Feb 12, 2021
Operator
Hello everyone and welcome to the Adyen’s H2, 2020 and First Ever Earnings Video Call. I'm Ethan, and I'll be your moderator today.
As this is a new format, I'd quickly like to run you through how this will look. We'll start with a video from our design team, which will be narrated by our CEO, Pieter der Does and our CFO Ingo Uytdehaage, followed by Q&A with the both of them.
If you are an analyst, you can leave your question using the Q&A functionality at the bottom of your screen. And we'd much appreciate if you leave your full name and the firm you represent when asking your question.
I'll now pass it off to Peter and Ingo to explain what happened in the second half of 2020. Enjoy.
Pieter der Does
Good afternoon, everyone. And thank you for joining.
Before we begin, I hope that 2021 has been off to a good start for you and your loved ones. I will now share an overview of how we performed in the second half of 2020 as well as some trends in the payments landscape, which we have visualized for you.
Afterwards Ingo will take over to take a closer look into the numbers and our team. With 2020 in our rearview mirror, we have seen how the COVID pandemic continue to impact the world economy, businesses, people around the world and the team.
We remain focused on learning and adapting in this ever changing environment, and helping our merchants to do the same. Around the world, we have seen the acceleration of long-term trends as a result of the pandemic this includes the shift from cash-to-cashless economies, the increasing share of volumes in the global ecommerce and the convergence of the online and offline shopping channels.
Despite the COVID-19 pandemic continuing to disrupt the day-to-day many of our merchants, the business was resilient, and we saw profitable growth in the second half of the year. This is mirrored by process volume for the period, which was on the 74.5 billion and 303.6 billion for the full year with net revenue at 379.4 million and 684.2 million for the full year.
We supported many merchants in shifting volumes between online and offline channels to keep their businesses going. So merchants needed to swiftly facilitate new ways of selling, so we help them to roll out new channels, such as curbside pickup.
When lockdown restrictions eased in some regions, we enabled our merchants to then safely reopen as all of our terminals offer contactless payments. Due to COVID, shopping holidays shifted this year to become fully online events and more momentous than ever during a prolonged week long periods Black Friday, Cyber Monday and Singles Day.
Our merchants [indiscernible] record volumes. We are proud to have helped navigate our merchants through this uncharted territory.
Multiple consistent long-term trends on the platform persisted in this period with increased diversification of our merchant base to grow a number of existing merchants adding a second channel volume churn remaining below 1% for the period, and existing merchants continuing to contribute to over 80% of our growth. These trends have been consistent since our IPO.
For us, it's incredibly going to important to support our merchants locally. In line with that philosophy, we opened an office in Dubai, and we're looking forward to explore the potential of the region.
Additionally, we grew our presence in North America in this period. Many of our existing North American merchants who have historically used our platform for their non-domestic volumes chose to also use us for the U.S.
volumes. We saw this shift due to the increasing complexity of the U.S.
domestic market. In line with previous years, and the price merchants already on the platform continued to be our largest growth driver.
We also continued on-boarding new merchants with a pipeline unaffected despite early COVID impact. In unified commerce, we saw the upward trend of merchants adding a second channel persist.
We also saw continued success across the broad spectrum of retail from high end to mass market, illustrated by how we added Ralph Lauren for sale and Columbia to the platform this period. In the mid market, we continue to invest in simplifying access to single platform, and we saw the merchant portfolio rose significantly in this case.
We always built to meet our merchants needs. This philosophy is reflected in how we built the Network Token Optimization feature of our RevenueAccelerate product in partnership with Microsoft.
We also launched IdentityRisk, Android-based mobile POS devices they are 3DS2 tool and Adyen Giving a tool that enables merchants to accept super donations to charities and checkout. We also continue to invest nothing for the long-term, and grew during the second half of 2020 to a total of 1,747 people.
And despite the challenges that came with the pandemic, such as remote on boarding, working from home our culture remains our top priority as a management team. Throughout the year, we implemented many new initiatives to help our colleagues stay connected, exercise their mental health, and find communities of likeminded individuals within Adyen.
As a team, we continue to balance realism and optimism as it relates to the pandemic. For more details, you can find our shareholders letter online.
Now, Ingo will deep dive into our numbers.
Ingo Uytdehaage
Thank you, Peter. And thank you everyone for joining this call.
Diving into processed volumes, we processed 174.5 billion in the second half growing 29% year-on-year. Full year processed volume was 3.6 billion.
Of this 174.5 billion, 21.3 billion came from point-of-sale accounting for 12% of total volume. Point-of-sale volumes were directly impacted by the pandemic and subsequent increase in ecommerce volumes due to the closure of physical stores.
Net Revenue went up to 379.4 million for the second half, up 28% year-on-year. Full year net revenue was 684.2 million.
Deferred diversification of net revenue contributions across regions and verticals resulted in business resilience over the period. Tax rate was 21.7 basis points in the second half of 2020, down from 22 basis points in the second half of 2019.
