, but also typically higher ATV, so higher average transaction values in the airline and travel space in general.

And that also has an impact on take rate.

Travel is growing very fast in the first half year. That's clear.

It's still not the same proportion as it was of our business before the pandemic because many other verticals have grown a lot throughout that time period as well. But yes, those are the impacts that the travel has on take rate.

Thank you for that question, too. On to the next.

Frederic Boulan from Bank of America.

So first of all, coming back on your commentary around no macro impact, just trying to turn back a little bit the slowdown in revenue growth you've seen in H1, a bit more than 30% on an underlying basis. So that's about 10% slower than H2.

So if you can discuss some moving parts here, any seasonality we should look forward to in H2 in retail or other verticals that could drive different dynamics in growth in your street segments being digital, new COO platform?

And then secondary around your margin, we discussed it a bit, 270 bps compression in the first half. Taking your commentary around your commitments, your investments in people, marketing, travel, et cetera, is it fair to assume that we should be at that kind of base level for H2 and next year before we start to see some of [indiscernible] coming back up just to gauge a little bit the phasing of margins?

Thanks, Fred. I think Ingo, these are 2 questions that we'll both fit you.

The first is on revenue growth, what moving parts have been there and also the impact of industry mix? And the second one, also on what we're expecting on our margins and when we -- how those will pay off over time?

Yes. So I think if you look at our revenue growth, it's also good to look at volumes.

So the volume growth is 60%, and the fact that revenue growth is just 32% (sic) [ 37% ] is partly caused by this take rate development that we just discussed. I think the good thing if you look at our revenues that it's more and more diversifying.

So we're becoming more and more global business. And the region, all regions are growing.

So that's also a very, I think, healthy development in our base. So as a result, we're, yes, pleased with those developments.

On the margins, we're -- again, we're focused on the long-term investments. If we had to get to the 65% guidance, we could get there very, very quickly.

And that would only have impact in like multiple years before you would see it down in the revenue growth. At the same time, we think that this is crucial to do right now given the opportunity that we see.

And I find it very hard to give like this year's guidance or next year guidance on EBITDA percentage because we want to invest in the business. And at the same time, of course, we don't want to overspend.

I think the most important factor is growing the team, making sure that we grow the team in a healthy way. We've always had the bar -- set the bar very high in hiring new people.

And that also avoids situation where we would instantly overspend because we would overhire basically. We've never done that.

We won't do that. But we also won't give any EBITDA guidance on the short term because we think it doesn't fit our business model.

We want to focus on that long term.

I think that comes to no surprise to anyone. That's -- thank you for sending in your questions, Fred.

It's time for next up. Josh Levin from Autonomous.

I have 2 questions, first on full stack percentage that's around 78% of TPV now. Before COVID, it was closer to 72%.

So do you think that will -- full stack acquiring will go back to the 72% area?

And the second question is on headcount. You added, I think, 400 new employees during the first half.

Is that the pace we should expect for the next few semesters? Or where should we think the headcount ends up at the end of this year or the end of next year?

Thanks for your questions, Josh. Ethan, could you take the first one on full stack acquiring and how that's evolved?

And Ingo, could you speak a bit more to our hiring plans?

Yes, sure. So on full stack percentage, pre-pandemic, we talked a lot about how at that time, the majority of our nonfull stack volume was with airlines and how we expected that airlines wouldn't grow at the same rate as all the other verticals on our platform, not only because the other verticals were growing fast, but also because we were adding verticals to our platform over time.

And I think it's safe to say that we've done that over the years, the last couple of years, and we'll continue to do that. So I wouldn't expect that it would go back down to those levels because I wouldn't expect the proportion of airline volume to remain what it was pre-pandemic.

I think very clear. Next question, our hiring plans for the upcoming years.

I think the movie might have already said something, but go ahead, Ingo.

Yes. So indeed, we hired 400 over the first half.

We certainly want to further expand to the team and because we see the opportunity. At the same time, we want to keep the bar high.

So it's always about finding that right balance, also the capacity to onboard new people.

But if we could hire 400 people in the second half of same quality, we would certainly do so. So I think this will absolutely be the pace that we try to keep if we find the right talent.

And we're currently in a position that we can, so we will.

As we said, the time to execute is now. Thanks, Josh.

On to the next question. Next question is from Nooshin Nejati at Deutsche Bank.

First of all, I'm surprised Peter is not with you. Hope he's fine.

