Adyen N.V.

Good afternoon, everyone, and thank you for joining Adyen's H2 2024 earnings call. My name is Josh Massa and I'm head of investor relations here at Adyen. I'm pleased to be joined today by our co-CEO Ingo and CFO Ethan. For today's call, we'll start with a short discussion on our business progress and financial highlights from the period before opening the floor for Q&A. Please remember that you can send in your questions at any time using the Q&A functionality at the bottom of the screen. And as usual, the raise hand functionality will not be incorporated. We ask that you please leave your full name and the firm you represent when submitting your questions. Thank you. Okay, so let's get started. Ingo, how do you look back on the last year?

Yeah, I look back at a very strong year. We continue to invest in our financial technology that is a strategic enabler for our customers. And that is very important to us as a company. We invested in products like uplift and intelligent payment routing. And those products balance cost, conversion, and fraud. And these are the topics that we discuss on a daily basis with our customers. What I'm very proud of is that we continue to deliver on our promise to be a subscription to innovation, because it's not these two products that we delivered in the past half year. It's also how we launched SFO1, which is a terminal that helps retail customers to optimize their customer journeys. These investments help us to increase the share of wallet with our customers. It's an important part of our growth strategy. And I think that's also clearly reflected in the numbers that we posted this half year.

Thanks for that summary, Ingo. It's really great to see that we've proven that payments can be a strategic enabler. Ethan, maybe you can shed some more light into how that played out in our numbers.

Sure. I think ultimately delivering for our customers is also visible in our numbers. As in the second half, we were able to grow net revenues to close to 1.1 billion euros or 22% growth for the period. That's ultimately mostly driven by growing with our existing customer base. And the biggest part of that is gaining share of wallet within them. If you look at EBITDA margins, if you combine that strong net revenue growth with a year where we did less hiring than the years before, you see that EBITDA margins expanded to 53% in the second half of the year and just under 50% for the full year. Looking back on this period of growing with our customers and growing our business, I'm really proud of both being able to deliver for them today, but also making investments for the long term.

Thanks for that summary, Ethan. Ingo, coming back to you, you talked a bit about unlocking value for our customers, which is certainly a key draw for Adyen globally. Can you go into a bit more detail on some of our product investments and how they're helping our customers?

Yeah, absolutely. So if you look at our product investments, like the intelligent payment routing or uplift, I think that's all based on a foundation of being a single platform. And being a single platform helps us to have more data. If you just realize that over the past year, we processed over a trillion of volume, that all gives new data points to make better decisions. And that's also how we, for instance, developed payment routing for used debit. 20 customers piloted with this product. It resulted in 26% less cost. and 22 base points of increased conversion. And that combination makes it very special. Over the past couple of months, we have seen that the number of merchants using this has doubled. And this is, I think, a very strong proof point that it helps us to increase our share of wallet. So ultimately, it all comes back to the single platform and the investment in the single platform that help us to basically have a compounding effect of all the investments. And I think it's reflected in the way how customers appreciate us. If you look at, for instance, Net Promoter Score over the past half year, it's at an all-time high, 66. And of course, that's the result of hard work of our team. And I'm very proud of this.

Yeah, thanks, Ingo. It's really exciting to see that our platform intelligence is really compounding at this scale, and it's also being recognized by our customers. Ethan, one of the things that sets us apart is what Ingo earlier referred to as our subscription to innovation. In other words, our commitment to delivering the best technology for our customers' continued advancement. But it's also important to ensure that we deliver today reliably and at scale. Can you maybe give us an example of how we delivered on that this half?

Yeah, sure. So indeed, combining that subscription to innovation with our ability to provide reliability at scale is something that is really important to many of our customers and is personified, I think, especially in the second half around the Black Friday and Cyber Monday weekend, where for many of our customers, this is a make or break sales period for them. Of course, we've been focused on large enterprise businesses as long as Audien has been around, and we're built for scale in that way. That's also the power of our single global platform. But ultimately, it's tested in this weekend, because to give a proof point, we processed around 160,000 transactions per minute. And so when our customers think about what partners are there and available to help them through such an important moment, we are the ones they look to to support them in doing that. And we do that not only with reliability at its core, but also combining that with all of the value propositions that we've talked about previously around conversion and cost savings, et cetera. So I think it's a really nice proof point about how we can deliver for our customers, especially when they need us most.

It's very impressive and clearly a great case study of what the platform is capable of. Moving to the pillars, Ingo, can you maybe give some examples of our pillar strategy and how we furthered that this half?

Yeah, sure, absolutely. So I'd like to take three examples of our customers that have grown with us over the past half year. And to start with digital, where we have Adobe, who is a long-time customer of ours, and that's continued to expand their share of wallet with us. So their geographical expansion helped us to get more volumes. And the key reason why digital customers select us is because we are innovating. The examples that I just mentioned, like uplift and intelligent payment routing, these are reasons why they are sending us more volume in this pillar. The second example is in unified commerce. Moto One is a customer of ours that is beyond retail. So we're not just focusing on the retail vertical, but this is hospitality. And they selected us to help them to improve their insights, but also their customer loyalty. And I think it is very key that with this unified commerce strategy that we have, that we are in the best position to help customers also in hospitality space. The third example is Spendesk. Spendesk is a platform merchant of ours. Together, we basically unlock payments and financial products for SMBs. Of course, it's their customers, but we provide a wide-label technology to them to make sure that they are successful. These three customers in the different pillars are great examples why we continue to increase our revenues in the last half year and why we're doing that with both existing customers, but also with newer ones where we bring the innovation.