This is mainly due to enterprise merchants moving into new volume shares. For the full year tax rate was 22.5 basis points.
OpEx was 57.7 million for the second half and up 80% year-on-year. We continue to invest in building Adyen across all regions in the team and the marketing.
For the full year, operating expenses are 310.3 million. EBITDA 236.8 million in the second half of 2020 up 36% year-on-year.
For the full year, EBITDA was 402.5 million. EBITDA margin was at 62% for the period and 59% for the full year.
Net income for the period was 163.1 million and 261 million for the full year. CapEx were 4% of net revenue in H2, 2020, slightly up year-on-year.
Full year CapEx were 3% of net revenue. Reflecting on the previous period, our pipeline and product development were largely unaffected despite the pandemic.
Given the substantial growth in operating leverage we have seen since IPO and our continued focus on the scalability of our single platform. We've decided to update guidance on the EBITDA margin, going forward to increase to levels above 65% in the long-term.
Our other guidance remains unchanged, with net revenue growing at a compounded growth rate between the mid-20s and low-30s in the medium-term, and with CapEx sustainably up to 5%. We have posted these results in our company’s shareholder letter on our website.
This can be found at adyen.com/IR. Thanks all for listening.
Peter and I are happy to take questions now.
A - Unidentified Company Representative
Great to see the business's resilience in the second half of the year. I'm sure there's lots of questions now to get to.
So we'll be happy to take them. As a reminder, you can leave your question in the Q&A section at the bottom of your screen.
And if you don't mind, leaving your full name and firm you represent that would be very helpful for us. The first question we have is from the line of Sandeep Deshpande of JP Morgan.
Sandeep, you'll be asked to unmute yourself and then please ask your question.
Sandeep Deshpande
Yes. Hi.
Can you hear me?
Unidentified Company Representative
Yes, we can hear you well.
Sandeep Deshpande
So I have two questions. I mean, clearly you had a very strong second half; U.S.
growth was very robust indeed. And my question is that U.S.
growth was helped by the eBay transition, which is occurring to your platform at this point. But if you look at the growth that you're seeing as such, excluding if we can calculate eBay exposure, your growth was still higher in the U.S.
than it was in Europe. So is this an issue with the base effect in Europe that your base is already very high?
And so that's why the growth is lower or there is something else happening U.S. versus Europe?
And my second question is, is Adyen targeting any new sectors from here, you've targeted mid market in the past, but the data shows that almost all your growth is still enterprise? So is mid market still very much in emerging or hobby sector?
Or is this going to be a key focus, and at some point, you expect this to be a big driver of your revenues? Thank you.
Unidentified Company Representative
Ingo, maybe you want to start with the question about U.S. growth and Peter, you can follow up on the mid market question.
Ingo Uytdehaage
Sure. Thanks, Sandeep for the question.
So if you look at U.S., I think U.S.is clearly the result of our investments over the recent years to be a relevant player in that market. And the reason why we're relevant player in that market is because we're getting more and more domestic volume sent to us, because we're solving for complexity.
There are lot of retailers in -- and I want to solve the unified commerce problem. And that's why they like to work with us.
Good example, for instance, it said DICK’S Sporting Goods, but also H&Mrecently announced to start working with us in the U.S. And this is the opportunity that we have in these markets.
So I agree, of course, Europe is growing from a larger base. But there's also something very important happening in U.S.
that they see us as a relevant player in that market.
Unidentified Company Representative
Peter to you.
Pieter der Does
Right. Something about the question about mid markets.
And if we're focusing on new segments, let me first say the segments that we're focusing on. That is next to mid market, we're also focused, while there's new hospitality, and we see some good early traction there.
And mid market, if you look at the size, below the highest segment, platforms also play a large role. And we also add platforms and marketplaces.
And we also play a role there. So it's not just mid market.
On the mid market initiative, yes, that is something which we are rolling out and which will take some time. So we are investing in that.
And it's more important the lessons that we learned there, because they're also relevant for platforms or marketplaces. And we'll see that further developing over the next years.
Unidentified Company Representative
Thanks. Next up is Adam Wood from Morgan Stanley.
Adam, you'll be asked to unmute yourself, and then please ask your question.
Adam Wood
Hi, good afternoon, and thanks for taking the questions. I've got to please.
Just first of all, it's kind of a follow on, it's very interesting to hear you describe how the payments market is changing. And in the U.S., in particular business that maybe wouldn't have come to Adyen a couple of years ago is now coming to you.
Could you talk a little bit in general about how the payments market has become more complex? What changes have happened?
Do you think that increases or decreases as we come out of the COVID pandemic? And is there any way you can quantify how much more of the market you think is open to you because of these changes than would have been the case a couple of years ago.
And whether you want to do that with percentages or maybe verticals, however, would be very helpful and useful? And then secondly, maybe just on the EBITDA margin change, is that basically forced on you because of the economics of the platform, you just can't invest enough to offset the leverage of the platform or did you make a conscious decision to take the profitability of the company up and invest a little bit less?
