Good afternoon, everybody, and welcome to Adyen's H2 2023 earnings call. My name is Josh Masser, and I'm Head of Investor Relations here at Adyen. For today's call, we'll have a fireside chat with our co-CEO, Ingo, and CFO, Ethan, and then we'll open it up to a question and answer session. But before all that, we've prepared a short video, which we'd like to share with you, outlining some of the key highlights of the period. Enjoy! Welcome to Adyen's H2 2023 earnings call. We look forward to sharing our latest business and commercial updates. H2 was a period of expansion for our global team and customer relationships. It was also an exercise in continued focus. By implementing meaningful changes while executing on our long-term strategy, we closed the year with a period of profitable growth. Net revenue landed at EUR 887 million in H2, up 23% year-over-year. This was primarily driven by the continued growth of our existing customer base. Even after two years of investing in our team, EBITDA had full year growth, up 14% year-over-year in H2. EBITDA margin landed at 48% in H2, a metric reflecting slower hiring than in past periods as we brought our investment phase to a close. Even so, we welcome 313 new joiners, bringing us to a total of 4,196 FTEs at the year's end. Net income outpaced this growth as it also benefited from significant interest income in the period. We now have the team equipped with the skills required to execute on our key growth ambitions and to do so at scale. Once again, the majority of hires sat in tech and commercial roles located in offices outside of Amsterdam. Across the business, we know that growth is not always linear. Across all pillars, H2 was a period in which iterative product innovation bolstered our commercial ambitions. Digital volume growth increased to 33% year-on-year this period, benefiting from the ramp-up of a large existing customer. Unified commerce volume grew steadily, but at a slower pace in H2, at 24%, in part due to the pillar's inherent retail exposure. Platforms saw continued traction as the SaaS business model further embedded payments, driving us to grow 19% year-on-year. On the product side, we helped our customers by improving conversion rates, reducing fraud, and unlocking significant operational efficiencies. To continue meeting their needs, we adapted our sales and account management strategies to better emphasize the total cost of ownership benefits that Adyen brings. Looking at our growth, more than 80% stemmed from existing customers, which serves as a testament to the way we partner. We are now pleased to dive into this period in greater detail. We'll start with a fireside chat with our Co-CEO, Ingo Uytdehaage, and our CFO, Ethan Tandowsky. We'll then open the floor for a Q&A, during which you can send in your questions using the Q&A functionality at the bottom of the screen. Please note that the raise hand functionality will not be incorporated. We ask you to leave your full name and the firm you represent when submitting your questions. We will unmute you to ask them live at the end of this segment. Thank you for your cooperation. So, Ingo, Ethan, thanks so much for joining us here today. Now, Ethan, it wasn't long ago that we were addressing this audience at our Investor Day in San Francisco. So what are some of the key learnings you took from that event, but also from throughout the second half of the year? Yeah, that's right. We definitely increased our engagement with the investor community over the last six months. We listened carefully, we collected a lot of feedback. It's been very helpful, and we've tried to implement meaningful change in the way that we communicate to this group. Yeah, I think we can all agree there's been a lot of positive outcomes from that dialogue, including some of the more detailed insights that we gave both there and also built upon throughout the letter. That being said, you know, we're maintaining the long-term view. So, Ingo, how do you view this period in the context of our longer-term strategy? Yeah, so this has been a really important area for our strategy. If you look at the last half year, we basically ended our 2-year investment in the team. We now operate with a team that is with a skill set and at a scale that we wanted to be to serve a global merchant base, which is very important to us. And that investment has been countercyclical. So where a lot of people, a lot of companies took different measures, we expanded the team because we had financially the opportunity to do so. If you then look at the last half year, we hired over 300 people, mostly in commercial and engineering roles, and mostly outside of Amsterdam. We became more and more a global company, which is very important to us, also to serve our merchant base in the best way. Going forward, we continue to hire, albeit at a lower pace than we used to. For this year, we expect to hire 200 people, and mostly, again, outside of Amsterdam in commercial and engineering roles. Yeah. So now we've reached the next scale of Adyen, and we're really ready to execute on the opportunity, that's clear. But as well as growing the team with a view on the long term, we also kept this view with our financial performance. So, Ethan, could you speak to some of the financial highlights of the period? Yeah. A few of the long-term trends that we've seen over past periods continued in the second half this year. We saw that most of our growth came from our existing customers, so above 80% came from that existing base. We saw less than 1% volume churn within our customer base, trends that we've seen for a long time on the platform, so they continued. In terms of net revenue growth, we grew 23% in the second half. That was driven across each of the regions, but especially in North America, where we saw 27% net revenue growth, and we continued to gain market share there. A very strategic market, of course, so we're excited to see that. Then, on the profitability side, we saw EBITDA margins go up to 48% in the second half, given that we came towards the end of our investment cycle. And on net income, we saw 48% growth, given the tailwinds we saw from net interest income, as our strong cash position and conservative balance sheet led to growth there. Yeah. It's great to see the land and expand strategy still really playing out. Could you also maybe just add some color around how those numbers worked through the commercial pillars? ... Yeah, sure. So indeed, the land and expand strategy is really key to our growth. And nowhere is that more visible than in the digital pillar, where we saw a large acceleration in our volume growth, in the second half, and especially into Q4, especially coming from one large customer. In terms of unified commerce, we continue to grow strongly there, 24%, albeit at a slightly slower rate than in H1, given we did see a broader slowdown in our retail segment within unified commerce. And then on the platform side, we continue to see that embedding payments is highly, highly strategic for SaaS businesses. And, to roll that out, they want to partner with a company like us, so we're really excited to see the growth we see there. To conclude, we've said it before, but in our business, growth is not linear, and I think this is another good example of how our growth developments play out if you look at it on a half-by-half basis. Coming back to some of the customer growth, now, in the letter and the video, we talk a lot about how our sales and account management strategies have evolved to better suit the economic backdrop that our customers find themselves in, and to really emphasize Adyen's total cost of