BusinessMarketsMoneyTechnologyAdyen IPO Disrupts the Future of Payment Processing

Thomas Smale6 months ago197014 min

Adyen Confirms June IPO on Amsterdam Markets

About Adyen

Adyen, the payments processing firm based in the Netherlands and founded in 2006, has announced plans to IPO. Since its founding, the company has grown into one of the world’s largest and most technologically advanced payments processing firms, serving clients in over 37 countries and 4000 cities, most recently expanding its point of sale offering to Singapore. Among its global client base Adyen counts leading brands Facebook, Uber, Netflix, eBay, Microsoft, Spotify, Casper, Bonobos, L’Oreal, ASICS, Lush, and Dunkin Donuts. The European company supports as many as 250 payment methods hosted on a given business’ site, on a mobile page or in a physical store, earning revenue through charging a processing fee and a payment method fee per transaction.

Consistently at the forefront of technical developments in the merchant-consumer retail experience, Adyen’s most recent major development is its Terminal API, which allows payment transactions to run entirely on the cloud or in an internet infrastructure. This addition to the platform means that shoppers are able to initiate a transaction from any device or location of the shop floor, load their cart into their mobile device and pay for items directly through the software. Such an API “makes life easier for merchants, creating a more flexible infrastructure that eliminates compatibility issues between different local networks, legacy systems or cash registers. Ultimately this saves them both time and money,” according to Adyen’s Chief Commercial Officer Roelant Prins. Methods like these allow the benefits of e-commerce—flexibility, mobility and visibility into accounts—to expand directly in store and shrinks the operational and logistical gap between merchant and consumer. Further, introducing Adyen’s in-store solution allows merchants to unify all their retail channels in one payments system, granting them a significant advantage in understanding consumer behavior to further develop the customer experience and build loyalty with consumers.

Notably, Adyen won a contract in January of this year to supply eBay’s payments, winning out against eBay’s former in-house payments service PayPal, which was spun out of the company nearly three years ago. Other recent partnerships for the company include omnichannel retail solutions provider Mi9 Retail to allow its merchants to accept payments through Adyen’s Terminal API, as well as WeChat Pay in the Chinese e-commerce space.

Financial and Operational History

Adyen nearly doubled its sales in 2016, coming in at $727 million (up from $365 million in 2015) and forecasting similar growth for 2017. EBITDA for the company was reported at $87 million for 2016 compared with $46 million the year before. In 2017, Adyen generated $1.14 billion in revenue, a more than 62% increase from the $727 million recorded in 2016. The company was valued at $2.3 billion back in 2015 and has raised $266 million in funding to date from lead investors including ICONIQ Capital, Index Ventures, and General Atlantic, among others.

Adyen has been profitable since 2011 and consequently, raising new funds is not a crucial focus of the IPO, however the company has been expanding its offerings with new products into new regions and is looking to ensure it has the resources to scale as planned. According to Prins, one of the largest opportunities for growth for the company is merchants’ need to keep up with an ever-growing market of mobile payment apps that customers continue to adopt.

As one of the fastest-growing companies in the online payments industry, it carries relatively little name recognition compared to incumbents like PayPal—though brand awareness is not currently their main concern. Integral to the growth strategy of the business is forming direct relationships with merchants around the world. Interestingly, Adyen’s position as an internet payments provider is actually the leverage it uses to foster partnerships with brick and mortar retailers, as part of their appeal is providing merchants with one single payment processor for in-store and online purchases. Adyen plans to use the growing e-commerce industry’s clout to leverage its in-store growth, since their offering of seamless integration between in-store and online payments is highly beneficial to multi-channel merchants. Retailers are almost universally aware that in order to remain relevant today, their e-commerce strategy must be a focal point of their business. With a strong processor as well as robust analytics functions available for merchants, Adyen is a clear choice for retailers with in-store and online operations.

The company’s partnership with WeChat Pay (now available on their point-of-sale terminals worldwide) will allow Adyen merchants to accept payments from China’s three largest payment providers, including Alibaba’s Alipay and China UnionPay. China-based Alibaba is the world’s second-largest e-commerce marketplace, following Amazon, and operates in the world’s largest internet user market.

IPO

On Thursday of this week, Adyen officially confirmed they will be going public in Amsterdam markets. While listing documents did not provide a fundraising target, the valuation will fall between €6-9 billion euros ($7-10.5 billion USD), and current stakeholders will be selling up to 15% of shares. Alongside the filing, Adyen stated that they aim to grow revenue by 20-30% over the next few years, with a 2018 revenue growth target of 40%. The prospectus shows that the company processed $126.3 billion in payments in 2017 and recorded net revenues of $254.5 million, with adjusted earnings of $115.7 million. In the prospectus released with the filing, Adyen reported net revenues for the fiscal year ending December 2017 reached $255.45 million, a 38% increase from 2016, and processed $126.55 billion in volume, up from $77.34 billion in 2016. The company remains profitable on an EBITDA basis ($116 million) in 2017 with a margin of 45.5%. Additionally, 1Q’18 revenue is up year over year, coming in at $86.75 million (up from $51.9 million the year before).

Listing on the public markets will be a critical point in Adyen’s growth trajectory, as CEO Pieter van der Does noted in a statement released alongside the filing: “We feel that we are still in the early stages of a remarkable journey. Our focus remains on building new functionality and on helping our merchants grow. This offering provides us with the freedom to keep building the company, while offering our shareholders a path to liquidity. Adyen will remain a company that is driven by a long-term vision and strategy.”

The announcement around the company’s IPO comes just hours after being named to the CNBC Disruptor 50 list, which selects 50 private companies around the world that elicit exceptional worldwide change through innovation. Now in its sixth year, the list gathers the most powerful companies creating a massive disruption through breakthrough technologies. Adyen’s unified commerce solution for thousands of retail companies worldwide has earned it the 16th spot on the 2018 list.

Of the company’s IPO and recognition on such a prestigious list, Ismael Wrixen, CEO of leading M&A advisory firm for online businesses FE International, congratulated the payments leader, saying, “The timing for the IPO couldn’t be better, as it is now one of the few European tech companies to surpass the $1 billion in generated revenues mark. At each critical point in its roadmap Adyen has proven it is at the forefront of innovation for retailers and merchants across the globe. It comes as no surprise that we have seen an increase in the e-commerce companies we advise using the processor over the past several years, as its reliable system and commitment to innovation demonstrate it is a clear leader in the space.”

Reuters has reported that Adyen plans to list in June, which would make it the largest tech listing by a European company since Spotify went public in April of this year.

Thomas Smale

Thomas is Editor in Chief at SaaS Mag and Founder of FE International, the leading M&A advisory firm for online businesses. He is a serial online business entrepreneur and expert. In his early 20s, he began building and selling small online companies. This turned into a full-time career when he founded FE International in 2010, growing the business with zero funds from ground up and consistently doubling annual revenue, as well as the average deal size. Thomas specializes in advising in the M&A of SaaS, e-commerce, affiliate and content businesses. He has consulted hundreds of internet entrepreneurs on exit strategy, growth and business development.

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