Okay, perfect. My name is Adam Wood. I look after software and payments on Europe for Morgan Stanley. I'm very, very pleased to welcome Ethan Tandowsky, the CFO of Adyen. Ethan, thank you so much for joining us in San Francisco. Yeah, thanks for hosting me. It's an absolute pleasure. Let's get started. I wanted to start off on the core of Adyen's business historically, the acquiring business. Your story has been very much about the benefits of the single platform that give you this structural advantage against a lot of the legacy players in the industry, enabling you to innovate more quickly, you know, leverage machine learning, AI, and so on. You had an investor day back in November of last year where you talked about the foundations of this and how it's been evolving. Could you maybe just start us off by outlining the three layers of that core foundation and then maybe specifically the behavior-based identity layer, how those things set you apart from a lot of the traditional competitors in payments? Yeah, sure. Indeed, we laid out our three foundational layers. We talked about them. They're essentially how we deliver value to our customers and how we plan to continue to deliver value to our customers. Indeed, the first is the single platform. That means that if you process an in-person payment in Brazil or an online payment in Malaysia or in the U.S., it's all over one single tech stack. That means that the pace at which we can build out new innovation but also roll it out to our customers around the world is typically faster than what we see from others. The second thing is that we've added licenses on top of that. It started with acquiring licenses from Visa, Mastercard, for instance, all around the world. Over time, it also developed into banking licenses. We've added banking licenses in the U.K., the U.S., and Europe. That means we can be end-to-end between our merchants and our customers and in ourselves, which means that the data lineage, the availability of the data that we see on these transactions is end-to-end and completely available to us. The third thing, which is what we talked about newly for our Capital Markets Day in November, was what we call Dynamic Identification. It's essentially that the world is changing rapidly around us, and financial services, financial infrastructure is built a lot on static checks. You check that somebody is who they say they are at a moment in time, and then things change and things develop. What we see is that because we have such strong data set, we can actually look at the data we have and understand behavioral patterns, which can inform the choice that we take on that individual transaction. Let me give an example. Because we process transactions online and in person, we may know that you went to Starbucks this morning to get a coffee, which means you're much more likely to be who you say you are if you're using the same card to buy a sweater tonight versus if we haven't seen you use a card in person in months. It may be more likely that that's a stolen credential, for instance. We can use it to better solve for fraud. We can use it to better solve things like refund policy abuse we talked about. For example, that 2% of customers may lead to 50% of refunds for some of our customers. How do we help them design policy to reduce that cost? A lot of the behavioral patterns that are also changing and developing with the advancements of technology today with AI, we can help solve through these behavioral patterns we see in our data set, and that's where we've had a big focus on rolling out products to our customers over the past years. Also if we look forward, how we think we can build differentiated products for them. I guess an important there you talked about there's obviously fraud and authentication that are key in that, but I guess as well how you can route payments becomes differentiated if you've got evidence of how that's worked before. Is that also a factor and can that help how you serve customers and how, you know, your pricing and so on can evolve given how you route? Yeah. There's a lot to optimize in payments. There's a lot of dimensions, right? There's how do you increase revenues? How do you make sure more transactions get approved? How do you do that without increasing fraud? 'Cause fraud has a big cost. Within payments cost alone, there's also a lot of components to it. Different payment methods have different cost components. They have different performance capabilities. Right here in the U.S., we represent about 5%-10% typically of our customers' payments cost. How can we help optimize, for instance, debit transactions to go to alternative payment rails like STAR, Accel, NYCE, or Pulse versus a Visa or Mastercard. They have different cost components, different performance levels. All of those are optimizations we can make in real time. We can make them because we understand the shopper deeply because we've seen them multiple times on the platform. We know the behaviors that are expected and unexpected, and we can help our own customers then balance for those trade-offs. That makes a lot of sense. I guess one of the big kind of fundamental debates I have with investors around this is to the extent all that works out and you've got this differentiated platform, that becomes a lot more valuable if payments continues to become more complicated. Could you just maybe talk a little bit around how do you see the market evolving? Do you see more complexity coming in? Do you see any moves that we have more commoditization? You know, how do you see that playing out? In general, the trend we've seen is more complexity, right. First it was more payment methods, and we still see that. I think maybe a helpful example is, again, we're in the U.S. Let's take the U.S. market, right. U.S. market