A hiring spree at Adyen has hit the Dutch payments company’s half year profits, which missed analyst estimates and sent shares tumbling on Wednesday.
Despite the hit to earnings, the fintech said on Wednesday that it intends to continue with its rapid staff expansion over the coming year, benefiting from job cuts at rivals who have had to reduce costs to seek a path to short-term profitability.
“During Covid we hired fewer people than we wanted because the market was very competitive — in this environment it’s easier,” said chief executive Pieter van der Does. “We’re still keeping the bar very high, but there are a lot of talented people on the market.”
Adyen reported on Wednesday that earnings before interest, taxes, depreciation and amortisation for the six months to the end of December were €372mn, up 4 per cent from 2021, but well under consensus estimates of €445mn.
The company’s share price fell by as much as 15 per cent in early morning trading.
The primary driver for the fall in earnings was rising staff costs, such as salaries and share-based pay, which increased more than 80 per cent in the second half of 2022 to €222mn. Adyen grew from 2,180 full-time employees at the end of 2021 to 3,332, with around 800 added in the second half of 2022. It expects to grow by a similar amount in 2023.
Fahed Kunwar, equity analyst at Redburn, said that the level of investment and lower than expected level of probability had surprised the market.
“Whether this is, as management says, is counter cyclical investment for long term growth, which is a sign of long term strength, or a wider issue we see across payments . . . as the cost of growth is getting higher and higher remains to be seen,” he said.
Processed volumes for the second half of 2022 increased 40 per cent to €422bn. However, it came in slightly below analysts’ expectations of €429bn as the full reopening of borders and increased airline travel in the second half of the year was balanced by slower ecommerce in core European markets.
Van der Does said that Adyen serves a diverse range of clients, which include Spotify, Uber, Booking.com and Microsoft, limiting how it was hit by falling consumer confidence driven by the cost of living crisis.
Net revenue — which includes settlement fees, processing fees and other services, minus costs such as interchange fees paid to banks — rose 30 per cent in the second half of the year to €722mn, just under consensus of €736mn.
Shares have fallen close to 20 per cent over the past year, although it has performed significantly better than other fintechs who have had to pivot to focus on profitability rather than growth. Shares in US listed buy now, pay later provider Affirm have fallen 73 per cent over the past year.
In November, San Francisco-based rival Stripe, announced it was laying off 14 per cent of its workforce — about 1,000 people. Chief executive Patrick Collison wrote in a memo to staff that the company had been “much too optimistic about the internet economy’s near-term growth in 2022 and 2023.”
Swedish payments fintech Klarna announced plans to cut 10 per cent of its workforce last May, as it seeks a return to monthly profitability for the first time since 2020. The buy now, pay later leader aims to reach that target by August or September this year.
“The price is just a reflection of what’s happening in the market,” said Ingo Uytdehaage, Adyen’s chief financial officer and who the company announced on Wednesday was being promoted to co-chief executive.