Adyen N.V.

everyone and welcome to the h1 2021 audien video call hope you've all been well and thanks for joining us today my name is ethan tandowski and i'm here from live from the amsterdam headquarters of audien together with our ceo peter von reduce and our cfo ingo who will talk you through our first half results To start, we have a short video which will cover some of the trends we've seen on our platform and in the broader industry. Enjoy!

We've seen a half year of strong profitable growth despite the COVID-19 pandemic continuing to impact the day-to-day of many of our merchants and their shoppers. Within this shifting landscape, many historical platform trends persisted in the first half of 2021.

We saw merchants already on the platform again contribute over 80% volume growth and volume churn remained low.

We also saw the regional diversification of net revenue contributions again increase.

Macroeconomic trends were consistent with previous periods too.

Some of them were even accelerated by the COVID-19 pandemic.

Economies around the world are evolving from cash to cashless societies, and commerce continued to move online at an increased pace.

The consistency of these trends and our continued strong execution led to a solid half of results.

We processed $216 billion in the first half of 2021, up 67% year on year.

Of these volumes, point of sale volume was 22.8 billion, accounting for 11% of total process volume.

Despite a turbulent period for in-store, POS volume growing in line with overall business is a testament to the strength of our unified commerce offering.

Net revenue was 445 million, up 46% year on year. EBITDA was 272.7 million, up 65% year-on-year.

EBITDA margin was 61%, as we continue to see increased operating leverage as we grow the business.

If you look at these results, you can see we're becoming a more global business every cycle since we went public.

These results are a consequence of our long-term approach to investing in our solution. One such space is platforms, an increasingly dominant business model.

For merchants in this space, we've built iGEM for platforms, a solution that we're seeing significant traction with as platform business models are adopted in more verticals.

We saw merchants continuing to adopt our unified commerce solution as commerce had to largely move online throughout the COVID-19 pandemic.

Due to this reality, multi-channel shopper journeys are now ingrained in shopper behavior and shifted from being a nice to have to a need to have for businesses around the world.

The Adyen team totaled 1,954 colleagues at the end of H1, as growing the team continues to be a key focus. We are proud to see that we are continuously able to add top talents to the team. Now growing of a larger base in more offices and largely remote, management still sees every new hire prior to joining.

We maintain the same outlook as we continue to build Adyen for the long term.

Great to see the continued growth of our business. And major shout out to the design team. Another really well done video. Thanks for that. We'll now move into a short discussion with Peter and Ingo, which will be followed by a Q&A from you all. You can now use the Q&A functionality at the bottom of your screen to ask your questions. When doing so, please leave your full name and firm you represent. But maybe to start with a short discussion with the three of us. So Peter, to start with you, anything that you'd like to highlight in the first half of the year? And is it really true that the board still meets every candidate that comes into AudGen?

Well, I'm very pleased to see that more than 80% of our growth is again from existing merchants. And at the same time, we have a very low churn in sub-1% of merchants. That proves that we service our merchants well and that they want to grant us more business. This is an engine that has been running now for years, that we sign up new merchants, they start small with us, we gain their trust, and they give us more and more volume. So I'm very happy to see that that trend is also the case this year. um regarding employees do we still see everyone yes so you cannot be hired by audien without having seen one of the six board members it's very important for us to keep the bar high and also to be very accessible and that means that everybody who works for audien has at least spoken for like half an hour with one of the board members we have a very deep bench you see that we promote internally At this time, we're now over 2,000 employees, but 9,954 when we closed the half year. So we are growing business and we're investing heavily in our employees.

Wow. So to summarize, you would say we focused on our merchants, we focused on our team, and we continue to grow both during the first half. Yeah. Yeah. Yeah. Great. Ingo, I'm sure you have something to add. Anything else you'd like to highlight?

