Adyen Plunges 20% After Hiring and Inflation Hit Earnings

(Bloomberg) — Adyen NV’s shares plunged after increased competition in North America contributed to the slowest revenue growth since its initial public offering.

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Shares fell the most on record, down 23% to €1,140.80 at 10:29 a.m. in Amsterdam.

Revenue growth in the first half was impacted by pricing competition, as well as higher inflation and interest rates, the Amsterdam-based fintech company said on Thursday. Net sales rose 21% to €739.1 million ($803 million) in the period, compared to an estimate of €776.5 million in a Bloomberg survey of analysts.

Revenue growth in North America, which accounted for a quarter of the company’s sales in the period, more than halved to 23% in the first half. Adyen’s digital customers have been focusing on profitability more so than on growth in the US, Chief Financial Officer Ethan Tandowsky said in a phone interview.

“That did have some impact on the growth that we saw,” he said. “In a market like this, some customers choose to see if they can find a lower cost provider who could offer the similar functionality.”

It “will be difficult for Adyen to accelerate growth” in the second half as competition and currency headwinds will remain a factor, said Jefferies analyst Hannes Leitner in a note.

What Bloomberg Intelligence says:

Adyen’s disappointing 1H net revenue — a 5% miss vs. the MODL consensus — along with a slowing North America segment (25% of the total) and digital volume, add to concerns of the Ebitda margin not achieving estimates again (a 6 percentage-point miss) as the hiring push continues. This suggests the reiterated long-term goal 65% Ebitda-margin goal will face greater skepticism, making analysts’ estimate of 49% this year and 28% net revenue growth look steep.

Tomasz Noetzel, BI Financials analyst

Adyen’s profit margin missed expectations due to its industry-defying hiring push and inflationary pressures. Margin on earnings before interest, taxes, depreciation and amortization – a measure of profitability – was 43% in the first six months of the year. That compared with an average estimate of 48.6% among analysts surveyed by Bloomberg.

Adyen added about 1,150 employees last year and has said it will hire a similar number in 2023 as it prepares for its next growth phase. Hiring at the payments firm sets it apart from larger peers that have announced job cuts to lower costs amid rising interest rates and economic uncertainty.

The company said it expects to slow hiring at the start of next year.

Adyen, which handles transactions for companies such as McDonald’s Corp. and Hennes & Mauritz AB, reaffirmed its guidance for Ebitda margin at above 65% in the long term. It continues to expect net revenue growth at a rate between the mid-20s and low-30s in the medium term.

–With assistance from Henry Ren.

(Updates with analyst comment in the sixth paragraph)

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