Full Year 2024 Adyen NV Earnings Call

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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 just two product step we deliberately in the past half year. It's also how we launched a simple one which is a terminal that helps retail customers and to optimize our 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 outside this half year summary, and go 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 10 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.

With that summary, Ethan and go coming back to you you talked a bit about unlocking value for our customers, which you certainly you know a key drove adding globally can you go into a bit more detail on some of our products investments and how that helping our customers. Yeah. Absolutely. So if you look at our product investments like the intelligent payments routing or uplift I think that's all based on a foundation of being a singer.

Oh 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 oh volume that all gets new data points to make better decisions and that's also how we for instance develops a payment routing for use debits.

I'm 20 customers piloted with this product it resulted in 26% less cost and a 22 basis points of increase 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 this single platform and the investment in a single platform that help us to basically have a compounding effect of all the investments and I'm I think it's reflected in the way how our customers. Appreciate us. If you look at friends is net promoter score over the past half year.

It's at a all time high 66 and of course, that's the result of hard work of our team and I'm very proud of this year.

Speaker Change: Yeah. Thanks, Ingo is really exciting to see that our platform intelligence he's really compounding at this scale and it's also being recognized by our customers.

Speaker Change: And one of the things that sets us apart is well Ingo earlier referred to as a subscription to innovation in other words, all commitment to delivering the best technology for all customers continued advancement, but it is also important is to ensure that we deliver a day reliably and at scale can you maybe give US. An example of how we delivered on that this off yeah sure. So.

Speaker Change: Indeed, combining that subscription to innovation with our our ability to provide reliability at scale is something that is really important to many of our customers and has personified I think especially in the second half around the black Friday and cyber Monday weekend wear for many of our customers. This is a make or break sales period for them.

Speaker Change: Of course, we've been focused on large enterprise businesses as long as our Gen 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 you are we we processed around 160000 transact.

<unk> per minute right and so when our customers think about what partners are there and available to help them through such a important moments. 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 <unk>.

Speaker Change: Version and cost savings, etc.

Speaker Change: So I think it's a really nice proof point about how we can deliver for our customers, especially when they need us most and it's very impressive and clearly a great case today of what the platform is capable of moving.

Ingo: Moving to the pellets are Ingo can you maybe give some examples of all pillar strategy and how we thought that 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 was a longtime customer of ours and that's continued to expand the share of.

Ingo: Wallet with us so day their geographical expansion helped us to get more volumes and the key reason why digital customers select us because we are innovating. The examples that I just mentioned like uplift and intelligent payments routing. These are reasons why they are sending there's more volume in this pillar.

Ingo: The second example is a 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 and they select us to help them to improve our insights, but also their customer loyalty and I think it is very key that weight.

Ingo: The unified Commerce strategy that we have that we are in the best position to help customers also in the hospitality space.

Ingo: The third example is to spend desk can spend actually is a platform merchant of hours and together, we basically unlock payments and financial products for Smbs and of course, it's der customers, but we provide to white label technology to them to make sure that they are successful.

Ingo: These three customers who had different pillars are great. Examples why we continue to increase our revenues are in the last half year and why we're doing that with both existing customers, but also with new west once where we bring the innovation yeah, Hi, it's really great to see really broad range of examples that and as well as all.

Ingo: Tell us about the GE of course, we also have all regions. So Ethan can 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 if we start with EMEA are large.

Ingo: Just market, where we've been for the longest time it was our fastest.

Ingo: This growing region. This half I think it's a really strong proof point that even in our most most core market. We are still able to deliver significant growth in this opportunity is nowhere near the end of its cycle.

Ingo: If you look at North America, we again were able to gain market share in a strong way and we combine 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 a in the second half or committing to new space in Chicago.

Ingo: In APAC, our 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.

Ingo: 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.

Ingo: And lastly on Latam, we're seeing some acceleration not on a reported basis, but on a constant currency basis, we're seeing that in 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 in our <unk>.

Ingo: <unk>.

Ingo: We talked a bit about the team and maybe having a bit further along that line and go when you think about the current team that we have and how do you think we can position ourselves for further success. Yeah, sorry, if you take a longer term view like in 2022 2023 we significantly expanded our teams have almost doubled the company in size from a team perspective and in 'twenty.

