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Adyen unveiled its future strategy plans and objectives in the CMD. The newly proposed targets are both ambitious and time-bound, fulfilling the expectations of both investors and AV. The Q3 update was a relief and better than had been feared by investors. Adyen plans to hire more slowly than initially planned, which will improve the profitability expectations. We maintain our BUY recommendation based on the increased confidence in Adyen’s strong single platform.
Companies: Adyen NV
AlphaValue
Adyen’s Q3 trading update revealed that the market’s response has been overly severe. The Q3 numbers exceeded our initial expectations, surpassing our industry peers. In terms of hiring, the company has revised its plans, shifting from the originally projected 550 new hires to a more realistic estimate of around 350. Moreover, the company has established new, attainable targets. We embrace this change in objectives and appreciate having a set deadline to achieve them.
Adyen’s H1 23 results were unexpectedly weak. The EBITDA fell well short of expectations, primarily due to extensive hiring. While the decline in the margin was somewhat anticipated, the situation took a more concerning turn as the revenue growth fell by more than the consensus. Our confidence in Adyen’s platform remains strong. However, our previous optimism about any setbacks being a temporary hurdle has slightly diminished. We now consider the possibility that these setbacks could signify th
Adyen released H2 22 figures that surprised everyone with EBITDA margins shrinking on the back of intense recruiting. However, the firm’s path to growth remains intact and the share price drop (-16% at closing) offers a unique entry point.
As we highlighted a couple of days ago (see our comment on Nov 4), Adyen’s CEO has confirmed that the firm will not be making lay-offs. The CEO’s comment indicated the firm’s disciplined approach to recruitment so far and the fact that growth needs to be fed by talent as Adyen is sourcing new products. Adyen’s CEO mentioned that it plans to slow recruitment only by 2024 and then fully exploit the leverage of the firm’s platform. This confirms our investment case on Adyen.
This is first set of disappointing results since we have covered Adyen. Tensions on the top-line can be sensed and foreseen, while profitability missed materially on the back of more intense hiring. However, we believe this to be temporary while the new generation of embedded finance products is launched and reiterate our belief that the medium-term targets will be met.
Adyen’s capital markets day was much anticipated. In fact, while the broader industry accumulates news of potential disruption stemming from BigTech, the CMD was a timely reminder of what Adyen is about and the future roadmap. Developing in embedded finance is hardly ground-breaking in our view and much will depend on execution where we expect Adyen to deliver.
Results come and go and all look similar. Adyen is once again beating consensus expectations as management shows a sassy control over its business. Despite our recommendation, we believe that, with the visibility over cash flows and the maintained super-efficient business model, the firm is well on its way to recover its previous valuation levels, unless there is a new Central Banks’ coup.
As we previously anticipated, Adyen is now more exposed to North America than any other continent, in terms of gross revenues, highlighting the high tension in the market when comparing net revenues. This implies a lot however, as according to its H1 release, nothing seems to be a drag on its outstanding growth while the world seems very much bonded with its online-shopping habits.
Adyen has announced on Tuesday that the US Federal Reserve had approved its banking license application. While the obtaining the Office of the Comptroller of the Currency’s approval (OCC) remains outstanding, a “formality” as per our industry discussions, the announcement reveals a wrong assumption on our part. We had overstated the BIN-sponsor cost effect, which turns out to reassert -more than ever- our opinion regarding the company’s valuation.
Adyen is piling up money in its balance sheet with no plans to spend it. This is questionable behaviour for which we believe the answer may be that the company is building up some capital to reach the requirement for a US banking licence. However, time is ticking and Adyen needs to keep up with the pace of its American peers. Raising further equity would be the key.
Adyen is releasing FY top-line growth (+28%) which is consistent with the market’s expectations (+1%), sustained by high growth in the US now almost equally weighing with Europe’s gross revenues. The company also disclosed a much higher than expected FY EBITDA margin (61.5% vs 55.5%) and has set its long-term target to more than 65%... 1,000bp higher than the previous 55% target.
Adyen has developed a best-in-class payment software for merchants with unique growth prospects. It’s out of this world valuation has benefitted from the Covid-19 wave(s), Central Banks’ liquidity plans and a self-feeding buy loop (ETF, indices). Even heroic growth assumptions cannot match the recent valuations.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Adyen NV. We currently have 176 research reports from 5 professional analysts.
