You for holding, welcome to the Adyen First Half 2019 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 the conference to Mr. Pieter van der Does, CEO of Adyen. Go ahead, please.
Thank you, and good afternoon, everyone. To start, I would like to give you a brief update on the first half. Ingo will take a deeper dive into the numbers. After that, we will be happy to answer any questions. For more detail on these results, you can find our shareholders' letter on our investor relations website. We continue to see strong, profitable growth in the first half. As in previous periods, this was mostly from existing merchants. Processed volume for the period was EUR 105 billion, with net revenues coming in at EUR 221 million. There's a lot to be excited about as macro trends continue to benefit us, including an increase in cross-border commerce and a general shift away from cash to cashless payments methods. However, what excites us most is the ongoing trend of shifting shopping behavior and expectations.
Shopping is changing, and we are at the forefront of helping merchants adapt to this new environment. Regulatory shifts increase complexity for merchants, too. One example is PSD2. Solving for all this complexity is what we're good at. We pride ourselves on preemptively clearing these hurdles for our merchants. Meanwhile, we are also spotting new avenues for growth in evolving business models. Marketplaces and platforms are especially interesting as they allow us to cater for the smaller seller, unlocking the full Adyen solution for them. It's no longer just for enterprises. We also continue to invest in merchant-driven innovation, improving many of our key products to solve real problems. It's our belief that you will do well in this space if you make solving problems for merchants your core business.
We saw solid contributions from all growth pillars, with the main driver being the continued growth of the enterprise e-commerce merchants. Unified Commerce is also developing positively. We are having success in the retail vertical, with positive early signs in the quick service restaurants and hospitality, too. As I mentioned, evolving shopping behavior is really a key accelerator for our growth in this space. Merchants are seeing that they need to adapt to new realities, and we can help them. In mid-market, and remember that this is still very new to this space, we are seeing early traction with increased NPS scores for mid-market managed accounts and improved product tailored to these merchants and a volume share that's keeping pace with our overall volume growth. This is not yet up there with the other growth pillars when it comes to impact, but positive early signs.
We also continued to build the team in the first half. Our focus is on measured growth to maintain our culture. As a board, we still insist on seeing every new hire. We added 140 new colleagues in the first half, and we have since crossed the threshold of 1,000, something we are very proud of as a founding team. I look forward to answering your questions, and I will now hand off to Ingo to discuss our financial results in more detail.
Thank you, Pieter. Good afternoon, everyone. Thanks for joining. Let's dive into processed volume first. We processed EUR 105 billion, which was up 49% year-on-year. This mirrors the 50% year-on-year growth we saw in the second half of 2018. Point of sale processed volume was up 67% year-on-year, totaling EUR 11 billion. It accounted for 11% of total volume for the first half. Net revenue was EUR 221 million, up 41% year-on-year. The delta between processed volume growth and the net revenue growth is due to a slightly lower take rate for the first half, mainly as a consequence of the tier pricing we have for enterprise merchants. Net revenue growth was well diversified regionally and across the merchant base. We're also happy to see merchant concentration continuing to decrease.
This, we feel, is a testament to the merchants we have boarded and the increasing strength of our global offering. OpEx were EUR 106 million in the first half, representing 48% of net revenue. These were up 17% year-over-year, while we are still investing in growth in our people and in marketing. EBITDA was EUR 126 million, up from the EUR 17 million in the first half of 2018. This is a 79% increase as we continue to benefit from operational leverage associated with the low-cost base of the single platform. On to our guidance. We stated at the IPO that we would not change guidance unless our view of the business changes substantially. At this stage, it has not. We maintain the same long-term outlook. In the light of that and of these results, I would like to reiterate our financial objectives, which remain unchanged from our prospectus.