Ingo: Four we woefully choose to hire less people I'm focused a lot on making sure that the people that we onboard its years before we're very effective. So we also have made sure that the team at each had time to actually do this and going forward for 'twenty five we will continue to invest in the markets that are relevant to us So north America will be a core of.

Ingo: Our growth strategy, both commercially and on the engineering sites, where we will make additional investments and we think that for 25, we will hire more people than we have done in 'twenty four but at the same time. If you look at margins that our margin will continue to X bonds.

Ethan: It will nordics bonds are at a level that you have seen from 'twenty three 'twenty four but still we are expecting to have we will continue the path that for them great. Thanks, It's clear that we can continue to invest in the team, but still delivering some margin expansion as well I'm on the topic of the outlook Ethan how do you see 2025, yeah sure. So if we start with <unk>.

Ethan: 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 twenty's too high twenty's growth annually between 'twenty 'twenty four and 'twenty 'twenty six we also expected to start at the lower end of the range in 'twenty four with.

Some acceleration in the years after Oh, 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.

Ethan: 2025 on an annual basis.

Ethan: Ingo mentioned, how we are expect EBITDA to develop which is indeed that we expect some expansion of our EBIT margins and twenty-five but not at the same rate as we expanded them in 2024.

Ethan: 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 will commit again to doing that throughout 2025.

Speaker Change: 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 the time, so far and now it's time to move to the question and answer.

Speaker Change: The segment. So as a reminder, you can submit your questions using the Q&A functionality at the bottom of the screen will then ask you to a mute yourself and ask your question. Thank you.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Right.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: 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 mute yourself to ask your question.

Josh Thanks very much.

Adam: The question I appreciate it and congrats on a strong anchor yeah, maybe just focusing on the U S market for a second we obviously seen.

Adam: And you guys 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 on 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.

Adam: It's hard to break out the underlying performance in the fourth quarter, but maybe ex that one big customer could you say whether that is helping to drive an acceleration in U S. Digital volumes and how did you see the competition vessels you want me to deliver on those alternative debit rich. Thank you.

Speaker Change: Thanks, Adam if you want to take the first one and then come to you and go cycling sure I think our strategy in general has been quite consistent in how we focused on delivering value to our customers that as 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.

Speaker Change: Market and will continue to be that way, but we very very much focused on how do we deliver value and.

Speaker Change: And we are gaining market share as 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.

Ingo: I see then Ingo on U S debit and the differentiation that it is very important to have the differentiation of our products used to have it as an example, the other example of course is won't be do around to 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.

Ingo: I think it's a clear example, why payments is not a commodity why to an Italian definitely bring us appreciate it and why we increase while we continue to increase our share of auto show and are in the fourth quarter of this year.

Adam: Thanks, Adam.

Speaker Change: The next question comes from Justin Forsyth from UBS. Just then please go ahead and get yourself to ask a question.

Justin Forsyth: Awesome. Thank you very very much NGO.

Speaker Change: Ethan and Josh sorry, just hearing myself back on echo a little bit, but I have two questions on and better finance. So question number one.

Speaker Change: As you win more and more platforms and think about the adoption of <unk> solutions. It seems like in reality, there's two components right. There is whether the software platforms you are partnering with our making offers to their end merchants.

Speaker Change: We're actually those platforms, gaining requiring themselves to gain more share say across Europe or the U S.

Speaker Change: The BCG survey that you guys put out seem to suggest that there is demand from the merchant side for embedded solution. 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 a 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.

Speaker Change: Thanks, Justin and go do you want to take the one on in general on the general and but find out strategy and then we'll come to you even for our issuing.

Speaker Change: Yeah. So thank you for the question on embedded financial products I think our strategy is to grow with our platforms and needs a lot of SaaS platform that has have joined us from on our platform a growing number of platforms doing already more than 1 billion of payments volume is already 28, and that's the starting point and then on top of that of course, we need to own.

Speaker Change: More than all of sub salaries also there you see significant growth in our in 'twenty 'twenty four for over 150, K, a stepchild or Sunday that combination of more platforms are more sub sellers will creates a situation where we can also upsell to financial products.

Speaker Change: So that's the strategy here. This is also why we publish those numbers to give you a better visibility on how we're executing on this plan and we are very pleased what we've seen so far.

Speaker Change: Thanks, Ethan and issuing yeah, I think I'm. 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 1 billion something like that is more of the scale on the issuing side. If you compare that to what we're doing on the acquiring side, where we did well.