I have a couple. First, if you can give us some idea of your exposure to discretionary demand versus nondiscretionary?

That would be helpful.

And then, I guess, it's quite the same as others, but I want to know more about the CapEx trends going forward for the rest of the year. And how should we think about it going into 2023?

Do you expect to remain above your guidance or you would go back to the below 5%?

And yes, also, if you can give us more on the cost projection? I know you talked a bit more about hiring and so on.

But if you can give us a little bit of idea of how to think about margins going forward in the same range or you are actually thinking of expanding?

Thanks for your questions, Nooshin. Ingo, if you could start.

First question is on CapEx and then afterwards on discretionary spend.

Yes, sure. I think on the CapEx, we have slightly higher CapEx levels also than our guidance because we saw some supply chain challenges in ordering a new server capacity for our data centers.

That's why we have been investing quite aggressively to stay ahead of the curve. And I think that's for this year more a one-off than that this is a new spend level.

And then on the volumes, I think the majority of our volumes are linked to consumers spending at our enterprise merchants. And of course, that's, I think, mostly seen as discretionary spend.

So that's what I can say about it.

I think there was another question also on margins moving forward if I'm correct. Ethan, if you would want to take that?

Yes, sure. So I think Ingo touched on it, right?

The most important factor here is how do we grow the team, and we see the opportunity. We feel like the long-term opportunity for us is big and that there's talent and we can bring into Adyen.

We continue to find that talent. We'll continue definitely to bring them in.

On the other hand, this half year, there was the increase of travel of our team getting to meet with each other and with our customers and also the UN pledge I referenced earlier. And both of those things we expect to be consistent into the -- yes, consistent going forward unless something would change in the macroeconomic ability to travel and to see each other.

So I think those things are still in play going forward. And we'll continue to grow the team as long as we find the best people and are able to keep the bar high to help realize that long-term opportunity.

Thanks.

And maybe to quickly add, like also to have no confusion around this. Like if we would stop hiring right now, we could very quickly get to the 65%, and we also would not run into operational problems because I think that's very important to stress.

Like we're hiring because we want to expand.

We're not hiring because we need to keep running the business. So it is really on, yes, to get to this next level and the opportunity that we see.

I think it's very important to stress that.

Yes. I think it's a really good point to make, indeed.

And then to your point that Peter couldn't attend today due to personal circumstances. But probably he is doing well, and thanks for that question, too.

And with that, on to the next question. Sébastien Sztabowicz from Kepler Cheuvreux.

Yes. Just 2 questions from my side.

Have you seen any substantial discrepancies between the organic growth in Q1 and Q2?

And secondly, could you please quantify the impact from growing inflation to your business? Have you seen any specific impact on your net revenue or your profitability in the first part of the year?

Thank you for those questions, Sébastien. Ingo, could you speak to our organic growth with our customers?

And Ethan, could you speak to our CapEx developments in the first half of this year?

Yes. So if you look at revenue growth over the quarters, we don't really disclose it.

I think the development the first half has been -- they have not been really cyclical trends there. So I would say that's been very much in line or so with earlier years.

Yes. And on the CapEx side, it is about investing and making sure that we're building strategic relationships with our suppliers so that we're never in a situation where we have a shortage of anything, that we're able to scale and continue to grow the business as we believe we can without running into those more short-term related issues.

So this is certainly more in effort to make sure we get a bit ahead of any supply chain disruption or anything that could come and make sure that we're well prepared to grow into the coming years.

Thanks a lot. I think that should answer all questions on this front, too.

It's time for the next question with Antonin Baudry with HSBC.

Can you hear me?

Yes, we hear you now. Thank you.

First question is about there is a huge gap between the growth of your volumes on the gross revenues, so plus 60% on plus 55% year-over-year, respectively, on your net revenue growth, plus 37%, implying a strong unusual increase of financial institutional cost in H1 from '22. What explains that?

And how should we consider the relation between volume growth and net revenue growth in the future?

Thanks for those questions. I think, Ethan, they would fit you, both.

The first question is if I recall correctly on how take rate evolved during the first half of the year?

The difference between the gross revenue growth and the net revenue growth. And that's certainly something that I can talk to, which is that in general, in our gross revenue line, we also have the cost that we incur from financial institutions, right, the scheme fees or the interchange costs that come through.

And those we pass through to our customers.

So those have very limited impact on our net revenue position. They are really very much driven by what the schemes do, but also where the volumes come from and which geographies.

