Adyen’s Revenue Cut By Hiring Spree and US Competition; Stock Plumments 40%

Adyen’s decision to boost its staff continues to cut into the Dutch payment company’s revenues.

In its half-year earnings report issued Thursday (Aug. 17), the company said hiring costs and slower growth in America — where it faces competition from companies like PayPal — caused it to miss its internal targets. 

“In some areas the business grew at a lower rate than anticipated,” the company said in a letter to shareholders. “This was the case for our North American net revenue … an increasingly important contributor in recent years.”

The earnings miss prompted the company stock to drop 40.7% and wiping out almost $20 billion in market value Thursday.

Adyen is used by a number of high-profile companies — Microsoft, Instacart, and Subway among them — as an all-in-one payments processor that delivers payments across online, mobile, and in-store channels through an end-to-end infrastructure connecting directly to Visa, Mastercard and other payment methods. 

As noted here earlier this year, the company has continued to defend its decision to add staff, predicting profitability once its hiring spree slows.

A report Thursday by Reuters notes Adyen’s shares fell 22% on the news. The report also quotes a note from J.P. Morgan analysts: “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.”

According to Adyen, the company’s revenue climbed 21% to 739 million euros, lower than its own mid-term forecasts of upwards of 25% growth. The earnings report shows Adyen’s EBITDA margin declining from 59% to 43%, due to the increased cost of hiring.

“We could have actively optimized this metric, but prefer building the team that can realize the long-term potential of our single platform,” the shareholder letter said.

PYMNTS noted last year that Adyen was one of the rare European FinTechs taking on new hires amid a rash of job cuts in that industry. The company hired 400 workers in the first six months of last year, half of them for tech roles.

At the time, chief financial officer Ingo Uytdehaage — who has since been named co-CEO — said these hirings were an investment in the company’s future.

“It is a longer time horizon before you see a product like the embedded financial products turning into significant revenues, but that’s an investment that we want to make because we have seen in the past … that it really pays off,” he said.

In its letter this week, the company argued that it wanted to expand its team at a faster pace but wasn’t able to hire enough top-tier talent, which it said impacted its growth.

“We now see the impact of a sales team size that did not match our ambitions, particularly in North America,” the company said. “Since then, we have ramped up our investments. That being said, investments in the team and revenue never move simultaneously. Rather, the former drives the latter over time.”