ownership benefits. Ingo, maybe you could expand a bit more around some of the measures that we've taken to help our customers in these times of a cost efficiency. Yeah, sure. Absolutely. I think that's indeed an important focus point for us to help them implement operational efficiencies. Ultimately, what we wanna do, and that's always been our strategy, to help them drive down total cost of ownership. And we've done that in the different pillars. And that's what we're really proud of. For instance, if you look at unified commerce, we've been working with S Group from the Nordics, which is an everyday retailer, that selected us because we can help them both in store and online, and by doing that, also improving their loyalty offering. And I think that is helping them drive down the total cost of ownership. Also, on the digital side, where we work for customers, new customer like WorldRemit, and we also expanded our partnership with Klarna. And in... For digital, we help them to reduce fraud, to increase the authorization rates that are very important to our digital customers. But also on the platform side, if you think about a customer like Centtrip, where we help them to embed payments into their offering, but also to expand on the embedded financial products going forward. I think these are really interesting opportunities for us, helping them to get a better offering, and ultimately, again, drive down the total cost of ownership. Yeah. And I guess moving beyond that sales approach, you know, we don't- Yeah ... stand still from a product perspective. Could you maybe also discuss some of the key product developments that we've worked on in the period to really better improve our best-in-class offering? Yeah, of course, product has to follow what our customers want, so that's also been the focus of our product teams. One of the things that we, for instance, worked on during this half year is to improve the authentication during the checkout. That helps to improve conversion, because you have lower drop-offs during the checkout. That's one example. The other example is how we build out issuing, and I think we have a unique milestone at this half year, where we, for the first time, passed the EUR 100 million processed volume mark, which of course, is still very tiny if you compare it to our total processed volume. But it shows, it demonstrates how important issuing is in a strategic way to our offering. Of course, we expect to get more going forward. Another topic for product, which has been very important and which is overlooked very often, is how we are getting our banking license globally. We now have our banking license also in the U.K., which gives us direct access to the clearing in the U.K., which also then helps us to improve our payout offering to our merchants, which of course is also very important from a product perspective. Yeah. I mean, it sounds like a very busy period for our products and technical teams. Also a really nice milestone on the issuing side as well. But now we've talked a lot about this cycle, so now let's look forward. So Ethan, how do you see 2024? Yeah, we shared a lot about our strategy at the Investor Day in November, and we're very much focused on executing that strategy. We've built up the team in a very significant way in the last two years, and we feel really prepared and ready to deliver on that strategy, also for our customers. The team is enthusiastic and ready to go in execution. That's great. Then what does that mean financially for the year ahead as well? Yeah, good question. So, we recently updated our financial objectives. We did that a few months back, and, in there, we talk about net revenue growth over the next three years, between the low 20s and high 20s in terms of growth percentage. We expect to be towards the lower end of that range in 2024, given that a lot of the commercial investments and hiring we've done over the last couple of years won't really bear fruit until 2025 and beyond. Then on the EBITDA margin side, we do expect to grow EBITDA margin on an annual basis in 2024 when compared to 2023. There is some annualization impact of wages related to people that we've hired during 2023, so that growth won't be as big as we expect in 2025 and 2026. Yeah, that makes sense. That's clear. Thanks, Ethan. So now it's time to move to the question and answer session. To enable everyone to ask a question, we please like you to keep it to two questions per person. We'll be using the Zoom Q&A functionality, so if you could please put your full name and the firm that you represent, we will then invite you to unmute yourself and ask your question. Thank you. So the questions have come in, so let's go straight to the Q&A. So the first question is from Mohammed Moawalla from Goldman Sachs. So Mo, please, could you ask your question? Thank you, Josh. Hi, Ingo. Hi, Ethan. Congratulations on the quarter, but also really appreciate the additional disclosure and insight that you gave us. So certainly, it's recognized and very helpful. I had two. The first one was, Ethan, you talked about kind of the starting at the lower end of your kind of midterm guidance, but if you could help us kind of understand the puts and takes as to kind of what's driving that, and particularly as you balance the macro easing kind of comps, particularly in the first half of the year, but also some of the kind of partnerships that you've announced. How should we think of kind of potential range of outcomes around that? And then secondly, when you talked about the sort of U.S. customer, could you give us a bit more detail around that, the scope of that partnership? Was it an existing customer that you expanded with? And who are you kind of displacing? And just kind of curious from a kind of a technology standpoint, what were your differentiators? Thank you. So, Ethan, maybe you take the question on the guidance and Ingo on the US customer. Sure. Yeah, sure. So you're right, we've talked about in 2024 being towards the lower end of our, of our guidance range. That's driven off of a few things, right? In any given year, existing growth from our customers is gonna be the main driver. So the ultimate outcomes are driven by how fast do we gain wallet share with our customer base. At the same time, their growth is an important part of also how we grow, and the macro environment is quite uncertain at the moment. On top of that, we also saw some benefit in the second half from our smaller customers growing faster than our larger ones. Of course, with the exception of this large customer you referenced, and that we don't know will continue for the next 12 months. So that's why we've been. That's why we've shared that our growth will be towards the lower end of the guidance range. That's our expectation, and that's what we expect for the year. Ingo? Yeah, so if you look at the large customer in U.S., I think it is a very important proof point for us, because it proves that we are relevant in a digital market in U.S., and that a customer wants to give a significant volume to us. We can't disclose who we are displacing, because I think they work with multiple partners, but we became an important partner, and that's what we also, in our land and expand strategy, further want to grow with them. So we will keep working with them and make sure that the offering is in line with their expectations. Sure. Thanks. Makes sense. Thanks, Mo. The next question is from Adam Wood, from Morgan Stanley. So Adam, please go ahead and ask your question. Thanks. Great. Thanks, Josh. Thanks also, Ingo and Ethan, and again, I echo Mo's comments on the greater disclosure. It's very