Yeah, it's really great to see a really broad range of examples there. And as well as our pillar strategy, of course, we also have our regions. So, Ethan, could you please talk to the regional developments that we saw this half?

Yeah, happy to talk to how the regions did in the second half. And I think it's a nice combination of, again, delivering today, but also making sure that we are investing for the long term across many of them. So if we start with EMEA, our largest market where we've been for the longest time, it was our fastest growing region this half. I think it's a really strong proof point that even in our most core market, we are still able to deliver significant growth. And this opportunity is nowhere near the end of its cycle. If you look at North America, we again were able to gain market share in a strong way. And we combined that also with further investing in our team, not only growing the team, but also investing in new office space, whether that be in San Francisco, which we moved into in the second half, or committing to new space in Chicago. In APAC, two things are relevant. Both, we're making some long-term investments in some of those key markets like Japan and India, and we're seeing encouraging signs with that. But secondly, we're also able to help our APAC customers succeed both in APAC, but also to help them expand internationally, which is a core focus of many of our customers there. And lastly, on LATAM, we're seeing some acceleration, not on a reported basis, but on a constant currency basis. We're seeing that a lot of the product investments that we made over the last years in Latin America are paying off and we're able to help grow with our customers there.

Yeah, nice. Really great to see the continued growth and promise in our regions. We talked a bit about the team and maybe going a bit further along that line, Ingo, when you think about the current team that we have, how do you think we can position ourselves for further success?

Yeah, so if you take a longer term view, like in 2022, 2023, we significantly expanded our team. So we almost doubled the company in size from a team perspective. And in 24, we willfully choose to hire less people and focus a lot on making sure that the people that we onboarded years before were very effective. So we also made sure that the team leads had time to actually do this. Going forward for 25, we will continue to invest in the markets that are relevant to us. So North America will be a core of our growth strategy, both commercially and on the engineering side where we will make additional investments. And we think that for 2025, we will hire more people than we have done in 2024. But at the same time, if you look at margins, that our margin will continue to expand. It will not expand at the level that you have seen from 2023 to 2024, but still we expect that we will continue the path that we're on.

Great, thanks. So it's clear we're going to continue to invest in the team, but still delivering some margin expansion as well. On the topic of the outlook, Ethan, how do you see 2025?

Yeah, sure. So if we start with net revenue, which is, of course, as a management team where we spend most of our attention, then if you think about how we've been talking about it over the last year, it's been that we expect low 20s to high 20s growth annually between 2024 and 2026. We also expected to start at the lower end of the range in 24 with some acceleration in the years after. Well, so far, that is what we've seen, even with some acceleration already in 24 compared to 23, growing from 22% growth annually to 23% this past year. We expect that acceleration to continue. So we expect slight acceleration in 2025 on an annual basis. Ingo mentioned how we expect EBITDA to develop, which is indeed that we expect some expansion of our EBITDA margins in 2025, but not at the same rate as we expanded them in 2024. And in terms of how we plan to also share updates on how we're making progress during 2025, we committed to doing quarterly updates over the last year, and we'll commit again to doing that throughout 2025. If I think about our position now and I look ahead, I'm really, really excited for the opportunity, not only to help continue to grow with our customers, but also to make the investments that will help us grow significantly over the long term.

That's clear. Thanks, Ethan. And thanks both for the time so far. And now it's time to move to the question and answer segment. So as a reminder, you can submit your questions using the Q&A functionality at the bottom of the screen. We'll then ask you to unmute yourself and ask your question. Thank you. Thank you for the questions so far. The first question comes from the line of Adam Wood from Morgan Stanley. Adam, please go ahead and unmute yourself to ask your question.

Yeah, Ethan, Josh, thanks very much for taking the question. I appreciate it and congrats on a strong end to the year. Maybe if I just focus in on the U.S. market for a second. We obviously see a big competitor in the U.S. focus more on value rather than price. Could you maybe just give us a little bit of an idea of the impact that's had and how you see the pricing more broadly in the U.S.? ? And then just as a follow up on the debit routing, you flagged how important that is. It's hard to break out the underlying performance in the fourth quarter, but maybe X that one big customer. Could you say whether that's helping to drive an acceleration in U.S. digital volumes? And how do you see the competition versus you on being able to deliver on those alternative debit routes? Thank you.

Thanks, Adam. Ethan, do you want to take the first one and then come to you and go for the second one?

Sure. I think our strategy in general has been quite consistent in that we focused on delivering value to our customers. That is one approach. There is also another approach, which is to try to compete on cost. I think competing on cost will exist in this market, has existed in this market, and will continue to be that way. But we've very, very much focused on how do we deliver value. And we are gaining market share, right? You referenced the U.S. We're gaining market share there. We're winning from a number of different competitors, a lot of competitors that are focused on cost as well. So it has some impact, but it's also a trend that we've been seeing over a longer period of time as we've gained market share in that market.