On net revenue growth, mid-20s to low 30s in the medium term. On EBITDA margin, we expect EBITDA margin to increase to levels above 55% in the long term. Please do keep in mind that these objectives were set prior to the IFRS 16 accounting change that we benefited from this half year. Without it, EBITDA margin would be about three percentage points lower. On CapEx, we aim to maintain a CapEx level of up to 5% of our net revenue. We have posted these results on our website as well as the shareholder letter. You can find these at adyen.com/ir. Thanks all for your attention. Pieter and I will be happy to take any questions now.
Thank you. Ladies and gentlemen, we will start the question and answer session now. To be registered for the question and answer session, please press 01 on your telephone keypads. Your questions will be answered in the order that they are received. Our first question comes from the line of Sandeep Deshpande of J.P. Morgan. Please go ahead. Your line is open.
Yeah. Hi. I have a couple of questions. Firstly, Pieter, when you talk about your customer base at this point, has anything significantly changed from six months ago? You have continued to see strong growth. You talked about growth in marketplaces, you're talking about fast service restaurants. Has anything in your customer base or in some of your mix compared to last year changed significantly? Secondly, regarding your take rate. Your take rate has, as you mentioned, slightly declined. Is there any impact from the airline vertical on this simply because you have full stack outside the airline vertical? Given that you grow, the overall industry, e-commerce grows much faster than an airline. Would we not be expecting to see that shift towards e-commerce from airlines and which doesn't seem to have occurred?
Does it mean that we've got more airline customers during the first half of this year in terms of process volume? Thank you.
All right. Let me answer the first question. Not all questions were very well audible, so I might have to ask you to ask on the following questions. When you look at our customer base, I think it's very good to see that we grew on all aspects. So in all the pillars that we mention, in all regions. Your question, is there anything specific to mention if you look at the delta from the last update? I think that we are very happy to announce that all segments grew nicely. Could you please repeat the second question that you had?
Yeah. What I asked on the second question was on the take rate. What we saw was that you said that 71% of your overall volume came from full stack, which is not very different from last year. What we do know is that e-commerce overall as end market tends to grow much faster than airlines as such. Does this mean that you either got more airlines onboarded or more regions as customers or it means something else in terms of the mix?
I think that's a direct result of our airline portfolio growing. We always said that payments has an unpredictable element in there. That means that this half year, if we board a few airlines, indeed that percentage remains stable with the growth of the rest of the portfolio.
In terms of any new segments that you are targeting, Pieter, are there any new market segments that you are targeting and that you've had success in?
We talk a little bit also in the letter about marketplaces. That's an investment area for us. Also, if you look at certain industries, we see traction in quick service restaurants and hospitality. At certain point, I think we would be in a position also to give the names with it.
Thank you very much.
Thank you. Our next question comes from the line of Aditya Buddhavarapu of Bank of America. Please go ahead. Your line is open.
Yeah. Good afternoon, gents. I had four questions if I could. Firstly, just on the eBay integration, I just wondered if you could provide any color on how that integration's progressing. If you could give any color on the ramp as well. Is it still expected to happen in the 2020 timeframe? Any color around that to help us in modeling would be very helpful. Secondly, just on PSD2, with that coming up soon, I just wondered if you could provide us with your thoughts on how you see that helping you potentially win, share, and I have a couple of follow-ups. Thank you.
Thank you for your question, Aditya. If we talk about eBay, I think in general, we're very happy with the project. At one of them, of course, we never really discuss individual customers. eBay is important to us. The majority of the volume will come in 2020. At least that's until that moment with PayPal, nothing has fundamentally changed since the announcement last year. We're really happy where we are at the moment. On PSD2. PSD2 has been a real opportunity for us. We were first to market with the new 3DS flow that is needed for the stronger authentication. That's a great discussion topic also for new merchants. We had a few customers that announced that they agreed to work with us, including Uber, also I think it's a very nice testimonial from Zalando that we announced.
These are, I think, great examples where we work with our customers to improve the product and get more traction. It also, of course, attracts new customers because we solve the complexity for our merchants, and that's what they like.