Speaker Change: Over a trillion in payments volume during 'twenty 'twenty. Four then you see the difference in scale, what's important for US is that while it is still small we see really strong traction and to your other point around use cases, we see that traction and expense management. That's one of the big areas that we're going after within issuing and where where we see good traction as.

Speaker Change: Well, it's also in the O T a space where virtual cards are more relevant those are a few of the early use cases that we're we're currently are working together on with our customers.

Speaker Change: Thanks, Justin.

Speaker Change: Next question comes from Mohammed <unk> from Goldman Sachs. Please go ahead, Amit yourselves to ask your question.

Mohammed: Great. Thank you, Josh triangulation 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 that the growth in this acceleration to your midterm plan can you sort of perhaps again tell us kind of some of these key lever. So obviously land and expand as has always been the biggest piece.

Mohammed: But as you look to see expanded the team sales productivity kind of kicks in but also wins from prior years start to contribute so how should we 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 numbers, obviously, particularly impressive.

Mohammed: 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 of uplift.

Mohammed: And debit routing are important products, but how should we think about kind of customers now upgrading the quality of our technology offerings and how does that change your position in there kind of a sales cycle of the competitive landscape. Thank you.

Speaker Change: Thanks, Mel So first one Ethan on the building blocks for 2025, yeah sure. So similar to what we saw during 2024 a share of wallet growth with our existing customers is also what we expect to be the biggest part of our growth in 'twenty twenty-five and that's also where we expect to see some acceleration I think that.

Speaker Change: Areas that I would highlight our across each of the pillars, I think which is the positive sign within digital that's more around content and subscription delivery mobility as we've called out previously within unified Commerce.

Speaker Change: We see that while retail remains really core to us within a 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.

Speaker Change: Each period, it gets to be a bigger part of our overall business. So it will continue to contribute more and more over time.

Speaker Change: In terms of the cadence of that growth.

Speaker Change: Our growth isn't linear, especially not on a quarter by quarter basis, I think 'twenty 'twenty four was a good example of that where we did 21% in Q1 'twenty six 'twenty and then twenty-three Ah 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.

Speaker Change: Acceleration.

Speaker Change: Maybe to touch on your last point, which was around how new sales, what's 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.

Speaker Change: But the traction we see there is as strong they are a new team members are able to deliver how previous team members had done at the same time in their tenure.

Speaker Change: 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.

Speaker Change: Thank you then ingo on gaining market share in North America with 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 have been discussions around like is North America payments markets completely Commoditized is there really a right to play for you there.

These products show or demonstrate that there is variety of play like we clearly see that the value proposition that we bring to our customers is bringing us in a position where we gained market share and that's been a consistent story over time. That's also why North America is the second largest market in our portfolio we're committed.

Speaker Change: To further invest are going forwards.

Speaker Change: And I think it's a very clear point that we are in excellent position to to further drive market share there.

Speaker Change: Clear. Thank smell. The next question comes from Hall sheets of rollout from Bernstein, All sheets out. Please go ahead and ask your question.

Speaker Change: Alright, thank you.

Speaker Change: I wanted to follow up on audience uplift.

Speaker Change: Very exciting new product launch an impressive conversion uplift that you're gonna Chad can you expand upon this.

Speaker Change: Thank you.

Speaker Change: You know you talked about not to Medicare, but it costs that just didn't resonate more what are you hearing from your customers.

Speaker Change: And then just a follow up on the large.

Speaker Change: Customer and digital it looks like the volumes haven't rolled it off completely or is there still some sequential headwind we should expect.

Speaker Change: Thank you.

Speaker Change: So she said when you start with your question, Yes sure absolutely.

Speaker Change: So our needs for uplift.

Speaker Change: Called Somerset adopt this or the enterprise merchant specifically in digital that's where you have high volumes and where the data really help us to get to these higher conversion and in combination.

Speaker Change: With lower fraud. So that's why we see it as a distraction is a relatively new product how of course, we had risk product before but this is a new AI powered at 42 to.

Speaker Change: So we get traction on the site right.

Speaker Change: Great. Thanks, and if another large customer in digital yeah sure. Indeed on the large digital customer we saw that volumes are slowed down throughout the course of H. Two so boat both in Q3 and Q4 there were volumes by the end of 'twenty 'twenty four there are no volumes are still.