Thanks, Ethan. Ingo on U.S. debit and the differentiation.

Yeah, it is very important to have the differentiation in our products. US Debit is an example. The other example, of course, is what we do around uplift. In the digital pillar, these products are essential to increase our share of wallet. So that's why we're heavily investing in it. I think it's a clear example why payments is not a commodity, why the added value that we bring is appreciated, and why we continue to increase our share of wallet also in the fourth quarter of this year.

Thanks, Adam. The next question comes from Justin Forsyth from UBS. Justin, please go ahead and unmute yourself to ask your question.

Awesome. Thank you very, very much, Ingo, Ethan, and Josh. Sorry, I'm just hearing myself background echo a little bit. But I have two questions on embedded finance. So question number one, as... You win more and more platforms and think about the adoption of EFS solutions. It seems like in reality, there's two components, right? There's whether the software platforms you're partnering with are making offers to their end merchants or actually those platforms requiring themselves to gain more shares, say, across Europe or the U.S., The BCG survey that you guys put out seemed to suggest that there is demand from the merchant side for embedded solutions. So what does it take to meet that demand as we move forward? And then second question is, I want to hit a number that you put out in the release, which was issuing growth of volumes, I believe, of 258%. Does that put you close to a billion euros annualized in volume? And would you say the main use case is expense management or is there something else there? Thank you very much.

Thanks, Justin. Ingo, do you want to take the one on our general embedded finance strategy? And then we'll come to you, Ethan, for issuing.

Yeah, so thank you for the question. On embedded financial products, I think our strategy is to grow with our platforms. Indeed, a lot of SaaS platforms have joined us on our platform. Current number of platforms doing already more than a billion of payments volume is already 28. And that's the starting point. Then on top of that, of course, we need to onboard a lot of subsellers. Also there you see significant growth in 2024 for over 150K of subsellers. And that combination of more platforms and more subsellers will create a situation where we can also upsell the financial products. That's the strategy here. This is also why we published those numbers to give you better visibility on how we're executing on this plan. We are very pleased what we have seen so far.

Thanks. Ethan, on issuing?

Yeah, I think the issuing question was both about scale of issuing today and about the use cases. First on scale, I think you generally get it in the right type of ballpark, right? You mentioned a billion. Something like that is more the scale on the issuing side. If you compare that to what we're doing on the acquiring side, where we did well over a trillion in issuance, payments volume during 2024, then you see the difference in scale. What's important for us is that while it's still small, we see really strong traction. And to your other point around use cases, we see that traction in expense management. That's one of the big areas that we're going after within issuing and where we see good traction, as well as also in the OTA space where virtual cards are more relevant. Those are a few of the early use cases that we're currently working together on with our customers. Thanks, Justin.

Next question comes from Mohamed Moala from Goldman Sachs. Mo, please go ahead and unmute yourself to ask your question.

Great. Thank you, Josh. Hi, Ingo. Hi, Ethan. And congrats on the performance in Q4 as well. I had two, if I may. Number one, as we think of the kind of cadence of the growth and this acceleration to your sort of midterm plan, can you sort of perhaps again tell us kind of some of these key levers? Obviously, land and expand has always been the biggest piece. But as you've obviously expanded the team, sales productivity kind of kicks in, but also wins from prior years start to contribute. So how should you think of that sort of cadence of the growth and the importance of the different levers? And then secondly, you're obviously clearly gaining market share in all regions. The Europe number is obviously particularly impressive. I know that in North America, there was a big focus on selling on value. So perhaps you could update us on that. But also, Ingo, you called out the innovation a lot. Obviously, uplift and debit routing are important products, but how should we think about kind of customers now upgrading kind of the quality of their technology offerings and how does that change your position in the kind of the sales cycle of the competitive landscape? Thank you.

Thanks, Mo. So first one, Ethan, on the building blocks for 2025. Yeah, sure.

So similar to what we saw during 2024, share of wallet growth with our existing customers is also what we expect to be the biggest part of our growth in 2025. And that's also where we expect to see some acceleration. I think the areas that I would highlight are across each of the pillars, I think, which is the positive sign. Within digital, that's more around content and subscription, delivery and mobility, as we've called out previously. Within unified commerce, we see that while retail remains really core to us within Unified Commerce, we've also been expanding to areas like hospitality, food and beverage. And so areas outside of retail will also continue to be a driver of our growth in Unified Commerce. And then the platform pillar is our fastest growing pillar. In each period, it gets to be a bigger part of our overall business. So it will continue to contribute more and more over time. In terms of the cadence of that growth, um our growth isn't linear especially not on a quarter by quarter basis i think 2024 was a good example of that where we did 21 in q1 26 20 and then 23 if you follow each of the quarters and it's much more about the underlying trends that we see and that's why we very much look at it on an annual basis where we expect slight acceleration Maybe to touch on your last point, which was around how new sales was developing, we see strong signs. Indeed, we've invested a lot over 2022 and 2023. We're still making investments, especially in the commercial teams, and we'll continue to do that. But the traction we see there is strong. New team members are able to deliver how previous team members had done at the same time in their tenure. And I think that is a strong signal that not only can we absorb them into the teams, but also our ability to go after more and more verticals as payments becomes more strategic to them is also very visibly there. And so that will also play out over the coming years, although at a smaller rate than growing with our existing customers.