Understood. I had a couple of follow-ups, just very quickly. On the same-day payout product that you are going to offer with your Dutch banking license, I just wondered if you could give us an update there. How are the volumes ramping? How should we think about the impact on take rates as we look forward? Also secondly, I understand you are getting a banking license in the U.S. to launch a similar product over there. I just wondered if you could give us an update on that. Finally, just on costs into the second half. Obviously, your margins were very strong and I understand the impact of IFRS 16, but this came in significantly higher than expectations.
I just wonder if you could give us some color on the puts and takes on expenses into the second half to help us better understand how we should think about margins into the second half. Thank you.
Okay, good. On same-day payout, I think the standard product that we offer to our merchants is that we pay out after a couple of days. Let's say the standard is two days later, and we offer that product for free. Only if you like to accelerate that payment, we charge for it. The take-up of this product is great. I think it's fair to say that most of the merchants, they select this with the free flow. We don't charge anything for this. Also there's no cost to ourselves. Of course, because we see so much traction, we always ask ourselves, okay, in other markets, could we replicate this? This is one of the reasons why we indeed announced that we would look at a branch license in the U.S. It's relatively early in the application process.
These are typically processes that take quite a bit of time. As soon as we can give an update, we will. There is nothing new to report since the press release. On your third question on the cost. We keep on investing in the business. Growing a team and also investing in marketing is key in growing this company. We feel that we are in a pretty unique position. For that reason, I think it's hard to say, okay, we will for sure, if you exclude the IFRS 16 effect already this year, get to the 55% EBITDA margin. It's also not how we manage the company, and I think that's very important to highlight.
We manage the company on the long run, so we focus on growth, getting new merchants on our platform, and do everything what's needed to invest in the business to continue this growth. To that extent, it would almost be better that we have sufficient opportunities to invest, find the right people, do the right marketing campaigns. The 55% getting there this year is not a goal in itself.
Understood. Thank you.
Our next question comes from the line of Hannes Leitner of UBS. Please go ahead. Your line is open.
Yes, thank you for letting me on. I have also a couple of questions. The first question is, could you remind us what your total merchant base is currently? The second one is, may you talk us through your Africa opportunity? The third question is maybe you can give us a better feeling for the current penetration of customer base, of the merchant base. If you could categorize it where you have just single products like the PSD2 implemented, or how many of those you have already expanded in multiple geographies or in single countries. Thank you.
Okay. On the merchant base, so we don't disclose the number of merchants. We're not a company with a lot of merchants, as you know, so we mostly focus on enterprise. We have chosen not to disclose the number of merchants. Right. The question about, so what's the rate of penetration in your current merchant base? That's a continuous process. What you see in the large players is that the land and expand, so we typically open in a region and then we move to other regions, and that's a continuous process. It's very difficult for us to measure in a specific merchant the take of the total share of wallet, because they often don't disclose. Sometimes we can see it because they publicly say something about it. What we do see is a healthy flow of new merchants from pipeline converting into customers.
We constantly see new companies being added where the land and expand continues. This is not an ending process, this is a continuous process. If you look at how much we are converting, and if you look at the size of the pipeline, we are confident that this process will continue in the future as well.
Your question on.
Question on Africa. I think it's a great example of how we typically work. We follow our merchants into new geographies. There were certain merchants that want to do more in Africa. That's why we signed a partnership, and we hope to further build our proposition. It's relatively early days there. Of course, we see the opportunity as our merchants see it.
Just a quick follow-up. Thank you for all the answers. Regarding the land and expand, do you see the opportunity currently bigger from moving across geographies within the installed base, or is it rather more the cross-selling of products you have newly developed?
The moving from geography to geography, that's usually how merchants roll out, because that's a fairly standard way of implementing. There's also the movement across channels, especially in the unified commerce. There's always the trend that you either start with your physical terminals or online, and then the other part follows. It's nice to see that we also have U.S. merchants which do not have an international business boarding on our platform. It's not necessarily that it's always moving from geography to geography.
Thank you.
Our next question comes from the line of Joshua Massa of Morgan Stanley. Please go ahead. Your line is open.