Speaker Change: So you shouldn't expect to see volumes throughout 2025, and so of course that will take a few quarters to play out in terms of growth rates.

Speaker Change: But that's ultimately what you should expect there and of course much less impact on a net revenue basis.

Archie: Thanks Archie.

Speaker Change: Our next question comes from how does lighten up from Jefferies. Please go ahead and ask your question.

Lighten Up: Yes, thanks for letting me on a couple of questions. You mentioned the idea of the net revenue growth from on the different growth drivers you have but maybe you can drill a little bit into the different pillars into regional split.

Lighten Up: I think the North America slowed a little bit but it could be that this was related by your exposure to E Bay indication then.

Lighten Up: The second question is in in store T. P V maintained quite a strong momentum maybe you can talk about it how much of disease from existing customer pre pandemic expanding their business and how much after just a ramp post pandemic given the pandemic has been quite decisive in driver for unified Commerce.

Lighten Up: Yeah.

Lighten Up: Thanks, and as if and maybe both of you starting with the net revenue split.

Lighten Up: Yeah, you you highlighted a couple of angles. One is one is the pillars.

Lighten Up:

Lighten Up: 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 are less so beneficial in Latam and APAC to our net revenue numbers.

Lighten Up: 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.

Lighten Up: 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% 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 year.

Lighten Up: Ears, so we're continuing to invest there.

Speaker Change: Thanks, and then a second one on install T. P V. So the momentum that we're seeing that how much is from the existing customers and ramp of new customers.

Lighten Up: Yeah.

Lighten Up: I think the general trend in unified Commerce is that more and more verticals are looking at unified commerce and payments as a strategic enabler right. 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.

Lighten Up: Pre pandemic, we were mostly focused on retail within unified Commerce and of course, we're very much still focused on retail theres a lot of markets still to win in that space, but we've also been growing outside of retail and hospitality and food and beverage as I mentioned earlier and that's been a big driver of our growth over the last year as well.

Lighten Up: 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 and unified commerce with the in person payments in platforms, which is also a important value driver for us in platforms, we see that.

Lighten Up: Did over 20% in person in the second half, which is quite an acceleration from where we were last year. So this is really something that is resonating with our customers, bringing these online and in person transactions together.

Speaker Change: Thanks, Hana as the.

Speaker Change: The next question comes from Fred <unk> from Bank of America. Fred. Please go ahead, I mean, you yourself and ask your question.

Fred: Yeah, Hi, Thank you Josh.

Speaker Change: Hi.

Speaker Change: A quick question for me in terms of our opportunities on the five year view in terms of regions.

Speaker Change: So EMEA and impressive growth considering how old nature of that business in the region is for you guys, but if you look at some other regions beyond the EMEA and in the U S and in specific.

Speaker Change: Oh, Yeah, you want to call out you talked about Japan, and India in the past and your progress here of nodes.

Speaker Change: And then there's a short follow ups you can update us on your use.

Speaker Change: Use of cash police your.

Speaker Change: Or any commentary you can share around that thank you.

Speaker Change: Thanks, Brett and go do you want to hit the first one on the longer term opportunity and they need some will come to you on the cashiers policy.

Laura: Sure Laura.

Laura: Our term opportunity indeed like in EMEA and North America are really well positioned for basically arent wrote in a next couple of years I think the fact that we have strong traction in all three pillar, so digital unified commerce and platforms.

Laura: It's a reason why you see the strong growth in both EMEA and North America.

Laura: But longer term and specifically for Japan, and India are that's more like a five year plan or at least a five year plan that social 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 attraction in local market.

Laura: The initial response from boat market is very positive. So this is the the five here gameplay and.

Laura: We do everything we can to to accelerators of cotton apply lessons that we've learned from all of our implementations.

Laura: But it's going to take time to to see massive volumes in these regions.

Laura: Ethan uncapped allocation sure yeah, I'm on capital allocation nothing has really changed here over the over the last six months I think we continue not to have M&A as a core part of our strategy.

Laura: We're very much focused on growing this business are growing that with the team that we have and the products that we're rolling out.

Laura: At the same time, we see a lot of advantage to having a very strong balance sheet as we're trying to rollout our financial product suite.

Laura: The confidence that our customers have in us as a partner to help them rollout. These types of products is really key and ultimately being able to get these yeah growing it in and becoming a much more significant part of our overall business. So we still see that as the as the best use of cash today.