Thank you.
Unidentified Company Representative
Thanks for your questions. Adam.
I think, Peter, it'd be best if you started on the complexity of payments and how that's changing with the COVID-19 pandemic.
Pieter der Does
Yes, so what we have seen is that our efforts, and we were very early with combining online with point-of-sale, and we call unified commerce. And there's a need for that, globally.
And there's a second element in the U.S. We were later with being able to offer full stature with acquiring, processing all in one platform.
So what you now see coming up is that in the U.S., we are logical player to choose. And we've seen that in recent announcements with DICK'S Sporting Goods, but before also in the quick service restaurants.
And then COVID of course creates tailwinds with the move from cash to cashless. And what we've seen in retail is that if stores are closed, then online takes over.
And the companies, the retailers who had a unified commerce strategy that really benefited from that. So that explains why the U.S.
is coming up with this not temporarily. But that I think that that's a trend which was anticipated.
And also in earlier course, we spoke about it U.S. is just lagging behind the developments, what we have seen in Europe.
Ingo Uytdehaage
Let me say a few words on the EBITDA guidance. So when we IPO to the business, we set a target which we set back and we are going to change it if something fundamentally to the business has changed.
And if you look at the current discussions that we recently had also with investors around our profitability levels, we already past the 55 mark quite often. And we still firmly believe that there is additional operational leverage into our platform.
We have a single platform, we really benefit from having a single platform. And that's why we believe that we can further increase our margins.
That doesn't come at a cost of lower investments, because we still find the top line growth more important. That's also why we have guided these margins towards the long run.
And so that's also how we see it. So if we see a good investment, we will for sure make it but with the single platform, eventually we will get to this very high efficiency and average of the platform.
Adam Wood
Thank you very much.
Unidentified Company Representative
Next up, we have Hannes Leitner from UBS. Hannes, you'll be asked to unmute yourself, and then please ask your question.
Hannes Leitner
Yes, thank you. Congrats to the result.
I have also a couple of questions. Could you talk a little bit more about the unified commerce merchant wins?
It help us a little bit better to understand of those specific group. What is their current split between in-store and ecommerce?
And on that note, clearly, status at the quick service restaurants, merchant wins ramp up. That's the first question.
And the second is, maybe you can give us a little bit more KPIs around the Issuing business, you stated 30,000 cards issued? And then the last question is coming back on that long-term EBITDA margin guidance.
Should we think now about kind of a linear progression over that? And always there's something rather more that the margin should stay at the moment fairly stable.
It's the print what do you have done this year? Thank you.
Unidentified Company Representative
Ingo, you want to start with the split between how unified commerce looks given point-of-sale or online?
Ingo Uytdehaage
So I think the good thing from unified commerce is that we always start in a single channel, I think what most of the implementations that's the case. And it's either a retailer starts in store, and then later ads online or the other way around.
I think what is very key to us is that payment is strategic. And the fact that it's strategic that helps us to have these type of conversations.
We see volumes in both channels increasing. And if you just think about the fact that also in the second half, quite a bit of stores were close.
And you see the strong performance of retail in general on our platform. We feel that we're very well positioned.
And also when stores will reopen that we continue to see this growth. If you think about all the verticals that we're addressing here, and so we're always solving for complexity.
There also sets of reason why they like to work with us. So whether its multiple geographies or multiple channels like the combination of in-store terminals with apps, that's the type of problems that we solve and rollout with our partners goes well.
So we're very happy with the progress that we've made in [Indiscernible].
Unidentified Company Representative
Peter you can pick up how we look at Issuing?
Pieter der Does
So Issuing is a relatively new product that we launched. We just announced that we're going to rollout in partnership with Glovo 30,000 cards.
So that's a more significant best case than we ran so far. Also, what we have done this for Christmas, we gave all employee cards, so that everybody could test.
And that means that it's a product which we're confident how we rolling it out. But on the other hand in contribution that will take longer before you see that back in the total results.
Ingo Uytdehaage
Hannes, your question on EBITDA. We really see this as a long-term guidance.
And we continue to invest in the business. So if we see a good opportunity, we will invest revenues and costs are basically unrelated on the short-term.
So it is hard to say like it will be a gradual change over next years towards 65%. It is more intended to say like, we strongly believe in operating leverage of our platform.
And that’s make sure that we get that on the long-term. I think that you have seen in the second half of 2020, the operating margins already quite high.
But if we see a good opportunity to invest, we will certainly do so, and that couldn’t mean that on the short-term, EBITDA margins could be slightly lower.
Hannes Leitner
Thanks.
Ingo Uytdehaage
That's not a guarantee that we will -- that is basically what I want to say, it's not a guarantee that we will maintain the H2 EBITDA margins going forward.
Hannes Leitner
And just a quick follow up here on the unified commerce, just to be specific, those, for example, in the quick service restaurants, they also sell quite a lot of their products via our platforms, thinking about Deliveroo or Uber Eats, would that still go over the Adyen platform. So are you there connecting central connector of that streams?