Hey, good afternoon, everyone. Two questions, please, if I may. The first one is just on the full stack. You've said you've moved to 71% now. It was 70% at the full year 2018 and then 60% in 2017. It looks as though the pace of that increase has slowed down a little bit. Has your credit appetite changed? Are you now starting to acquire for airlines? An industry journal has said that you'd signed Singapore Airlines for credit card acquiring, or is it just because airlines are growing more slowly than your digital or e-commerce merchants? That's the first one. Second one is just on the mid-market. That's clearly a priority for you guys and expanding into that mid-market.
Do you think that that changes the business model in any way in terms of the amount of salespeople you need to hire, and could that have an impact on the margin going forward? Thank you.
Yeah. Thanks, Joshua. I think on a full stack, we indeed saw the percentage now 71% compared to 70% the full year 2018. I think this is more like an outcome. We tend to invest in both companies that like to process full stack, but we also are very risk aware to airlines because there are a lot of airlines that are not profitable, and we don't want to be in the risk chain for these airlines. I don't think that we will change our policy here very quickly. Of course, if there is a good opportunity or if there is a very stable airline, we would certainly consider it. The majority of volume for airlines, we will never acquire because we think it is not where our strength is. We don't have the balance sheet for it.
We don't want to have this risk in our books. I think for mid-market, I think if you look at what we have tried to accomplish over the past periods is that we work closely with customer success teams and our merchants to increase the speed of implementation so that we can really help the mid-market merchants to get onto our platform quickly. For this, we also need close ties with integrators to make sure that they know how to integrate to our platform, that we work with the right plug-ins, that the implementation is easy. This is still early success. We're relatively, for a short time frame, focusing on this. We're further optimizing the product. The feedback's very positive. If you look at NPS scores, NPS scores in mid-market is increasing and getting to the levels of enterprise, and that's exactly what we want to accomplish.
We're very happy where we are at the moment. We think that we have a scalable solution for mid-market.
Great. Thank you.
Our next question comes from the line of Ron Heijderink of ABN AMRO. Please go ahead. Your line is now open.
Hi. Good afternoon, gentlemen. A few questions from my side. Starting off with mid-market clients. You are speaking in the shareholder letter of migration of mid-market clients from mid-market to enterprise. How many clients are we talking about, and what's the rough TPV that went from the one bucket to the other bucket? Secondly, coming back on this full stack versus processed only, are there any new non-airline clients in the processed-only bucket that would explain the similar growth rates between the two buckets in the first half of the year? If the airline bucket, has it just grown by 50%, just like the non-airline bucket? Thirdly, on the expense beat that you showed in the first half of this year, especially sales and marketing were a bit lower than expected with 19% year-on-year growth.
Would that be a new run rate, or should we expect this to accelerate in the second half and maybe into 2020? Then finally, 2 small modeling questions. One is the tax rate effective at 19.5%. Are there any drivers why it's a bit lower than what we've seen earlier? Secondly, on the CapEx, it's now at 3.7% of net revenues. Is there any seasonality in this CapEx line that we should take into account? Thank you.
Thanks, Ron. If you look at the mid-market versus enterprise, I think it's more related to how we internally define mid-market. If it gets to a certain size, we see it as enterprise. We've defined it at EUR 1 million a month process volume. You have certain merchants that grow quickly and get them to the enterprise level or enterprise definition. On your question for airline or non-airline volume, or basically the gateway-only model, I think it's fair to say that the majority of the volume where we're gateway only is airlines. There is, of course, also another element here, which is the more immature markets, where we gateway into other providers. I think the Africa example this half year is a great example. Where we gateway into Cellulant, which is a very good partner to work with, but which is then seen as gateway-only volume.
We have more of these types of partnerships. On the cost side, I think if you look at the current cost for this half year, it's not necessarily the run rate going forward. We see a lot of opportunities also in the sales and marketing costs, where we can further invest in the business, and we will not hold back where we see the opportunity. I think that's fair to say we're in full investment mode. I think that's also related to my earlier comment on the 55% EBITDA target. It's not a goal in itself to get there as soon as we can. It's a goal in itself to grow the company on the long term. That's what we want to achieve with this company. Your question on tax rates.