was very much focused on Visa, Mastercard, Amex, bit of Discover. If you had that, you could process basically all payments. Now you see the debit networks playing a bigger role. You see Buy Now, Pay Later. You see a Cash App Pay or a Venmo Pay. You see Klarna. You see Pay by Bank. There's more payment methods. There's also regulatory complexity that's evolved and adapted over the years, and customers need support with that. There's the complexity of people want to interact with the brand across channels in a seamless way, so they want to be able to buy something online and return it in store. They want to get loyalty points across transactions that they do in store and online. There's a number of Unified Commerce needs that have made this more complex as well. Within that, there are certain parts which get easier over time or they get less differentiated, right? For us, what's important is that we're continuously innovating because what we'll be differentiating in five years or in two years will be different than what differentiates today and what differentiated five years ago. The fact that we've built everything on that single tech stack, that single global platform also allows that pace of innovation to continue to be leading compared to our competitors. If you take a development that we expect to play out over the next years, Agentic Commerce, for instance, that increases complexity because fraud becomes more challenging, authenticating a user becomes more challenging. How do you ensure that more payment methods are available? How do you ensure that the merchant interacts with their customer still in the same way they're used to on their website or in their store? It relies on a lot of the things that we've built over the past years but it will only increase complexity for our customers and that's where we think we can differentiate. I definitely want to come back to the whole. Agentic Commerce side of things. Maybe just to kind of finish off and round this up, I think one of the key products you've had around all of that technology you've mentioned is the Adyen Uplift product. Could you maybe just give you know, some examples of how that exactly has benefited merchants in terms of how they're transacting? What the some specific numbers on that product and the benefits. Yeah, sure. Uplift is essentially our product capabilities which help our customers balance their performance across multiple metrics, like I mentioned before. You could always approve more transactions, but if you approve more transactions and get more fraud, you'll not save money, you'll not increase revenues. Yeah, you always need to balance the choices that you take. You could also only push customers to the lowest cost payment method, but in your checkout page you'll lose conversion. You'll have people dropping off. All of these choices need to be made in balance and that's how we've rolled out our Uplift suite. Again, coming back to the same example I said before, let's take the U.S. debit networks. They're typically cheaper than if you use a Visa or Mastercard rail. I think what's interesting about what we've seen in the work that we've done with our customers is we can reduce payments cost but we can also increase authorization rates. We can do both. We don't need to make the trade-off necessarily. We can make the choice on each of their transaction about which route makes most sense for that transaction, what's most likely to be successful, and we can make those optimizations in real time. We've seen that in a number of different areas, right? It's not that you have to sacrifice one for the other. We can balance them across multiple metrics. The other thing that we've seen is that we've been rolling out our Protect functionality. We've had it for many years but we've improved the product over let's say two, three years ago and when we combine it with the full Uplift suite, so the optimization not just on fraud but on many metrics, we see that there's a lot of benefit to be had from our customers and we see two-thirds of our customers signing up for it when they come to Adyen as new customers, which is a much higher rate than the existing customer part of the business and the level at which they're adopting that product. I think we're seeing real traction, a real need for this optimization across multiple parts of the payments funnel. Again, comes back to your point around complexity. It's complex when you need to manage each of these metrics not in isolation but in, in combination. To your point around that Protect product and fraud, we've seen in online in particular merchants split up a little bit who they've used for different parts of the payment process. Do you feel now that having a suite and being able to address these in a unified manner is actually becoming more differentiated and that's how merchants are looking to go or? I think, what I find important is that these products work better together than separate. Still, we can provide some of them separate, especially the more up-funnel parts of the payment flow like the fraud tooling for instance, but they work better when they work together and I think that's the value again of the single platform of having the dataset that we have of being able to make real time optimizations across multiple metrics. It sounds straightforward but if you think about what it takes, it takes one database essentially to be able to make that optimization in a millisecond across multiple metrics and so many of our competitors have built that across many back-end systems and are unable to replicate the speed which is required to make that judgment in a millisecond, which allows us to differentiate. There's that combination of huge data volumes but having to take that learning and apply it almost instantly to