Fred: That's clear thanks Fred.

Speaker Change: Next question comes from Darrin Peller from Wolfe Research. Please go ahead I mean, it yourself and then ask your question.

Fred: Yes.

Fred: Good results I, just wanted to touch on unified Commerce again continues to accelerate we're seeing an increasing mix of Pos processed volumes, maybe just touch on whats resonating how much of the Tcf the total cost of ownership.

Fred: Our 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 was helpful. The commentary was helpful.

Fred: Much of what you talked about being a little more this year, but maybe just a bit more granularity on where the business is the hiring is occurring and maybe how it compares to I think it was around 150 Ftes added in 24, okay.

Speaker Change: Thanks Darren.

Speaker Change: Do you want to take the one on the value prop and you see and then if anything since you're on the hiring.

Darren: Sure I'm, sorry needs for a unified commerce to key reason why our customers work with us is indeed.

Darren: How we can help them to improve customer journeys and if you improve dose customer journeys that of course helps with conversion, but also where total cost of ownership and we try to be to explain is also in the kpis that we.

Darren: Show. So what are do you see customers that are active in multiple geographies because I think that's a strong indicator of how you can.

Darren: Lower your total cost of ownership by working with a single supplier over multiple geographies, but it's a need also over to channels like if you have multiple channels and you can drive payments cost because here down because you have more volume. That's another reason why we're winning here. So those kpis are important to track. That's also what we do internally.

Darren: Thanks, Ethan on the hiring yeah sure. So I think generally you can think about our hiring in two main areas and in the more commercial area, where account management. For instance is our is our biggest part of our commercial team. So that's where we would expect the most of the hiring from a commercial perspective to happen at the same.

Darren: Time, we're also adding to our sales teams.

Darren: And in building those out as well 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.

Darren: And we see the opportunity to do that across.

Darren: 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.

Speaker Change: Thanks Darrin.

Speaker Change: The next question comes from Sandeep Deshpande from JP Morgan Sandeep. Please go ahead and ask your question.

Sandeep Deshpande: Yeah, Hi, Thanks for letting me on.

Sandeep Deshpande: Quick question for me on your growth in Europe versus the U S. I mean is the growth in Europe coming from some new businesses that are ramping up with ideas 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 something new what it goes out on a pick up in Europe, given that you have.

Sandeep Deshpande: Eventually the market.

Sandeep Deshpande: One of the market leaders in Europe in this market and then my second question is regarding.

Sandeep Deshpande: What he called it sounds again, I mean, you and quick service restaurants, a few years ago, well before that market places et cetera. So are there any new article that I did this targeting at this point do you like that earlier conference call I talked about go to the end.

Sandeep Deshpande: Spansion into a finished grocery chains like have you seen any further traction data are there any other side right because you're looking at.

Sandeep Deshpande: Sandeep, if and maybe you can take both of them. So on the growth in our Europe, where is it coming from.

Sandeep Deshpande: It is a it's a combination of of course the bulk in any year is going to come from existing customers I think theres. A Lando example is a 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.

Sandeep Deshpande: 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.

Sandeep Deshpande: It's very much in scope of our offering within our within Europe, and so that combination means that we have still a major opportunity ahead of us to not only grow in 'twenty 'twenty four mm in EMEA, but also to grow significantly in the years ahead. So it's a combination of I think all of the things that we've been talking about Oh.

Sandeep Deshpande: The last periods.

Sandeep Deshpande: And then more generally on the verticals and anything that were targeting yeah. So I think we highlighted a couple in unified Commerce I think.

Sandeep Deshpande: I would also highlight our insurance is a vertical that we've also been working together with and with health care within our within platforms. For instance, so 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 for a number of years that we're also expanding with but we're seeing.

Sandeep Deshpande: Traction in a few of these verticals as well.

Sandeep Deshpande: Thanks Sandeep.

Speaker Change: The next question is from Josh Levin from Autonomous Josh. Please go ahead and ask your question.

Josh Levin: Hi, Good afternoon, two questions for me.

Josh Levin: 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 a follow up on the cash question you have an a minus rating from S&P as you think about having a strong balance sheet to signal to clients and potential clients.

Josh Levin: We have the strength do you view he minus has the lowest rating you can have or would you be willing to possibly go lower is that should we think of it as a constraint.

