Ladies and gentlemen, thank you for holding and welcome to the Adyen First Half of twenty twenty Results Conference Call. At this moment, all participants are in listen only mode. After the introduction, there will be an opportunity to ask questions. I would now like to hand over to the conference to Mr. Peter van der Doose, the CEO of Adient.
Please go ahead, please.
Thank you, and good afternoon, everyone. Before we talk about first half results, I'd like to take a moment to talk about the COVID-nineteen pandemic. I cannot imagine having a discussion on the 1st 6 months of this year that goes with that that does not begin with addressing the impact that the pandemic has had on the global economy, on businesses and on people around the world, on the team here and on all of our daily lives. I hope that you and your loved ones are safe and that the impact on your well-being has been limited. With that said, I would now like to give you a brief update on our first half as that's why you're all tuned in.
Ingo will take a deep dive into the numbers after my introduction. We will be happy to take any questions after that. We continue to see profitable growth in the first half of the year as the business has proven itself highly resilient despite the impact of the pandemic. This resilience is a result of continued diversification across our merchant base, verticals and regions. Processed volume for the period was $129,000,000,000 with the net revenue at $280,000,000 Despite the impact of the pandemic, we did see several historical trends persisted on the platform with volume churn remaining below 1%, net revenue contributions were further distributed amongst regions and over 80% of volume growth came from existing merchants.
Longer term trends continue to benefit us as well as the shift from cash to cashless, the blurring of lines between online and in store sales channels and the digitalization of commerce continued. Some of these trends were even accelerated by the pandemic. For our merchants, the pandemic meant that they had to adapt fast. We focused on helping them to ensure that they could keep their businesses running and sales flowing. Solving real problems for our merchants has always been a strength for us.
I'm happy to see that this did not change. When stores closed, we helped merchants to move online quickly even if they didn't have an online sales channel before. In the recent reopening scenarios, we have been able to build several contactless setups so our merchants could reopen in safety. We were happy to see that large enterprise merchants' interest of partnering with us remained unchanged over the course of the pandemic. We continue to onboard new volume from existing merchants and add new merchants to the platform too like Ifood and Belle has.
While our merchants priorities naturally shifted, it's exciting to see that our success in unified commerce space continues. We saw an upward trend of merchants adding a second channel persist, a real proof of our success in the unified commerce space. On mid market, we continue to invest in our long term approach to moving into the next adjacent segment to enterprise. It excites me to see that volumes in this segment are growing at the same pace as our enterprise volume. Remember, it's still early days here.
On the product side, we expanded our global acquiring footprint to Malaysia and updated our 3ds 2.2 product with the whitelisting feature. It also excites me that we are now live with the 1st Avian issuing transactions. We also continue to build the team in the first half. With our intent to capitalize on long term opportunities and scale, we grow the team accordingly and welcome 266 new colleagues. Onboarding them via video conferencing was quite a challenge, but we are happy to see that this all worked out well.
The Altium team now totals 1448 FTE. Our focus is on measured growth while scaling, so we ensure that we maintain that same culture. While the entire team adapted quickly to working from home, we did not encounter significant slowdowns in onboarding new merchants, building out the platform or scaling the team. Continue doing what we have done since foundation in 2006, building Appian for the long term together, not held back by the backdrop of global pandemic. This is something I think the whole team is proud of.
For more details, you can find our shareholder letter online. I will now hand over to Ingo to dive into the numbers in more detail.
Thank you, Peter, and good afternoon, everyone. Thanks for joining the call. Let's dive into processed volume first. We processed 129,000,000,000 in the first half, up 23% year on year. Of this €129,000,000,000, €11,000,000,000 came from point of sale, accounting for 9% of total volume.