helpful. Two from me. Maybe just first of all, you talked about the banking licenses, Ethan, and, you know, maybe something that's not talked about enough. When we look at the BNPL companies and the peer-to-peer payments companies, we're obviously aware that you can do acquiring into those platforms. But is there an opportunity for you also to power the bank-to-bank payments that we guess would be happening on those platforms as well? Would that be competitive with people? Are you leveraging open banking to do that, and how do you monetize it, where it's bank to bank rather than on the acquiring side? And then just secondly, kind of, again, towards this 2024 debate around growth, you've announced quite a few wins recently, S Group, Bill.com, Klarna, and Shopify Enterprise. Are they broadly new contributing for 2024, or should we be aware that they've already been partly in 2023, and we shouldn't be assuming a full year contribution from them as we look into 2024, please? Thank you. Maybe, Ingo, you can take the first one on our relationship with these BNPL fintech companies, and then Ethan, second one on the financials. Yeah, sure. So if you look at the buy now, pay later companies that we work with, we work with them, first of all, as a payment method. I think that's how we've built a relationship over time. But then also they need to get funded for their customers. And I think that's where it is very clear that financial technology helps. They recognize that our offering is the right offering to help them out, and therefore we work with them. So we're very excited that we have this opportunity, and of course, we work closely with them to see what we can do more. I think the core infrastructure that we've built, also, if you think about the banking licenses that we have in multiple geographies, that helps us to build very specific things for also fintech players. And yeah, we're very pleased, of course, with this offering. Ethan, on the outlook for revenue growth? Yeah, and maybe before I get to that outlook, I'd maybe just add that we do see that the complexity around different types of payment methods, that is something that we see increasing, and you see it with these types of customers as well. So yeah, it's about being able to process card payments, but it's also around bank transfers and other means of paying to accept those payments too. In terms of our outlook, you named a number of, of great customer wins. We're really excited by them, but typically our land and expand model doesn't play out in a short period. These are opportunities that will lead to our growth over a number of years, if we do them right. We're really excited about that ambition, but it's not that you should expect that everything comes through all at once in 2024. Thanks, Adam. The next question comes from Justin Sherwood- Forsythe from UBS. So Justin, please go ahead and ask your questions. You there, Justin? Sorry, can you hear me? Yes, we can. All right. Thanks a lot, Ingo, Ethan, and Josh. Appreciate it. Just a couple of questions here from me. So first, I wanted to touch on the EBITDA margin a little bit... excluding that inventory write-up, I think you're pretty close to that 50% margin guidance that you gave for 2026. Maybe you could talk a little bit about your expectations for that going forward in the context of the number of hires that you're doing, and maybe just a little bit around the maintenance level of people that you need to add in a given year to achieve what you need to achieve on the technological side of things, kind of leaving the commercial side out of it. That's question number 1. Question number 2, just wanna talk a little bit about the digital channel, kind of excluding this larger merchant win. Can you talk a little bit about how the interaction works with the largest key merchants over time? So presumably, illustratively, if you were to lose some volume, maybe there's a key account meeting that happens, and they might give you a little bit of color around where volume is shifting and what you might need to do to win that volume back. Maybe you could just walk us through that, how that happens, and if that happened incrementally better in the last two quarters than it had done in the past. Thank you. Ethan, maybe you take the one on EBITDA, and then, and go on how we talk with our merchants and the AM process we have there. Yeah, sure. So we gave annual guidance on EBITDA margins. So in 2023, we had 46% EBITDA margins for the year. We also talked about the annualization impact that will come in 2024. So while we do expect to expand EBITDA margins in 2024, we don't expect it to be at the same rate as in 2025 and 2026. And I do think it's important that I mention that we don't think that 50% is the limit of what we can get to over time. It's more a timing discussion, and we are still very, very much focused on top line growth and investing where we see fit to drive that top line growth. So in terms of maintenance, which I think was the second part of your question around this, most of the team is working on building new innovation for our customers, and that's really benefited by the fact that we've built everything on the single platform. That's where we focus most of our team's energy, and that's really that subscription to innovation that our merchants are looking for. So that's where the vast majority of our technical teams are working on. Yeah. Ingo on this. Yeah. So on the other question around shifting volumes, I think specifically in a digital space, we see that merchants test us quite frequently. So volumes are indeed shifting around, and it is the ultimate function of who has the best authorization rates, who has the best total cost of ownership, and that's where we have really investing. So I think that's also the examples that we gave. For instance, what you see currently, why customers like Klarna select us, that we bring this uptick in approval rates, and they test us, they see that we perform well, and that's how we get additional volume. Of course, sometimes it happens that some volume get routed away, and then a very important part of our offering is also that we have account management teams working very closely with our merchants to see, okay, why are we underperforming? What is the reason that volumes get shifted away, and how can we win it back? And I think that's also over time, what you see. We have this land to expand strategy. Most of our growth comes from increased share of wallet. So ultimately, also on the digital side, we're winning market share and not losing it. So I think the testing is quite common, but we are in a very good position there. Yeah. Okay, cool. Thanks, Justin. The next question is from Harshita Rawat, from Bernstein. So, Harshita, please go ahead and ask your questions. Hi, good morning. My first question is, can you elaborate on your S Group when it looks very interesting with almost 2,000 locations, and also kind of beyond your core high-end retail and into everyday kind of retail services? Are you replacing a legacy patchwork of competitors? Maybe also talk about the pitch to them in terms of digital innovation and transformation. Then, Ethan, just a question for you also on Latam. I know you are in transition in that region. When can we expect growth to re-accelerate there? Thank you. Ingo, do you want to take the first one on S Group and our proposition there? Yeah, sure. So if you look at the S Group, S Group has selected us because we can bring the innovation that they're looking for, so merging online and in-store, and also, then helping with getting a better, loyalty, offering. So we're very pleased with