December 7, 2023

FDI Forum

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PayPal rival Adyen is battling slower consumer spending after stock drop

For a co-CEO whose company’s shares have fallen 62% since reporting disappointing earnings in August, Ingo Uytdehaage appears relaxed and sanguine when discussing the future of Adyen.

The Dutch payments company, which competes with the likes of Stripe and PayPal to allow merchants to accept card payments, has seen its yearslong hot growth moderate amid slowing consumer spend and growing competition. But Uytdehaage shrugs it off, arguing that big stock drops come with the territory when you’re a tech darling.

“The most important thing as a company is that if you have some headwinds, you don’t change direction,” he tells Fortune at Adyen’s bustling headquarters in central Amsterdam. 

Wall Street has punished Adyen, whose clients include A-list customers like Netflix, Meta, Spotify, Gap, and McDonald’s, for revenue growth of 21% in the first half of 2023. Even though it’s a growth rate that would be the envy of most companies, it’s Adyen’s slowest pace of growth over a six-month period since becoming a public company in 2018. 

The company’s ascent in recent years has been fueled by the rise of e-commerce and traditional retailers’ ability to electronically integrate store sales data with those online. 

Founded in 2006, Adyen remains one of Europe’s largest tech startups with a market cap of $22 billion, and even after the stock drop, Adyen is by far the largest tech startup in the Netherlands.

Recently, though, it has found itself pinched by rivals offering cheaper services, as consumers slow spending, and impeded by rising interest rates and higher inflation. But Uytdehaage, who was made co-CEO in May after 12 years as Adyen’s finance chief, says the company’s expansion is moving full steam ahead. That effort includes a large new office in Chicago and a greater focus on enhancing the services its tech can provide, such as more detailed information on customer habits.

“We’ve never positioned ourselves as fintech. We’re more focused on building something that lasts for our customers and brings a different mindset,” Uytdehaage says. 

At the same time, he says Wall Street doesn’t quite understand Adyen’s growth prospects, a problem he hopes its Wednesday investor day will address. Adyen recently received a vote of confidence from investor Cathie Wood when her ARK Invest took a sizable stake in the company. And as a former CFO, explaining things to Wall Street is right up Uytdehaage’s alley.

This interview was edited and condensed for clarity.

Your stock took a dive on your last earnings report. Is that just the law of arithmetics after years of fast growth, or does this signal fiercer competition and slowing consumer spending?

We’ve always built the company for the long run, and you have periods where you grow faster. I don’t think that sentiment has really changed. I think what has changed a bit, of course, is the macroeconomic environment, rising interest rates, and a higher focus on our costs of doing business. That could impact how our revenue grows. The most important thing for us is that if you have a bit of a headwind, you don’t change direction, and you keep focused on what you want to accomplish long-term while explaining what you’re doing. 

Is the investor reaction to your last earnings report overdone? 

I think it’s fair that they have questions, especially if the market reacts like this. That’s also why we’re organizing an investor day. You don’t get a better opportunity to explain what’s happening in the market.

What’s your moat against shakey consumer sentiment, given that it’s out of your control? 

You can’t completely avoid what’s happening around you. I think we have a really well-diversified merchant portfolio. We don’t interact directly with consumers, but we’re helping our merchants. That’s the important thing. 

What functionalities do you think you can add to Adyen to protect against your competition? 

Look at digital commerce, where we have always been very present. We can increase authorization rates (reducing the percentage of transactions that don’t go through). It’s also things like, “How do you make sure that you’ve got a 360-degree view of consumers whether they shop in stores or online?” We have the payment data to help merchants get those insights. There’s also a long-term strategy not just to offer payments but other financial products like bank accounts. Traditional banks have difficulties serving small and mid-sized businesses, so that’s a huge opportunity.  

Can you keep growing at the same rate with this lean staff, or will you have to bulk up even at a risk to profit margins? 

We’ve added a lot of people, and it brought us to the next level of maturity. We expanded on the engineering side so we could offer multiple products and on the geographic side to be close to where the merchants are. It is also why we built out, for instance, Chicago, to make sure that we have the right product and engineering in the U.S. You need to have a certain size if you want to compete with companies that are 10,000 or 15,000 people. You can’t do that with 1,500 people, even if you’re super efficient, if you want to play on a global scale.

Let’s talk more about talent attraction. You’re going up against the likes of PayPal and Stripe in the U.S. Does the Netherlands offer you the access to talent that you need?

Amsterdam is a very attractive city to international people. There is also great international talent coming to Dutch universities. The fact that we have so many successful scale-ups here is a vital sign that we are in good shape. (A bit more than half of Adyen’s Amsterdam-based employees are non-Dutch nationals, a spokeswoman said.)

What made you choose Chicago for your new U.S. office?

We have operations in San Francisco. But for engineering and product teams, we decided to build in Chicago because the typical tenure of people in San Francisco is relatively short, and we are building for the long term. We strongly believe that we’ll get people likely to stay a bit longer and have less turnover in Chicago. 

How does the co-CEO arrangement work at Adyen?

The reason why it works is because we know each other well. We dare to discuss each other’s views. I think what I really appreciate about working with Pieter van der Does (CEO and cofounder) is that if we have opposite views, he always takes the time to understand, ‘Hey, what are the underlying assumptions? Why did you come to a different view?’ These are rational discussions and operational discussions. I think we’re both quite flexible. 

But sometimes, founder-CEOs don’t make for easy co-CEO arrangements. Look at Salesforce. 

Pieter is not a person looking to be a founder-hero who wants to be recognized.

So, the vision but without the diva outbreaks?


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