Peter just talked about store closures due to the COVID-nineteen pandemic and as a natural consequence growth in point of sale was limited in the first half of the year. Net revenue went up to EUR 280,000,000 up 27% year on year and continue to diversify across regions. Take rate was 21.7 basis points, up from 21.1basepoints in the first half of twenty nineteen. This delta is mainly due to the increase in full stack volumes following the negative impact of global lockdown restrictions on airline volumes. OpEx were €153,000,000 for the first half, representing 54% of net revenue and up 44% year on year as we continue to invest in Adient for the long term in the team and marketing.
Employee benefits are the main driver behind the increase in OpEx as we made significant investments in scaling the team to capitalize on long term growth opportunities. EBITDA was €141,000,000 in H1 2020 with EBITDA margin at 50%, down from 57% in the first half of twenty nineteen. This decrease is mainly a result of our increased hiring pace as employee benefits exceeded net revenue growth in the first half of the year. CapEx were 2% of net revenue in H1, down from 4% of net revenue in H1 twenty nineteen. The low cost of operating the single platform allows for maintaining a low CapEx level.
Onto our guidance. Our financial objectives remain unchanged since the IPO as our view of the business has not substantially changed. We therefore maintain the same longer term outlook as we did at IPO. With that being said, I would like to reiterate our financial objectives, which remain unchanged from our perspectives. We aim to continue to grow net revenue and achieve a compounded growth rate between the mid-20s and low-30s in the medium term.
We aim to improve EBITDA margin to over 55% in the long term, and we aim to maintain a CapEx level of up to 5% of net revenue. We have posted these results and our accompanying shareholder letter on our website. This can be found at agen.com/ir. Thanks all for listening. Peter and I are happy to take any questions now.
Ladies and gentlemen, we will start the question and answer session now. Our first question comes from the line of James Goodman of Barclays. Please go ahead.
Good afternoon. Thank you very much for taking my questions. If I look at the TPV run rate where you've hopefully provided some data, you were broadly flat in the final weeks of the period with the January index level. Presumably given the better mix, net revenue was running above the January level, though. So I wondered if you could maybe quantify that.
And then if I think back to the Q1 update where you gave us some volume data, you gave us some data post period end. I wondered if you could give us a sense of where TPV has been trending in the nearly 2 months post the end of the period.
Thank you, James. So if we look at processed volumes, of course, we are very happy to see that volumes are sort of the same level as the start of the year from a run rate perspective. So I think it proves the resilience of our business. Of course, we lost a lot of travel volume, but this was compensated in other verticals. Going forward, of course, it really depends on what will happen in the next couple of months.
We're very positive on the medium to long term. That's also how we build the business. But I think it's difficult to say what it exactly means for this year. We, of course, are happy with where we are by the end of this Q2. We, of course, hope to continue this trend.
And we feel we're ready also to help our merchants if a second wave of the pandemic will be there.
Okay. Can I just ask if there was any specific reason why North America accelerated growth? Was that down to 1 or 2 large contracts ramping up or anything specific? Thank you.
I think if you look at the different regions, it's mostly the result of a change in mix. So some regions had a different merchant mix than other regions. And as a result of this different merchant mix, also the pandemic has a different outcome. And for North America, our merchant mix has basically limited impact by COVID.
Thank you.
Thank you. Our next question comes from the line of Aditya Matuku of Bank of America. Please go ahead.
Yes. Good afternoon, guys. So two questions. Firstly, just on the ecomstructuralversostyclical trends. Obviously, ecom penetration has been going up and you guys have benefited from that.
But as the economies open up and as people come back to normal over the next maybe 6 to 12 months, What proportion of that increase do you think will be structural as opposed to cyclically? Any thoughts around that, more generally as well, not just looking at your volumes based on your the margins that you're talking to and the capacities you're deploying, etcetera? And then I have a follow-up. Thank you.
Yes. We clearly saw the trend that merchants who had both a store and online sales channel that the lockdown led to them their volumes the lack of volumes in store were compensated by the online transactions. So that part is likely to revert back. On the other hand, there were also merchants who did not have an online strategy, who were hesitant, felt that it didn't fit their brand maybe. And they opened up an online channel.