that. Indeed, we're replacing a legacy player there. I think this is the first step into a vertical, that is indeed relatively new for us, but also it's part of a trend that we have seen since the pandemic, where everyday retail was already testing us with, for instance, curbside pickup or with online, shopping. And you see that retailers start to think strategically about: How can we bring this together? How do we better recognize our customers? How can we get or present them better loyalty offerings to have the best optimal customer journey? I think that's ultimately what we're bringing to a company like S Group, and yeah, hopefully that's the start of more success in everyday retail if you look at the full processing part. Sure. And Ethan, on Latam. Yeah, sure. So, Latam mostly consists out of, Brazil and Mexico. They're both highly strategic markets for us, given that a lot of international customers of ours are also interested in those markets. At the same time, we have domestic merchants there that we work with, and we think we can continue to grow that. If we talk about Brazil specifically, there are some, product adaptations that we are making, given the complexity of payments in that market, especially around anticipations and installment payments. And we're looking to bring that onto our own product offering, where previously we had partnered, which meant that from a cost perspective, we could be less competitive there. So we're excited about what we're building out there. We're certainly investing in it. It's a highly, highly strategic market for us, both for international customers and domestic ones. It will take some time to play out, like most things in our business, but we're certainly excited about the opportunity there. ... Thank you, Harshita. Next question is from James Goodman at Barclays. So James, please go ahead and ask your questions. Great, good afternoon. Thank you. Yeah, my first question is around the competitive environment that really dominated the conversation six months ago. I mean, to some extent, also at the CMD, but can you update us on what you're seeing there in terms of competitive behavior, particularly in the U.S.? And I guess, overall, has the pricing behavior become more rational? My second question is around the other services revenue line. I recollect that's mainly FX services, but please correct me if that's wrong. It declined year-on-year in the second half, so I'm asking, is there something structurally that's happened there, and should we expect any further pressure on other services revenue? Thank you. Maybe, Ingo, you can take the one on the competitive dynamics, and then go on the other services. Yeah, sure. Sorry. I think if you look at the competitive dynamics in the U.S., in essence, it has not really changed. Of course, there are signals that other players want to take a different strategy, and maybe anecdotally, we sometimes already hear this back, but it's certainly not reflected in the second half numbers. What we continue to focus on is also what we talked about today, is how can we help to drive down total cost of ownership? And that's also how we're gonna win in this very competitive and dynamic market. And I think if you look at the growth in the second half, 27% net revenues in the U.S., I think it is very clear that we're winning markets here and are very competitive. Yeah. Ethan, on the other services line? Yeah, sure. So, you mentioned FX, that is a big part of that line. There's also a few other fees, terminal service fees, for example, is another piece. If you look at it on a full year basis, we did see that it went up year-over-year, but you're right on, in the second half, that it went down. That's typically driven by mix, because we offer our merchants a range of currencies that they can be paid out in, and if you, for instance, think that we grew fastest in North America, where those are typically single currency type markets, you see less FX in part of those in that part of the world than in other parts, like in Europe or in Asia. It's mostly down to mix and driven by the faster growth we had in North America. Okay. Thank you, James. Next question is from Sandeep Deshpande, from J.P. Morgan. Sandeep, please go ahead. Yeah, hi. Thanks for letting me on. My question to you, Ingo, and Ethan, is, I mean, Unified Commerce is probably one of, I thought, your most differentiated business units, but the growth there, which was, you know, very, very significant in the last three years, seems to have slowed down quite a lot in the second half. Maybe you can comment on that, you know, customers versus market and, you know, how this is gonna go back to the sort of growth that, you know, was seen, maybe not the kind of 100% growth, but, you know, the kind of good growth that you had before. And my second question is that you highlighted in your release that you saw significant growth in the issuing part of your business. Now, is this part of your business now a core offering from Adyen? I mean, this was, you know, a separate offering in the past because you were working on the technologies, et cetera. Now, is this fully out there for everybody, that you can sell it, and thus, you know, this is going to be a major revenue driver for you in the next few years? Ethan, maybe you'll take the question on Unified Commerce and then Ingo on the Issuing piece. Sure. So on Unified Commerce, I think the starting question is, are we still highly differentiated in this market? I think we certainly are. We do have a big exposure to retail within Unified Commerce, and that's where we saw a broader slowdown. But at the same time, we're also seeing many more industries look to benefit from Unified Commerce capabilities. If you talk about food and beverage or hospitality, we've talked about in the past or this S Group example we've given this half, much more everyday retail type of use case, you see that more verticals are trending this way, and we think that we can certainly deliver value here and grow within the space. At the same time, Unified Commerce as a proposition is also really important to platforms, and that's where we also see really exceptional growth on the point of sale side. It's a really important factor in why we win a lot of SaaS businesses on the platform side, too. So we still have very big ambitions for Unified Commerce. We see that as a major growth opportunity for us in the coming years. We're still highly under-penetrated, if you think about the portion of point of sale volumes that we have, compared to the way that those are set up in the world. I think we did around 17% in the second half, and that's more like 80%-85% in the market. I think we have a long way to go, and we see a number of verticals moving in this direction. We're definitely continuing to invest here and hope to grow at a higher rate in future years. Ingo, on the issuing question? Yeah, so if you look at issuing, it is very strategic for us, and we focus mostly on the merchants that we already work with, where issuing becomes a very important part of their offering. If you compare EUR 100 million to EUR tens of millions over the full year in 2022, it is a significant increase, and at the same time, like we said, it's still small. So the current focus for us to work with our merchants to increase these volumes. I think the recent announcement with, for instance, Bill.com, I think is a very strong testament that we are having the right customers on our platform that are going to use our services. So it will grow over the next years. It becomes meaningful. At the same time, it will take time, and I think that's a very important