Interims to January are in line with the February TU, and materially unchanged forecasts for the FY July 2024. After the well flagged expected 1H24 revenue movement of -7% (vs 1H23 which had been strengthened by c£2m perpetual licence sales in the US), prospects for the second half are supported by several new contracts that will generate revenue in 2H24, in addition to material contract delivery milestones from existing large projects such as major TRACS Enterprise, Railhub deployments, and Rem
Companies: Tracsis plc
Cavendish
Eleco’s FY23 results show robust organic recurring revenue growth of +17% with recurring revenue +22% to £20.7m, adj EBITDA +2% ahead of the January update, and a confident outlook with Q1 ARR already at £24.5m vs £22.6m at FY23. At this point, the excellent start to FY24 leads us to reiterate our FY24-26E revenue, adj EBITDA, EFCF, and DPS, and we include the April 2024 acquisition of Vertical Digital in our FY24-26E net cash, as we explain below. As Eleco builds upon the successful acquisition
Companies: Eleco Plc
Made Tech has won a material expansion (worth up to £19.5m/2yrs) with a long-standing customer, The Department for Levelling Up, Housing and Communities (“DLUHC”). Coming off the back of a soft H1 bookings performance, we expect this win to materially boost investor sentiment and reassure how notwithstanding a tough backdrop (given an impending general election) MTEC continues to outcompete legacy providers and in-so-doing, grow its share of wallet with large/strategic customers. Landing near FY
Companies: Made Tech Group PLC
Singer Capital Markets
Companies: 88E CNC FTC TRCS HEIQ CREO ZAM
Companies: 1Spatial Plc
Liberum
Following the updated guidance published last week, Alphawave reported a 74% YoY increase in revenue to US$321.7m for FY23 generating adjusted EBITDA of US$62.6m, up 34% YoY. As previewed, bookings in 1Q24 were strong at US$117.9m, up 20% YoY and ahead of guidance. The results release and conference call confirm that revised guidance mainly reflects a more conservative approach to revenue recognition under new CFO, Rahul Mathur, and an acceleration in the pace at which Alphawave is pivoting away
Companies: Alphawave IP Group PLC
Capital Access Group
tinyBuild’s FY23 results confirmed a sharp drop in revenue and swing into adjusted EBITDA losses, as well as asset impairments and high cash burn. After already making $10m of annualised cost savings, the company continues to run-down its cash balance and now relies on a H2-weighted release schedule to reduce cash outflows.
Companies: tinyBuild Inc.
Zeus Capital
Companies: Cerillion Plc
We view confirmation of market forecasts / PEN's February update as providing further validation for the company's strategy. Ongoing business streams (including the concluding stage of the Boeing / Apache contract) provide underpinning for forecasts for the current year and software-derived earnings as strategized look set to rise in FY24 with the launch of the company's GenS technology (well-regarded and long-established OmegaPS series update). Tuesday's statement from the Prime Minister ple
Companies: Pennant International Group plc
WHIreland
Companies: Synectics PLC
Shore Capital
Cerillion has announced a very solid update, as H1 sales and EBITDA are both up 10% y/y to £22.5m and £10.9m respectively, notwithstanding the exceptionally strong base period (sales and EBITDA +27% and +38% resp.). Results therefore point to continued strong customer demand, reflecting how Cerillion’s out-of-the-box product continues to resonate and gain adoption, particularly in a ‘budget conscious’ environment, by offering faster time to market, greater configurability and at a lower cost. Me
In a tough trading environment, Checkit managed to grow FY24 revenue by 17% and reduce EBITDA losses by nearly half. The company has had a positive start to FY25 with new contract wins and the launch of a new module. Focus on growth from its existing customer base combined with strict cost control is helping Checkit to make steady progress towards its target of positive EBITDA and cash generation in FY27.
Companies: Checkit plc
Edison
24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi
Companies: FTC AGL SRT SOU G4M AOM SUP
Hybridan
As reported in March, underlying EBITDA profitability improved to record levels despite FX headwinds. Further platform and proposition developments were completed, key steps on its digital roadmap, and it has already won 7 contracts YTD. Alongside planned growth in private membership, this will at least offset the loss of one contract. Forecasts are left unchanged today and, as member engagement throttles back up, FX headwinds ease, and proof points of digital efficiency emerge, markets should b
Companies: Ten Lifestyle Group PLC
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