I think that the way how we look at taxes, that we pay taxes as much as we can locally. Current tax rate is around 19%. There's important benefit here in Netherlands that we benefit from the Innovation Box. Going forward, I would not assume big changes there, unless of course our geographical mix completely changes. Then your last question on the CapEx. I would not really assume seasonality in CapEx. We benefit a lot from having one platform. We only have to make investments just in one platform. That's why we have these economy of scale benefits. I think this is why we are uniquely positioned.
Thank you very much. That's very clear. If I could have two small follow-up questions. The first one is a combination between the expenses and the CapEx. I'm not saying that you're under-investing or that you're holding back your investments. The question that I want to get my head around is, can you spend quick enough to keep track with your net revenues, actually? Or is your net revenues running away from you in a quicker pace? On the mid-market to enterprise, that was very clear explanation. Thank you for that. Can you share with me, or are you willing to share with us the TPV that was actually shifted from the mid-market bucket into the enterprise bucket? Thanks.
If you look at if we are under-investing or how we are raising our expenses, for us, it's very important to grow this company in a responsible way and in such a way that you can maintain culture. That has always been, for us, the rate of growth. We are growing of a bigger base, so you can all see that we added 114 people to the company now. You look at that as a percentage. The way you ask the question, we look at growing this company at the maximum pace, and that will decide our investment rate.
Yeah. That's clear. Thank you.
Yeah, your question on migration from mid-market and enterprise, how many merchants these were or what the volume was, I'm afraid we can't share that at this stage.
Fair enough. Thank you very much, gentlemen.
Our next question comes from the line of Lucian Nijati of Deutsche Bank. Please go ahead. Your line is now open.
Good afternoon. Thanks for taking my question. I have three. First of all, on eBay again. Is it correct to assume the majority of eBay MP managed payment volume has been processed by you? Are you planning to expand the same-day payout offering to any credit offering for merchants, like what Klarna is doing? If you can give us an update on your RevenueProtect Toolkit progress. As I remember, you said you want to use this as a means of attracting other merchants that are not currently on your platform to also get them on your platform. Can you update us on this as well, please?
Your question on eBay. I think if you look at the current situation now of eBay is still piloting with us at early stage. Majority of volume is still with their old provider. That's the difference. I think your question on same-day payout. Same-day payout is for a merchant, is from a reconciliation point of view, a nice product because basically it means that your transaction of Monday, all those transactions you see in your bank account on Wednesday. For same-day payout, that technically is that you pre-fund certain transactions. Technically it would qualify as a loan, hence it needs a banking license. We are not in the business of giving loans to merchants as a product. We don't proceed to build up a portfolio with credit to merchants.
I think you had a third question, but that didn't come through.
Yes, sure. On the RevenueProtect toolkit. If I get it correctly, last time you said that you also want to use this as an open API for the merchants that are not on your platform, just basically to attract those, and then they would also join as customers of yours. I was just wondering if you have any updates on that. Thank you very much.
Yeah. That's correct. We offer RevenueProtect separately to our merchants so that they can basically send all their fraud volume to our platform, even if we don't acquire it. We sell this to our merchants. I can't give you individual numbers on volumes on this. It's true that this is a separate product.
Thank you.
Our next question comes from the line of Sanjay Sakhrani of KBW. Please go ahead. Your line is open.
Thank you. I've got a couple of questions. One is some clarifying questions, actually. 80% of your growth has been coming from existing merchants, which is great, but I was wondering if at some point you expect that mix to sort of change given all the new wins that you've had? Secondly, you mentioned in the release that you're seeing a change in the way the U.S.-only merchants are choosing you in the example of Restoration Hardware. Should we expect a change in terms of the growth in the U.S. market? Finally, I also have a clarification question on eBay, Ingo. When we think about the second half of 2020, should we expect the majority of volumes that could shift over to you would shift over in the second half of 2020?