part of this proposition. It takes time to build it completely, organically, but it will result in the best user experience, and that's ultimately what we're building right now. Sure. That makes sense. Okay, thank you. The next question is from Hannes Leitner at Jefferies. So Hannes, please go ahead. ... Thanks for letting me on. Hi, everyone. I have also two questions. The first one is on full stack TPV. You have substantially improved your share in full stack TPV in H2. Could you talk about the moving parts, and how should we think about the trending going forward? And the second one is, essentially on Oracle payments. You called out already, you mentioned SaaS partnerships. How far are we in that journey, and, how is the feedback from your partner side and the economics? So, Ethan, maybe you'll take the first question and then go talking about the SaaS partnerships. Yeah, yeah, sure. So, we've talked in the past about our non-full stack volumes, mostly being tied either to airlines or to certain payment methods that we service as a gateway for. Of course, the biggest chunk of our volume is in the digital side. That's also where you saw the fastest growth, and it's safe to assume that that was airlines, or that was industries outside of airlines growing much faster. That increased TPV, or that increased full stack TPV, in the second half. A similar trend is probably expected in the future. Ingo? Yeah. I think if you look at SaaS, how we work with SaaS players, it fits mostly in our, into our platform offering. And what you see with a lot of SaaS players, the first step that they do is they look at, okay, how can embedded payments help them to create additional revenue streams for them? So that's how we help them to create those revenue streams. And then on top of that, there are often other interesting use cases for them. But it's always starts with first migrating the payments volume at, to them or building that with them. And then on top of that, we have the opportunity to sell the embedded financial products, which also, of course, ultimately leads to more stickiness, which is important, I think, in building a long-term partnership together. So it is, if you look at platforms ex-eBay, it is growing super fast, but still absolutely not at the size as we want it to be. We see a huge opportunity in this market also, because it's a very strong market trend that SaaS players are embedding payments into their offering. So it's just the start of a longer journey. Yeah, sounds like strong, strong structural growth ahead there. So, thanks, Hannes, for your questions. The next one is from Josh Levin at Autonomous. So Josh, please go ahead. Hi, good afternoon. Just one question for me. Going back to the big win from an existing customer in the US, in your report, you said it was Cash App. Can you talk about what exactly you're doing for Cash App and what the economics of that business are? Ethan, do you wanna take that one? Yeah, sure. So I think for a couple of reasons, it's a nice proof point. It's a nice proof point to our land-and-expand model. It's been a customer for several years. We started on the international side and now supporting them also domestically in the U.S. Of course, the U.S. is a very big focus market for us, and it's a nice proof point there that for the largest at enterprise scale, digital customers, we are chosen to support them in that market. So for a number of reasons, it's highly on strategy. Of course, they have a lot of volumes to bring to the table, and with our tiered pricing model, you should expect that they're significantly below the average take rate we see on the platform, given their scale. Sure. Okay, thank you. Thanks, Josh. The next question is from Pavan Daswani from Citi. Pavan, please go ahead. Hi, Ingo, Ethan, and Josh. Thanks for letting me on. I've got a couple of questions. Firstly, you've had a couple of quarters now of quite strong wallet share gains in digital in the U.S., even excluding the large customer win that you talked about. Can you maybe help us understand what is really driving this, given you say there's little change in the competitive dynamics? Is it your new sales approach focused on lowering costs, or is it that customers have moved back volumes to Adyen because of performance? And then secondly, can you maybe talk about the take rate dynamics, excluding the big customer win, and how you kind of expect that to trend going forward? Maybe, Ingo, you can take the one on U.S. digital and then Ethan on the take rate dynamics. Yeah. I think in general, if you look at U.S. digital, we have been outperforming the market for a long time. I think the only thing that we highlighted in the first half year, last year, is that it was slower than the quarters or half years before. So I think in essence, we haven't not completely changed our strategy. Of course, we started to talk more about total cost of ownership. That resonates well with our customers, so that's what you see on the digital side in Q3 and Q4. But it is or continues to be a competitive market, and for us, it is very important to listen carefully to what the needs are of these customers. But also, like, Ethan just explained around what we are doing for Cash App, like the fact that they select us in a domestic market based on a land-and-expand strategy. I think it's a very clear signal that our offering in the U.S. is best in class. And that's, of course, ultimately why you keep winning. Even in a price-sensitive market, it is about the value that we bring, and I think it is a very strong proof point that we bring the value in that market. Ethan, on the Take Rate dynamic, excluding the large customer, and how you see it going forward? Yeah, so in general, what we've seen over the last half, if you take that large customer out, is that our smaller merchants grew faster than our larger ones. In the end, that has the impact of driving take rate up, but that's not something that we are actively managing by itself. It's also why we don't manage on an overall take rate in the business. We manage on absolute revenues. And, driving that absolute revenue growth is the thing that we're focused on. So it's not something that we predict, because we don't actually actively manage on take rate. We much more look at absolute net revenues and how that's growing over time, and that's what we'll continue to focus on. Okay, got it. Thanks, Pawan. The next one is from Fred Boulan at Bank of America. So Fred, please go ahead and ask your question. Thank you very much. Good afternoon. Thank you very much for taking the question. Two, if I may: the first on the cost of your employee. So we saw some pretty steady average cost inflation last year and in H1. The cost per employee in the second half was almost flat despite that dynamic of hiring in the U.S. and pretty senior people. So can you explain a little bit what's going on there, and what kind of expectations we should have for 2024 onwards? And then on the Cash App deal, I don't know if you could add a bit more color on what you're doing for them. So you mentioned Afterpay. If you can discuss the nature of the expanded scope of your relationship with Cash App in the US? Thank you. Ethan, on the cost per employee? Yeah. So in the past, when we've talked about cost per employee, it's been all about mix. Of course, that plays a role in H2. What we also saw is that a portion of compensation is also tied to stock-based compensation. We try to do that for all employees, so that we're aligned to the long-term ambitions of Adyen as a whole. And of course, during the second half of the year, we saw that the stock price was negatively