That part will not go back. So whereas it's difficult to say the exact numbers, we see both. We see compensation in online sales for closed stores and we see indeed, the answer to your question is, new merchants, merchants opening up new sales channels online, which will not disappear.
Understood. And just my follow-up on the cost increase. Ingo, you said earlier that the cost increase was driven by the annualization of the hiring that happened last year. Can you talk a bit about how your hiring has gone through over the first half, given COVID? Has that really slowed as you have given the difficulties with doing interviews, etcetera?
And if it has, should we back to that in as we look out into 2021, given the FX seems to come with the lag? Thank you.
Yes, sure. So if you look at the hiring, we continue to hire in the first half, and we try to find ways to onboard people successfully, for instance, through Zoom. Of course, the pace of hiring went down a bit because it's more difficult to relocate people. At the same time, we try to continue hire also at the moment and for the second half of this year because we strongly believe in the long term success of this company. And as revenues and costs are basically unrelated, we need to invest in the future to make sure that we are ready for additional growth in the future.
And of course, it's very unfortunate that in other industries, companies have to let people go. And of course, there's also an opportunity for us to look at talent and offer them a job at our end. So that's also the strategy for the second half. And of course, one of the key areas in the past where we focused on is to maintain our culture, and that's what we continue to focus on. Also as Management Board, we still see all final candidates in or all candidates in final rounds through Zoom, but we will continue to do that also in the future.
Understood. Just a quick follow-up, if I may. Just so if you were to compare the number of people you made offers to in the first half of last year as a proportion of your employee base and compare that to what's happened in the first half of this year, what would that look like? Would it be similar or would it be very different?
I think on the top of my head, it is relatively similarly. So we continue to hire. Of course, the hire in the first half would have been higher if there had not been any COVID impact. But the I think the relative day or the relative part is almost the same. We can look at it in more detail if you like, but that's a high level of what we see.
Understood. Thank you.
Thank you. Our next question comes from the line of Nishan Nejati of Deutsche Bank. Please go ahead.
Good afternoon and thanks for taking my question. 3 on my end, if I may. Firstly, again on your OpEx, I understand the strategy of investing in your headcount for further growth. But can you give us some light as how long this elevated OpEx will continue? Is 10% of sales in new run rate?
And secondly, you gave an update until week 26th of the year on your volume. And lastly, do you have any update on the issuing business? How And lastly, do you have any update on the issuing business? Have you started onboarding merchants? What is the traction here?
And how does the pipeline look like? Thank you.
We see the elevated OpEx as an investment in the future. Of course, we want to make sure that we do this in a responsible way. And of course, we have no intent to have a big drop in EBITDA levels. But if we see good opportunities to invest in a team, we will. And if you look at travel volume, of course, it's very hard to predict what travel will do in the next couple of months or quarters.
You probably have seen the same trends around the world as we have. So it's too early to tell what is going to be. Of course, the trend that we have given in the shareholder letter, You see a rebound. Well, I think also based on what you've noticed in outside world, there is no reason to assume that, that trend is completely different in July, but I don't want to speculate too much on H2 at the moment. Then on issuing, Peter, you want to say a few words on that?
Sure. Issuing what I think is what is good is that issuing is live now. We're running it in test, but we're doing transactions. The contribution at this moment to the numbers is, of course, not significant. But it's a product where the feedback is very positive on and which we really believe in.
Thank you. So you see a lot of demand from your other merchants basically for this issuing business?
Yes, there's a demand from existing and from new merchants. We have developed it, for example, for marketplaces. But this, again, is it's we were in pilot. So it's very early days.
Okay. Okay. I understand. Thank you. Very clear.
Thank you. Our next question comes from the line of Mohammed Moawala of Goldman Sachs. Please go ahead.
Yes, thank you and good afternoon gentlemen. I had two questions. First one was on unified commerce. I think I recall at the time of Q1 when the pandemic broke, a lot of some of the conversations you were having customers were sort of put on hold. Can you give us a sense of how those conversations have restarted?