Ingo Uytdehaage
It depends a bit on the type of implementations. We work with different food delivery services.
So it depends, I would say.
Hannes Leitner
Thank you. Good luck.
Unidentified Company Representative
Thanks, Hannes. Next up is James Goodman from Barclays Bank.
James, you will be asked to unmute yourself, and then please ask your question.
James Goodman
Thanks a lot. Good afternoon.
Couple from me as well, please. Firstly, on the affirm partnership that you announced, I think the backend of last year.
Pretty interesting, what's happening in buy now, pay later, as I understand it, you're integrating it as an additional payment option. You've talked a lot in the past about just continually expanding all of the alternative payment types that you accept.
But I just wondered if you could share some thoughts around, I guess this explosion we're seeing in buy now pay later what your own expectations are around that, and given the some of these vendors, of course, are also pushing their own sort of checkout experience. I just wondered if you see that toward extent as an opportunity or a threat.
And then secondly, a bit more specifically, just on the FX impact that we saw in the second half of the year, particularly on the net revenue, which was more impacted? I think 9% versus the gross revenue?
Could you just explain that, is that a mixed thing that some of the region's more impacted were higher tax rate? Or is it more that there is some scheme fees that are in a specific currency?
And do you expect to see that exaggeration of the FX impact as well as we kind of come into the first half of this year? Thank you.
Unidentified Company Representative
Thanks, James, I think Peter, if you could start with our view on buy now pay later. And then Ingo can take a look at constant currency and the impact that we're seeing.
Pieter der Does
So in general, you see new payment methods coming up, you constantly see that and the way how we look at that is we have merchants, which have -- if we see a clear merchant demand and if we have merchants, that if we build the product we will immediately take it life, then we integrate it into our platform. So that's what we do with buy now pay later.
If we look at those companies, sometimes they indeed have their own checkout experience. But what you -- in practice fee is that it's much more attractive for merchants to work with us and have it part of their bank suite.
And also typically what you see is that many of those companies we are the largest provider of volume to them. So for us, it's more opportunity because complexity in the market is what we sold for merchants for more payment methods, more complexity.
What I'd like to add is that we are agnostic too much payment methods. So it is merchant demand.
And we provide the payment methods which are used by consumers and we're not steering in that.
Unidentified Company Representative
Ingo, if you want to maybe do the second half of the question.
Ingo Uytdehaage
So if you look at the revenues on a constant currency base, we were about 9% higher, which is, I think, a great outcome because it means that the underlying growth in currencies is even better. So we service a bit from devaluation of some currencies like the dollar and the Brazilian reais.
It's the difference between gross and net is mostly a mix effect. So there's no specific trend there.
James Goodman
Okay, thanks.
Unidentified Company Representative
Next up, we have good Tom [Indiscernible] from Goldman Sachs. Tom, you will be asked to unmute yourself, and then please ask your question.
Tom, are you there?
Unidentified Analyst
Can you hear me?
Unidentified Company Representative
Yes, we can hear you.
Unidentified Analyst
All right, great. So two questions from my end.
Firstly, on large customer ramp up, and can you comment on how the ramp up is progressing in customers like eBay and Alibaba? And should we assume that this could be a kind of a growth tailwind in 2021?
Also, can you comment on the partnership expansion with Microsoft? And how important is Microsoft becoming as a large customer for you?
And on the topic of large customers, there was announcement from Spotify yesterday that it will rollout Spotify before Facebook and Instagram merchants. How does it affect your relationship with Facebook, if you can throw some light on that?
And secondly, a follow up on the FX question. Ingo, can you give us a rough sense of your currency mix?
You highlighted U.S. dollar and Brazilian real as having the biggest impact.
But if you can just give us a mix of that in the revenues would be great? Thank you.
Unidentified Company Representative
Peter, maybe you can take a start with our large customers. I think these are our favorite type questions talking about single customers.
But if you could expand on how we view that, that'd be great.
Pieter der Does
If you look at how we rollout with companies like eBay, I mean, we're really proud to have them and they have communicated to the markets what their plans are to shift volume over to Adyen. On the other hand, we should realize that that doesn't change the underlying trends.
So to call the major tailwind, no, it's a good contribution. But the underlying trends are also the same without single merchants.
What I really like about relationship with Microsoft is that is what you often see in our relationships. And that said, we start with a market or with a product, and that overtime, you build them out to multiple products in multiple markets.
And that's also what you see with Microsoft. I think the question behind the question is, does that mean that becomes a huge merchant in your portfolio, I think the trend in our portfolio is the other way around.
We have more merchants, more diversification, rather than the opposite trend versus single merchants make up a large part of our portfolio. Then I think it's good around on single merchants, you sometimes see that merchants announced that they do a project or multiple project with other companies.
And I've no comment. Other than that, we see no volume churn or no -- less than 1% volume churn.