Yeah. Thanks, Ethan. I think very much in line with what Peter just said. I'm mostly proud of the fact that we have this growth at scale. I think the land and expense strategy that we have with our merchants really pays out. So we start to work on projects with them, gain their trust over time. And as a result, we get more volume. And of course, that's something to be very proud of. at the same time i think i'm very proud of the fact that we become a more global company every cycle we become more global from a team perspective with more than 20 offices around the world where we've added new team members over the past six months but also more global from a revenue perspective the way how north america now contributes to total net revenue is getting more and more significant and i think that's a strong proof that we're building the right uh offering in the us

and us is now total 22 of net revenues and i think that's a great achievement of the the team in the us yeah so some long-term payoffs we've seen from some investments in the past i guess yeah absolutely i think that's absolutely what you see right now yeah fantastic and if we talk about our merchants of course peter a number of them are still dealing with the coven 19 pandemic are there any trends or macroeconomic things that we've seen on the platform in the first half of the year

Well, what you see on the macroeconomic level is that the stores that were capable of, well, unified commerce now becomes even more important. Stores that were closed could sell online. So having those channels, it's more ingrained in shopper behavior. So there's more an expectation, of course, to be able to return in store endless aisle. All those services have become more ingrained. Of course, there are tailwinds, the move from cash to cashless. So that's a trend that we see persistent. If you look on the platforms, you see that we have On the platform, we see that certain verticals are impacted. Of course, first travel was heavily impacted, airlines. And now for the first time, airline at the end of this half, it was at the level at the pre-pandemic level. So no growth, but at least back at the level where it was before. And you see that point of sale volumes doubled. year over year, so that's quite significant. It's now 11% of volume. Then we have proven that we can run the business from home. So working from home works very well for us. Of course, offices play an important role in keeping our culture. So we make them a very attractive place to work, but we have always been very flexible. Also pre-pandemic people could work partly from home. And what we look at is how we can make sure that with maximum flexibility, we run this business going forward.

Yeah, clear. So there's been a number of changes, but looking to help our team and our merchants get through it. Clear. Thanks. And Ingo, if we would move to the product side, to innovation, I'm sure a lot has happened this half year. Care to explain? Yeah, absolutely, Ethan.

I think, first of all, we continue to iterate on our full stack strategy. We added Japan to the acquiring mix, which basically is a next step in our ambition to become a full global player and basically follow our merchants to the countries where they think it's relevant. And of course, if you want to have this global position, you need to add to the portfolio. So really pleased to see that this is live right now. But also more on specific products like issuing, for instance. Issuing, we launched it last year in pilot mode, and we've added now new use cases to the offering, which I think is very much a proof that it is a very flexible offering where it's relatively easy to add new use cases to it. In this case, it's about expense management, which we launched for customers like Visma. And also today we announced justetakeaway.com that's going to use it for increasing their revenues and also optimizing their cost, basically. So we're very pleased to see that. But also on the platform side, we continue to iterate. Platforms has been very important for us over the recent years. It's all started off with marketplaces, of course, with eBay as a huge win. But we have now also shifted more towards the software type of businesses. We've won hospitality verticals, for instance, a company like CloudBets, which is using our platform now to sell to their sellers. And I think that's for us the way to reach the long tail. And of course, we're very pleased to see the huge pickup there. The last point I want to mention is all the iterations we've made on our impact offering. We try to use our technology for the good. That's how we launched giving last year, where merchants are helped to give donations to charities. And that's being picked up by a lot of merchants. And we also added this year a product which we call Restore, where we help merchants to offset the carbon emissions during transactions. So all kind of great additions and iterations to our product offering where we're very, very proud of.

Great. Well, issuing platforms and impact helping our merchants with their initiatives all sounds good. There's a lot going on. There clearly must be many questions from you all. So as a reminder, you can use the Q&A functionality at the bottom of your screen to ask your questions. And we'll move into that right after this. First up, we have Mo Moawala from Goldman Sachs. Mo, please ask your question.

Good afternoon, Ingo and Peter and Ethan as well. Can you hear me okay?

Can hear you well, Mo. Thanks.

Great. So I had actually a couple. So first of all, just coming back on Unified Commerce, I mean, you've clearly had a head start. in this area even before the pandemic. I think on the previous call, you talked about the whole mindset shifting. In the past six months or so, how much of a shift have you seen at the customer end? And how is that translated for you in terms of the pipeline, in terms of the momentum, and how quickly you are able to ramp up your customers? And it's interesting, the LVMH win that you talked about in the shareholder letter was quite fascinating. So keen to kind of get your insights and how far of a competitive edge you have in this area to kind of keep driving growth. My second question was on issuing. I think issuing, as we are seeing from your kind of customer wins, is very multifaceted. And be curious to understand how you see, you know, these sort of different use cases unfolding and then just sort of the sort of the the cyclical effect this has with more and more additional customers. And the Visma one is particularly interesting because here you're kind of indirectly approaching the mid-market here through a kind of a technology partner. So keen to understand that and when do you think this could start to contribute to your growth and your revenue over the medium term? Thank you.

