Adyen’s shares drop 33% due to earnings disappointment.

By Toby ​Sterling and ​Elizabeth ⁣Howcroft

AMSTERDAM (Reuters) ⁢-Dutch payments processor Adyen NV’s shares fell by a third on Thursday, wiping ‍more than⁣ 13 billion euros off its⁢ market value, after first-half earnings missed estimates, as sales growth slowed and hiring costs hit margins.

Analysts said the company’s performance raised concerns about stretched​ valuations in the digital⁣ payments sector⁢ and added⁢ to worries about⁤ a general slowdown in what has been viewed as a ⁤high-growth business.

Adyen, which provides services to the likes‍ of Netflix, Meta, Microsoft and Spotify,⁣ said revenue growth⁢ was slower in North America and that its margins⁤ were ‌impacted by hiring costs.

CEO Pieter van der Does acknowledged that competitors in the U.S., which is Adyen’s second-largest ⁤market after‌ its⁣ European base, had won business by lowering prices. But ‌he said it did not make sense for Adyen⁢ to engage in a price war with them.

“If ⁢there is any place ⁤that you could ​say is most‍ prone to price competition it ⁣would be ‍the U.S. because you can switch more easily,” he said.

He ‌said Adyen had not lost any ‌of its large​ platform customers and the competition was an “isolated phenomenon” for one kind of customer: merchants that process both online and in-store payments.

Adyen’s rivals in the US include Stripe, Braintree, Fiserv and PayPal.

The company’s shares fell sharply after a delayed start⁣ on Euronext due to volatility ⁤and were down 35% at ⁢951⁢ euros at 1233 GMT. At ⁢current prices, the shares ⁢are down more than 20% in the​ year to⁣ date, surrendering gains up to Wednesday’s⁣ close.

“These are disappointing results, particularly the sales miss, and the‍ key question will be ⁣whether the company can quickly revert‌ to mid-term trend growth,” JPMorgan⁢ analysts said.

Earnings ⁤before interest, tax,⁤ depreciation and amortisation (EBITDA) were 320 million ⁢euros ‍($348 million), down 10% from a year earlier and below analyst forecasts of 386 million euros, Refinitiv data showed.

Revenue rose 21% ⁣to 739 million‌ euros, against​ Adyen’s mid-term ⁣forecasts of⁣ more than 25% growth.

“In some areas the business grew⁣ at​ a lower rate ‌than anticipated,” the company said.

Jefferies analyst ⁢Hannes ‌Leitner said some concerns‍ are focused on Adyen, ⁣which ​is‍ still more ‍profitable and more highly valued than ⁣peers, and some on the ​sector and economy.

He said the economy overall⁤ is ⁢slowing and online payments growth may not be quite⁤ as fast ‍as it was⁤ in the pre-COVID era. “This is impacting Adyen⁤ a little more‌ than others.”

Adyen’s ‌EBITDA margin fell to ⁣43% from 59%,⁣ which the company said was mostly because of higher⁣ wage costs as it takes on more staff.⁢ The company hired 550 full time employees as ⁣part of an accelerated hiring push,⁣ a 17% increase.

A similar margin decline​ led to a sell-off ‌in‌ Adyen shares when the company reported full-year earnings in February.

Adyen CFO Ethan Tandowsky⁣ told analysts hiring would‍ remain ⁤at similar levels in the second half of 2023 before slowing.

He said⁢ the company is‌ maintaining​ its medium-term targets for revenue growth above 25% and an improving EBITDA margin that it‍ expects to reach ⁣65% in the long‍ term. But he said it would take time ​for margins to expand toward that ⁤target after the current hiring push had slowed.

($1 = 0.9177 euros)

(Reporting by Toby Sterling, additional⁢ reporting‌ by ‍Sinead Cruise.Editing by David ​Goodman, Barbara Lewis⁤ and Jane Merriman)

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