So over time, the volumes that we are capable of keeping them or expanding them. So churn is at the current company, not a big thing for us.
And maybe Ingo, you want to do the second half of the question.
Ingo Uytdehaage
Thanks, Peter. So if you look at the NDT, FX constant currency mix effects, it's largely related to the reais and dollars it's hard to give you or we don't disclose the precise mix of this.
I think the best proxy is to look at net revenue distribution if you want to have a proxy. Because we have given the net revenue per region.
Unidentified Analyst
Perfect. Thanks so much.
Unidentified Company Representative
Thanks, good, Tom. Next up, we have Charlie Brennan from Credit Suisse.
Charlie, you'll be asked to unmute yourself, and then please ask your question.
Charles Brennan
Great. Thanks for taking my question.
And well done on the results. Can I just touch on the acquiring market, you mentioned it in the context of the U.S.
market. But if we look at the airline sector, we've seen some of the incumbents leaving the market.
I was just wondering, what's the opportunity there for you to accelerate acquiring airlines?
Unidentified Company Representative
Peter, would you like to take that one?
Pieter der Does
If you look at acquiring airlines, we always took the view that airline risk can be significant. So we always chose to do a processing service only with a few exceptions.
And if you look at -- in the future, if we would change that view, I think during COVID, it turned out that we are quite happy with our strong from the -- on the topic of airline acquiring. Did that answer your question.
Charles Brennan
It doesn't sound like you're leaping to fill the void that's left by Wirecard exiting the market.
Pieter der Does
Well for airlines, we have always been careful, because airlines is the typical case where as an acquirer, you could end up with huge losses. So it's a business model, where time of buying and time of taking the service flying, it’s quite far for us.
So it doesn't really fit our risk appetite. But we will always look at the market.
And if there are good opportunities there we would, but I think Wirecard have a larger airline portfolio than fits our risk appetite. And that's for acquiring for processing.
We're fine for the technical service, but requiring so being liable if the company goes bankrupt. That's a different story.
There we have a low risk appetite in airline.
Charles Brennan
Perfect. Thank you.
Unidentified Company Representative
Next up, we have Sanjay Sakhrani from KBW. Sanjay, you'll be asked to unmute yourself, and then please ask your question.
Sanjay Sakhrani
Thank you. Ingo, you talked about the impressive -- growth while stores have remained closed.
And obviously, we're hoping for some sort of normality as we move into the second half. Can you just talk about what the volume growth might have looked like?
If we had seen a more normal environment, have you guys tried to estimate that? I'm just trying to think about how the volumes come back on the other side?
In terms of what's gone negative? And then second question is on LATAM growth that was a little bit soft.
Maybe you could just speak to how much of that was FX related versus COVID related maybe something like that. And then final question on the U.S.
bank charter just wanted to get an update on timing, and sort of how you see that impacting the company. Thank you.
Unidentified Company Representative
Ingo, would you like to start with volumes and how we expect those to bounce back as a pandemic hopefully improves?
Ingo Uytdehaage
It is a difficult question to answer. I think we're seeing an exploration of a couple of trends that we have seen already for a long time.
That the trends that also Peter was referring to in the video, the trends that people pay more cashless, the dissertation of commerce. And that's where it is hard to give a precise number or even a rough estimate.
I think that if we would reopen again, and the pandemic is over or slowed down, then we also have a lot of reopening scenarios where we will benefit from a rollout for our merchants is very important. If you look at the number of terminals that we have added over the recent months that has developed really according to plan, so we feel very good position.
Also, if you think about the non-retail flows of volumes, like in travel, if we would reopen again, of course, also will really help us to get to additional growth. But to give precise numbers is even rough estimates is quite difficult I must say.
Unidentified Company Representative
Did you want to give a comment on LATAM as well Ingo?
Ingo Uytdehaage
I think on that and we're still heavily investing in a business. So we only went live at point-of-sale, they're relatively recently.
So it's, still early stage there. We strongly believe that.
Also there we see from a retail perspective, exactly the same trends or the convergence between online and offline. So we're absolutely feeling that we're in a very good position in LATAM.
And we will continue to invest in that markets.
Unidentified Company Representative
Just the final one on bank charter. Thank you.
Ingo Uytdehaage
So on the bank charter, we're still in the process. The moment that we can give an update, we absolutely will, there is, unfortunately, nothing to add at the moment.
Sanjay Sakhrani
Thank you.
Ingo Uytdehaage
You're welcome.
Unidentified Company Representative
Thanks, Sanjay. Next up, we have Nooshin Nejati from Deutsche Bank.
Nooshin you will be asked to unmute yourself, and then please ask your question. Nooshin, are you there?
Okay, next up -- if Nooshin comes back, we can try and come back to you. No problem.
Next up, we have Alex Faure from Exane BNP Paribas. Alex, you'll be asked to unmute yourself, and then please ask your question.
Hi, Alex, are you there?
Alexandre Faure
Can you hear me?