Maybe, Peter, to start with the unified commerce question, what are some of the trends we saw this half year?

Yes, so what you see is that unified commerce is now, it was a trend that was there, which is now even more widely embraced. So it's becoming need to have. It's a reason why we win merchants. Think about the body shop American Eagle. So it's so much more ingrained in the expectation. What is more difficult is to prove that we don't really influence the rollout schedule of our merchants so it's more difficult to say now we see that this merchant which was single channel now became multi-channel because of this trend but on the macro level yes that's what we see happening and we see that therefore our positioning is really is really good

Yeah, so the difference between was the timeline accelerated or did this happen where it wouldn't have happened otherwise? That's tougher to tell, but we're seeing that acceleration.

On the merchant base, it's more difficult, but on the general portfolio, we see it's happening.

Yeah, clear. And Ingo, maybe on issuing, is there anything you want to add about the use cases that we mentioned in the shareholder letter or other use cases potentially that we could utilize?

Yeah, absolutely. I think we built issuing for the flexibility. I think there was also large feedback from the potential merchants that we talked to back then when we started to develop that they were looking for flexibility, so different type of use cases. So we developed with, for instance, OTAs in mind, but also on food delivery. And then you see now that we're all kind of new use cases. And I think It's not specifically like we have a target list of five new use cases. I think the flexibility that is key to us. And that's why we strongly believe that we have something unique in hands. The fact that you can issue cards based on location, time, type of store where you want to spend it. These are very important aspects of the product. um it's a strategic play for us so we're not expecting a lot of revenues on the short term but of course we're doing this to make sure that we build a stable portfolio on the long term so it's absolutely a key topic also if you look at investment from our sand sites to further develop the product

And the flexibility you talk about that comes from the single platform, I guess.

Yeah, indeed. So we built this on our platform. It is it has potentially global reach where we started off in Europe and US. And of course, we will continue to add on it.

Great. Thanks. Next up, we have Sandeep Deshpande from JP Morgan. Sandeep, you'll be asked to unmute yourself and then you can ask your question.

Yeah. Hi. Can you hear me?

I can hear you well, Sandeep. Thanks.

Thanks, Ethan. I mean, when we look at your growth, your growth was incredibly strong in the enterprise part of the business in unified commerce. But when we look at that in mid-market, which has been one of your target areas, it's not as strong. What do you think you need to change there to be able to get that growth to the level you have in your core areas in enterprise and unified commerce? Is it technology or is it go to market? And I have one quick follow up on POS, which is that clearly you've been very successful in POS unified commerce. Initially, at least when at your IPO, a lot of that growth was coming from European customers. Are you seeing this POS unified commerce success in the US as well? Thank you.

Peter, you want to give a comment on what we're seeing with mid-market, whether it's commercial or technical challenges that we see?

Yeah, in mid-market we're investing in a few markets and we're growing there. It's true, it's not at the pace where the full company grows, but that's also because we're looking at what's the best strategy to execute there. That means that for those smaller merchants, we want to have them through platforms. Through those platforms, we can also provide them, say, with unified commerce. So we do that with Lightspeed or EPOS Now. But it's early days in that market segment, so it's not something that worries us.

And switching to a point of sale, which was the second question. He mentions that we were focused on Europe at the start. I guess it's a global offering that we have now, or how do we... Yes, that is great to see that we sign up U.S.

domestic merchants for unified commerce, so for all channels. And when there's complexity, that makes it very attractive. And that's why you see that U.S. merchants choose for us.

Yeah. So definitely a global initiative we have on the point of sale unified commerce side. Yes. True. Great. Great. Well, thanks, Sandeep. Next up, we have Hannes Leitner from UBS. Hannes, please go ahead with your question.

