Hi all, and welcome to our H1 2022 and Earnings Call. I'm here live from our Amsterdam office, together 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.

For now, a short note on the Q&A function is already enabled, and you can start sending in your questions. Please do not forget to include your name and the firm you represent when sending these in.

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 will 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 two years. The relationships we foster face-to-face are vital to 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 were able to accelerate our hiring pace, the Adyen team totaled 2,575 FTE at the end of HI 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 journey. 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 suit encompassing bank account, 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 €345.8 billion on the single platform, growing 60% year-on-year.

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

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

EBITDA margin was 59% for the period. With travel restrictions lifted, travel and event costs returned 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's 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 that 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. And 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 a team. And we have always focused 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 three years, the whole company here in Amsterdam, seeing each other and 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 am very proud.

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

But if you'd had to add anything else to the 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 -- or at 60%, as you saw in the video.

Net revenues grew at 37%, and we got to €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 U.N. 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 uses 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 the iPhone, which we also launched in this half-year.

So, a lot of exciting things happening on the unified commerce side.

Yes, so it, indeed, really sounds like 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 there, 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 have focused very much on helping platforms to offer payments.

Of course, that started off with eBay, but also other software-as-a-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, and 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 area.

And 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, and very pleased to see those new people.

I think we've 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 very -- 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 Mohammad Moawalla from Goldman Sachs. Mo, please go ahead and unmute yourself.

Great, thank you, Sanne. Hi, Ingo.

Hi, Ethan. I had two 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 operating leverage to return, because you've, obviously, reiterated your long-term guidance? And then secondly, how do you measure the payback on -- for those investments and how should we think of the 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 you're setting with further share gains and some of the other structural initiatives?

Thank you.

Thanks for your questions, Mo. Ingo, if you could take the first two 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. And 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, 15% 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 U.N.

pledge. So, these all result in higher cost.

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

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 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 faster 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're 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.

Adam, please go ahead and unmute yourself to ask your question.

Hey, Sanne, Ingo, Ethan. Thanks also for taking the question.

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

The 30% growth there is obviously very strong, but suggests that maybe you're not taking share at quite the pace that you were in previous periods. I 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 with the existing merchants because you've already got -- you have a stronger market presence in that market? And then secondly, just maybe digging in a little bit further on Mo's 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 a narrowly based level of margins, that we should expect some operating leverage off or whether you do see any need for incremental larger investments because you're targeting a much broader set of products than you were when you were just focused on merchant-acquiring?

Thank you.

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 income bins 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, and 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 are 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 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 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. James, please go ahead and unmute yourself to ask your question.

Yes, great, good afternoon and thank you. A couple for 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, how does that allow you to compete and what sort of subset of your merchants is that going to be relevant to? Thank you.

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, afterward, speak to the rationale behind our -- the launch 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 there 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 on 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 that journey as seamless and easy for them as possible.

And so, we took their feedback into our own design. And we have worked hard to create our own Adyen design 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 an add-on to an iPhone or an iPad, a smartphone which also makes some of those journeys easier. So, I was really listening to our customers identifying what the use cases were 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 to Sandeep Deshpande from JP Morgan.

Sandeep, please unmute yourself and ask your question.

Yes, hi. Good afternoon and thanks for letting me able to ask a question.

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 have seen this take rate decline quite a lot in the half.

I mean your process volume was impressive really in the first-half as that really -- given how the market behaves. So, I have two 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 it 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 in terms of the take rate because there are two aspects of airlines, right, which is that they are not full-stack 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 am trying to understand how we look at this travel, because travel probably will remain a strong growth driver for you another year at least.

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

I think Ethan then can take over for the 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 price per transaction.

So, 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 are growing the business and that is actually what we want to achieve.

I can only agree. Ethan, the follow-up question is 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 full-stack percentage, but also typically higher ATDs or higher average transactions values in the airline and in 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; Fred, please go ahead and unmute yourself to ask your question.

Hi, good afternoon. Thank you very much for taking the question.

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

So, if you can discuss some moving parts here, any seasonality, we should look forward to in H2 in retail or the verticals that could drive different dynamics and growth in the three segments being digital, CEO platform. And then secondary around the margin, we discussed it a bit 270 Bps compression in the first-half, taking your commentary around your commitments, your investment in people, marketing, travel, et cetera, is it fair to assume that we should be at that kind of rebased level for H2 next year, before we start to see some operating leverage coming back up just to try to gauge a little bit the phasing of margins?

Thank you.

Thanks, Fred. I think, Ingo, these are two questions that will 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 how those will pay off over time.

Yes, so I think if you look at our revenue growth, it is also good to look at volume. So, the volume growth is 60%.

And the fact that revenue growth is just 2% 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 are 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 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 we would see it down in a 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 and 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 it also avoid situation where we would instantly overspend because we would over hire 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. Thank you for sending in your questions, Fred.

It's time for next up, Josh Levin from Autonomous. Josh, please go ahead, unmute yourself and ask your questions.