Should we expect that to sequence over a year and a half or so? Thanks.
All right. Let me start. Your question around the percentage growth coming from existing. We are growing in all areas, so that is difficult to forecast. What you see is that we are constantly feeding new merchants to that base that keep on growing as existing merchants. That's not an ending process. As you also see that we grow with unified commerce in the mid-market, those elements are growing as well. Then you're talking about relative growth. That's more difficult to say something about. If you look at U.S. only, is that what is nice to see is that we grow everywhere and that we also grow U.S. domestically, and that the product is not just interesting for unified commerce merchants or international merchants, but also for domestic merchants. It's a trend we have seen in the past.
We have seen various countries where that happened, and you now also see that happening in the U.S. Again, you have to balance that off with everything grows in this business. If its percentage will grow, it's difficult to say. Ingo, on eBay? Yeah. On eBay, I think it's a really good question, but I think it's also most fair to ask at eBay because it's not under our control. Of course, we will be very happy to process all the volume. For us, it's very difficult to predict. We're ready for it, and we hope to be good partners on the long term.
Thank you.
Our next question comes on the line of Josh Beck of KeyBank Capital Markets. Please go ahead. Your line is open.
Yes. Thanks for taking the question, Pieter and Ingo. I wanted to ask about the QSR wins. Pretty impressive that you've won some names like Joe & The Juice. I'm just wondering, when you look at the pipeline of conversations that you're having in QSR, do you see the potential to scale to larger, more global type of QSR types of customers?
The reason why we're excited about this part of the market is that their needs are indeed shifting. Their payment needs become much more complex as they indeed, a part of it is ordering mobile. It's a unified commerce customer. There are chains which are operating in many different markets. Their need is exactly what Adyen can offer. Hence, we are excited about the market, we are investing in it, and we are confident that at a certain point, indeed, also names will follow.
Okay. Very helpful. Then hospitality, I think is a vertical that you're excited about. Just wondering, what are the challenges that those types of customers are facing? Obviously, it's probably a bit different maybe than retail or QSR. Why do you see such a good product market fit with your platform there?
If you look at hotel chains, what is the challenge that they have? It's being operational in multiple markets, that they take orders online, that they do payments in the hotels, that it's a very wide portfolio of payment methods being used because you usually talk about international travelers. What they need is they have very complex demands, and if we can make that simple for them, that's extremely attractive.
Last question for.
And in that perspective-
Oh, go ahead. Sorry.
No, I just wanted to add, and that's very similar to what we see in retail and QSR. I think a lot of the features that we developed on our platform can be used in multiple sectors.
Very helpful. Last question, just maybe could you talk about MarketPay a bit. Obviously, you have some very impressive reference customers with eBay and Etsy. Is that a pipeline where you see a number of opportunities as you look years down the road?
Yes, absolutely. MarketPay is an important product of us. We see also other type of models now evolving on our platform. I think a customer like SAP that we announced earlier this half year is a good example, where the offering is slightly changed, but we're in a very good position to help them. We see MarketPay developing more broadly into a platform product where smaller merchants can make use of our technology.
Thanks so much.
Our next question comes from the line of Joseph Foresi of Cantor Fitzgerald. Please go ahead. Your line is open.
Hi. A couple of quick questions for you. I just want to get an update on authorization rates and your ability to deliver higher rates and what your opportunity is there. That's the first one. On the second one, on the mid-market penetration, it's been at sort of a slow pace. Do you expect that pace to continue or accelerate? Thirdly, I know that you didn't change your medium-term margin trajectory, and you've been very clear about how you feel about margins. Should we think of that 55% as being the base, and then there's going to be a certain percentage of upside coming from the accounting change?