Yes, thank you for letting me on. I got a couple of questions as well. On the growth initiatives like issuing, could you talk about the different use cases and economics for ADN? And will you provide volume breakdown going forward? I'm aware that you mentioned that you don't expect too many revenues over the new term. And then on the unified commerce, you stated in the past new interest from supermarkets. Could you provide us with an update on that engagement? And then lastly, on the acquiring license wins like in Japan and other countries in the first half, and the stated comment around airline volumes being almost back to pre-pandemic, I think the full-stack contribution is quite of a surprise. Maybe you can dissect the contribution from, for example, Japan. You stated Microsoft was one of your first customers there. So how much of that was basically impacted by the existing volumes and then just like insourcing the acquiring bit of it to charge full settlements?

Okay, so three questions. Maybe to start, Ingo, with issuing. Maybe you can talk us through some of the use cases and how the economics work.

Yeah, that's OK. I think if you look at the use cases, we have several use cases now live. It's for food delivery, for instance, where Glovo has been the most important example, where couriers go to supermarkets to pick up goods and we issue a virtual card or a physical card with a specific amount for a certain period of time. We just talked about expense management for Visma and for Takeaway.com. These are now use cases. OTAs is another use case where we could issue virtual cards. Of course, with the travel industry now still not completely rebounding, that's more a longer-term play, but we certainly think that our platform is very well suited for it. The good thing is that if you look at the economics, it's very similar to how we make margin on the acquiring side. So there is a number of base points that we earn on the interchange fee. So interchange fee typically goes to the issuer. We're issuer now. And we share those revenues together with our merchant. And depending on the type of the deal, the location, the number of cards, et cetera, we agree a certain rev share basically with the merchant. On top of that, we charge a fee for our platform, which is very similar to a gateway fee on the acquiring side. So I think from an economics perspective, there are a lot of similarities with acquiring. Currently, it's still early stage. We haven't given any forecast for issuing specifically. But of course, on the long term, we hope that this will contribute to our revenues in a significant way.

And on unified commerce, you mentioned supermarkets specifically. Do either of you like to share something on an update there?

Yeah, I can say a few words on supermarkets. I think the supermarkets also with the current pandemic have started to think about, okay, what else can we do to make sure that we have the right touch point with consumers? So you get all kinds of different customer journeys. curbside pickups in-app ordering and that's exactly where we're good at so that's why we started to work with supermarkets to help them out of course the the high volume processing in supermarkets is typically not the first thing they talk about but if you want to have like a integrated approach to payments that's the long-term objective of course to get that on our platform as well so we're very excited in this area and And so far, I can't announce any new deals, but it's, of course, given the fact that payments are so strategic for this vertical, yeah, we're the right partner to work with.

Yeah, so the trend towards unified commerce in many verticals we're seeing there as well.

Yeah, exactly. I think that's, for me, that's the key learning from this pandemic, that payments, I think a lot of businesses have seen how strategic payments is to basically enable their business. And that's where we like to help out.

Great. And on the last question about our increasing full stack percentage, is there any color that you'd like to give maybe, Ingo, about why that's increasing and what's driving that?

Yeah, the most important factor that is driving the full stack percentage is, of course, that we have more acquiring on our platform. And of course, I think the question that Hannes just raised around, okay, but how does that work with travel if travel is back? I think it's fair to say that we were just talking about like the last week of June is almost the same now as the last or the first week when the pandemic started. So if you look at the full half year, travel volumes are still very low, but we see it picking up again, both on airline sites in the US, but also OTAs globally, because a lot of people have local travel, go to hotels, et cetera. So that's what we see returning right now.

Yeah. And of course, the rest of the platform did see growth. So absolutely. Yeah. Yeah. Great. All right. We have next up, we have a few questions from Adam Wood of Morgan Stanley. He's unable to join our call, but I will ask the questions on his behalf. So there's two questions. One is that there are a few licenses which have been added, especially in the US. What do they enable for us? And is it about customer service, our cost to deliver our breadth of our offering or something else? Maybe we can start with that one, Peter, and then we can go to the second question.

Yeah, if we look at licenses, this is about customer service. So we're looking at what's the best way to service our customer. And I think that the cost of working with a partner for the license, that is not that significant. That's not the reason to do it. So when we look at our licensing structure, we look at what is the best way to service our merchants. And you should look at it in that light, not in a cost-saving light.