Hi, good afternoon, I have two questions. Around 78% of TPV now, before COVID, it was close 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? Thank you.

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 thorough hiring plans?

Yes, sure. So, on full-stack percentage, pre-pandemic, we talked a lot about how at that time, the majority of our non-full-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, over the last couple of years and will 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, are hiring plans for the upcoming years, I think the movie might have already said something but go ahead, Ingo?

Yes, so indeed we hired four over the first-half, we certainly want to throw that response 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; the next question is from Nooshin Nejati of Deutsche Bank. Nooshin.

Please go ahead and unmute yourself to ask your question.

Hi, guys, thanks for taking my questions. First of all, I'm surprised, Pieter, he's not with you, hope he's fine.

I have a couple. First, if you can give us some idea of your exposure to discretion or demand versus non-discretionary and 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 in there 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 low 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? Thank you.

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 one-off than that.

This is a new expense 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 in the market that we can bring into Adyen, if we continue to find that talent will 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, hence with our customers, and also the UN pledge I referenced earlier. And both of those things, we expect to be consistent into the -- consistent going forward unless something would change in the macro economic ability to travel and to see each other.

So, I think those things are still in play going forward, and we will 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 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 higher, because we want to expand, we're not hiring because we need to keep running the business. So, it is really 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 really good point to make, indeed. To answer your points, Pieter couldn't attend today due to personal circumstances.

But he'll probably, he's doing well. And thanks for that question, too.

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

Sebastien, please go ahead and unmute yourself to ask your question.

Yes, hello everyone. Just a question 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 business? Have you seen any specific impact on your net revenue or your profitability in the first part of the year?

Thank you.

Thank you for those questions, Sebastien. Ingo, could you speak to our -- on the organic growth of customers and Ethan, could you speak to our CapEx developments in the first-half of this year?

So if you look at revenue growth over the quarter is we don't really disclose that, I think the development in the first-half has been, there have not been really cyclical trends there. So, I would say, that's been very much a 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 efforts 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 that should answer all questions on this from too.

It's time for the next question from Antonin Baudry at HSBC. Antonin, please go ahead and unmute yourself to ask your question.

Antonin, can you unmute yourself?

Do you hear me?

Yes, we hear you now. Thank you.

Okay, sorry. Good afternoon all.

And thank you for taking my questions. First question is about there is a huge gap between the growth of your volumes on the gross revenues, so plus 60%, 65% year-over-year, respectively, on your net revenue growth plus 67% implying strong than an unusual increase of financial institutional costs in a strong '22.

What explain that and how should we consider the relation between growth or 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 was during the first-half of the year?

I think 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 costs 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're 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 Grégoire Hermann from AlphaValue. Gregoire, could you please go ahead and unmute yourself to ask your question?

Everyone can you hear me correctly?

Yes, we can. Thanks.

Okay. Great.

Thank you very much for taking my question. If we look at digital, could you give us some insights 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 products 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?

Thank you.

Thanks, Gregoire. Ingo, could you take both questions, the first on that 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 environments?

Sure, yes. So, if you look at the digital merchants, they're certainly digital merchants and 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 quite a few digital merchants still in that vertical that overtime 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 the type of discussions that we have at 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 at . 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 a 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. Gregoire, that should answer your questions.

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

Chris, please go ahead and unmute yourself to ask your question.

Okay, great. Can you hear me?

Yes, we can, Chris.

Awesome. Thank you so much for taking my question, and congratulations on the excellent results.

I'd like to ask the 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. And I know you worked with many providers.

Can you just talk about how the growth on your platform has behaved and how adoption rates have never 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 has always been compared to, I think, still the majority of our volume on our platform, which is current 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.

Hi, Jamie, please go ahead and unmute yourself to ask your question.

Hi, Sanne. Nice to see you guys.

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

And I know you don't manage to 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 give the ecosystem of the financial products, 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 products suite? So, the first one on platforms, the second one on financial products.

Thank you.

Thank you, Jamie, and acknowledging that it is your job to ask Ethan, can you answer Jamie's question on how platform volumes impact 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 a 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 that revenue as well, but it's much more driven by the size of the business than the pillar.

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

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

If you see life currently it is mostly issuing payouts, are doing what the other products relatively small things 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. Alexandre, please go ahead and unmute yourself to ask your question.

Good afternoon. Thank you very much for letting me on.

Couple of questions and just a follow-up on earlier questions on take rate. So, you explained very clearly how the size of customer at the end of the day is a driver of take rate.

Was just wondering if outside of platforms you have other initiatives to change perhaps the bottom end of the enterprise segment of the , 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.

And when it comes to the eBay contract asset, I think you said in the shareholder letter that the component is not fully amortized. So, how should we think of the annual depreciation charge of this contract?

About €20 million a year, does that sound sort of ballpark correct? Thank you very much.

Thanks for your questions, Alexandre. I think, Ingo, if you could on his first questions speak to our different commercial pillars and how we go to market there?