be able to make decisions for customers. Dynamically that we make a different decision today than we made seven days ago or that we made two months ago. That's that requires that real time capability. That makes a lot of sense. I mean, one of the other things that's been interesting to me is seeing how the Unified Commerce piece is now starting to grow more quickly and you're seeing what were originally digital customers, so basically just online customers now transact with you and work with you both in online but also in the offline space. You called this out last year. We've seen that continue. Could you just talk a little bit around what the benefits are of merchants being able to work with you in both of those areas? Yeah, sure. There's back office improvements, right? Like you get one payout across multiple channels. You have one integration. You get one set of reporting. Tech teams also can manage the integration seamlessly across multiple channels. You can roll out payment methods across multiple channels at once, right? There's a lot of like back-office benefits to working with a single provider. You can also improve the customer experience. I mentioned the buy online, return in store. There's a lot of or the opposite, right? You're in a store, they have the product you want, but it's in the wrong size, so you need it fulfilled from their e-commerce warehouse to your house. Those flows can be implemented for a better customer experience. Then the third thing, and I find this piece really important as well, is that you understand your customer better. If you understand how they transact with you across multiple channels. Sometimes payments data is the best data to do that. They don't know who their customer is at each channel, especially in person. Sometimes payments data is the only data they have to actually identify who that person was that was in their shop. Then you can use that customer profile, the data set on how that customer is interacting with your business to make loyalty decisions, for instance, to give promotions, to understand shopper behaviors and decide where you're gonna open a new shop, or how you're gonna think about your refund policy, to the earlier example I had. There's a number of, kind of, improvements you can make even at the almost at the marketing level to be able to better understand your consumer and your shopping preferences of your customer, if you've got an integrated data set. Right. That makes sense. The other thing that's interesting is obviously the online payments world already is a huge addressable market for you, and you're relatively small even in that journey. If we go into offline and the in-store world, it's kind of another multiplier effect of what the opportunity is. I guess there's two things I'd like to dig into. The first one is it looks as if in-store, you've gone kind of vertical by vertical. The other debate I have a lot with investors is, okay, this is a gigantic market opportunity, but is all of it addressable by you? There's gonna be more commodity use cases, maybe people paying very, very low levels, you know, to Walmart or Tesco or whoever you wanna pick. How much of that do you think is addressable by you over time? Yeah. It's a good question because a lot of the verticals or businesses we work with today, I think we would've thought the same five, 10 years ago. I think we had a great example of, we won Starbucks. We talked about it in our last shareholder letter that we won Starbucks in a few markets in Europe. I think that's a good customer we've been trying to go after for the last 5-10 years thinking, I don't know if we'll ever win Starbucks, but, you know, eventually they also see like the strategic importance of payments is evolving and changing. The needs of consumers are evolving and changing, and there's the ability to kind of meet these needs. Same in the U.S. I think when we started in the U.S., we always thought we'd help U.S. companies go abroad. That's where we could differentiate for them. For all the reasons I mentioned earlier about the U.S. becoming more complex, we've been able to win here in a way where U.S. is now mid to high 20s% of our business. I think the trend over the years has been more and more verticals have seen payments become strategic. On the in-person side, that started with luxury retailers, right? Luxury retailers, they do everything for the customer experience. That included payments. They were the first to kind of move towards this frictionless, improved payments experience in person. Consumers saw that there were some first movers in broader retail. Others wanted to compete also that way. Now we've had quite a lot of success in retail in general, beyond the luxury providers in H&M or Zara, for instance. We saw that move to hospitality and food and beverage. Hotels, restaurants, especially quick service restaurants, we've had a lot of success in. They're all seeing the benefit of unifying their payments technology to give that consumer that seamless experience and to better understand the consumer. Over time we've added more verticals, not necessarily because we've developed something special for them, but I would say the bigger change is they've seen the strategic importance of payments increase, they see it as an important solve for their customer base. I think that trend will just continue over time to more and more verticals. Will there be small pockets of the market which are more commoditized? Yeah, there will be. I think the trend in general is that there's much more strategic importance being paid on payments. The complexity is rising and we're still a very small fraction of the overall market, right at about 5% of the total market. There's a lot of room to grow in the space we're in. I guess there's also a lot of discussion