Unidentified Company Representative
We can hear you Alex. Thanks.
Go ahead.
Alexandre Faure
Sorry about a bit of a lag here. Thanks for letting me on and I have two questions.
The first one is on Issuing again in visa cards.
Unidentified Company Representative
Alex, the line is very broken out? Alex, I think the best is if we try and come back to you.
If you can…
Alexandre Faure
Visa commercial cases that you discuss.
Unidentified Company Representative
Alex, it worked much better at the end. Maybe if you could try to ask that question one more time, we can see if it works.
This is a very 2020 type of thing that happened. So no worries, but if you could ask the question again, we much appreciate it.
Alexandre Faure
Sure. So sorry for that.
Give it another try. I wanted to ask on Issuing and the cards you're doing with Glovo at the moment.
Am I right to think that these are commercial cards. And more broadly in the different use cases you're discussing with potential customers on issuing you feel more demand for -- or more use cases for commercial cards or for consumer cards?
So that'd be my first question. And my second question is on platforms.
Just wondering if you've seen any change in the competitive landscape with the biggest platforms out there? Do you find a multi source a bit more than in the past?
Or are quite the opposite, they tend to consolidate the providers they use at the moment. Thank you very much.
Unidentified Company Representative
Peter, I think those questions are best for you. Maybe starting with Issuing and how we look at that to commercial versus consumer.
Pieter der Does
Yes, so indeed, Glovo, that's an on-demand courier service. So we are the couriers getting up unissued card to pick up goods and so they are not consumer cards.
And that is from an Adyen point of view also what we focus on. Our customers are merchants and we focus on additional services to merchants.
And that means that our card issuing product is geared towards them. But that can also be the settlement to hotels or other user cases with virtual cards.
Also, if you look at the requirements, the requirements in the round of cases are different because suddenly uptime being able to really quickly issue cards with [indiscernible] important. That's exactly what our system is geared to.
Unidentified Company Representative
The second question about platforms and how the competitive landscape there is changing if at all and if they're using multi source strategy or consolidating their payments.
Pieter der Does
What you see in the platforms is that we effectively are our signing them up? And sometimes it's because they use multiple supplier strategy.
And we are quickly building a track record in that segment. And sometimes they see change of partners.
So yes, as you see a strong economy into this segment.
Alexandre Faure
Got it?
Pieter der Does
I'm not sure. I answered your question.
Did I.
Alexandre Faure
No, no. it does, it does.
Thank you.
Unidentified Company Representative
Thanks, Alex. Next up is Josh Levin from Autonomous.
Josh, you'll be asked to unmute yourself. And then if you could ask your question.
Josh Levin
Thank you and good afternoon. I have two questions.
First, can you give us an update on how SCA is impacting volumes and how you expect it might impact volumes throughout the year? And then the second question is, you're accumulating a fair amount of cash on the balance sheet, even after you exclude the merchants cash, you're not going to do M&A.
So, any plans to deploy that cash? Thank you?
Unidentified Company Representative
Ingo, maybe you will start with the cash question first, and then move to SCA.
Ingo Uytdehaage
So we still have disparity to give this cash on the balance sheet. Basically, for two reasons, its makes our discussions with auditors very easier, because they can see that we're very financially stable company, which I think is important, if you're applying for licenses throughout world.
So that's the first reason. The second reason is that we're winning larger deals.
So with larger companies as a customer, and also they're having this stable balance sheet without any debt is helping us. So it’s a moment, we don't have a strategy to change this.
So we will continue the current no dividend policy for now. Should I also say a few words on the SCA?
Josh Levin
Please.
Ingo Uytdehaage
So if you look at from customer certification, the reason, of course, a lot of changes are being implemented. This is an outcome of how the regulatory environment is changing around us.
And what we want to make sure is that we help to navigate our merchants throughout these changes, we strongly believe that we have a very good solution for our merchants. And it's a huge opportunity for the company that does it best.
So if we strongly believe that we solve it most elegantly compared to others. And that's why it's a big opportunity for us.
Of course, if you bring an additional layer of security that could lead to lower conversions, it's up to the companies to make that as smooth as possible. They will win the trust of merchants and that's what we're aiming for.
Josh Levin
Is it being enforced right now or the enforcement lacks?
Ingo Uytdehaage
It is partly enforced. So we're strictly monitoring it at the moment how it's being rolled out throughout Europe.
Some issuers’ do, others don't. So we track that on the individual win level, and also act on it on an individual win level.
Josh Levin
Thank you.
Unidentified Company Representative
Next up, we have Chris Brendler from Seaport Global. Chris, you'll be asked to unmute yourself, and then please ask your question.
Chris Brendler
Hi, thanks. Good afternoon, and congrats on the great results here.
I have two questions. The first one is on the take rate.
I don't know we don't focus on the take rate. But with the pandemic, there's some moving parts here.