And how has the customers' mindset and strategy shifted? And as a result, how does your pipeline look? Because kind of post pandemic world, as Adient is used kind of cross channel, does it significantly open up new opportunities for you? And as a result, whether we have a second lockdown or not, how do you expect that to sort of impact the growth? 2nd question was on basically eBay.
The contract I believe is now kind of in full ramp up. Can you give us a sense of how that's going And what sort of percentage of sort of eBay you expect to capture over the sort of coming years? Thank you.
Yes. All right. So indeed what you see with the that the effect of the pandemic has been that merchants have been postponing some rollouts. On the other hand, you also saw merchants with a direct need to start up an online channel. So it was very busy for us.
So it's not that things slowed down, but things changed. As a result now of reopening in various parts of the world, we also see that those rollouts now are being picked up again. So that element is reversed with the speed of where markets are opening. Pipeline, the pipeline build is very healthy and although of course our salespeople would be much rather face to face at merchants. This also works for us.
So we are capable of building the pipeline as usual. Regarding eBay, the so eBay has made positive comments about exclusivity expired. So this is a ramp up exclusivity expired. So this is a ramp up, which eBay is the driver of. We are fully ready to do it.
And very pleased with the relationship, which is good. So the results of that remain to be seen over the next years. Just as a note, it's a great and profitable contract for us, but it's not the only deal. This is amongst all the other things we're doing.
Great. Thank you. And if I could squeeze one more in on just back on the issuing. Can you talk about sort of the use cases, is it sort of prepaid cards that you're sort of doing for some of your merchants and any sense of sort of take rate differentials versus the traditional payment processing you do?
User cases, there are 2 questions. The user cases, think more about where if you run a service like Lovo, where you can where people pick up stuff, you can at the moment fund a card real time when the transaction is being done. So there you can have with such a modern issuing platform a very precise way of managing your business. You can do that in multiple geographies because we have the background of running a single platform across regions. That means that this is not either a U.
S. European platform, but that this works in across the world. The question about how should I compare revenues from this or income from this product versus acquiring that, it's a bit too early to make that comparison.
Okay. Thank you very much, Peter.
Thank you. Our next question comes from the line of Sandeep Deshpande of JPMorgan. Please go ahead.
Yes, hi. Thanks for letting me on. I have two questions. The first one, Peter, if you see the growth of some of the traditional retailers in the last quarter, I mean very, very high growth in online. I mean historically, your customers have been the Internet e commerce retailers.
How much emphasis are you putting on onboarding some of these traditional retailers who may want to use some of your e commerce technology? And of course, you have in store technology as well, so your unified platform. And so in terms of your future customer base, I mean, is this an important part of it among the large retailers? My second question is on your cost base. I mean, your cost base grew in the first half of the year.
Clearly, you have opportunities to invest in. And do you see, I mean, further regional investment opportunities into the second half or into 2021? Or is it that opportunities from here are going to be more that you need to invest in some newer technologies or something like that, which will keep the OpEx up at higher levels? So because I mean, in the short run, of course, you will possibly have some continuing impact from the impact on travel, etcetera. But then in the long term, I mean, I don't think the cost base will be the driving factor of the EBITDA.
Thanks.
Yes. Let me say a few words. So if you look at large retailers, we are of course very much focused on making sure that we can help them. And of course, it depends a bit on how they come to us. Sometimes we're already live with them on the online side.
And then given our success in point of sale, they reach out to see if we can also do physical stores. But indeed, it's also the other way around where they want to work with us for physical point of sale because they know that we already can do online. So it's a very important vertical for us going forward. We continue to invest and this is also what you will see in the future. On the cost base, I think the way how we look at our managing our company is that we want to make sure that we invest in the future of the company.