impacted, meaning that there was some smaller costs on that side. At the same time, looking forward, like I said about mix, we don't expect to hire as many people in 2024. So the mix doesn't substantially change in the same way that it did in past years. And therefore, I think it's safe to assume that there will be less impact than in some of the years we've seen over the last couple, where we made substantial investments and really changed the dynamics of our employee group. Yeah. And then maybe just on the Cash App part, maybe just to give a bit more color on the exact... Like, the kind of activity that we would be facilitating there. Yeah. So, ultimately, it's about pay-ins, so receiving money into the app. And there's a range of ways that people can add money to the app. That's what we support, both in the U.S. and internationally. Okay. Got it. Thanks, Fred. The next question is from Alex Faure from BNP Paribas. Alex, go ahead. Can you hear us, Alex? Hello? Can you hear me? Hey. Yes, we can hear you. Oh, apologies. Yeah, just two questions. One is, bit of a back to basics. Could you remind us, with your largest enterprise clients, how often you have pricing discussions? How often do you fully renegotiate the pricing grid, if that's something you do? And the second question is on Reg II and debit routing in the U.S. Do you reckon that's something that's very differentiated for Adyen at the moment, and is this also helping you gain share in the U.S. market? Thank you very much. Ingo, do you want to take the first one on the pricing discussions? And then, Ethan, maybe you can take the second one, on the regulation. Yeah. I think on the pricing, there is no standard answer to this. Ultimately, if you look at our business model, how we work is that we have this tiered pricing structure. So the more processed volume you bring, the lower your pricing gets. And that's, of course, also if you get to your final tier, a very logical moment to start the discussion again. So I think that's typically how we approach it. And of course, there are sometimes situations where, for instance, a contract ends, and you need to renegotiate. But we typically focus on this tiered pricing approach. Sure. And, Ethan, on the debit routing side? Yeah. So I think in general, we see this regulation, but also other regulation, driving more complexity in the market. There is more opportunity to pick which route you send a certain transaction. We've always been very clear that we're agnostic about payment method, so which route we send it to will be determined on performance and cost for our customer. We see that as absolutely an opportunity to help them to manage their total cost of ownership, right? Because in the end, our fees, especially in the U.S., are a very small fraction of the overall fees that they're paying for payments. So we definitely see it as opportunity, whether that comes through regulation, as you just mentioned, or through new payment methods that consumer behavior is driving. Each of them creates an opportunity for us, and we're really focusing on delivering that outcome for our customers. Got it. Okay, cool. Thank you. Thanks. Next question is from Andrew Bauch at Wells Fargo. Andrew, please go ahead. Hey, guys. Thanks for taking the question. I know it's been asked in several ways, but I wonder if you can give us a little bit more color on the month-to-month progression of volumes that you saw in the fourth quarter, and any other additional detail that you can provide on first quarter to date. And then my follow-up is, I know that you historically have said that, you know, maintaining a very strong cash balance on balance sheet was important for the value proposition and in conversations with regulators. But just given the magnitude of where it is today at EUR 8.3 billion, just wondering if your thinking has been changed at all around that? Ethan, I think that's two questions for you, so maybe the first one on the Q4- Yeah ... and any color on first quarter so far this year, and then, on the cash balance. Yeah, so, if we look at the second half, and I'll much more talk on net revenues, because that's what we manage the business on. We saw consistent performance across the half. Right? We see that if you look at a constant currency basis, we saw that both in Q3 and Q4, we saw similar trends. There were not big movements throughout the period. As far as next year, we do plan to give more updates, so we'll give a quarterly update in Q1 and in Q3, as well as our half yearly updates. That's where we'll update the market on how we're progressing as a business throughout this year. And then in terms of capital allocation, we constantly assess our capital allocation policy. It's not that we're stuck in our ways by any means, but we see that the value of keeping that strong balance sheet is really important for us when we talk to regulators, but also in maintaining our credit rating. That's especially important as we get into financial services and as we fulfill many more of these responsibilities for our customer base. We wanna be sure that the operational flexibility, but also the commercial success, is driven off that strength, and that's why we think this is the right decision. Got it. That's clear. Thanks, Andrew. And the next question is from Darrin Peller at Wolfe Research. Darrin, please go ahead. Guys, thank you. Maybe just shifting to the platform's growth profile for a minute. I mean, backing out eBay impacts, we've seen really solid, looks like triple-digit growth. And so, you know, when we think about anniversary and the impact from eBay to a degree, into early 2024, along with additional customers you're talking about, can you just touch on the prospect, what kind of prospective growth profiles we can see in that segment, in 2024? Maybe a little more color on that, and really just the underlying drivers of strength you're seeing there. What... I know we've touched on this a little bit last year, but maybe revisit what's been sustaining that. And then a bigger picture question, just broadly, maybe for Ingo, is just the competitive landscape again. I really just wanna know what you think are the top few features. It seems like auth rates are a little more table stakes now, right? So what would you say are really resonating with customers these days? Thanks again, guys. Maybe Ethan, you take the first one on platforms, and then we'll come to you, Ingo. Yeah. I think we benefit from a few trends in platforms. One, that more and more customers are embedding payments into their offering, or more and more SaaS platforms are embedding payments into their offering. So they're either doing that net new, or they're selling it more into their customer base. Both are trends that we benefit from. At the same time, we also have a share of wallet to win with our existing customers. We still have a small fraction of the overall share of wallet of our platform customers and have a lot of growth there. So both of those growth drivers give us a lot of confidence that we can continue to grow the platforms business significantly over the coming years. At the same time, we're also adding new platforms all the time as they look to embed first payments and then financial services more over time. So we think that this will be a big growth driver of our business. I mentioned it earlier, but we're also highly differentiated on the fact that we have a strong Unified Commerce offering in that space, and that we have our own banking licenses. The whole infrastructure is built ourselves. There's no reliance on third party. So we expect... It is the smallest part of our business to date, but