And it looks like it was up a little bit year-over-year, as the gateway volumes come down just how we think about the take rate as gateway comes back and either puts and take you would highlight I assume relatively stable, it's probably the right outlook. Just want to make sure.
And then the second question is really impressive growth sort of point-of-sale considering what's going on in the world these days. Just wondering if you could talk about the geographies, is that mostly in Europe, is it also in the U.S.?
And how do you feel about your trajectory of your point-of-sale efforts today? Thanks.
Unidentified Company Representative
Ingo want to start with take rates?
Ingo Uytdehaage
Absolutely, let me say a few words and take rate. So the declining take rate is mostly the pack of mix, indeed, with travel going down on our platform that absolutely has a positive impact on take rate, because we're typically not in the settlement flow, and as a result of that are incompatible action is lower.
But we also have a couple of effects that are the opposite, which is mostly a result of working with large merchants. And I think the pandemic has demonstrated that the large players are basically or the large merchants are winners of this pandemic.
They typically have tiered pricing with us. So the more volume they bring, they get to lower pricing.
And that's also I think, what you see here in take rate, that's also exactly why we don't manage on take rate. So we're very pleased with the development we see significant growth in the enterprise segment.
I think also the development in U.S. is very impressive where, in general, it is a pretty much commoditized in markets.
So we feel that our take rate has developed in a way that we like it, we still manage the company on absolute margins.
Unidentified Company Representative
And, Chris, I think you had a follow up question about point-of-sale and the regional mix. Ingo, you want to take that one?
Ingo Uytdehaage
So let me say a few words on how we've built point-of -sale. So we started off with point-of-sale in Europe, and then quickly, also moved it to all the geographies, including the U.S., Australia, Singapore, Hong Kong, Brazil.
So we're expanding in all those markets. And that's exactly what large merchants expect from us.
So we have continued discussions with them, where to go next. And one of the benefits of working with us as a single platform is that you can optimize loads in the in the backend.
So that's also why they'd like this approach that we service multiple markets, and we will continue to follow this strategy. If you look at where are most terminals active at the moment.
That's still very much concentrate on Europe and U.S.
Unidentified Company Representative
Great. Next up, we have Klaudia Klaus from ABN AMRO.
Klaudia, you'll be asked to unmute yourself. And then if you could ask your question now.
Unidentified Analyst
Good afternoon. I hope you hear me.
And, I had a question on -- first of all, of course, congratulations with the results and the great outlook going forward. Got a few questions on the cost side.
And what we've seen, of course, is that the other cost has been quite stable. It's around €200 million and the other costs versus revenue is going down from 18% to 15%.
Could you elaborate a little bit more on the economies of scale there is the temporarily cost -- the costs are a little bit lower? Or will these trends continue, the other cost versus revenue will continue to decline as you continue to grow and get more economies of scale.
,
And the last question is about wages, we've seen that the average wage is still around €200,000 at that Adyen you can grow a little bit more on an international scale outside of the Netherlands. Could you give some indication on the average wage cost for FTE going forward or do you think that that can remain around that level?
That's where my questions. Thank you.
Unidentified Company Representative
Maybe Peter, you want to start with how we look at growing the team and then we can move to the operating expense questions for Ingo.
Pieter der Does
Adyen has been growing the team, we feel at the maximum speed at which we can absorb people. Growth is very important.
Also, if you look at our merchant base, we have a large merchant base, which is expanding with us. And therefore we work with -- we need to work with highly trained people on that side on the engineering part.
We have an experienced team and we don't want to dilute the quality. We have continued to grow during COVID because we work of the -- we are investing in Adyen for the long-term.
But also we think that this is a moment where it could be a good time to get a high quality of candidates out of the market because the employment market is a little bit less overheated than it used to be. So that's why we keep investing in the business whilst maintaining the culture.
Then I handed it over to Ingo should answer another question.
Ingo Uytdehaage
Let me say a few words on the OpEx. That's fine.
I think that the fact that you see that operating costs is lower compared to net revenues is a result of the operating average in the business. Of course, one cost category is significantly lower, which is the travel of the team, because we haven't traveled so over the past year.
But other than that there is no significant change in -- I think how we do cut our cost pattern, most important part of our cost is still cost of the team. You were asking like, what are you expectations around the average income or cost per employee.
And we've won for the guide on that. We make sure that we continue to build the team globally.
And of course, in different regions, you have different wages and expectations and we make sure that we hire the right people in the right locations. So we're not going to give any guidance on the average cost per employee going forward.
Unidentified Analyst
Thank you.
Unidentified Company Representative
All right. Next up, we have Jeff Cantwell from Guggenheim Securities.
Jeff, you'll be asked to unmute yourself, and then please ask your question. Jeff, are you there?
Okay, Jeff, if you can get back on, let us know and we're happy to take your question. Next up, we'll have Jamie Friedman from [Indiscernible].
Jamie, it's your turn. Please unmute yourself and ask your question now.
Thanks.
Unidentified Analyst
Thank you, Peter, and Ingo, I enjoyed the animation earlier. It was quite interesting and creative.