Thank you, Ethan. Ingo, on the gaining market share, North America, the value proposition, selling on value, and the innovation, can you maybe give us some updates on how that's all progressing?

Yeah, sure. So I think if you look at our North American proposition, of course, there have been discussions around, like, is North America payments market completely commoditized? Is there really a right to play for you there? These products show or demonstrate that there is a right to play. We clearly see that the value proposition that we bring to our customers is bringing us in a position where we gain market share. That's been our consistent story over time. That's also why North America is the second largest market in our portfolio. We're committed to further invest our going forward. I think it's a very clear point that we are in an excellent position to further drive market share there.

Clear. Thanks, Mo. The next question comes from Harshita Rawat from Bernstein. Harshita, please go ahead and ask your question.

All right. Thank you. Ingo, I want to follow up and add in Uplift. Very exciting new product launch and impressive conversion Uplift that you kind of shared. Can you expand upon this? Are there kind of specific, you know, regions? You know, you talked about North America, verticals, where this can resonate more. What are you hearing from your customers? And then Ethan, just to follow up on the large customer in digital, it looks like the volumes have rolled off completely. Is there still kind of some sequential headwind we should expect for our modeling purposes? Thank you.

Thanks, Ashita. Ingo, should we start with your question?

Yeah, sure, absolutely. So, indeed, for Uplift, the customers that adopt this are the enterprise merchants, specifically in digital. That's where you have high volumes and where the data really help us to get to this higher conversion in combination with lower fraud. So that's where we see this traction. It's a relatively new product. Of course, we had risk products before, but this is a new AI-powered effort to get traction on this side.

Great, thanks. And Ethan, on the large customer and digital?

Yeah, sure. Indeed, on the large digital customer, we saw that volumes slowed down throughout the course of H2. So both in Q3 and Q4, there were volumes. By the end of 2024, there are no volumes still, so you shouldn't expect to see volumes throughout 2025. So, of course, that will take a few quarters to play out in terms of growth rates. But that's ultimately what you should expect there. And of course, much less impact on a net revenue basis.

Thanks, Harshita. The next question comes from Hannes Leitner from Jefferies. Hannes, please go ahead and ask your question.

Yes, thanks for letting me on. A couple of questions. You mentioned already the net revenue growth on the different growth drivers you have, but maybe you can drill a little bit into the different pillars and the regional split. I think North America slowed a little bit, but that could be that this was related by your exposure to eBay and Cash App. Then the second question is in-store TPV maintained quite a strong momentum. Maybe you can talk a lot about it. How much of this is from existing customer pre-pandemic expanding the business and how much of that is the ramp post-pandemic given the pandemic had been quite decisive in driver for unified commerce?

Thanks, Hannes. Ethan, maybe both of you starting with the net revenue growth split.

Yeah, you highlighted a couple of angles. One is the pillars. If you think about that from a regional perspective, the only one that I'd really highlight separately is that platforms is very relevant in EMEA and in North America, less so beneficial in LATAM and in APAC to our net revenue numbers. In terms of North America and its growth, I think the important part here is that the underlying trend is that we're gaining market share in a significant way. It's a really... It's a really important focus market for us. We're continuing to invest there. And yes, if you take North America, it's about 25, 30 percent of the business. So anytime you you cut our overall net revenues into smaller parts, you get to more concentration. But the general trend is that we are gaining market share there and we believe it will continue to be a growth market for us in the coming years. So we're continuing to invest there.

Thanks. And then the second one on in-store TPV, so the momentum that we're seeing there, how much is from the existing customers and ramp of new customers?

Yeah. I think the general trend in unified commerce is that more and more verticals are looking at unified commerce or at payments as a strategic enabler. So they're seeing the benefits of bringing their online and their in-store transactions together in one system. And we see that because I would say, Pre-pandemic, we were mostly focused on retail within Unified Commerce. And of course, we're very much still focused on retail. There's a lot of markets still to win in that space. But we've also been growing outside of retail in hospitality, in food and beverage, as I mentioned earlier. And that's been a big driver of our growth over the last year as well. So it's a combination. It's adding new logos, of course, but it's also continuing to grow with our existing base. and maybe one last data point that i can give on it if you combine basically the in-person payments in unified commerce with the in-person payments in platforms which is also a important value driver for us in platforms we see that we did over 20 percent uh in person in the second half which is quite an acceleration from where we were last year so this is really something that is is resonating with our customers bringing these online and in-person transactions together

Thanks. Thanks, Hannes. The next question comes from Fred Boulan from Bank of America. Fred, please go ahead to unmute yourself and ask your question.

Yeah. Hi. Thank you, Josh. And I know it's a quick question for me in terms of opportunities on the on the five year view in terms of regions. So EMEA, an impressive growth considering how major that business is, that region is for you guys. But if you look at some of the regions beyond the EMEA and the U.S., any specific areas you want to call out? I mean, I think you talked about Japan and India in the past. Any progress here of note? And then as a short follow-up, if you can update us on your use of cash policy or, you know, any commentary you can share around that. Thank you.

