You can watch the pitch HERE
Or read the transcript of the pitch below.
Adyen provides merchants with a payments platform to allow them to receive digital payments. This in itself is nothing too special, but there's something really special in how Adyen does it that really differentiates it from the rest. So historically the payments value chain had lots of different parts and each was conducted by a specific company.
This structure created two main pain points:
1) Merchants needed to partner with several players to process payments.
2) Data was cluttered around the value chain, which made driving insights difficult.
Adyen was basically born to fix this.
Adyen provided all the services in a unified platform, which gave its customers a data advantage, and simplified the process of setting up payment processing.
Merchants now only needed to partner with one company which was Adyen and not ten.
That's high visibility across the whole value-chain was also important for Adyen, because it allowed it to increase authorization rates for its customers.
Thanks to this value proposition, Adyen soon started to gain enterprise customers, because with Adyen, they had higher authorization rates. They could quickly expand to additional geographies.
They had access to all the payment data to drive actionable insights, and they were also able to see this data across channels.
Adyen followed a land and expand model.
It would typically start processing payments in one geography or channel, and then customers would incrementally give payment volume to Adyen by opening new geographies or new channels.
It's in their best interest to do so because the more payment volume you give to Adyen, then the better authorization rates you get.
And you can also drive more actionable insights because you will see all the data in the same place.
Since Adyen, historically targeted enterprise customers, it faces competition from incumbents and not disruptors. However, as the company goes down market, it will increasingly face disruptors. I think Adyen has several competitive advantages.
It's loyal customer base,
It's unified platform,
It's focused on organic growth, and
It's global footprint.
It's also important to put some numbers behind this value proposition. I think the company scale is pretty big and it's growing very fast. The company process half a trillion last year with translating into 1 billion euros in revenue.
Thanks to its capital light and scalable model, Adyen was able to post a 63% EBITA margin.
Revenue is fueled by two metrics:
1) Process volume, and
2) Take rate
Process volume is the payment volume that flows through Ayden's platform. And take rate is basically what percentage of that volume Adyen gets to keep.
Management's goal is to grow process volume, not take rate.
This is their way of incentivizing merchants to bring more volume to the platform.
I think there are three ways to keep fueling volume growth.
First, continuing to grow with enterprise customers, both existing and new. This is what the company has been doing historically.
Another one is further penetrating the unified commerce trend by adapting to new customer journeys. This way, Adyen will be desirable for new customers, such as retailers.
And the third one is targeting the mid-market through Adyen For Platforms.
With these growth drivers, management expects to translate into a mid twenties to low thirties revenue figure over the medium term.
I think there's no doubt that Adyen is a high-quality company and the market knows, which is why it trades at a premium.
You can see here, the multiples.
When it comes to the bull case, I would definitely focus on Adyen's customer base, it's management, and the secular tailwind of cashless payments.