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#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
penetration reached 27% in Q2 '20This 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
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
Let’s say you want to start selling the beautiful clothes
you design as a side projectFirst 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 
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
You have an IDEA
Now that your sales are good You decide to build your own websiteThis 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 
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 cardsHere 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
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)
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
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
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
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)
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 StripeHere 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
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
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
Processed volume at € 129B - a 23% YoY increase Net revenue at € 280m - a 27% YoY increaseEBITDA 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%
$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
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
Sources
✑ Investor presentation
✑ Company website
✑ Fundera
✑ Ivey FinTech on Medium
✑ Spreedly
✑ Spreedly
✑ Bocconi's Valkyrie Trading Society on SA
✑ Spreedly
✑ Spreedly
✑ Bocconi's Valkyrie Trading Society on SA