So we tend to focus our attention purely on the net revenue number rather than on the gross revenue number.

Clear. Thank you.

I think that should answer Antonin's question. Next up, we have [ Greg Ward ] from AlphaValue.

Everyone, can you hear me correctly?

Yes, we can. Thanks.

Okay. Great.

If we look at digital, could you give us some insight about how much of these merchants also have in-store capacity? And what holds them back from actually deploying Adyen's point-of-sale solution to actually enhance the benefits of Adyen's product?

And under this unstable and sort of tense environment, could you share with us whether there has been a change in tone from merchants and whether their approach or willingness to further spend money to upgrade their checking out experience has slowed or actually increased?

Thanks, [ Greg Ward ]. Ingo, could you take both questions?

First on customers in our digital pillar also leveraging point of sale, and the second one on how we're working with our customers in the current environment?

Sure. Yes.

So if you look at the digital merchants, there are certainly digital merchants that indeed at one moment in time also start to add point of sale to the mix. I think it's a very logical next step, adding a sales channel.

We've been very successful in migrating merchants or expanding merchants in our land-and-expand strategy, and we continue to do. So there is -- there are quite a few digital merchants still in that vertical that over time could migrate to Unified Commerce.

And yes, we are, of course, very happy with that.

There's also, by the way, a lot of unified commerce merchants that have point of sale activated that could still add the digital part of their business. So there's still lots of room to grow.

Then discussions that we have with our merchants also on the macroeconomic circumstances, so far, we have not really seen a big inflation impact in our business also because an important part of our pricing is ad valorem. So if the volume increases, that also impacts our net revenue.

And I think some other trends that are seen in the industry, for instance, that there is lower growth in e-commerce, that's not something that really has affected us yet. I think that's also very visible in our volume growth.

So, so far, so good. We have no indications that it's different right now.

Thank you. [ Greg ], that should answer your questions.

Next up is Chris Brendler from D.A. Davidson.

Okay. Great.

Can you hear me?

Yes, we can, Chris.

Awesome. Congratulations on the excellent results.

I'd like to ask a question on buy now, pay later phenomenon that really gained a lot of traction in the United States and elsewhere during the pandemic and has slowed a bit here. I know you work with many providers.

Can you just talk about how the growth on your platform has behaved and how adoption rates have maybe changed after the pandemic?

Yes, sure. Chris, thank you.

Ingo, buy now, pay later. Could you answer Chris' question?

Yes, sure. So yes, buy now, pay later is, of course, one of the payment methods that we offer to our merchants.

Indeed, depending on the region that we're active, we offer different types of buy now, pay later methods also depending on the merchant needs. It has really taken off during the pandemic, but it's always been compared to, I think, still the majority of our volume on our platform, which is card volume.

And yes, we have to see how it will eventually work out in the next couple of quarters. Also, of course, depending on probably macroeconomic circumstances, given the fact that these are typically credit products.

So we have to see how this works out.

Clear. And with that, on to the next question.

Next up is Jamie Friedman from Susquehanna.

I had 2 questions. How in general should we be thinking about the platform impact on the take rate?

And I know you don't manage the take rate, but it's my job to ask. So the platform impact on the take rate, that's one thing.

And then in terms of the financial product suite, and I like this Slide 11, where you get the ecosystem of the financial product suite. It has accounts capital and issuing.

Which of those currently is gaining the most traction? If it's too early to say, how in general are you going to market with the financial product suite?

So the first one on platform. The second one on financial products.

Thank you, Jamie. And acknowledging that it is your job to ask.

Ethan, can you answer Jamie's question on how platform volumes impact our take rates?

Yes, absolutely. So in general, when we look at platform volumes, we don't see that there's a big difference in a platform versus unified commerce or digital merchant in terms of the take rate.

We typically look at it in the size of the business, right?

So if the size of the business is much bigger or much smaller, that typically has much more of an impact on the pricing than the pillar by itself. Of course, if we can sell more services over time with the embedded financial products that were referenced, that should, of course, help find opportunities to generate net revenues as well.

But it's much more driven by the size of the business than the pillar it's in.

And I think that's a nice segue into selling more services to platforms. Ingo, if you could do a recap of the functionalities of our embedded financial product suite for Jamie, then I think we have covered both of his questions.

Yes, sure. So if you look at the suite, it consists of issuing accounts capital and payouts.

If you see what's live currently, it is mostly issuing payouts. We're doing with the other products relatively small pilots at the moment.