Speaker Change: Thanks, Josh Ethan both here sure so.

Josh Levin: I think the way to think about.

Josh Levin: The 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.

Josh Levin: What types of markets, they're in and ultimately based on that assessment, we come up with a pricing per boat proposal that fits both our both of our needs and 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.

Josh Levin: Read less into which lines are moving in which direction, we focus much more on overall net revenue growth.

Josh Levin: Now with in other services just to just to add there is the biggest part is FX, but it has a number of other areas like some.

Josh Levin: Some terminal fees.

Josh Levin: It has issuing for instance in there although that's a much smaller a piece.

Josh Levin: 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 than on the question around the balance sheet and the a minus rating I think if you. 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 minus 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 with this policy to make sure that we accelerate like we know we can.

Josh Levin: N.

Josh Levin: Thanks, Josh.

Speaker Change: The next question comes from Pavan, the Suwannee from City Pavan. Please go ahead and ask your question.

Speaker Change: Yeah, Thanks, Josh and good Ethan I've got a couple of questions. Firstly, the EBIDTA margins already pretty close to your 2026 targets and as you go as he said that will accelerate in 2025 should we expect any big step up of hiring or investments over the next couple of years.

Speaker Change: 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. This is a more unbundled approach.

Speaker Change: Thanks.

Speaker Change: Ethan first one for you on the EBITDA.

Speaker Change: So I think if we look to twenty-five 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 twenty-five just less expensive than we saw between 'twenty three and 'twenty four.

Speaker Change: Okay, and then on the competitive dynamics in our approach to having everything in house NGO Yeah. So 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.

Speaker Change: Create better insights and make better risk decisions.

Speaker Change: That's why we strongly believe in this approach is to value that we bring to our customers having these data building products around it and by doing that ultimately getting to the best conversion at the lowest cost.

Speaker Change: It's clear.

Speaker Change: Thanks, Pablo and the next question is from Sven Merkt from Barclays. It's then.

Speaker Change: Please go ahead and ask your question.

Speaker Change: Great. Thank you just a follow up question on issue can you provide us a bit more color what drove the strength. There. It was just primarily from the senior law 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 J F.

Speaker Change: You want a number of high profile customers doing turnkey.

Speaker Change: Before and then curious whether you expect to see a further acceleration in 2025 on the back of your investments. Thank you.

Speaker Change: Ethan maybe you'll come to your first and the main thing that we can come to you on the pipeline so Ethan on issuing yeah.

Speaker Change: So the question is is it broad based or is it more concentrated I think at this scale, it's certainly more concentrated.

Speaker Change: 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 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.

Speaker Change: And then you can get on the pipeline of Big Unified Commerce deals and so if you look at the in general the pipeline, we feel very comfortable how the pipeline is progressing of course, if you think about exploration 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.

Indeed for unified Commerce, we are very pleased with the development of our pipeline and the opportunities that we see going forward. Okay. Thanks Pam.

Speaker Change: The next question comes from the line of Andrew Baum from Wells Fargo. Andrew. Please go ahead and ask your question.

Speaker Change: Hey, Thanks for taking the question I just wanted 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 is the pricing environment similar to what or as intense as you see in there.

Speaker Change: Digital and then I guess for Ethan.

Speaker Change: You've talked about in the past the other services being kind of the tip of the spear for success and platforms, but in your conversations today relative to where we were last year, what are they saying where do they kind of telling you that that they'd like to adopt and use over time.

Speaker Change: Thanks.

Speaker Change: So maybe the first question on the competitive environment in platforms and how that differs versus digital NGO Yeah. That's why I think the difference between platforms and our digital is quite significant I think specifically for all the imputations around SaaS. There's also a lot of new business that we're doing so sauce platforms. Realizing that there is additional margin to be made.

Speaker Change: With embedded payments. It may be later on also embedded financial products. So that's really a new market opportunity.

Speaker Change: And I think that's different than a digital show also the competition is different so there's only a few competitors out there that are actually really competing on the platform side, whilst if you look at digital Ah Theres a wide range of companies competing in this space. So yes, it's a it's a different competitive dynamic there.

Speaker Change: Digital.

Speaker Change: And then Nathan on the conversations that we're having with customers around the services they would like.

Speaker Change: We talked about issuing and capital being the biggest opportunities, we see and I think that remains to be the case and talking to customers.

