*Historical figures have been adjusted since prior publications of results.
H2 29% YOY
FY 27% YOY
H2 28% YOY
FY 28% YOY
H2 36% YOY
FY 27% YOY
February 10, 2021
Weekly retail processed volumes indexed to the first week of January
Enterprise merchants in online verticals continued to be our main growth driver. We work hand-in-hand with these merchants across regions and product lines to ensure their growth is never held back by their payments set-up. We continued to see increasing diversification across our enterprise merchant base, which helped us during a year where COVID-19 impacted everyone. We see this as a proof point of the business’ resilience going forward.
We also continued to roll out Adyen for Platforms during the second half of the year. Adyen for Platforms allows us to provide the long tail of the market with access to the full power of the Adyen platform through enterprise-level partnerships. By partnering with merchants like Modernizing Medicine, a business technology provider to over 150,000 medical practitioners, we deliver SMEs the payment technology required to successfully operate their businesses. To further enhance our offering for platform merchants, we continue to build for its scalability — most notably with automated information and verification checks and extensive sub-seller fraud controls implemented over the full year.
In the unified commerce space, the convergence of the offline and online channels continued to be a major theme — shoppers expect a single brand experience, regardless whether they are buying online or offline. During the period, we saw the historical trend of merchants adding a second channel on our platform speed up. Illustrative to this development, and the land-and-expand approach with existing merchants that we have employed since foundation, is how we have grown our partnership with H&M. In 2018, we started a global partnership across key markets in Europe and North America, focusing on online volumes. Today, we are proud to announce that we are rolling out our full unified commerce offering across Europe, the US, Canada and Puerto Rico with them.
Within the retail vertical, we started at the high end of the market where there was more complexity to solve for — e.g. creating personalized shopper journeys. In recent years, we have successfully moved into retail more broadly, as shoppers across the spectrum are increasingly expecting seamless experiences across channels. We continued to add household names to the platform from all ends of the retail segment — including Boulanger, Ralph Lauren, and Gianvito Rossi.
As the COVID-19 pandemic continued, the day-to-day of many merchants in the in-store retail and quick-service restaurant verticals were impacted by the closure of physical outlets. We saw that unified commerce merchants could more easily adapt to the current environment — as offering in-app and online ordering, as well as curbside pick-ups were essential to keeping sales up. Our unified commerce offering has proven to be especially well-suited for facilitating these experiences, and made renowned players like Hungry Jack’s opt for the solution. In post-pandemic reopening scenarios, we view the need for contactless payment set-ups as an opportunity to showcase the strength of our unified commerce offering.
We experienced initial traction in the hospitality vertical in the second half of the year — with merchant wins ranging from high-end boutique resort QC Terme to international hotel group Yotel. The fact that hotel and resort guests increasingly expect state-of-the-art experiences with seamless booking, check-in, and check-out across channels helps us — offering multi-channel experiences has always been our strength in retail, and now helps us move into new verticals.
In the mid-market segment, we are increasingly moving toward an approach that encompasses all down-market segments from enterprise. We go to market with a direct sales approach in the higher end of mid-market, while enabling marketing-driven strategies and engagement via partnerships and system integrator communities to reach down the long tail of the market. To service businesses of all sizes, our lower-touch approach through partnership models provides us comfort on scalability, without compromising on organizational efficiency or culture.
Product innovation on the single platform continued to be a co-creative process with our merchants, despite the pandemic. The workstreams that make up the Adyen product organization work directly with our merchants, ergo can efficiently prioritize their needs. To ensure that we address our merchants’ needs at speed, company-wide strategy is set annually based on these workstreams’ goals.
This merchant-centered approach to product development is clearly reflected in how we built the Network Token Optimization feature of our RevenueAccelerate product in partnership with Microsoft. Through EMVCo-certified cloud tokens, the feature enables a more secure way of obtaining payment approval — without having to send or store sensitive data such as PANs (primary account numbers). By deciding whether to seek approval via a token or a PAN via smart transaction routing, the feature facilitates higher authorization rates for our merchants.
Another example of our merchant-driven innovation is IdentityRisk, a support tool that enables sub-seller fraud checks at scale for platform merchants. We were already helping our merchants identify shopper fraud with our RevenueProtect product, and now offer this functionality on the sub-seller level as well. Improving effectiveness and reducing time spent on sub-seller fraud checks, the feature increases operational scalability for merchants running platforms.
