#Ecommerce penetration reached 27% in Q2 '20

This BOOSTED $SHOP $AMZN $SE

But who has ALSO benefited from the shift to this VIRTUAL WORLD

Payment & Financial Solutions

Let’s talk about $ADYEY

$ADYEY was founded in 2006 by Arnout Schuijff and Pieter van der Does

Before starting Adyen, Pieter was the Chief Commerce Officer at Bibit and Arnout was a Systems Architect

Fair to say, $ADYEY was founded by industry veterans

But what does $ADYEY do? Let’s dive into payment solutions

Let’s say you want to start selling the beautiful clothes you design as a side project

First things first, you set up a $SHOP website and start accepting payments with Shopify Payments

Things are going well and you decide to open a retail location and start selling abroad

Now, you need to accept in-person payments and foreign cards

This is still possible with $SHOP point-of-sale and Shopify Payments which is available in 16 countries

For now, everything is running just fine but you don’t want to be limited by $SHOP reach of 16 countries

You have an IDEA Now that your sales are good You decide to build your own website

This way, you can customise it as you want and add all the features you want

But wait Who is going to take care of the collecting payments now?

Since you are not a *World Class Business* yet you want a simple payment solution you can install overnight

Stripe is the tool you need Easy to implement, simple pricing, access to 42 countries, accept all major credit cards and most local cards

Here is a small note Stripe actually powers Shopify Payments

Ok, let’s say that the small clothing brand you started grew to become Nike

You now have thousands of shops and accept payments in lots of countries

Your POS system is fragmented, you rely on different payment gateways, service providers, acquirers and processors

To keep it short, since you now run *OMNI-CHANNEL* operations (online, physical stores) on a *GLOBAL* scale You have 3 problems

Your global POS system is fragmented among lots of intermediaries (payment gateways, service providers, acquirers, processors)

Since payment preferences differ across the world, you have to work with different intermediaries by location

You have a hard time collecting a unified view of your customers

What did Nike do? They worked with $ADYEY

Adyen is a payment gateway, service provider, acquirer and processor for online and physical shops

It just requires 1 system, 1 process integration and 1 contract for ANY company

You can then service customers in over 150 countries and accept over 200 payment methods

Of course, every single startup would sign up with $ADYEY if it was that simple

Here’s why Stripe is more popular with SMB and Adyen caters to med and large business

When using Stripe, your business’ funds are deposited into a single merchant account, along with the funds of other business

Stripe then transfers these funds minus their fees to your business bank account

This make Stripe easy to set up but more expensive and more limited when it comes to the strict “payment capabilities”

When using Adyen, you need to set up a merchant account Your funds are then deposited into your merchant account directly

Adyen’s fees are often limited to the Interchange++ fees (and $ADYEY own fees)

Adyen is more complex to set up but offers a more robust and more complete solution than Stripe

Here is a more schematic explanation (taken from Capital Market Day, April 12 2019)

If you just discovered a passion for Merchant Accounts, here is all you have to know https://www.fundera.com/blog/merchant-account

So by now this whole payment solutions thing should be clarified and the “WHY” of Adyen should also be clear

Adyen acts as a single solution for all payments (online and physical) on a global scale

It is more complex but cheaper, more robust and more focussed on payments

This strategy pays off and translates into the following numbers for the first half of 2020 (H1 ’20)

Processed volume at € 129B - a 23% YoY increase

Net revenue at € 280m - a 27% YoY increase

EBITDA at € 141m - a 12% YoY increase

EBITDA margin at 50% (57% a year earlier)

Free Cash Flows of € 129m in H1 ’20

On these numbers

$ADYEY was affected by #COVID more than $SHOP $AMZN as they also provide payment solutions to physical shops and travel, hospitality industry

$ADYEY is by no means cheap, trading at a PE of 227 but delivers a Return on Equity (average 5Y) of 26%

Compared to $FIS that has a PE of 78 but a ROE of 4%

In order to justify its valuation $ADYEY needs to deliver What’s in the box?

Winning key customers $MSFT $SPOT $ETSY $UBER $BKNG $FVRR $FTCH $EBAY

Focussing on creating the best platform, here is a testimony from Spreedly

"Adyen is laser focused on payment processing and doing everything they can to improve payment processing. They discuss success and decline rates and what they can do to improve them for you today and over time, higher cart conversion [...] and so on."

The Bottom Line

$ADYEY is laser focussed on becoming the payment solution of mid to large accounts

They have transformed the industry by offering a “All in one” solution that is cheaper, more robust and unique

Their valuation is stretched for now but can be explained by 50% EBITDA margins and 27% growth

We have initiated a medium position in $ADYEY

$VRM is on our watchlist To Be Reviewed SOON

Please note that this is not a recommendation to buy - You are responsible for conducting your own research

Hope you liked this thread!

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Disclaimer - This is not investment advice in any form and investors are responsible for conducting their own research before investing.

Sources

✑ Investor presentation

✑ Company website

✑ Fundera

✑ Ivey FinTech on Medium

✑ Spreedly

✑ Spreedly

✑ Bocconi's Valkyrie Trading Society on SA