Makes sense.

Makes sense.

Great. And the second question he had was, will you have all periods where investments go up more or should we broadly expect you to be able to offset a large part of take rate degradation with the operating leverage you have in the business? Maybe for you, Ingo?

Yeah, absolutely. So I think if you look at our business model, there's a clear split between how we basically earn our revenues and the cost side of the business. So on the revenue side, we have always had this approach where if you bring more volume as a merchant to our platform, your price per transaction goes down. But we want to make sure that absolute margins with that customer grow over time. Of course, if you then bring more process volume, the take rate indeed declines. But that's a positive outcome of our business strategy. Then on the cost side, the cost side is mostly related to building the team, paying for our housing, the IT infrastructure, and that's unrelated to the revenue side. So the marginal cost of a transaction is basically zero, and therefore we think that we have a lot of operating leverage in the business. Of course, on the Capex side, we continue to invest in building out our platform. Over this half year, we initiated a couple of new projects to do this. But if you look then on the ratio between basically EBITDA growth and volume growth, that's very much in line, and that's something we're very proud of.

Clear. Thanks. Next up, we have Timothy Chiodo from Credit Suisse. Timothy, please go ahead with your question.

Great. Thanks, Ethan. Appreciate you taking the question. So my question relates to some of the platforms' comments and the dominant business model comments. So when you think about the underlying SMB payments opportunity that resides within or underneath those platforms, what is a rough percentage that you think about in terms of SMB volumes running through platforms versus being sold either SMB direct or otherwise separately in terms of the payments? And then the follow-up to that is, In addition to you already have payments, you have payouts, you have issuing, what are some of the additional embedded financial services that you could offer those platforms longer term? Things like capital, payroll services, bank accounts, tax prep, et cetera.

Maybe, Peter, to start, think about our approach to the mid-market or the long tail. When we talk about platforms or going direct, how do we see those two playing into our strategy?

You see that platforms become a very attractive way for SMB businesses to operate. So you see that we invest in that and they have a large take up. So this is a moving area where indeed you do see that it becomes more attractive to run over a platform.

And would you say that both of those are important to our business?

We, of course, have an enormous track record in servicing larger merchants and being an invisible partner. And that's exactly what we do with the platform. So we make them excel without being visible ourselves.

Yeah, clear. Ingo, maybe on the embedded financial services question. Any plans?

Yeah. I think we continue to work with our platforms to see what is next. At the moment, we have nothing new to announce. But, of course, these are the logical questions to ask, like what kind of products could you potentially offer to sellers? And we want to make sure that we have the flexibility to offer new products. So it's absolutely an area where we closely look at. And once we have things available, we will let you know. Yeah.

clear thanks next up we have james goodman from barclays james please go ahead with your question

Good afternoon. Thank you very much. Yeah, so maybe a couple from me, please, as well. Firstly, just on the employee, the headcount ramp. I think you added just over 200 employees in the period. I mean, that's actually less than you added in either of the last two six-month periods. So presumably the rate of absorption you speak to in terms of employee onboarding is a little higher than currently. So basically, have there been some challenges to hiring there or something in employee churn? Or is it simply the case that Agin doesn't need to continue to hire at the rate at which you were doing in the second half last year. And then just maybe coming back to the to the top line development and from a regional perspective, North America, extremely strong, clearly a couple of specific client ramps there, but specifically on the domestic U.S. opportunity. You call that out in the shareholder letter as well. Just wondering if you can add some context there in terms of broad competitive displacement or specifically outline the drivers that are now helping you on the domestic opportunity as opposed to helping U.S. merchants internationally. Thank you.

Peter, maybe if we start with how we're building the team and then we move to the U.S. afterwards.

um yeah if you see um um we've been able we we keep the bar high we've been able to attract uh talented people we don't specifically guide on how many people we are higher per quarter or per half year we do see though that some some people who who need to move couldn't do that because of covet So there is some impact there. They'll come later. So that will be post-pandemic. Then the second part of the question is on our U.S.

business and why now can we start to win domestic when we couldn't?