Thanks, Fred. Ingo, do you want to take the first one on the longer-term opportunity, and then Ethan will come to you on the cash use policy?

Sure. Longer-term opportunity, indeed, like EMEA and North America are really well positioned for basically our growth in the next couple of years. I think the fact that we have strong traction in all three pillars, so digital unified commerce and platforms, is the reason why you see the strong growth in both EMEA and North America. Longer term and specifically for Japan and India, that's more like a five-year plan or at least a five-year plan. That's also what we've seen in the past with markets like North America. It takes a couple of years to really build it out to make sure that we have the traction in the local market. The initial response in both markets is very positive, so this is the five-year gameplay, and we do everything we can to accelerate this, of course, and apply the lessons that we have learned from other implementations. But it's going to take time to see massive volumes in these regions.

Ethan on capital allocation? Sure.

Yeah. On capital allocation, nothing has really changed here over the last six months. I think we continue not to have M&A as a core part of our strategy. We're very much focused on growing this business, growing that with the team that we have and the products that we're rolling out. At the same time, we see a lot of advantage to having a very strong balance sheet as we're trying to roll out our financial product suite. The confidence that our customers have in us as a partner to help them roll out these types of products is really key in ultimately being able to get these growing and becoming a much more significant part of our overall business. So we still see that as the best use of cash today.

It's clear. Thanks, Fred. The next question comes from Darren Pella from Wolf Research. Darren, please go ahead, unmute yourself, and then ask your question.

Thanks, guys. Good results. I just want to touch on unified commerce, again, continues to accelerate. We're seeing an increasing mix of POS process volumes. Maybe just touch on what's resonating. How much of the TCO, the total cost of ownership, efforts are really resonating there as well as online. Maybe just compare and contrast because it obviously seems like there's something that's helping you win share there. And then maybe quickly as a follow-up on the hiring side, look, the plan was helpful. The commentary was helpful in terms of what you talked about being a little more this year, but maybe just a bit more granularity on where in the business the hiring is occurring and maybe how it compares to, I think it was around 150 FTEs added in 2014. Thanks, guys.

Thanks, Darren. Ingo, do you want to take the one on the value prop in UC? And then Ethan, we can come to you on the hiring.

Sure. So indeed, for Unified Commerce, the key reason why customers work with us is indeed how we can help them to improve customer journeys. And if you improve those customer journeys, that, of course, helps with conversion, but also with total cost of ownership. We try to explain this also in the KPIs that we show. What are the UC customers that are active in multiple geographies? Because I think that's a strong indicator how you can lower your total cost of ownership by working with a single supplier over multiple geographies, but it's indeed also over the channels. If you have multiple channels and you can drive payments down because you have more volume, That's not a reason why we're winning here. Those KPIs are important to track. That's also what we do internally. Thanks.

Ethan, on the hiring?

Yeah, sure. I think generally you can think about our hiring in two main areas. In the more commercial area where account management, for instance, is our biggest part of our commercial team. That's where we would expect the most of the hiring from a commercial perspective to happen. At the same time, we're also adding to our sales teams. uh and and building those out as well um so that's one part and then of course we also hire within our tech and operations areas and i think that's in general there to make sure that we're delivering continued innovation of course for our customers and we see the opportunity to do that across multiple product areas but also across geographies across pillars what i find really important is that we make the investments now that will allow for us to grow net revenue over a longer period of time. And we're quite confident that doing that throughout this year will help us be positioned to deliver. Thanks, Darren.

The next question comes from Sandeep Deshpande from JP Morgan. Sandeep, please go ahead and ask your question.

Yeah, hi, thanks for letting me on. Quick question for me on your growth in Europe versus the US. I mean, is the growth in Europe coming from some new businesses that are ramping up with Adyen at this point? Or is it just, you know, ongoing footprint gains in Europe that you've seen over the last few years? Or is there some new verticals that are wrapping up in Europe, given that you are essentially the market, you know, one of the market leaders in Europe in this market? And then my second question is regarding new verticals itself. Again, I mean, you entered quick service restaurants a few years ago, before that marketplaces, et cetera. So are there any new verticals that are targeting at this point? You had in an earlier conference call talked about grocery and your expansion into a finished grocery chain. So have you seen any further traction there? And are there any other such verticals you're looking at? Thank you.

Thanks, Sandy. Ethan, maybe you can take both of these. So on the growth in Europe, where is it coming from?

Yeah, it's a combination. Of course, the bulk in any year is going to come from existing customers. I think the Zalando example is a great example of a customer that we've worked with for a long time but have expanded the relationship throughout the course of this year. At the same time, it's also adding new customers. And I mentioned earlier that in EMEA, we benefit not only from working with digital customers, but also unified commerce has a lot of complexity throughout Europe, given the fragmentation, as well as platforms is very much in scope of our offering within Europe. And so that combination means that we have still a major opportunity ahead of us to not only grow in 2024 in EMEA, but also to grow significantly into years ahead. So it's a combination of, I think, all of the things that we've been talking about over the last periods.

