Wednesday, August 23, 2023
In addition to overstated valuations and general economic headwinds, sources told The Green Sheet that tech giants with full-stack platforms enter the U.S. market without "reading the room," by assessing consumer preferences and complex regulatory trends.
Allen Kopelman, co-founder and CEO of Nationwide Payment Systems, mentioned that Adyen recently tried to solidify a deal with Micros and other major U.S. tech companies.
"Companies like Adyen, Checkout and dLocal, with well-established track records in Europe, are unprepared for U.S. consumers and regulators," he said. "They typically don't have agent programs and sell direct to enterprise clients that willingly pay a premium for pricing transparency."
dLocal, a Latin American cross-border payments enterprise, is reportedly on the rebound after investors shorted its stock in November 2022, causing share prices to drop by 50 percent, according to TechCrunch reporter Mary Ann Azevedo, in her Aug. 16, post, titled, "Armed with new execs, dLocal rebounds from a short seller attack in a big way."
"Uruguayan fintech company dLocal saw its stock surge by over 30% on Wednesday on the news that the payments outfit had tapped former Mercado Libre CFO Pedro Arnt as its new co-CEO," she wrote. "Shares closed up nearly 32% at $20.45, after climbing as high as $24.22 earlier in the day, giving the company a $6 billion valuation."
Azevedo additionally noted that the company beat earnings estimates, with reported revenue of $161 million, up 59% year-over-year and 17% quarter-over-quarter. With gross profit of $70.8 million in the second quarter of 2023, the company was up 43 percent year-over-year compared to $49.6 million in the second quarter of 2022, and up 14 percent compared to $61.8 million in the first quarter of 2023.
Financial analysts pointed out that investors are concerned by Adyen's lackluster performance, stating its high-profile status as a service provider for Netflix, Meta, Microsoft and Spotify reflects poorly on the digital payments category in general.
The company reportedly missed its 25-percent growth target by four points, posting earnings before interest, tax, depreciation and amortization (EBITDA) of 320 million euros ($348 million), a 10 percent drop compared to the previous year and significantly below the forecasted 386 million euros, according to Refinitiv data.
"Adyen's EBITDA margin fell to 43% from 59%, which the company said was mostly because of higher wage costs as it takes on more staff," Reuters reporters wrote. "The company hired 550 full time employees as part of an accelerated hiring push, a 17% increase."
Reuters additionally noted that a similar margin decline occurred after the company's February earnings call, which led to a sell-off in Adyen shares.
Pieter van der Does, CEO at Adyen, characterized the U.S. market as a race to the bottom, with numerous competitors aggressively cutting prices. While he didn't call out price-cutting companies by name, Reuters reporters cited Stripe, Braintree, Fiserv and PayPal as major Adyen competitors in an Aug. 17 press release.
Adyen has a different philosophy, van der Does noted, even in the United States, which, he added, is the company's second-largest market after Europe.
"If there is any place that you could say is most prone to price competition it would be the U.S. because you can switch more easily," he said, adding that Adyen has not lost any enterprise clients by refusing to engage in price wars.
Adyen CFO Ethan Tandowsky agreed with van der Does, stating that the company is maintaining medium-term revenue targets of above 25 percent and an improving EBITDA margin that he predicts will reach 65 percent in the long term.
"These plans should be a wake-up call to ISOs and agents," Kopelman said. "It's time to recognize that internet platforms are our competition, not other ISOs." 
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