We are all very much long term focused. We never take decisions that only lead to short term optimizations. And it is relatively easy for us to get to 55% EBITDA margin if we want to, but that would mean that we would stop hiring and then we would get quite quickly to this 55%. The main reason why we continue to do this is because we believe that we can easily, by investing in the business, get to more growth in the future. And as long as management, we believe that we can do this, we will continue to do this.
And of course, we always ask ourselves like whether it is going to benefit us. So we're not we don't want to make any irresponsible investments that have a very negative impact on our profitability.
Thank you.
Thank you. Our next question comes from the line of Adam Wood of Morgan Stanley. Please go ahead.
Hi, Peter. Hi, Ingo. Thanks for taking the question. I've also got a few, if I could. Maybe just digging in again on the issuing business and the strategy there.
I guess to start off with, that's going to be very much issuing cards to corporates to pay on to other corporates. Is there a model though as well where that could go to quasi consumers? So you could think about eBay merchants, Uber drivers, Airbnb hosts as potential options. I guess travel is quite important for that, the OTA market in particular. Do you need travel to come back for issuing to scale?
Or is there enough opportunity, for example, as you described on food delivery, to be able to improve that business? And then maybe just finally on issuing, on the differentiation of that business, could you talk a little bit about whether you can manage the whole reconciliation process across the acquiring and issuing platforms of the businesses to help them do that? Is that one of the big value adds and differentiation versus other people that are coming out of this? And then moving away from Michelin, if I could just on to the mid market side, could you talk a little bit about the strategy there? Is that very much going to market with partners?
And if so, how do you manage the profitability, risk and then the support for those customers going forward? Thank you.
Okay. Thanks. So to start with issuing, we closely work with our merchants to develop the product. So innovation that takes place is in close cooperation. The first and most easy step is to go and eat into the business to business space.
Whilst, of course, longer term, you could think about indeed more the business to consumer space for our biggest merchants. That's, I think, a very logical step. And of course, if we see the right opportunity, we will have a look at it. It's exactly think in the end why we want to do this is because we want to help our merchants. So depending on their ask, we will work closely with them.
So that also I think answers the second part of your question around is it only travel related. Well, certainly not. I think there are many other potential use cases for issuing that we can work on, and that's also why we continue to invest in it. We are, I think, overall very surprised by the feedback on this product. People really like to see what is possible.
And therefore, we have good expectations on this product, but it will, of course, take time to build it. If we then look at how do we differentiate ourselves to other players, I think the main approach that we take is the single platform approach. So single platform in multiple regions that is going to help us. Of course, we can do a lot around linking the issuing and acquiring together and making sure that the funding of these 2 is optimal. So that's certainly a benefit of having a single platform.
Then on the mid market strategy, we're taking a couple of routes there. One of the routes is going directly to mid market merchants and pitch them. But indeed, we also work with partners. And those partners are important to us because they can bring the acceleration. And depending upon the type of implementation and how much risk they will want to take, we have different type of partnerships.
So in the end, the way how we look at it is that we want to be invisible in the background. And depending upon how much risk we like to take or the partner likes to take, we also think about the economics. So we want to be flexible in line with the risk of the business model. That's I think how we look at it and how we also do the commercial negotiations.
Perfect. That's very helpful. Thanks, Inger.
Thank you. Our next question comes from the line of Hannes Leitner of UBS. Please go ahead.
Yes. Thank you for letting me on. I have also a couple of questions. One is to start with, is a follow-up on the eBay. PayPal has provided quite detailed volume numbers from the eBay relationship historically.
And I think eBay also in terms of their market managed payments opportunity. Could you talk a little bit about the GMV? Is there any restriction from the current eBay volumes? Is there anything to exclude it like in the past PayPal has been excluded from? That's the first question.
The second question would be on your post inventory. There was quite a spike in inventory level in H1. Is this in any relation to your hiring that you need more people on the ground to then install terminals, given some pipeline looking into next year? And then maybe the last question is around the other services. Other services remain fairly resilient, flat year over year and just a modest decline sequentially.