It's a timing question because that's the service which we first had live in Europe and then it only came later in the U.S. Also, the maturity of our business is, of course, much... Well, we matured as a business, so we are now such a logical partner for that that you see that happening now at scale.

so it's it's from my point of view pure timing and of course we grew an office there we grew we grew a presence there we grew references there you cannot hit the ground running from day one you wish but that takes time yeah and ingo looks like you have something to add yeah i wanted to add like i think what you see in the us is that the unified commerce leads to additional complexity which we can solve and i think that's like having all those different type of customer journeys is a key topic for also for us retailers And we're one of the few potential companies that could actually offer this. And that's why we see traction. And I think on the online side, I think there is also more complexity with all the local U.S. debit networks where we have an offering. So we can optimize routing in the U.S. And that's why you also see more and more U.S. players to route domestic traffic to us.

Yeah, clear. So while we've been working with U.S. companies for a long time, the complexity in the domestic market is rather new, and that's giving us a chance to win there as well. Yeah, exactly. Yeah. Great. Next up, we have Sanjay Sakrani from KBW. Sanjay, please go ahead.

Hi, this is Vasu Global for Sanjay. Can you guys hear me?

Yes, we hear you well. Go ahead.

Thank you. So thanks for taking my question. I guess first I wanted to follow up on the question about the banking license approval in the US. Could you maybe give us a little bit more detail on how your product roadmap in the US might evolve as a result of that license? And the second question I had was just, you know, you've seen pretty strong growth. You called out travel volumes are rebounding. But as we think about the other verticals where COVID sort of pressured volumes, What have you seen in terms of where we stand now in terms of normalization of those volumes? And would that continue to be a tailwind into the back half as some of those volumes come back? Thank you.

Ingo, maybe the US branch license, how that impacts our product roadmap there.

I think one of the main reasons to apply for the banking license is what Peter just mentioned, is to improve our service levels for our merchants. I think the key thing what we can do is settle directly to merchants, so having no dependencies on any third-party banks. I think that's a very similar thing that we have done in Europe, for instance, over the past years. And that's, of course, part of our product promise that we want to have full control over our value chain. And that's really appreciated by our merchants. So that's the first thing that we're going to do. And probably also, well, that's why I'm CFO, probably one of the most important things, because if you have full control over the payout of your cash, then, of course, you're in a way better position than if you're dependent upon third parties. Yeah.

Makes a ton of sense. And if we think of some of the more macroeconomic trends, Peter, she mentioned travel, but it may be another. It could be in-store volumes we saw specifically in retail. Anything that you can add to give context there on what we've seen on the platform?

Well, what I think is amazing that we have seen how point of sale now doubled. And that's despite that not all stores around the world are open. So you see that the team has been very flexible in helping merchants to roll out. Other macroeconomic trends, do you have things to add?

I think if you typically think about the retail sector, they are one of the sectors together with travel that are mostly hit by the pandemic with all the stores closed. And I think one of the strategy or strategic discussions we have had with a lot of retail is like, how can we further implement a multi-channel strategy? And I think that's what you see right now. So for the upcoming period, like how can we do more implementations how do we make sure that we add another channel to the mix so i think if if the pandemic is over of course we expect in-store travel or in-store traffic to be back at at original levels but at the same time we strongly believe that we have added our installed base quite significantly so that makes the total buy way bigger than pre-pandemic

Clear. Thanks. Next up, we have Jeff Cantwell. Jeff, please go ahead.

Hey, can you hear me? Yep.

Can hear you well.

Go ahead. Hey, great. Great. Thanks so much, and congrats on the results. It seems to be one of the key topics. Can you talk a little more about North America right now? Because the reasons, you know, now 22% of the net revenue of the company. Maybe just talk a little more about the reasons why you think you're getting those volumes, you know, either from competition or from new use cases, you know, so to speak. And do you see any, you know, further opportunity to do that with other add-in customers beyond those which you are currently processing? And then the second question is, just to kind of piggyback on that last one, can you just discuss a little more about the U.S. banking charter in terms of where those impacts will show up in the financial model? I was under the impression there might be some impact to your cost, for example. So just curious if we could discuss that a little bit. Thank you.

Ingo, maybe on both and net revenue contribution in the US and the US banking?