And Ethan, we are 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 merchants 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 have got 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 amended 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 actual 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.

And I think it's important to start there. And then if you talk about the contract assets of eBay, then specifically there are two parts.

There is the monetary component and the non-monetary component. And the monetary component indeed has been fully amortized so that you shouldn't expect a charge going forward.

On the non-monetary side, that will continue. And so, you can just look at the non-monetary piece which we have 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.

Fred, please go ahead and unmute yourself to ask that question too.

Hi, thanks for the follow-up. I'll keep it brief.

Can you shed any light on the margin profile of POS versus the online and specifically on the new initiative you announced today in terminal? If you can comment on margin of that, and may be as well?

Thank you.

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

Yes, sure. 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'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 terminal. So, offer it at a more competitive price through a merchant but also through the platforms.

So, that's I think the strategy behind this. And 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. Tammy, please go ahead and unmute yourself, and ask your question.

Thank you for taking my question. So, one of the long-term one because of your expenses are continuing to up and probably that will still continue to go up in the future given you are the only one probably didn't stop hiring.

So for the cost of getting additional business or getting additional merchant, is that going to be more expensive going forward? And also, there is another long-term question I would like 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 customer?

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

And I think that is really an important point. But, what we are saying is that we really want to invest in these new areas, right?

We are 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 scenario where we will 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 truly is an investment before it really kicks into net revenues.

So, yes, it's fair to say that it 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 go after the opportunities that we are currently or that we were previously going after, then yes you could get there more quickly.

But absolutely, we think the long-term opportunities also in these newer areas are worth investing in. And we're going to do that.

Thanks. Tammy that should answer your question.

If you are still unmuted, please feel free to also ask for second surprise question.

Okay, hi.

Hello?

Yes, hi. Do you hear me?

Yes, we do.

Okay, amazing, thank you. My second question is about what is your strategy for emerging markets, because we start to see a lot of emerging market payment processors.

Some of them are listed in U.S. and has been making significant progress in getting transaction with international merchants in that region because I think your long-term proposition would be to be the global omni-channel service provider.

And I would say that's probably one of the area 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 question, Tammy. Before we dive into and answer, I would like to remind the audience that a raised hand in the Q&A function does not work.

So, it's great if you can send in your questions via the chats including the name and the firm you represent. Else, will be very difficult for us to answer them, but we would be happy too.

So, please do it that way. 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 a unified commerce platform which is really truly a single platform, right?

It's built whether you are 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 what's next for us, what can really move the needle for our customers.

And that will be new countries at time 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. Sandeep, please go ahead and unmute yourself.

Yes, hi, thanks for letting me on again. Quickly now, I mean, given your much higher expenses because of the new initiatives, could we have a little conversation for me 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 a 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 -- any of these gone beyond the initial two or three 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 initial line.

So, in the first-half of 2022, we onboarded a nuance to issuing, it has not the size of point of sale at the moment, and it also not when we list it. So, it's still relatively small.

And, of course, we want to give transparency once it becomes a bit meaningful. We're, 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 the product, 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.

Sanjay, please go ahead and unmute yourself to ask your question.

Thank you. I think, Ingo, you mentioned there were no cyclical impacts 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 can 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.

Thanks for those questions, Sanjay. Ingo, they were already directed at you, so, my job is already one.

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 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's accelerate or decelerate, I think what we have seen in the first-half, slightly higher investment level in our datacenters.

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 wanted to run into capacity issues.

But it's not that we are structurally under-invested in this area. And then, yes, on the question, indeed, like how do we measure success on the new investment, 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 the next two or three 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 very clear answer to Sanjay's questions.

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

He doesn't have access to the Q&A function but we will unmute you now. Justin, you can now unmute yourself to ask your question.

Can you hear me?

Yes, Justin, we can.

Thank you, apologies for the technical difficulties. What was the question on Adyen for Platforms?

Thank you. 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 are eBay at this point, can you give us an idea of that remaining set of volumes, where you're focusing going forward, what the go-to-market is there in two 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 wanted to understand how that was calculated.

So, I think it would have been a decent size 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 meaningful of a tailwind in 1H '22, all else equal. Is there any hedging or can you help us bridge the gap the get to the difference between kind of the two periods in FX?

Thank you very much, guys.

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

I think the first one was on Platforms, how we're evolving there across with segments. Ingo, could you speak to that one.

And the second question on FX impact too, Ethan, could you take that. If I'm missing anything, Justin, please do feel free to unmute yourself once more, and we'll make sure that we cover all your questions.

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

There'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 it -- 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 to unified commerce. I think there are -- if there are two 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 there 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 traction -- have 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 bill to our customers, they have the control over what currency that's billed in and, of course, the costs 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.

Got it, thank you --

Go ahead, Justin, did we cover everything that we had to for you?

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 billed out in U.S.

dollar 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 driven by those larger currencies on the platform, like U.S.

dollar, but they do have that flexibility.

Lovely. Thank you very --

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 there, 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.