around pricing because your take rate is actually not high relative to others, but that's 'cause you process for very large merchants. As you've had this experience of going vertical, and more has opened up, how has that pricing evolved? Have you felt we've been able to maintain? We normally hear it's a price premium that you would charge merchants. Has that been sustainable as those markets have opened up? Yeah. Mostly we see the difference between customers in size, so how much volume they bring, and we provide tiered pricing. That's where we typically see differentiation. Of course, if you do like 99% in person and 1% e-commerce, the value we can create for you across channels is gonna be less. There's some difference in the types of business and how much value, how much strategic importance there is within payments. In general, we've been able to price these similarly based on size to previous verticals we worked with. Again, to the point of them seeing the strategic importance of payments more than us forcing it upon them. That makes sense. Maybe turning to platforms, I mean, this has been a pretty big success story for Adyen. You've had, you know, incredible growth. Could you just talk a little bit about, you know, what the strategy is here? What type of platforms are we talking about? How broad does the product set become? This is a good point also on the, on the which part of the market are we exposed to? 'Cause previously we didn't have a small business strategy. We were exclusively focused on enterprise, so there was a segment of the market that we weren't going after. What we saw as we started to go a bit down market was this, what we call platforms. This platforms model was really starting to grow pretty significantly, and it started in the U.S., and it's come to Europe as well, which is you provide software to help your customer manage their business. Often this is vertical-based, so maybe you provide software to help your customers manage their dental practice or maybe a restaurant or maybe a veterinarian clinic or a kids' theme parks. Semi micro-vertical. It's very vertical-focused. Right? They provide software to help manage that business. They know your needs in and out. What they've now been doing is they've been embedding payments into that. Now you can get software from us to manage your business, but you can also get payments from me. If you think about all those examples I gave, they're both online and in person. It fits really well to our Unified Commerce proposition. Over time, they have also heard from their customers, we struggle to get financial services in a way that we would like, financial products. Maybe now they're also gonna say, "You can get a bank account from me. You can get a card to manage your corporate expenses. You can get a short-term loan when your oven breaks or when you want to open your second store," or whatever the case may be. Those are all products we can provide 'cause we have the licenses to provide them, again, so the banking licenses I mentioned earlier. We can also provide them the technology in one single place with one partner, and these products work well off of each other, right? We can make a short-term loan decision based on we know your sales history because we know your payments volumes. We can collect every day a part of that loan throughout the cycle because we have access to your payouts every day. The ease and simplicity of being able to provide these products, but also to have them benefit from one another and bring that connectivity where it's better to work with one provider than multiple has been a big advantage for us to grow this part of the business. It's our fastest-growing part of our business, still smallest 'cause it's the newest. If I look in both our existing customer growth and when I look out into new business into pipeline, this is certainly gonna become a much bigger part of our business over time. How would you think about the competition in this space? 'Cause it feels like everything we've talked about so far around complexity and data and licenses and all the things that you highlight as differentiators, it feels like these all come together in platforms. How, you know, how do you see the competitive landscape there? How's that playing out? It's very complex, again, to your point, right? Like it's multiple channels. It's complex because we need to onboard all of these sub-merchants. We need to pay out all of these sub-merchants. We need to provide more products, so also financial products. This is where you see that there is significant complexity, and that also means that there's less number of competitors in this space. There's less that can provide that kind of end-to-end service. It's still competitive. Payments is a very competitive market in general, but there's less number of competitors that can actually bring these capabilities to these customers. You mentioned Agentic Commerce before. I think we definitely need to get into that and start talking about it. It feels like there's been like a little bit of a press release battle here that maybe some of the competition have been out there more aggressively marketing what's happening. You've maybe been a little bit quieter, and that's led from investors I speak to, you know, as a concern, you know, are you right at the forefront of what's happening. Could you talk about what you're doing around Agentic Commerce, what partnerships you have, and again, you know, how exciting you see that as a, an opportunity for Adyen over the next few years? Yeah. Let me start with what we're doing already, which is that we have transactions live on the platform. We're working with OpenAI, with Google, with Visa, with Mastercard to develop protocols. I think the position that we can take is we have the largest