Yeah, sure. I think for the US, we will continue to work with our current customers to add new channels to the mix. I think if you have more and more showcases that unified commerce works, it's easier to sell it to other existing merchants. At the same time, also a lot of new retailers we're in talks with. And then, of course, we also have the platform business that is becoming more and more important in the US, where we are one of the few companies that can actually offer unified commerce through platforms. So having a point of sale offering on platforms is also a very strong offering in the US. So that's why we expect to further grow our U.S. domestic volumes in the next years and that the investment that we have made over the past decade will further increase. And then on the banking charter, I think if you look at the economics, in the end, it's more about service levels than economics. I think if you look at, for instance, acquiring, we're still working with bin partners in the U.S. Even if we could get that ourselves, that's not going to make a difference. huge difference in the economics because we have huge volumes in the US, so we have quite attractive pricing already with our bin sponsors. They're great partners. It's all about making sure that we get from a settlement perspective to the best service levels. because if you grow at the pace that we do that is a very important factor you can't miss out a payment because you're relying on a third-party settlement bank and specifically in the platform business that's a key thing that we've learned like those are all small sellers they're waiting every day for their cash they want to pay out uh to uh they want to pay out for instance their wages so you need to make sure that you never miss a settlement and by having full control over settlement it sounds like a silly thing but it's uh it's very very important yeah

So much more about service levels than about a cost driver that we should expect.

Exactly. And of course, there's some cost optimizations possible, but that's not the key thing. And that is, I think, very similar to what we have done in Europe. Also, when we applied for the banking license in Europe, we never thought like, okay, it's going to be a huge cost optimization. It's mainly because we wanted to improve the service levels. And that's also the feedback that we have gotten from merchants that payout has become more stable than in the past.

Clear. Thanks. Well, next up we have Jamie Friedman from Susquehanna. Jamie, please go ahead.

Hi. Good afternoon. Good morning. I wanted to ask directed to Peter and your recent comments on point of sale and the strategic significance of point of sale. I was just wondering, does point of sale from your experience always follow e-commerce and Omni, or do you have any instances you're seeing where the point of sale comes first and the others actually follow?

Yeah, we have seen many examples where the merchant said point of sale is so complex for us to run that in multiple countries that first we will migrate point of sale to you and then online volumes will follow. So it's not always omnichannel or unified commerce, but it indeed is our separate choices.

um what i like about it is that we have such a track record in ecom that is that you now see how we build our track record in point of sale so that that makes us the unified commerce player great if i could just sneak in one more yeah no problem jamie go ahead um you know it seems like there's such a proliferation of uh wallets and funding sources in the world I know there's a fair amount of detail on your website about what funding sources you accept locally in places like Brazil, but I was just wondering, is that a technological challenge for the company and the industry, or is that, in the scheme of things, relatively easy to address?

It's a form of complexity that we're good at solving. So what you see is that different shoppers have different preferences to pay. You see people traveling now, again, a little bit more than the year before. And that means that they want to pay with that payment method and that increases conversion. So for us to be able to supply those services, that helps merchants choosing for us. So it's complexity that we take away. We don't see it as a challenge. We see it as a specialism that we're very good at.

Thank you. Thanks. Next up, we have Paul Kratz from Jefferies. Paul, go ahead.

Hi, thank you very much for letting me ask the question. I guess for Roller and Lightspeed, these are both, you know, vertical specific, you know, software kind of dash hardware vendors. So how should we think about those relationships in terms of exclusivity and how they go to market with your product? And maybe then also to what extent you tailor your offer for these platforms or is the innovation really more led by the platform themselves and leveraging, I guess, your platform API documentation and everything to kind of come up with new features using your platform. Thanks.

Ingo? If you look at those players, we work closely with them. We are the party in the background, so they typically manage the relationship with the sellers. They have a good integration, they understand the needs, but they're often lacking the best payment implementation. And that's when we are going to help, but we're often not visible. And that's also the type of role that we like. So it's a very good implementation of our Agents for Platforms implementation. And yeah, we will continue to focus on this also for other platforms or other verticals where it is relevant. It's a very generic implementation. So if we build something, we want to make it available for all merchants. So that also means that we want to make it available for all platforms, so we don't do any tailor-made work for those players. We just use the standard functionality of the platform. I think that's also the strength of our platform.

Yeah.

Clear?