So it's early stage, and we will continue to talk about it once we have more proof. The feedback on the product so far has been really positive.

So that's also why we keep investing. We're quite convinced that this is the right investment for us.

And with that, on to the next question. Next up is Alexandre Faure from BNP Paribas.

A couple of questions on -- just a follow-up on earlier questions on take rate. What -- so you explained very clearly how the size of the customer is at the end of the day, but the bigger driver of take rate.

I was just wondering if outside of platforms, you have other initiatives to chase perhaps the bottom end of the enterprise segment or the top end of the mid-market segment. I don't know how you want to say it, but perhaps go after customers that would be slightly more supportive to take rate in the next few quarters or so?

And my second question is very much a clarification. When it comes to the eBay contract asset, I think you say in the shareholder letter that monetary component is now fully amortized.

So how should we think of the annual depreciation charge of this contract, about EUR 20 million a year? Does that sound sort of ballpark correct?

Thanks for your questions, Alexandre. I think, Ingo, if you could on his first question, speak to our different commercial pillars?

And how we go to market there? And Ethan, we're lucky, we have an expert in the room, can explain you everything about the eBay contract?

Yes. So if you look at the -- specifically on any initiatives to increase take rate, I would say like it's not typically how we manage the business.

And maybe that's a bit boring because we keep repeating that.

I think for us, mainly the driver is size. If the merchant grows, and we have lower pricing per transaction and therefore, a lower take rate.

So it is, to a certain extent, a sliding scale if you get more and more volume from bigger merchants.

Of course, if there is an area where in the long run you could expect a bit more increase in take rate is, of course, with embedded financial products. That's where it is.

But of course, that's less also linked to process volume because these are different type of products.

But of course, we think about how we can further grow the revenue of the business. It's key to us.

We really want to make sure that we continue to grow the absolute margins of the business.

Thank you. And then Ethan, on the eBay contract assets?

Take it away.

Yes, sure. I think as a good starting point, it's important to understand that every contract that we have on the platform is profitable.

I think it's important to start there.

And then if you talk about the contract assets for eBay then specifically, there are 2 parts. There's the monetary component and the nonmonetary component.

And the monetary component, indeed, has been fully amortized. So that you shouldn't expect a charge there going forward.

On the nonmonetary side, that will continue. And so you can just look at the nonmonetary piece, which we've disclosed and expect that to continue over the life of the contract, while the monetary piece is now fully depreciated.

Thanks for that, Ethan. Alexandre, that should have answered all your questions.

Thank you for those. On to the next question.

I see another question from Frederic Boulan at Bank of America coming in.

I'll keep it brief. Can you shed any light on the margin profile of POS versus online and specifically on the new initiative you announced today on terminal?

If you can comment on line of that and maybe tap to pay online as well?

Yes, I think we certainly can. Ingo, could you take that question?

Yes, sure. So if you look at the margin profile for our payments, both in-store or online, typically, there is not a real difference.

Also on the terminals, we -- we've never focused on making huge margins on terminals because for us, it's more important to get them out in the field. We also don't want to have it as a loss-making business.

So we always try to sell it with a minor profit. So the introduction of our own terminals is certainly not to increase profits on the terminal hardware side.

It's more on the innovation side and making sure that we also by having full control that we could drive down the cost of the terminals to offer it at a more competitive price to our merchants, but also to the platforms.

So that's, I think, the strategy behind this. For payments, it's, again, mostly volume-driven.

And we don't see a big difference between in-store and online.

Thank you. Thanks for that additional question, Fred.

On to the next question. This is Tammy Qiu from Berenberg.

So one of the long-term one, because of your expenses are continuing to go up, and probably that will still continue to go up in the future, given you had the early one probably didn't spend -- didn't stop hiring. So for the cost of getting additional business or getting additional merchants, is that definitely more expensive going forward?

And also, there is another long-term question I would like to ask after this.

Okay. Great.

Then we'll dive into the first question, and we'll wait for your second one. Ethan, could you take the first question on cost and how that over time will also translate to new customers?

Yes. So I think it's an interesting question because it is true that if we would just focus on the markets that we're in now and the customer groups that we go after now, of course, that we could already get to a lot of operating leverage, right?

That's what Ingo referenced earlier. And I think that is really an important point.

But what we're saying is that we really want to invest in these new areas, right? We're starting to see a lot of traction in the platform space.

And their needs are wider than just payments. It's a great starting point, but they need more than that.