All right. Thank you for those questions. First on authorization rates, this is not a product that is at a certain point finished. We are investing every day to release new functionality to further increase authorization rates, consistently we hear back from our merchants that we outperform the competitors. If you look at examples of that, for example, in our RevenueProtect, we have given the merchants more possibilities on the experiments feature to test how different settings would impact their authorization rates. We have launched a product to help subscription merchants to know when to help them to capture transactions that didn't go through the first time. Then they outsource that logic to us. These are examples of things we do every day to raise those authorization levels. Your second question, could you help me with that?
Yes. I'll slow it down a little bit. On the mid-market side, you've had a slow penetration rate there. I'm just wondering if you can expect that to accelerate or if that's the pace that you think it's going to go at. It will be more gradual. Will there be an acceleration or an inflection point at some point there?
If you look at the mid-markets, I think it's going to take a bit more time. We are investing in there. We're very happy to see the Net Promoter Score going up. We see we're on the right path. It's also helping us in the other segments because being able to service that segment is also ultimately liked by other merchants. Yes, we have expectations of it, but not on the short term. It's early days.
Got it. The last one was just on the margins. I know you kept the medium-term guidance. You've been very clear about how you look at margins. Just to be clear, you're looking at 55% and then a possible 3%-4% upside due to the accounting change. I just want to be clear on the way to look at it.
Yeah. I think that's a neat way to look at it. It's currently 57. If you would correct for the accounting change, it would have been 54. We don't steer on it. Do we expect a dramatic decline in EBITDA margin? No, because we see the operating leverage. Again, if we see an opportunity to invest, we will.
Got it. Thank you.
Our next question comes from the line of Jeff Cantwell of Guggenheim. Please go ahead. Your line is open.
Hi, good morning. Congrats on the results. Thanks for taking my question. I understand that managing to the take rate's not your focus. You've been very clear about that. I did want to ask you one on that because we see you moving in-store, we see unified commerce taking root quite positively, and we see you moving down market from enterprise. What would you say is the biggest mover in the take rate if we think out over the medium term? Is it fair to say that you see opportunity to drive it higher, or will it move lower over time as a result of mix? Thanks.
It's a really good question, it's also because there are so many moving parts. It's hard to answer. I think the most fundamental development on our platform is at the one end, of course, working for large enterprises has a negative impact on take rate. At the same time, we see that mid-market and also the fact that we're doing more and more full stack have a positive. It really depends on how this pans out in the long term, how fast certain things go, whether that's a up-trending take rate or a down-trending take rate. I think that's exactly why we don't want to manage on it.
We want to make sure that we have profitable contracts on the platform, that we work with our merchants, and that we see the absolute invoices of our merchants growing, so that if we do more for them, that we make more absolute margin with them. Also basically reward them for bringing more volume, because I think that's also important in a partnership, that you give something back if volumes grow.
Okay, I appreciate that. The second one I have is on the competitive environment, given all of the M&A of the space this year. What are your thoughts in terms of the competitive environment? Is it getting easier for you or tougher? From the outside, we could see it both ways, right? Sometimes large consolidations might lead to lags or maybe just a change in strategic focus by the companies that are merging, which could create opportunities for you to capitalize on. Right? It could also make things tougher as well. Would just love to get your thoughts there. Thanks.
Yeah. I think we fundamentally look deep through a different lens at the market. From the Adyen point of view, the market is complex and there are new products being launched. Like think the shift to unified commerce, think about mobile payments, think about QR codes. There's a constant release of new products and merchants need a company that can help them there. There's also another way of looking at this industry, and that is payment is a commodity and it's only about scale. If you're looking through that lens, then mergers make sense. If you look at the market through our lens, you would say, but you just have as many platforms as you had before, and now you have to manage all of those platforms. That's probably a killer for innovation rather than helping innovation.
We feel more confident having a single platform, making sure that we have more than 40% of our employees being engineers, that all those engineers are our merchants are benefiting from their effort. They're not working integration processes. They are not working keeping the weaker system up and running. They're working to their benefit, and we believe that is the right strategy. We've always said that. We've never done an acquisition. We believe that growing this business as fast as possible in a controlled manner is the best outcome for shareholders.