Adyen Issuing was implemented at scale in the second half of the year, as we are now rolling out 30,000 cards with Glovo — an on-demand courier service. The extensive use of the product by Glovo couriers allows us to iterate based on real-world use cases. This is an exciting avenue for growth — and we are just at the beginning here.
On point-of-sale hardware, we launched Android-based mobile POS devices during the second half. These devices integrate the hardware and software that historically would complicate in-store operations (e.g. inventory management software, customer loyalty programs, staff communication tools) in one device. Due to its all-in-one function, these smartphone-sized, portable terminals significantly enhance in-store efficiency. We see potential use cases range from merchants avoiding in-store queuing, to streamlining in-store operations or facilitating curbside pick-ups.
The trend towards stronger authentication across the payments landscape continued in 2020. The PSD2 (Payments Services Directive 2) regulation is now gradually being enforced in Europe, and we are ready to help our merchants adapt by using our 3DS2 tool. The feature, which we were first-to-market with, is built to facilitate uplifts in conversion and authorization rates in this new environment. We expect that the regulation will bring conversion rates down across the industry, but there are efficiency gains to be made in solving for this reality most elegantly.
Lastly on product, we are proud to mention our donation tool Adyen Giving. Adyen Giving facilitates direct donations to our merchants’ preferred charities in the checkout process via a two-transaction logic. This natural extension of the payment flow enables fundraising at scale and simplifies the charitable donation process for our merchants, their shoppers, and good causes. To ensure the full donation amount goes to its beneficiary, we take on the cost of the donation transaction if the beneficiary supports at least one of the United Nations’ Sustainable Development Goals.
Adyen’s net revenue in key regions (by billing address in EUR millions) in H2 2019 and H2 2020
Total operating expenses were €157.7 million in the second half of the year, up 18% year-on-year, and representing 42% of net revenue. For the full year, operating expenses were €310.3 million, up 29% year-on-year, and representing 45% of net revenue. This increase is mainly driven by employee benefits.
Employee benefits were €92.4 million in H2 2020, up 37% from €67.6 million H2 2019. For the full year, employee benefits were €180.0 million, up 47% from €122.4 million for full year 2019.
Other operating expenses were €50.3 million in the second half of 2020, down 8% from €54.7 million in the second half of 2019. This drop is mainly due to the decrease in travel expenses following global travel restrictions caused by the COVID-19 pandemic.
Sales and marketing expenses totaled €18.2 million for the period, down 3% from €18.7 million in H2 2019, as our focus shifted from physical events in enterprise to running online marketing campaigns.
FY 2020 other operating expenses were €101.9 million, up 7% from €95.1 million for FY 2019 operating expenses. Of these, sales and marketing expenses were €39.6 million, up 23% from €32.3 million for FY 2019.
H2 2020 Consolidated statement of comprehensive income
All amounts in EUR thousands unless otherwise stated
Enterprise volume in EUR billions
Despite the COVID-19 pandemic, we continued to add merchants to the single platform with onboarding timelines largely unaffected.
The further diversification of our merchant base across regions and verticals in this space highlights the strength of our industry-leading technology.
The longer-term trend toward online commerce was accelerated due to the COVID-19 pandemic, leading to surging online retail volumes on the single platform.
We continued to expand our product portfolio to meet these merchants’ long-and short-term needs, and invested in the scalability of our offering for platforms.
POS volume evolution, including share of total processed volume in EUR billions
Continued success on all ends of the retail vertical was prevalent, as all types of shoppers increasingly expect seamless experiences across sales channels.
We saw emerging traction across all ends of the hospitality space — with international hotel chains to boutique resorts focusing on offering state-of-the-art visitor experiences.
Our unified commerce offering is well-suited to help QSR merchants offer in-app and online ordering, as well as curbside pick-ups, which became necessities over the period.
When lockdown restrictions ease, we are fully prepared to support our merchants in reopening safely as our full range of POS terminals facilitates contactless payments.
Mid-market volume in EUR billions. We define mid-market merchants as merchants processing up to €25 million annually on our platform. In H2 2020, 4,278 merchants met this definition.
We continue to dedicate resources to building simplified integrations to the single platform, in order to accelerate onboarding timelines.
Through engagement via partnerships and system integrator communities, we build for accessibility to merchants down the long tail of the market.
We continue to invest in processes that allow us to cater to businesses of all sizes — whether it is through higher-touch direct sales, or a lighter-touch approach through partnerships and plugins.
To best help merchants in this segment, growing the mid-market sales, customer success and product teams remained a focal point in hiring.