enterprises in the world on our platform, and we can help provide that perspective of what merchants, especially enterprise merchants, are looking for in an Agentic Commerce framework or world. We can provide that input to help these companies develop protocols that will work for the industry. That's on one side. What we hear from customers is a couple of things. One, there's an opportunity to have a new sales channel to acquire customers in a new way and to provide them services. What they find as a potential risk is that they worry about being disintermediated. They worry about the complexity to manage multiple, different LLMs. They manage the complexity of even making their product catalog available, to these various, LLMs as well. That's something that we are really well-positioned to help them with. We can help streamline like we do with payment methods, like we do with sales channels, the complexity it would take to integrate to each of these. We can solve the pain points which exist in Agentic Commerce, which look very similar to the things we've already solved for, which is, right. There is already small volumes, but higher fraud. There will be higher fraud. There will be questions on authenticating users, right? Is that person who they say they are, but also did they give that instruction that you're executing now? How do you tokenize that information? How do you make sure that we're using secure payments credentials? How do we make sure that multiple payment methods are available so that the payment method behaviors that a human would use is also being replicated on the agent side? Those are all things that we've historically been very good at that connect well to our Uplift suite, but that also connect to the Unified Commerce proposition of being able to work with one provider across multiple sales channels. Our customers are very excited to work with us in this space as this develops. On the other hand, it's just very early. The reality looks very different than the promise. The promise is really exciting, but that's what we are working on together with our customers. Do you feel, I mean, when merchants think about, okay, there's a big change, okay, it's not gonna happen tomorrow, but over the next few years, there's gonna be a big change in the market. Does that start to change their thought process around maybe we've got some legacy providers? They've done an okay job with what's happened so far, but it starts to change their thought process around who we wanna work for within the next three to five years? Yes. I think the question is, if you look at our existing customers, who do they want to talk to of their. Our large existing enterprise customers have multiple providers. That's the model in payments at the largest scale, large enterprise digital customers. That's what they do. The question is, who do they look to when something innovative or change happens? Who do they think about? Which partners do they think about to work with? That's where, I mean, we mentioned it, but we've had well over 100 in-depth customer interviews on this specific topic because we wanna understand from them their needs, but also they wanna understand how we can help them with their worries or with their opportunities. I think that's the thing that I find important, right? We're building a business we think can get to much bigger scale. We have multi-year growth path ahead of us that we're really excited about. For me, what's really relevant is on the important priorities of our customers, do they wanna work with us? I think Agentic Commerce is a very clear example I've seen in just over the last months, where there's a real desire to work together on this change that's coming to the market with us. Which also gives me the confidence of the ability to deliver growth together with them over the coming years. Maybe just talking about that kind of midterm to long-term growth algorithm. You talked about around 20% at the Capital Markets Day is what you think, not just kind of 3 years, but actually mid to long term the business could grow at. Could you maybe first of all just talk around what the building blocks are to get Adyen growing at 20%? Yeah, sure. If you actually look at our growth over the last few years, it's been pretty consistent. Yes. We grew 22%, 23%, 21%, and now this year we forecast between 20% and 22%. It's actually been quite steady. If you look at what drives that growth, which is also how we look into the future, is part of our growth comes from the growth of our customers, right? We're a usage-based model, so as our customers grow, we also grow with them. We size that at like high single digits percentage of growth. Just by working together with our customers, that's the growth we get from working together. The second piece is we gain share of wallet. We may work with a customer, but what's the proportion of payments that we actually do with them? As that percentage goes up, of course, we also get growth. If you combine that organic growth, market volume growth with the wallet share gains, they grow with us, and we also give them some pricing discounts to incentivize that behavior. We see some impact from pricing that's in there. That's the biggest part of our growth in any given year, right? If I think about, hey, what is our guidance for this year? The biggest piece that makes up the growth that we think for now, that's growth with our existing base. If you look forward, it's important that we're adding new customers. In any given year, it's low single digits part of our growth, the new customers we onboard in that year. In the year after, we see that they start to ramp up quite significantly. For instance, in 2025, we saw our strongest cohort yet on the new business side. Our growth will come from how fast our customers