And that's an area where we'll invest.

Of course, that investment, you won't see straight away. So if we wouldn't do it, you would get to faster operating leverage.

But because we are, there will be a period of time where it truly is an investment before it really kicks into net revenues. So yes, it's fair to say that it will be -- will cost more to get to new customers if we choose to go after new opportunities like we are here.

If we would stop and stagnate and just the opportunities that we're currently or that we were previously going after, then yes, you could get there more quickly. But absolutely, we think the long-term opportunity also in these newer areas are worth investing in, and we're going to do that.

Thanks. Tammy, that should answer your first question.

Do you hear me?

Yes, we do.

Okay. The second question is about what is your strategy for emerging markets?

Because we start to see a lot of emerging market payment processes. Some of them are listed in U.S.

and has been making significant progress in getting traction with the international merchants in that region because I think your long-term proposition would be to be the global omnichannel service provider.

And I would say that's probably one of the areas you need to cover in the future. What's your strategy down there?

Are you going to do it organically? Or at some point, you think it makes sense to do it inorganically?

Thanks for your questions, Tammy. [Operator Instructions] Ethan, our strategy in emerging markets, could you answer Tammy's second question, too?

Yes, sure. I think the big value we bring is that we offer this global unified commerce platform, which is really truly a single platform, right?

It's built whether you're doing a point-of-sale transaction in Brazil or an online transaction here in the Netherlands. It all runs over the same platform.

And I think that's a really core part of the offering that we have to our customers. So I think it's unlikely that we would take an inorganic strategy to do that.

Of course, there are countries that we want to expand to, and that's been a big part of our story as well. For us, it's about making sure that we stay focused and to do everything at once doesn't feel like the right strategy.

So it's continuing to focus on what's next for us, what can really move the needle for our customers. And that will be new countries at times, and that will be going deeper in certain areas like financial products now with our platform customers now.

So it depends from time to time, but we definitely will continue to expand regionally. And the focus would be organically rather than inorganically.

Thanks, Ethan. And after that household memo, I see that we have a few more questions coming in.

It's great to see that after a long time from home and working from Zoom, we can still learn every now and then. Thank you.

Another question from Sandeep.

Quickly now, I mean, given your much higher expenses because of the new initiatives, could we have a little conversation from you on -- comments on the new initiatives, particularly issuing was your first new initiative. When do you expect to see significant revenues from that?

I mean, I remember at the time of your IPO, POS was already your revenue stream that you were reporting out separately. Now we can see how successful that revenue stream has become for Adyen.

When do we expect to see some of these new initiatives reported as separate revenue streams in the sense that have they got -- any of these gone beyond the initial 2 or 3 customers that you started testing them with?

Thank you, Sandeep. Ingo, if you could answer Sandeep's question on issuing?

Yes, sure. So we absolutely have added new customers to the initial line.

So in the first half of 2022, we onboarded new ones to issuing. It has not the size of point of sale at the moment and also not when we listed.

So it's still relatively small.

And of course, we want to give transparency once it becomes a bit meaningful. Of course, very proud to show it, but it's unfortunately too early, but we -- I think the most positive thing is that we have a lot of good feedback from our merchants.

They appreciate products. They find it working really well.

So it's more a matter of time than anything else.

Thank you. Next up is Sanjay Sakhrani from KBW.

I think, Ingo, you mentioned there were no cyclical impact apparent in the first half, but I'm curious if the slowdown in e-commerce had an impact. And as we think about a potential slowdown in the macroeconomic environment, maybe you could just talk about your investment philosophy.

Would you continue along this path? Or would you decelerate them?

And I guess second question, maybe a follow-up to Sandeep's question. Maybe we won't get specific disclosure, but how should we measure the success or lack thereof of the investments you're making right now?

Thanks for those questions, Sanjay. Ingo, they were already directed at you.

So my job is already done. Could you please take them?

Yes, sure. So if you look at the first half, we see indeed in our numbers no slowdown in e-commerce, also because we have always had this land-and-expand strategy with our existing merchants.

So that's, I think, quite visible with the current volume growth that there is no slowdown.

If you look at the investments, whether that accelerates or decelerates, I think what we have seen in the first half slightly higher investment level in our data centers. That's something that we see as more of a one-off.

Maybe the second half still a bit visible, but certainly not going into the next year. We've been a bit opportunistic because we thought we never want to run into capacity issues, but it's not that we are structurally underinvested in this area.