Could you talk a little bit about the breakdown? What are the biggest parts of the other services? I guess, issuing is one element, 3 d Secure, etcetera? Thank you.
On eBay, the so there was a limitation in how much volume they were free to route. That is since this summer that has gone. So now it's a matter of migration. And of course, for PayPal, it's an important number how many people will use PayPal as a payment method. But indeed, there are no there is no legal the contract is expired where eBay was bound to limiting their volume shift?
Lingle, do you want to take that?
Peter, I didn't mean the restrictions of the kind of railcars. I meant rather more the addressable market within eBay. So last year, I think it was only 70%, 75% of the total eBay volumes of the reported GMV was addressable market to PayPal. And on this side, could it be that actually because of, let's say, VAT and other commission payments that actually your addressable market is higher, is above that level?
I'm looking at Ingo for that.
Yes. Let me say a few words on this. I think if you look at the the total addressable market just in general for platforms, we see a lot of opportunity. Of course, we always try to avoid talking too much about single merchants. Of course, eBay is very important merchant to us, but there are other platforms that we like to work with.
And I think in general, if you see like the development of platforms, there is a lot of there's an increase in potential addressable market that we want to capture. So we continue to invest in the product and making sure that we can help the different type of platforms. Then your question related to point of sale. I think if you look at the hiring, the hiring that we do is a combination of tech people, so engineers that build our platform, that are in the implementation part of our business, but not necessarily in the installation of terminals. That's outsourced to partners.
We don't do this ourselves. And also we have a different model than the more traditional parties. If we need to do updates, for instance, on terminals, we can do this remotely. So we don't need like big staff on the ground to get point of sale terminals running, and that's helping us. So I would say that the hiring increase is not related to point of sale.
It's more related to the general growth of the business and investment for the future. Then revenue that we recognize under other services that includes, for instance, the terminal service fees, so the fees that merchants pay on a monthly basis, it includes the margin that we make on FX and also issuing where that's not significant at the moment.
Okay. Thank you. Maybe just the last question to squeeze in. Do you have any sense how much of your Q2 volumes were supported or were cushioned by refunds? Processing, please.
Well, of course, if you look at refunds, we're mostly talking about travel. Of course, there was some impact in travel for refunds. But I would say on the total, this has not been super significant.
Okay. Thank you.
Thank you. Our next question comes from the line of Ron Heidenreich of ABN AMRO. Please go ahead.
Good afternoon, gentlemen. A few questions from my side. To start off with the cash flow statement, when I look there at the payables to merchants and financial institutions that ballooned in the first half of this year, is there a specific reason for this? Have you made a change in risk framework or something like that? Then secondly, on your revenue growth in the U.
S, you recorded almost 60% in net revenues and revenue growth, but 77% in gross revenue growth. And I would expect I would have expected it to be the other way around given that you can now acquire directly rather than using a BIN sponsorship. So are there any one offs in this? Then on the FTE growth, again, strong growth in the first half of this year. Could you indicate what would be the right size for Agen with regards to employees?
And then finally, maybe can you share some words on the competitive environment post COVID-nineteen? Have you seen any significant changes there?
Thank you. Yes, thanks. Let me take the first questions. If you look at the framework around payables to merchants and financial institutions, we haven't made any changes there. That amount fluctuates with basically the day of the week.
So it's mostly related to timing. We pay out our merchants on a daily basis. And depending on whether the month ends, you get different outcomes. Then revenue versus net revenue. Most of the differences in revenue versus net revenue is related to the interchange, and interchange is different in the different regions of the world.
So depending on where we grow, gross revenues can grow faster than net revenues because we have an interchange plus pricing to our merchants. So we just pass on the interchange. We recognize this in our gross revenues. And we only recognize net in our net revenue or the margin on net revenue.
Ingo, if I may, I was solely talking about the U. S. Here. So unless there's a major shift in the payment method mix, it's somewhat strange. So I'm not talking about the differences between geographies purely in the U.
S.