Speaker Change: Bank accounts is a really nice way to connect the products are to make sure it at acquiring and issuing or acquiring capital are well connected as as products, but I think the biggest opportunities that that our customers see and therefore that we also see our our and issuing in capital.

Andrew Baum: Thanks, Andrew.

Andrew Baum: The next question comes from the line of Sanjay <unk> from K B W. Sanjay. Please go ahead and ask your question.

Andrew Baum: Thank you I wanted to go back to the is showing growth I'm. Just curious when 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.

Andrew Baum: Is 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 the.

Andrew Baum: <unk> growth like is there any difference in terms of the cost per employee complexion in 2025 versus 2024.

Andrew Baum: <unk>.

Andrew Baum: Thanks, Sanjay so maybe starting with the first one Ethan on issuing growth in FY had thing a inflection point.

Andrew Baum: Yeah, I think I think we have strong momentum there.

Andrew Baum: 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.

Andrew Baum: What we've always felt confident about getting too, but I think we are in a good and 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.

Andrew Baum: Still going to take time until it really financially meaningful in the numbers yet.

Andrew Baum: And second one on the cadence of growth through the year, Yeah I think.

Andrew Baum: I just again highlight a bit how we are our growth developed through 'twenty 'twenty four if you look across quarters.

Andrew Baum: There will be it won't be a linear growth path again in 'twenty, five, but I think absolutely the underlying trends that we're seeing where we are gaining share of wallet at a at a faster rate with our with our existing customers. We have been adding new logos will continue to do so I think that underlying trend of acceleration.

Andrew Baum: In that we saw already in 24 compared to 'twenty to 'twenty three we expect to continue into 2025 I wouldn't highlight anything specific that.

Andrew Baum: I had 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 were.

Andrew Baum: We're also not a doubling the team or her doing anything of that type of extent, where that would become very visible in our numbers.

Andrew Baum: 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 some are faster than the revenues will grow so it all it ultimately won't have a major impact on our on our cost structure or our margins.

Sanjay: Thanks Sanjay.

Speaker Change: The next question comes from the line of Anthony and boundary from HSBC until then please go ahead and ask your question.

Anthony: Yes. Thank you Ray mentioned thank you. Thank you for taking my question just a question on the regions you'll cover the reasonable revenue growth would be a different from a region to another between Europe. The U S Asia.

Anthony: When possible to know what makes <unk> different, especially between Europe and the U S that continue to grow with a strong base on the Asia Latam at a lower base what makes a difference of performance between the regional competitive landscape is it offers that you bring to this region.

Speaker Change: Thanks Ethan.

Speaker Change: Yeah, I think maybe I would focus it on.

Speaker Change: There's a couple of there's a couple of angles, which I think are relevant one is the fragmentation in the market I think EMEA and APAC are much more fragmented.

Speaker Change: Then for instance, in North America, or Latin America.

Speaker Change:

Speaker Change: I think that's one one difference that we see but it's also how international are the are there the customers. We work with right 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, where they grew in Latam, where they grew in north of.

Speaker Change: America.

Speaker Change: And so that part of that growth is also represented in other regions and so I think I think those are maybe the two things I'd highlight the difference in how fragmented the various markets are but also.

Speaker Change: How international the business is coming from those markets are focused.

Speaker Change: And if I may add like one.

Speaker Change: Of course, it all started in EMEA and North America, we have our full offering so all of the three pillars unified commerce digital platforms, whilst in APAC.

Speaker Change: And Latam that's less the case, we're still developing this.

Speaker Change: Thanks Anthony.

Speaker Change: The next question comes from Harrison from TD Cowen Harrison. Please go ahead and ask your question.

Harrison: Great. Thanks, so much for taking my questions first one just on the regulatory environment.

Harrison: Lived intelligent routing use debit they were all called out is benefiting from the regulatory environment. So just.

Harrison: Curious on your outlook on the current regulatory environment, and how that might be shaping the product pipeline as we see it today.

Harrison: And any any potential opportunity and then just second question on embedded finance interest income just.

Harrison: You know, obviously really strong sequential growth there so.

Harrison: How should we think about the scaling of interest income within that and finance and are there any particular verticals that are that are adopting it but embedded in finance products.

Harrison: Thanks very much.