And then yes, on the question indeed like how do we measure success on the new investments? I think that's a really fair question.

Of course, we want to make sure that we track those -- that we track the progress. But it's really fair to say that these are long-term investments.

So don't expect like a lot of revenues from the new embedded financial products in the next 2 or 3 years. It's really a long-term play.

Of course, we want to update you also qualitatively how we're progressing. We want to be transparent because also for ourselves, it's very important that we know that we're working on the right projects.

So I think what we probably want to do is also by showing relevant use cases how we're successful in -- with the different products and then build from there.

Thank you. I think it was a very clear answer to Sanjay's questions.

Next up, we have -- I'm waiting for my iPad to let me know who we have up next. I think we have a final question from Justin from Credit Suisse coming in.

Can you hear me?

Yes, Justin, we can.

Apologies for the technical difficulties. One was a question on Adyen platform.

I think I must be on a little bit of a lag. So I have a question on Adyen for platforms.

So given most of the volumes or eBay at this point, can you kind of give us an idea of that remaining set of volumes, where you're focusing going forward, what the go-to-market is there in 2 different facets really like on a geographical basis, given that we believe the SaaS market is quite fragmented in Europe compared to the U.S. and elsewhere as well as on a functional basis, meaning, is that vertical SaaS platforms?

Is that marketplace? Is that horizontal SaaS platforms?

And also, I think it was Ethan that mentioned kind of longer-term outlook for the embedded financial services opportunity. When we say longer term, do we mean 2025, '24?

Maybe we could put some rough directional around that?

And also, I just wanted to ask about the FX impact. And I wanted to understand how that was calculated.

So I think it would have been a decent sized benefit from the U.S. dollar if we compare those numbers on a magnitude basis in kind of 2H '21 versus 1H '22 though.

It seemed like it would be significantly more meaning of a tailwind in 1H '22 all equal. Is there any hedging?

Or can you help us kind of bridge the gap to get to the difference between kind of the 2 periods in FX?

Thank you for your questions. I'm going to do the best I can to recap them because I typically have a reminder here in my iPad.

I think the first was on platforms, how we're evolving there across which segments? Ingo, could you speak to that one?

And the second question on FX impact, too. Ethan, could you take that?

So yes, if you look at the Adyen for platform strategy, we have priority in Europe and the U.S. That's also where our embedded financial products are mostly offered.

It's also, of course, a licensee question. Pretty unique on our offering is Unified Commerce proposition.

There are not a lot of players that can actually offer this in a way we do. And therefore, we see a lot of traction in this area.

But if it's specifically on the embedded financial product, it's going to take years. Like it's not -- basically, the question is like what is long term.

I would say long term is multiple years away because this is not something like that you can build overnight.

It's, I think, very similar to the investments that we have made in Unified Commerce. I think if there are 2 things that we can learn from unified commerce implementation is that we could tell relatively early whether we would have success or not.

So based on feedback from merchants, but also then to really get to volumes, it takes years.

So that first point is also how we want to evaluate embedded financial products like it does -- it has the right traction with our merchants. And then secondly, we need to have that patience game again of building it out, and that's why we're so, yes, focused on that long term.

And on the FX side, it is true that USD was the biggest tailwind that we saw on a constant currency basis this half year. Of course, providing the constant currency amount is based on what we build to our customers.

They have the control over what currency that's built in, of course, the cost we get in. And compared to prior periods, we had less of a mismatch between our revenues and our costs this half year than in past periods.

Thank you, Ethan. Go ahead, Justin.

Did we cover everything that we had to for you?

No, no, that's super helpful. So is that fair to say you could have, say, flows coming in geographically from Europe, for instance, but then being built out in U.S.

dollars or something of that or the vice versa, which would make that impact different than kind of what the net revenue mix is? And it sounds like that's a yes.

Yes, that's possible, definitely. Our merchants have control over the currency that we bill them in.

And it's not to say that in any given period, it should fluctuate a lot. It is really by those larger currencies on the platform like U.S.

dollar, but they do have that flexibility.

Thank you, Justin, for your questions. That was the last question for today.

There are still a few more questions we have in the queue. We will answer those via our IR inbox.

And the answers will come your way very quickly.

Thank you all for dialing in. Thank you for sending in your questions.

It was great having you and talking you through the results and key developments of the first half of the year, where we were together in our office again with the team and presenting you a strong set of results. Thank you, and we hope to see you in February.

Bye-bye.