Yes. But in the U. S, you were referring to ending a BIN sponsorship, which is not the case. So we don't see that as an impact. Of course, what could be there is always a mix of like which part of fees is cross border and what is local.
So of course, merchants that we work with typically like to go local, which has lower interchange fees than if you go cross border. But I'm not sure if you are referring to that.
No, no. I was just wondering, and
I thought that the BIN sponsorship might have an impact, but you say it hasn't. No.
Okay. No. Exactly. And then yes, if you think about the right size of FTEs for Ardian, I think the question is like we see if you look at this addressable market, it's just very, very big. So we see no limitations basically.
So the key question for us is like how can we build a global business in the different regions without losing our culture of speed. And that is the management task that we basically have and that we try to execute as best as we can. So it's very difficult to say like what is the right size. I think the key question is like how fast can we grow the company in a responsible way without losing that culture. And then on competition, yes, I think if you look at competition, we haven't seen like a real change in competition after COVID.
I think we're still in the middle of this COVID wave. We've always seen different type of competitors in different type of the verticals. If you look at where traditionally payment volumes is, it's mostly with incumbents and local banks and we continue to help merchants to get to bring innovation. So we see still a lot of opportunity and do not fear additional competition as a result of COVID. Thanks very much for that.
Thank you. Our next question comes from the line of Alexander Foer of Exane BNP Paribas. Please go ahead.
Hi, good afternoon. Thanks for letting me on. I've got two questions, if I may. Firstly, on your gateway volumes or say the non full stack volumes. I think they were relatively stable year over year in the first half in absolute terms.
And that is despite, I suppose, airlines doing quite badly. So you mentioned in the shareholder letter quite a few other situations where you would process gateway only. Just wondering if you could help us size each of those buckets. So that would be my first question. Secondly, on your Q2 net revenue growth, I think it was something like 20%, 21%.
I was wondering if you could help us understand which category were outperforming that, which was growing in line. I suppose travel was quite poor. Just trying to understand how strong it was excluding maybe the most problematic segments such as travel, Uber, your post exposure or anything like that? Thank you very much.
Okay. If you look at our gateway only business, most of that bucket is always been airlines. And of course, as a result of COVID, most of that traffic has gone now. Then if you look at the other buckets in Gateway only, it's mostly the payment methods where we do not settle the funds directly to the merchant. And there you must think of part of AmEx volumes, American Express volume and part of PayPal volume.
In certain PayPal or AmEx contracts, they prefer to settle directly with the merchant and then we see this volume as gateway only. Then if you look at net revenue growth, like where does it come from? Well, we are pleased to say that like previous periods, most of our volume growth comes from existing merchants. So it's very important to continue to work on new projects with our merchants. And of course, we also announced a couple of new merchants.
So also filling that or realizing the pipeline, making sure that new customers go live is, of course, very important for future growth. In that respect, net revenue growth in the Q2 has not been impacted by COVID. We do exactly the same like before. Of course, the numbers are a bit lower, but the underlying trend that we see has not changed. Yes.
And then if you think about the easing of lockdown restrictions and the impact, of course, it really depends on the type of merchants. I think for us what is key is to continue to help our merchants, and it's very hard to see what exactly how this will pan out. We are I think we've proven in the first half year that we're very resilient as a business. So if travel volume goes away that there are other verticals that bring more net revenues. And we believe that we're really well positioned for the future.
That's also why we stick to our medium to long term guidance.
Got it.
Thank you.
Thank you. Our next question comes from the line of Jeff Cantwell of Guggenheim Please go ahead.
Hi, good afternoon and thanks for taking my question. When you talk to us now today about your investments and you talk about planning with a long term focus, my question is, has that focus changed at all as a result of what you're seeing from consumer and merchant behaviors during the pandemic? Because surely 2 years ago when you were planning for Adient's long term, you weren't contemplating a pandemic like we're all living through right now, right? So can you just talk to us, how has your strategic thinking maybe evolved at all based on what you're seeing over the past few months? Is there greater opportunity down market, for example?
