Stripe rival soars 22% on profit beat, hiring slowdown

Adyen reported a big miss on first-half sales Thursday. The news drove a $20 billion rout in the company’s market capitalization .

Pavlo Gonchar | Sopa Images | Lightrocket | Getty Images

Shares of European online payments giant Adyen jumped on Thursday, after the company reported strong sales growth and better-than-expected profit for 2023.

Adyen, which competes with Stripe, PayPal, and Block, told shareholders in its 2023 annual letter that it had slowed the pace of its hiring to counter concerns that it was spending too aggressively on expanding its team, while its margins were being compressed.

“We feel we’ve really built a strong team to execute on the opportunity that we have in the upcoming years. We of course did it at a time when others weren’t. “And we feel we’re really well positioned given that hiring,” Ethan Tandowsky, Adyen’s chief financial officer, told CNBC’s “Squawk Box Europe” Thursday.

“It was always intended to be a two-year accelerated investment cycle, which we’ve wrapped up at the end of 2023, so while we’ll still make strategic investments in the team in the years ahead, it will be at a much slower rate than we did the last two years,” Tandowsky added.

Shares of the company closed up more than 21%.

Here’s how the company did in its full-year results:

Net revenue: 1.626 billion euros ($1.75 billion), up 22% year-on-year. That’s broadly in line with expectations of 1.636 billion euros, according to LSEG, formerly Refinitiv

EBITDA (earnings before interest, tax, depreciation, and amortization): 743.0 million euros, up 2% year-on-year. Analysts had forecast EBITDA of 254.3 million euros, per LSEG

Adyen said its net revenue growth was driven by “continued growth across our existing customer base consistent with our underlying land-and-expand fundamentals.”

The company also said it “significantly expanded” its partnership with a single, unnamed existing digital customer, which contributed to better sales growth overall.

Adyen announced new global partnership deals with fintech firm Klarna and music streaming platform Spotify last year.

The company said that it gradually slowed down the pace of hiring significantly in the second half of the year, and that it was focusing on hiring outside of Amsterdam across tech and commercial teams.

The move intended to address investor concerns that the company was spending too aggressively on hiring while peers were cutting back on their capital expenditure.

“Without being specific on 2024, but confident commentary on mid-term execution, we believe shares will see a relief this morning given constant currency growth being well ahead of the soft-guided low20s 2024 growth, while ramps at Klarna and Shopify should further derisk,” analysts at Jefferies said in a note Thursday morning.

Adyen is one of several payment companies that faced an onslaught of challenges in 2023, including higher inflation, rising interest rates, and slowing consumer spending. These same factors put pressure on valuations of once-attractive payment darlings such as Stripe, one of Adyen’s closest competitors in the U.S., as well as PayPal, Block, and Worldline.

Stripe’s valuation was cut to $95 billion in early 2023, down from $95 billion at the peak of the Covid-driven boom in financial technology companies in 2021.

In August 2023, Adyen reported first-half results that showed it grew revenues 21% year-over-year — its slowest rate on record.

Investors have questioned the company’s punchy pricing for its payment solutions, which include digital and in-store transactions.

Adyen has been stubborn to reduce its payment fees, whereas competitors in local markets, particularly North America, have been muscling in with cheaper fees.

Investors were watching the company’s progress on margin closely to get a sense of whether it was focusing enough on keeping costs reasonable.

Adyen’s EBITDA margin came in at 48% in the second half of the year — “reflecting our deliberately slowed hiring,” the company said, adding it still brought in 313 new staffers for the period.

Adyen had a total of 4,196 full-time employees of the end of 2023.

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