Two questions from me. First, with regard to the issuer strategy, Peter, I just wondering is the addressable market the target market for issuer restricted to your -- those merchants that you process?
Meaning, is it possible to have issuer processing for merchants that for which you are not doing merchant acquiring? That's my first question.
And secondly, is in instance that there is a recovery offline, which obviously would be great for humanity? I'm just wondering, is that a good or bad thing for Adyen?
Those would be my two questions. Thank you.
Unidentified Company Representative
All right, Peter, maybe you start with the Issuing? And how we look at obtaining new customers in that space?
Pieter der Does
That's a good question. What we know of course, is that merchants who do the acquiring with us that those are the ones that we also discuss Issuing with a theoretically, you could run it as a separate product.
So it's not necessary to be an Adyen merchant, I would say. But that's not how we -- that's not the current implementations we're looking at.
And then secondly, if the physical world comes back, you see that merchants and that that's a trend which continues users both for online and offline. And if they start with us, it's often in the one channel.
So it can be with physical terminals or it can be with our online presence, but we see them -- we see us building out those relationships. So if you see, for example, with H&M that we've been working for a long time with, you see that they're adding countries for point-of-sale and countries for online.
So I would say that for us if the store comes back, that would be neutral and or a good thing. But I wouldn't be -- neutral in case of merchants where online volume then shifts partly back to store, but I wouldn't see that as a negative trend.
Unidentified Analyst
Got it. Thank you for the clarification.
Unidentified Company Representative
Next up, we have David Togut from Evercore ISI. David, you'll be asked to unmute yourself and then please ask your question.
David Togut
Thank you for taking my questions. Two questions, please.
First, could you discuss your 2021 investment in greater depth, should we expect more investments in unified commerce and full stack acquiring in the U.S.? And then the second question is, do you have any broader plans to really capitalize on PSD2 in Europe?
Since there are many open API's through which you could potentially offer, online and mobile consumer financial services to customers through the European banks. So I know this would potentially be a new line of business for you, but you do have a Netherlands banking license.
So I'm just curious as this is something that that you might consider.
Unidentified Company Representative
Peter, maybe on PSD2? it's an opportunity.
Pieter der Does
PSD2, I was still thinking about the first part, what are we investing in? So maybe I should do it in chronological order.
Then I might give the second part to Ingo for PSD2. So if you see what we are investing in, and I think, Adyen has organized in solutions, and I think that if you look at those solutions, if that such a short summary never really is the -- justice to what we're investing in, we think about digital and online.
That's where we started. So that, of course, is what we continue to investing.
That's about all trade, that's about risk. Then, of course platforms and marketplaces where you see companies like eBay is great examples of our investments there.
Issuing is also supportive to our investment in platforms and marketplaces. Then, of course, retail and hospitality, retail that point-of-sale hospitality, that's where we are relatively new and where we see some early traction, some good early traction, actually and then, of course, mid market that we are discussed about.
So those are the areas of investment and focus for our Adyen. And then Ingo, do you want to say something about PSD2?
Ingo Uytdehaage
Yes, of course. So if you if you look, what's happening in PSD2 in the besides the strong customers occasion, is indeed the open banking aspects.
If we would go or basically develop our own products around this, we will start to build direct relationships with consumers. So basically building our own payment methods.
And we think that that's a conflict of interest with our merchants, because we're basically then fighting for the same consumer, whilst we really want to be on the side of the merchants. So we will not do that.
We will of course, look if there are other players around us that might build on certain open API's for banks. You see certain initiatives in U.K., for instance.
And we will make sure that we integrated into our platform so that we can offer it as a payment method, but we will not develop it as a payment methods ourselves.
David Togut
Thank you very much.
Ingo Uytdehaage
You are welcome.
Unidentified Company Representative
Next up, we have Sean Horgan from Rosenblatt Securities. Sean, you'll be asked to unmute yourself, and then please ask your question.
Sean Horgan
Thanks for taking my question. So I was just curious about, I know don't guide near-term, but some of your peers have given assumptions about the recovery underlying their outlook for 2021 and thoughts on the periodic cadence there.
So I was wondering what your assumptions there. And if there's any color you could provide on the underlying assumptions?
Thanks.
Unidentified Company Representative
Ingo maybe for you.
Ingo Uytdehaage
Yes, sure. I think our most of our focus on is on building relationships with merchants were long-term.
So we don't focus too much on the short-term. It is still a very uncertain year for everyone.
So we want to make sure that we understand what the needs are of our merchants, make sure that we're ready for it. Also make sure that our team is ready for it because everyone has almost been working from home for a year now.
So we need to make sure that everyone's feels good, and that we're ready for this sustained situation. And the rest will follow.
So our focus is on the long-term, not on the short-term.
Unidentified Company Representative
Great. Well, that concludes the H2, 2020 Adyen earnings video call.
Thank you very much for joining us and we wish you all good health. Bye.