And then more generally on the verticals and anything new that we're targeting?

Yeah, so I think we highlighted a couple in unified commerce. I think I would also highlight insurance is a vertical that we've also been working together with and healthcare within platforms, for instance. Those are a couple that we highlighted also in the shareholder letter where we're winning new customers, but also we've had customers for a number of years that we're also expanding with, but we're seeing real traction in a few of these verticals as well.

Thanks, Sandeep. The next question is from Josh Levin from Autonomous. Josh, please go ahead and ask your question.

Hi, good afternoon. Two questions for me. First, can you talk about other services revenue? That grew quite a bit. What's driving that growth? And do you think that kind of growth will continue? And then just to follow up on the cash question, You have an A- rating from S&P. As you think about having a strong balance sheet to signal to clients and potential clients that you have the strength, do you view A- as the lowest rating you can have, or would you be willing to possibly go lower? Should we think of A- as a constraint? Thank you.

Thanks, Josh.

Ethan, both of you. Sure. So I think the way to think about... the way we break out our revenues is that our business is enterprise focused, which means that for the most part, our pricing is bespoke. We agree individual pricing with individual customers, depending on what products they'd like to leverage, what volumes they can work with us on, what types of markets they're in. And ultimately, based on that assessment, we come up with a pricing proposal that fits both of our needs. It's much less driven by how we separate fees between processing and acquiring or other services. We look at it more on a customer basis. And so I would read less into which lines are moving in which direction. We focus much more on overall net revenue growth. Now, within other services, just to add, the biggest part is FX, but it has a number of other areas like some terminal fees. It has issuing, for instance, in there, although that's a much smaller piece. Those are the biggest components of it, and so if you think especially about FX services, that is something that typically grows in line with our volumes as we expand with our customers. Then on the question around the balance sheet and the A- rating, I think if you think about most treasury policies, they typically want to work with banks who they see as providing financial services who have at least an A- rating. And so, yes, I think the strength of that rating is supportive to us expanding in financial products. And that is what we would really like to maintain and can maintain with this policy to make sure that we accelerate like we know we can.

Thanks, Josh. The next question comes from Pavan Daswani from Citi. Pavan, please go ahead and ask your question.

Thanks, Josh and Goethe. I've got a couple of questions. Firstly, the EBITDA margins are already pretty close to your 2026 targets, and you've obviously said that will accelerate in 2025. Should we expect any big step up of hiring or investments over the next couple of years? And then secondly, following up from an earlier question on the competitive dynamics, you talked about the value that you bring versus competitors that are trying to compete on price. But could you maybe touch on the advantages to having everything in-house versus a more unbundled approach?

Thanks, Pavan. Ethan, first one for you on EBITDA.

Yeah, sure. So I think if we look to 25 compared to 24, we do expect a step up in hiring. But again, we don't expect the team to grow faster than the business. That's why we do expect operating leverage still to be visible in 25, just less expansive than we saw between 23 and 24.

Claire, and then on the competitive dynamics and our approach to having everything in-house, Ingo?

Indeed, for the approach to have everything in-house, that helps us with a single platform to get more data. With more data, we can create better insights and make better risk decisions. That's why we strongly believe in this approach. It's the value that we bring to our customers, having this data, building products around it, And by doing that, ultimately getting to the best conversion at the lowest cost.

It's clear. Thanks, Pavan. The next question is from Sven Merckx from Barclays. Sven, please go ahead and ask your question.

Great, thank you. Just a follow-up question on Ischion. Can you provide us a bit more color? What drove the strength there? Was this primarily from a single or a few customers, or was it a bit more broad-based? And then secondly, can you comment a bit on your pipeline of large enterprise unified commerce deals? You want a number of high profile customers during 2024 and I'm curious whether you expect to see a further acceleration in 2025 on the back of your investments. Thank you.

Thanks, Sven. Ethan, maybe we'll come to you first and then we can come to you on the pipeline. So, Ethan, on issuing?

Yeah. So the question is, is it broad-based or is it more concentrated? I think at this scale, it's certainly more concentrated. It doesn't mean it's down to one customer or two customers, but it's certainly much more concentrated than, for instance, our growth on the acquiring side. I think we see a range of opportunities to deliver a strong solution within issuing, but still at this point, given the volumes we have today, it is more concentrated, absolutely.

Thanks. And then Inge on the pipeline of big unified commerce deals.

If you look at, in general, the pipeline, we feel very comfortable how the pipeline is progressing. Of course, if you think about acceleration, that's not just coming from new sales deals, but also from growth from existing customers. That's still where the majority of our growth comes from. But indeed, for Unified Commerce, we are very pleased with the development of our pipeline and the opportunities that we see going forward.

Thanks, Ben. The next question comes from the line of Andrew Bauch from Wells Fargo. Andrew, please go ahead and ask your question.