we expect it has a strong growth profile in the years ahead. Maybe that leads nicely to some of the notable features or that really keep us ahead of the competition. Yeah, and that depends also a bit on the pillars that we talk about. So, for instance, if you look at digital, very important there, for instance, is how we can offer local payment methods. So local payment methods for better acceptance, but also for lower cost, because typically local payment methods come at lower cost than card traffic. It's about preventing fraud in digital. Then on the unified commerce side, I think a very important reason why customers want to work with us is how we can help them to use data for better customer insights, or whether that's customer journeys, but also on who is shopping when, where, how can we—if you're very advanced, how can we use that data to make better marketing decisions? So I think these are typical areas where we are uniquely positioned. And then on the platform side, I think it is also back to the points that we already touched upon, like, how can we help to at first create embedded payments offering, and then on top of that, the other products. And that combination, I think, for each of the pillars, brings us in a very strong competitive position and to keep winning in in the different verticals. Got it. It's clear. Thanks, Ingo. Thanks, Darrin. Next question is from Bryan Bergin at TD Cowen. Bryan, go ahead. Hi, guys. Thank you. First one I've got for you is on the commercial ramp. As you've pillarized the commercial team and adjusted that go-to-market recently, have you had any early learnings that may impact how you were thinking about that 12-18-month ramp cycle for revenue conversion? And the second one, just on sales and marketing, the efficiency here is good to see. Do you have any opportunity for further efficiencies as you move through 2024, as we think about potential incremental margin tailwind? Ingo, do you want to take the first one on the pillarization? And then Ethan, we'll come to you on sales and marketing. Yeah. I think the pillarization has really helped us to scale both sales and account management. I think the fact that you get experts in each vertical is helping, but also, for instance, recruitment, finding experts in a certain industry is way more targeted. So it helps us to speed up the onboarding of new hires. It helps us to also share more knowledge within the company. So we have basically expertise pools in the company that have the best industry knowledge to help our merchants, and I think that is mostly appreciated. Of course, that is on top of the technology that we bring. So I think the combination, and that's also how we look at it internally, is like, we have a great tech stack, but also the account management function and support functions, that have a deep knowledge about the industry and about what we can bring from a functionality perspective, that brings us in a unique position to help merchants and why we keep adding, share of wallet to, to the mix. So and, and pillarization helps with, creating that knowledge, sharing that knowledge, and, and also ultimately benefiting from it. Yeah, sure. That makes sense. And then, Ethan, on the sales and marketing efficiency, so where are we finding them? Are we just starting this journey? What's to come? Yeah, so, Ingo just talked a lot about focus, right? And, and, and making sure that we have focused efforts on the commercial side, to go after the customers that fit well, with the value we can bring to the table. We've done the same on the sales and marketing side. So making sure that we are very targeted, we are very focused on the customers that we can bring the most value to. Given that it is a wide range of verticals, and regions that we're in, we've tried to just increase the focus we have there. And ultimately, of course, if it delivers commercial success, we want to invest in it. We think there's so much more room for us to grow, not only in our existing base, but long-term also with many new customers. So it's certainly not something that we're intentionally stepping off the gas on. It's just that we're much more focused, we're much more targeted, and we can drive strong results from that. Sure. Got it. Clear, that's or Ethan, thank you. So the next question is from James Friedman, SIG. You there, James? Maybe we'll try and come back to James to after this. So, instead, let's then go- Sorry about that. That's all right, James. I apologize. I just, Cool. Hey, James. Excuse me, I'd hidden the unmute button. I wanted to ask about the AP, APMs. So alternative payment methods, how should we think about Adyen's competitive position where alternative payments proliferate? 'Cause it seems like you have a lot of native skills in that opportunity, but at the same time, a lot of your growth is still coming from the carded market. So high-level strategic question about alternative payments. Ingo? Yeah, happy to talk about this. Like, if you look at the alternative payment methods, they are really important in the mix. We can't just rely on many markets, just on the cards. You have other preferences by customers or by consumers, how they like to pay. For instance, if you look at Brazil, how quickly Pix came up there, it is something that you need to offer. And I think then, the way how we try to position ourselves and why we have a lot of traction with alternative payment methods, is that we integrate as directly as possible to those payment methods, so that the user experience is best in class, and that the... ultimately, also the conversion is best in class. That's why maybe in the total mix, if you look percentage-wise, it is not as big as cards, because cards are still a very popular way of paying, but it's you can't miss it in the mix, and therefore, we keep investing in those local payment methods and also making sure that they are as best integrated as possible with the best mobile experience, et cetera. Yeah. And I think that clearly resonates. I mean, if you look at our digital customers, the top ones, over 90% are using them, so it is still very important to have in the mix. So thank you, James, for that question. The next question is from Fahed Kunwar from Redburn. Farhad, go ahead, please. Thanks, and hi, hi both for taking my question. Just the first one was just on, thinking about, obviously, the, what we, what we saw in 2023. So obviously, 2Q, we saw a lot of merchants focusing on costs, and we saw the slowdown, and we saw the kind of pick up again in the second half of the year. Should we think about that volatility as more inherent in the business now, given the kind of swings and roundabouts that we saw? And, and the other question was, of the merchants that chose to go for price in the second quarter, you've, how many have you convinced back with your distribution method and kind of convincing them about cost of ownership? Or is that potential upside to kind of 2024 and 2025 if those customers come back? My second question, just a clarification. I know you said cloud and the other wins will take some time, but were they included in your 2025 and 2026 guidance that you gave at the CMD? Thank you. Ethan, maybe you can touch upon the volatility, and then we'll come to you, Ingo, for the customers that we had discussions with in the first half, and then we'll come back to you, Ethan, for the 25 and 26 guidance. Yeah, sure. So, if we start with our growth trajectory, I've said it a few times on this call, but the bulk of our growth in any given year is our growth with existing merchants. Now, the biggest part of that is share of wallet gains. It's of course