grow, how capable we are in winning share from them in that year. It will also be supported by the growth we're seeing with new business, especially if you look out two or three years on those cohorts. The last piece that we added in is that we're starting to branch out beyond payments into financial products. We've sized it at around 1% of our as an addition to our growth over the next couple of years. That's really as we get into issuing, as we get into, capital, as we get into bank accounts, we think that will be small but still supportive to our growth over the coming years. I would expect that it is a bigger part of our growth algorithm if we're talking again in a few years. Maybe just to come back to the short term, I think it's fair to say people were disappointed by the guidance you gave for this year, 20%-22%, where at the Capital Markets Day, it's still been in the low to mid-20s. I think, you know, you mentioned strong new customer cohort in 25. Chinese merchants or sorry, the Chinese merchants selling into the U.S. maybe getting a little bit better. It's a surprise that that came down as much as it did. You know, is there any. I appreciate you're probably bored of being asked this question, but, is there anything you can help us with in terms of what changed in that interim? Maybe more importantly, was there any bigger change in your view of how Adyen is gonna grow in the midterm that drove that change? Or was it more of a short-term calculation? Yeah. There's no change in our view of our of our longer-term growth path at all. I feel very confident in our ability to continue to gain share and drive the growth that we expect. I look at certain signals which I find really important to that assessment, which is how able are we to win new business. Right? Every sales deal we're in is a buying decision. You get real-time feedback continuously, that base looks quite similar to our existing business. I look to our new cohort. I look to NPS. I think NPS, we shared a graph of at our investor day as well, continues to be really, I think, leading class for enterprise B2B business. That's an important indicator about how do our customers look at us as a partner but also as a future innovator and a party to work with over time. What will change from every year to the next is a small move up or down, a point or two in either direction, in what specific opportunities will we work on with our customers in that year, right? A couple of examples are, you mentioned an APAC online retailer. I think it was just as an indicative example is I think 2023, we did U.S. with them. 20 24, we did Europe. 2025 was more complicated with the macroeconomic situation, focused more on Latin America. Each year, we are building share of wallet with them, but the size of the revenue opportunity assigned to each of those was different. You have to imagine that we're much less concentrated as a business today than we were, five years ago. When you add up all of those opportunities, each year will look slightly different based on the size of the opportunities that you are gonna work on with your customer. We get visibility into specifically those opportunities for the next year as they go through their planning processes, which is typically at the end of each year, which is why we've moved to this kind of annual guidance view where, around beginning of each year, we'll give a view on what we expect the growth of that year to look like based on those conversations. Each year will look just a little bit different, but the overall growth path will be very steady, because we feel we're really well-positioned to continue to gain share in the markets that we're in and over time to build out more products to serve these customers. If I could ask one final one. You mentioned before the growth has actually been pretty consistent over the last three years. You know, your guidance, which you just is gonna be pretty consistent again this year. The share price hasn't been consistent. It's been volatile. I could feel there's a bit of frustration, maybe particularly in on the conference call around how we're reacting to your results. Is there something that we're missing in terms of that you'd like us to understand about the business that, you know, the visibility, consistency that you have that's not being reflected in terms of how the share price is moving and how investors are thinking about Adyen? Yeah. I wouldn't say frustration because I'm with you all. Like, I would wish that would be different too. That's also on us make sure that we communicate well. I think the thing that maybe I experience differently is that I see the signals in the business if I look at the things I mentioned earlier, that give me a lot of confidence that the 5% market share that we have now will look very different in a few years. I find that really exciting. I find that as somebody that's operating in the business, something really exciting to build. There's so much potential to help our customers, to grow with our customers, to add new businesses, to add new products. It's less helpful that there's volatility in the share price. It's not a frustration, it's just something that I think we need to continue to work on to make sure that we communicate well, because I think that consistency in performance, that consistency of the opportunity is what I've seen over the years. There's not a big move from one quarter to the next in the excitement or the opportunity available to us, that's reflected by it. I think that's just more the perspective that we want to share. That's really helpful. Thank you, Ethan. Cool. I remember I should have read the disclosure at the beginning. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Ethan, thank you so much for doing that. I appreciate it. Thank you. Thank you.