Hey, thanks for taking the question. I just want to, Ingo, maybe if you could start with, how would you characterize the competitive environment and platforms relative to, say, digital? Are you taking share from the same players that you are in digital? And is the pricing environment similar to what, or as intense as you see in digital? And then I guess for Ethan, You know, you've talked about in the past the other services being kind of the tip of the spear for success in platforms. But in your conversations today relative to where we were last year, what are they saying? What are they kind of telling you that they'd like to adopt and use over time?

Thanks. Maybe the first question on the competitive environment in platforms and how that differs versus digital. Ingo?

I think the difference between platforms and digital is quite significant. I think specifically for all the implementations around SaaS, there's also a lot of new business that we're doing. SaaS platforms realizing that there is additional margin to be made with embedded payments and maybe later on also embedded financial products. That's really a new market opportunity. I think that's different than digital. Also, the competition is different. There's only a few competitors out there that are actually really competing on the platform side, whilst if you look at digital, there's a wide range of companies competing in this space. Yes, it's a different competitive dynamic than digital.

Clear. And then, Ethan, on the conversations that we're having with customers around the services they would like.

Yeah, we talked about issuing in capital being the biggest opportunities we see, and I think that remains to be the case in talking to customers. Bank accounts is a really nice way to connect the products to make sure that acquiring and issuing or acquiring capital are well connected as products. But I think the biggest opportunities that our customers see and therefore that we also see are in issuing in capital. Clear.

Thanks, Andrew. The next question comes in the line of Sanjay Sakrani from KBW. Sanjay, please go ahead and ask your question.

Thank you. I want to go back to the issuing growth. I'm just curious, and you guys kind of touched on it a little bit, but if we're hitting a tipping point from a distribution and momentum standpoint where we can actually see this type of growth sustain itself or maybe even accelerate because you have these different channels available to you to sell that product. And then second question, Ethan, just some modeling stuff. When we look at sort of the net revenue growth outlook for 2025, is there any difference in the cadence first half versus second half? Because I do think you have tougher comps in the first half. Just curious on that. And then just on employee growth, like is there any difference into the cost per employee complexion in 2025 versus 2024? Thank you.

Thanks, Sanjay. So maybe starting with the first one, Ethan, on issuing growth and if we're hitting an inflection point.

Yeah, I think we have strong momentum there. In the end, still, we are at a small base. So even significant growth from here will not have a material impact, for instance, in 2025. But we absolutely have strong traction. And I think that's the... what we've always felt confident about getting to. But I think we are in a good moment where we not only have customers across use cases, but we also have them scaling their offering with us. And so, yeah, I think we're absolutely excited about the traction that we've seen so far, the momentum we have, but it's still going to take time until it's really financially meaningful in the numbers.

And second one on the cadence of growth through the year.

Yeah, I think... I'd just again highlight a bit how our growth developed through 2024 if you look across quarters. There will be, it won't be a linear growth path again in 25, but I think absolutely the underlying trends that we're seeing where we are gaining share of wallet at a faster rate with our existing customers, We have been adding new logos. We'll continue to do so. I think that underlying trend of acceleration that we saw already in 24 compared to 2023, we expect to continue into 2025. I wouldn't highlight anything specific that I'd already call out from a half to a half perspective. And then in terms of employee cost, yeah, again, also wouldn't highlight anything major here. We're also not doubling the team or doing anything of that type of extent where that would become very visible in our numbers. We are going to have a step up from our hiring this year, but it's not going to be growth faster than the team did or faster than the revenues will grow. So it ultimately won't have a major impact on our cost structure or our margins.

Thanks, Sanjay. The next question comes from the line of Antonin Baldry from HSBC. Antonin, please go ahead and ask your question.

Yes, thank you very much, and thank you to take my question. Just a question on the regions you cover. The reason of revenue growth appears different from a region to another, between Europe, the U.S., Asia, and LATAM. Will it be possible to know what makes regions different, especially between Europe and the U.S. that continue to grow at a strong pace, and Asia and LATAM at a lower pace? What makes the difference of performance between regions? Is it competitive landscape? Is it offers that you bring into this region?

Thanks.

Ethan?

Yeah, I think maybe I would focus it on... There's a couple of angles which I think are relevant. One is the fragmentation in a market. I think EMEA and APAC are much more fragmented. than, for instance, North America or Latin America. I think that's one difference that we see. But it's also how international are the customers we work with. I called out, for instance, in APAC that we work with a lot of international customers in APAC who also wanted to grow with us outside of APAC. And so maybe they grew in Europe or they grew in Latam or they grew in North America. And so that part of that growth is also represented in other regions. And so I think those are maybe the two things I'd highlight, the difference in how fragmented the various markets are, but also how international the businesses coming from those markets are focused.

If I may add, one other element, of course, is also that in EMEA and North America, we have our full offering, so all the three pillars, unified commerce, digital, and platforms, whilst in APAC and LATAM, that's less the case. We're still developing this.

That's clear. Thanks, Antonin. The next question comes from Harrison Rivas from TD Cowen. Harrison, please go ahead and ask your question.

Great. Thanks so much for taking the questions. First one, just on the regulatory environment, Uplift, Intelligent Routing, U.S. Debit, they were all called out as benefiting from the regulatory environment. So just curious on your outlook on the current regulatory environment, how that might be shaping the product pipeline as we see it today and any potential opportunity. And then just a second question on embedded finance, interest income, just you know, obviously really strong sequential growth there. So how should we think about the scaling of interest income within embedded finance? And are there any particular verticals that are adopting embedded finance products? Thanks very much.