Is there greater opportunity in Asia? Maybe it's full stack. Just any insights you can give us into how your strategic thinking has evolved would be very helpful. Thanks.
Yes. So indeed, we always had a long term view and that's also what we take here. If you look at how there's always an impact of COVID. And how we look at it is COVID is, of course, having an economical impact and some of our merchants are suffering from that. But what's also important is that COVID is pulling forward trends, which were already happening.
And in that sense, it can speed up change. And that change is often in our favor because that is change in unified commerce where you have the channels working well together. It's the change from cash to cashless. So therefore, we decided not to hold back and you also see it in our hiring. We ramp up for further growth and continue to invest in the business as we see the opportunity.
And that's the strategy which fits with indeed taking the longer term view. So yes, the opportunity changed a little bit and some things do our favor, although this is of course a very unfortunate situation. And we are hiring for that opportunity also and Ingo mentioned it before, they're very talented people in the market now. And we want to give them we want to we'd like to hire them and give them a place within our company. So we also see it on the HR side as the right moment to onboard talented people.
Great. And thanks for that. And if I could just ask a related follow-up. I understand that it's very early days, but you seem like the right person to be asking this question. The question is, do you think EPI has a real shot at gaining traction in Europe?
I was just curious if you could weigh in on that. Thanks again.
You're referring to EPI. What are you referring to exactly? Just to make sure that we is that your repayment initiative?
Yes, the new payments initiative for a potential new rail for payments. I'm just curious because the reason I'm asking is because you see so many different forms of payment, form factors of payment. And obviously, this one has been getting a lot of investor focus. So I thought you might have some comments on how that might eventually play out, call it, over the longer term since we were thinking through longer term impacts to your business. So just any thoughts on that would be great.
Thanks. Yes. So I think there are always companies or initiatives to develop new payment methods. That's been around for 20 years now since e commerce started. And of course, it's always very difficult to get real traction there.
Of course, if you have such a group of banks trying to pull this off, you might end up with some success. But then we, of course, will see how we can help our merchants to implement it and so making sure that they also have access to this payment method. The whole idea that a single payment method would instantly replace all the others is just very unlikely to happen. I think it is exactly why we're successful as a company. Typically, this only leads to an increase in complexity, which we try to take away from our merchants.
Okay, great. Thanks very much.
Okay, thank you.
Thank you. Our next question comes from the line of Julian Serafini of Please go ahead.
Hi, thank you for taking my question. I have two questions. The first I want to revisit on card issuing for one moment. Can you perhaps discuss the pricing strategy around card issuing if there is one? Essentially what I'm asking is could there potentially be a shift in profitability basically if an acquired an Adient card was used and then Adient acquired Gateway or POS, would there be a pricing concession?
Is that part of the strategy of closing that payment? Yes.
If you a ABN issued card, the interchange there is that is an amount of money that can be split between the between us and the merchant. So there is more to fit there. How we implement that split is dependent on the commercial negotiations.
Okay. But it's something you'd be willing to entertain or do it like?
Yes, sure.
Okay. Okay. And then I guess second question on Alibaba. You did announce Alibaba partnership last year. Can you provide us any update around that?
And any can you quantify perhaps how it's contributing to your results at this point in time?
Yes. So if you look at Alibaba, we process payments for their activities outside of China. Of course, like many other customers that we work for, we're very pleased that they are a customer. I think it's a proof point that combination of accepting cards and local payment methods is the way to go. And of course, given the type of company and their growth, we're very pleased to see this development.
Of course, we want to avoid to give any specifics on the single merchant, if you I hope you understand.
Yes. Yes, I understand. Thank you.
This was the last question. I will now hand over to Peter for closing comments.
Sorry, I was on mute. That completes it. So thank you and good afternoon everyone and thanks for joining the call.
Ladies and gentlemen, this concludes the Adient first half of twenty twenty earnings call. You may now disconnect your lines and have a nice day.