Harrison: Thanks, Ingo, maybe we'll start with you on the regulatory environment, Yeah sure. Yeah. So the regulatory environment is always we hear there is an opportunity like 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.

Harrison: That we adjust to it and build products that take friction out of the equation for a lot of our customers.

Harrison: 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, we tried to adjust our product to it and make sure that's relevant to our customer. So we see it as an opportunity and not as a threat.

Speaker Change: And then Nathan on the scaling of our net interest income yeah, I think important.

Harrison: Poured into mentioned on net interest income is that it includes.

Harrison: 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 a fees, which we earn them but.

Harrison: Between those two so bank accounts and capital.

Harrison: Currently we see that the bulk of our net interest income is coming from our bank accounts offering which is big in the in the digital type of marketplace space, especially.

Harrison: And yeah, I think the opportunity.

Harrison: As I mentioned in embedded financial products, we feel its 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 Ah.

Harrison: It won't be a material driver of our growth in the next year.

Harrison: Cliff.

Cliff: Thank you.

Nicholas: The next question comes from the line of Nicholas <unk> from Deutsche Bank. Nicholas. Please go ahead and ask your question.

Nicholas: Nicholas.

Nicholas: Hi can you hear me.

Speaker Change: Perfect. Thank you. Thank you for letting me on our apologies.

Speaker Change: Two questions from my side on behalf of nursing Miata.

Speaker Change: First can you. Please help us understand your volume mix and your expectations here with the visibility that you have today.

Speaker Change: We're trying to understand if you expect any major changes in the mix that possibly impact take rate in a similar magnitude.

Speaker Change: That we saw in the past two quarters.

Speaker Change: And then second question following up on your hiring plans, which is M. S.

Speaker Change: Higher priority or is it rather than North America, or Japan, and India. Thank you.

Speaker Change: Thanks, Nicholas even on the volume mix expectation, Yeah, I think most of the volumes change volume changes and take rate changes there on have.

Speaker Change: I have been mostly driven by a large digital customer.

Speaker Change:

Speaker Change: Most of those are all those volumes have been declining through the course of the second half and ultimately we exited with no more of those volume. So you should expect that that's still visible on a year over year basis for the next few quarters.

Speaker Change: Other than that Theres, nothing else, specifically that I'd highlight in volumes. It's again not what we manage on me manage on net revenues and we're very.

Speaker Change: Focused on how to continue the acceleration we've seen in 2024 and our net revenues and then Ingo maybe on the hiring plans, which the focus regions.

Ingo: That's what our focus regions are a multiple so it is north America was actually also markets like Japan, and India, but of course, the base, where we operate from in Japan, and India shipment then compare to the U S. So in North America, we expect to hire more people are in absolute terms than in Japan and.

Speaker Change: India also because we strongly believe in.

Speaker Change: <unk> balanced growth are not adding as much as we can in a in a year just to get us.

Speaker Change: Team is as big as possible, but also to make sure that we keep the culture. It is always super important to us and if we keep the bar high when we hire new people. So it's finding that right balance but boat regions are important for our investments.

Speaker Change: Thanks Anna.

Speaker Change: And the final question for today comes from Jamie Friedman from S. I G. Jamie. Please go ahead and ask your question.

Jamie Friedman: Thank you I had two questions first for either for a go.

Speaker Change: With regard to the sequential increase.

Speaker Change: The increase in the net revenue yield so I'm looking at the net revenue divided by the volume.

Speaker Change:

Speaker Change: You called out in the shareholder letter that that's related to mix.

Speaker Change: 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 left I mean, obviously these results speak for themselves, let him 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 do you how youre seeing Latam. Thank you.

Speaker Change: Ethan maybe on the 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.

Speaker Change: Throughout 2024, we've called out a large digital customer that has mostly been the driver first of our 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 to an H one about that customer having approximately 1% of our net revenues in that period.

Speaker Change: 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.

Speaker Change: You also want to take the one on the on Latam in constant currency, yeah. So Ah indeed on a reported basis Youre right, but we also shared is that on a constant currency basis Latam grew 12% in AR in the second half and we called that out because it has quite a big impact obviously.

Speaker Change: We've been making quite a few investments are especially with our product in Brazil.

Speaker Change: And I think we feel really well positioned which is also why we 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.

Speaker Change: 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.

Speaker Change: Thanks, Jamie and that 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 <unk>.

Speaker Change: Thank you and have a great day.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: No.