Thanks. Ingo, maybe we'll start with you on the regulatory environment. Sure.

The regulatory environment, we see it as an opportunity. Ultimately, this company is about building great technology, selling it with the best commercial team, but also having the best regulatory knowledge and making sure that the regulatory environment changes that we adjust to it and build products that take friction out of the equation for a lot of our customers. So indeed, if we see that there is a change, and I could assure you that the regulatory environment globally is pretty complex, if there is any change in that environment, that we try to adjust our product to it and make sure that it's relevant to our customers. So we see it as an opportunity and not as a threat.

And then, Ethan, on the scaling of net interest income?

Yeah, I think important to mention on net interest income is that it includes interest on bank accounts that we provide to our customers, but it also includes interest on our capital product. It doesn't include, for instance, issuing fees, which we earn. Between those two, so bank accounts and capital, currently we see that the bulk of our net interest income is coming from our bank accounts offering, which is big in the digital type of marketplace space, especially. And yeah, I think the opportunity, as I mentioned, in embedded financial products, we feel is much more in in capital and in issuing over the long term but certainly attaching bank accounts to that is is what we're seeing attraction in now and helps us connect all of these products so it will continue to scale but again it won't it won't be a material driver of our growth in the next year clear thank you the next question comes from the line of nicholas ums from deutsch bank nicholas please go ahead and ask your question

Niklas, are you there?

Hi. Can you hear me? Perfect. Thank you. Thank you for letting me on. Apologies. Two questions from my side on behalf of Nushin Niyati for May. First, can you please help us understand your volume mix and your expectations here with the visibility that you have today? We're trying to understand if you expect any major changes in the mix that possibly impact take rate in a similar magnitude that we saw in the past two quarters. And then second question, following up on your hiring plans, which G is a higher priority? Is it rather North America or Japan and India? Thank you.

Thanks, Nicholas. Ethan, on the volume mix expectation?

Yeah, I think most of the volume changes and take rate changes thereon have been mostly driven by a large digital customer. Most of those volumes have been declining through the course of the second half, and ultimately we exit with no more of those volumes. So you should expect that that's still visible on a year-over-year basis for the next few quarters. Other than that, there's nothing else specifically that I'd highlight in volumes. It's, again, not what we manage on. We manage on net revenues, and we're very focused on how to continue the acceleration we've seen in 2024 in our net revenues. Thanks.

Then, Ingo, maybe on the hiring plans, which are the focus regions for you?

The focus regions are multiple. It is North America, but it's absolutely also markets like Japan and India. Of course, the base where we operate from in Japan and India is different compared to the US. In North America, we expect to hire more people in absolute terms than in Japan. India, also because we strongly believe in balanced growth, not adding as much as we can in a year just to get a team as big as possible, but also to make sure that we keep the culture that is always super important to us and that we keep the bar high when we hire new people. So it's finding the right balance, but both regions are important for our investments. That's clear. Thanks.

And the final question for today comes from Jamie Friedman from SIG. Jamie, please go ahead and ask your question.

Thank you. I had two questions, first for Ethan and then Franco. With regard to the sequential half-on-half increase in the net revenue yield, so I'm looking at the net revenue divided by the volume, you call out in the shareholder letter that that's related to mix. I was hoping you could elaborate on that and if that also is a reflection of debit routing maybe. And then for Ingo, in terms of the – I mean obviously these results speak for themselves. LATAM did decline sequentially a bit, and maybe it's apropos of your previous answer, which was that you don't have the full suite rolled out there. But I'm just wondering about the competitive dynamic and how you're seeing LATAM. Thank you. Thanks.

Ethan, maybe on take rates? Yeah, when we talk about mix in general related to take rate, that's mostly driven to the size of the customers that we have on the platform and how they grow over any given period. Throughout 2024, we've called out a large digital customer that has mostly been the driver first of more significant volume growth. And now lower volume growth, if you exclude that, ultimately the impact on net revenue is much, much smaller. We talked in H1 about that customer having approximately 1% of our net revenues in that period. So it's not really related to product mix. It's related to the size of the merchants on the platform at any given moment. That's the type of mix we're referencing there.

Thanks. You also want to take the one on LATAM and constant currency?

Indeed, on a reported basis, you're right. What we also shared is that on a constant currency basis, LATAM grew 12% in the second half. We called that out because it has quite a big impact, obviously. We've been making quite a few investments, especially with our product in Brazil. And I think we feel really well positioned, which is also why we've started to see that acceleration in LATAM during the second half on a constant currency basis. I'd also highlight Mexico, where we had a win with Starbucks in Mexico. Of course, a great name, but also a great win for that market. We're also excited about what we can achieve in Mexico, too. So I think we're excited about the ambitions we have in Latin America. Clear.

Thanks, Jamie. And we're out of time. So thank you very much, everyone, for joining us this afternoon. And for any follow-up questions, please don't hesitate to reach out to the IR team here at Adyen. Thank you and have a great day.