Great. Next up, we have David Togut from Evercore ISI. David, please go ahead.

Thank you very much for taking my question. One of the main themes of the pandemic and payments has been the increased demand for liquidity for many participants in the payment ecosystem. In certain parts of merchant acquiring, for example, in Brazil, acquirers actually charge a premium for liquidity. You've had a lot of success with same day settlement to cash in Europe through your banking license. and you don't seem to be charging for that greater liquidity, should we expect that feature to roll out in the US once you have your federal bank license? And how important do you expect that to be to your future growth in the US if, in fact, you offer same-day settlement to cash without a charge to the retailer?

Ingo. Yeah, so the same-day settlement started basically as a reconciliation product, so to basically make the life of our retailers easier, that basically today's sales you immediately get paid out and that you fully understand which transactions are in, and that is partly pre-funding. If it is really the same day or next day, it comes with a fee. So we don't do that for free because it has this pre-funding. If we do it like the next day or the day after, then we offer it for free. So it depends a bit on also the liquidity pattern of our merchants. Typically, we have the philosophy that if we have to attract funds for it, we need to charge for it because we want to have profitable business in our books. And I think that's in Europe, that's in each region where we offer this product. And, of course, we were just referring to Brazil. Brazil is very specific with the 30-day settlement delay and all kinds of products around that, including anticipation, where I can talk hours about. I know you can. That's a lot of fun. Great.

Thanks. And now we're up with our last question, and we actually now have Adam Wood back in the call. So I asked a couple of questions earlier on his behalf, but he's now here. So, Adam, do you mind going ahead with your question? Are you here?

Yeah, I'm here. Can you hear me okay?

Yeah, we hear you well.

It's very kind of you to take a couple of extra ones from me. I appreciate it. Thank you very much. Maybe can we just talk about the US, first of all, another period of very strong acceleration in that business. Obviously, we're aware of a big merchant ramp up there. Could you give us a feel in terms of maybe from both a net revenue standpoint, but also more importantly, from a pipeline standpoint, X that merchant ramp up. Are you seeing a similar kind of acceleration in the US business in terms of the business that you're doing and the pipeline that you're building in that market? and maybe a second one that you alluded to in the financial statements you talked about um strong customer authentication in europe being a major driver um where are we on that do you think a merchant kind of at the early stages of dealing with this um are we actually kind of midway through it and do you see competitors coming up with anything similar to what you've managed to come up with to deal with that strong customer authentication issue in the european market thank you

So let's start with the US. Is that single merchant driven or is that across the width of the platform?

Yeah, it's across the width of the platform. I think that's the most important thing that we have seen over the first half year. The growth is from big merchants. Of course, you're referring to single big merchants as eBay. Of course, eBay has been important to us. They also announced in their earnings results that they are happy with performance so far. So also we benefited from this. But that's not the reason why we're growing at this pace. It's across the width of the merchant base, and that's also why we're so pleased with it. If you look at the pipeline, that's, I think, very similar. We're working on a lot of potential new deals. We're adding new merchants to our platform. So we feel very comfortable in that position.

great and then moving to the next question on psd2 and then specifically stronger customer authentication are there any trends that we've seen already playing out here in europe as it's being implemented yeah well it is being implemented right now or it is live now so we see that it's a great way to get in touch with new customers because they see

the flaws if it doesn't work well. I think everyone that lives in Europe knows those situations where you want to pay something online and you get to the second factor and the second factor doesn't work as you expect it to be or you're routed and it doesn't work. And I think our technology, because we have everything in-house, is built in a way that you get to the highest conversion levels. That's what leading merchants in Europe now see, and that's why they started to work with us. So will this have a spillover effect to next periods? Absolutely, because I think that more and more retailers realize that if you implement it in the wrong way, that you actually lose a lot of conversion. And in the end, if you run large volumes on the platform, conversion is very important. So, yeah, that's how we hope to change this into a benefit for us to help merchants get better conversion.

So that complexity word comes up again, another area where we're seeing more and more complexity. Yeah, exactly. Yeah, yeah. great well that wraps up the q a portion of today's session thank you all for your questions thank you peter thank you ingo for spending time with us today thank you yeah thanks it's been very enjoyable hope you've you've enjoyed your time with us and goodbye from amsterdam take care