important how they grow themselves, so their organic growth, but the biggest part over the years for us has been wallet share gains. We expect that to continue in the coming years. There is just naturally a bit of difference when you look on a short-term basis at when wallet share gains happen, and that's what we saw during this year. That's also why it's so important for us to keep a long-term horizon on building this business, because investments we make, decisions we take, they don't play out overnight. They play out over years, typically, and that's why we continue to make those investments. But yeah, the nature of wallet share gains is that they do happen at different times for different customers. Yeah. ... And then, Ingo, maybe you want to talk about some of the conversations we had with some of the customers in the first half, and if there's been any changes there. Yeah, sure. So first of all, I think I wouldn't speak about lost customers, because if you look at customer churn, customer churn is less than 1%, very consistently over time of the company. So it's mostly customers that test us compared to others. And I think that's also what we talked about before. That's quite standard in the industry. I think the fact that we shifted a bit of the talking towards, like, what is the total cost of ownership? How can we help you there? Has certainly resonated with our customers. I find it very hard to pinpoint it exactly in the numbers, but I think the growth in net revenues in the third and fourth quarter has been very consistent. I think it certainly, on an anecdotal basis, it helps to convince customers, but this is a long-term journey. I think that's also how we keep building the company with this very long-term perspective. The conversations are ongoing. That's also why we have account management, why they talk to our customers, make sure that they understand the needs, and then we will win volume over time. I think the land and expand strategy is very clear proof of this. Yeah, that's clear. And then coming back to the final question: so how do we think about specific deals in the context of guidance? Yeah, I think the great thing about our business over time is that the concentration within net revenues has decreased, right? So whether you cut that in your top 5 customers, your top 10, your top 25, top 50, we see that net revenue concentration is decreasing. So these are fantastic wins, fantastic customers we hope to grow with in the coming years. But it's also not that one or two customers determines our growth path. So we feel very confident that we will continue to be able to grow in the range that we've shared, but it isn't dependent on one or two customers. I think at this point, we've built out a wide set, a wide customer base that we hope to grow with over the coming years. Okay, that's clear. Thanks, Ethan. So thanks, Fahed. Next question is from Crawford Clark from Evercore. Crawford, please go ahead. Hey, guys. Can you hear me okay? We can. Terrific. Thanks so much for taking my question. I appreciate it. Congratulations on the performance. I think this may have been answered, so I apologize if it's a double question, but I do think the embedded finance opportunity is really important to touch on, as it relates to take rate. So we saw the compression, obviously, it's probably related to Cash App, but can you talk a little bit about how you expect take rate to evolve moving forward, and how the embedded finance opportunity may impact take rate over the midterm? Thanks. Ethan? Yeah, sure. So, I said it earlier, but the absolute net revenues is the metric that we manage on, and take rate on an average basis isn't very meaningful to us because the incremental volume that we do with a specific customer comes at a very low marginal cost. So we look at managing each individual customer on an absolute net revenue basis, and that's how we'll continue to manage it going forward. If we can win huge customers the size of Cash App, well, there's not so many, but if you can win those types of customers, of course, you should do it. It's great for our business to be able to grow with customers like them. That's what we focus on, rather than managing to absolute take rate levels. In terms of embedded finance, that's especially relevant in the platform space, and with platforms, there are more services that we feel that we can offer them, and they can offer to their customers, given the needs of their customer segments. So yeah, if we can offer more services, we should expect that we are creating more value and therefore also earning more fees from it. Okay, that's clear. Thank you very much. Thanks, Crawford, for your questions. Next question, this is the last question from Sanjay Sakhrani from KBW. Sanjay, please go ahead and ask your question. Thanks. Appreciate it. Ethan, when you were talking about the revenue growth expectations in 2024 and the point on not including the smaller customer growth that you saw in 2023, I just was wondering if you could dig deeper, if there was anything different about the go-to-market strategy, or is that just built-in conservatism? And then secondly, I know eBay is a valuable relationship, but obviously it's created a decent amount of volatility to the numbers. I'm just thinking, as partnerships are important, are an important part of your go-to-market strategy, maybe you can talk about some of the learnings from that relationship and how that might have changed the way you operate on a go-forward basis. Thank you. So, Ethan, maybe you can take the one on the expectations for revenue, and then, Ingo, on the eBay side. Yeah. So the point you're referencing, Sanjay, was around the mix impact that we saw in the second half. We talked about it in Q3, and we see it again if you exclude that large customer ramp up. We don't actively manage go-to-market in a way that we have driven that intentionally. That's due to where we've gained wallet share in the period. And it's not an expectation that we have either way for 2024, so we don't take that same benefit into our view of 2024. Sure. And then Ingo, on eBay? Yeah, I think in general, if you look at eBay and the partnership that we've had, it is truly a partnership, where we always had open dialogues about, "Okay, what can we do in a certain phase for you if you want to migrate away your traffic from PayPal to us?" So it had different phases. And ultimately, I think the reason why they like to work with us is because we have the flexibility. The fact that we own end-to-end the full platform gives a lot of flexibility in the tech stack that they can use. And ultimately, they wanna control their payments themselves as much as they can, because it is strategic to them. And where they, for instance, could integrate directly, they would. And they've always been open about this, so it's never come as a surprise. Of course, we had the warrants in place to make sure that there would be sufficient volume. So what have we learned from this? I think a true partnership is something you build if you understand each other needs, and that's also how we want to build out the other partnerships that we have with our customers, making sure how our technology can be leveraged for their product, and if you then have the value, they stay. Sure. That's clear. Yeah, and thank you both, Ingo and Ethan, for your answers. So yeah, that concludes the Q&A portion of our earnings call. So thank you so much for everyone for taking the time to join us today. For any further questions, don't hesitate to reach out to the IR team here at Adyen. And all that's left to be said is have a great day. Thank you very much.