Thanks again. If I could just squeeze the last one in. You're highlighting a number of wins, and you clearly have quite a bit of traction now within store and QSRs. In your shareholder letter, you called out Joe & the Juice. I'm just curious, it seems like it's in the section on unified commerce. Sometimes payment companies talk about wins in different ways. Can you just clarify what your win is there to any extent possible? Is that the whole relationship, including the POS piece? Is it just the order ahead online piece? Maybe just talk to us a little bit about that relationship would be very helpful. Thanks.
Yeah, we don't really talk about individual merchants. Although, if you go to an airport and you order a Joe & the Juice, it's always nice to see an Adyen terminal.
Okay. Thank you.
Our next question comes on the line of Corey Gale of Barclays. Please go ahead. Your line is open.
Yeah. Hi there. It's James Goodman actually on for Corey. Perhaps I could follow up firstly, please, on the full stack question. Apologies if I've missed it. Can you simply tell us what the % of full stack acquiring was in the first half last year? I'm just trying to work out how that changed over the course of last year and whether there was more of a tailwind perhaps in the first half this year to the settlement revenue. Second question, just on the regional growth. You made some helpful comments around the U.S., but when I look at that adjusted for foreign exchange, it looks like it's pretty much in line with the group growth. I guess longer term, you still think of the U.S. as probably accretive to the overall business growth given your level of penetration there.
Is there anything you can speak to there really in terms of the sort of trajectory of the ramp in the U.S.? The final one from me was, appreciate your commentary on the PSD2 advantage that you have. We've read a lot recently about delays in some of the secure customer authentication. Is that a frustration for you if that comes to pass? Or do you think the catalyst has already really happened for merchants to look for the leading solutions to deal with that issue? Thank you.
Okay, thanks for the questions. We haven't disclosed the full stack percentage over the first half. For the full year 2018, it was 70%. Your second question on the U.S., I think it is important to realize that we split revenues based on billing address. If you look at our sales operations in U.S., they work closely with U.S. merchants and sometimes, they win a deal and land it in a different region. A U.S. merchant selects us, but we also have traffic, for instance, in APAC. That's then recognized as traffic or revenues in the APAC region. We keep on investing in U.S. The teams are growing. We're over 100 people in San Francisco, over 30 people in New York. We think that we will also see more and more domestic revenues in U.S.
Of course, we also see a lot of traction in the other regions because U.S. companies are expanding on a global scale. I think the domestic part, Restoration Hardware, is the best example. Your question on PSD2. We're not frustrated at all. We like complexity and if complexity kicks in, we like to help our merchants. I think one of the most important things is that the way how we've implemented the measures around stronger customer authentication. Customers don't have to do a lot for it. We just help them to basically, if they're already integrated to us, the change is very limited and that helps to solve complexity for our merchants. If there are different timelines, of course we will respect it, but we're ready for it, and we're ready to support our merchants to accept it. Thanks.
Our next question comes from the line of David Togut of Evercore. Please go ahead. Your line is now open.
Thank you. Good afternoon. Three questions, please. First, cost incurred from financial institutions as a percentage of process volume increased 11 basis points year-over-year. Was that due to a mix shift toward credit versus debit? Second, how can you extend your business model with the introduction of open banking in Europe, given your Netherlands banking license? Do you intend to build out more of a consumer-facing network, which you certainly have the capability to do? Third, we've seen a number of companies in the merchant acquiring industry in the U.S. put a lot of resources into restaurants. If you could talk about how your approach, particularly in the QSR space, is differentiated. Thank you very much.
Thanks. On your first question, I think if you look at cost incurred from financial institutions, this includes the interchange and scheme fees. Depending on region, interchange can vary quite drastically. For instance, interchange in the U.S. is way higher than Europe. This is mostly a mix effect. That's also why we internally only look at net revenue to assess the healthiness of the business. On open banking, this would be a consumer payment method. We are not into the business of developing payment methods ourselves. We support payment methods. There are merchants currently live with us with open banking in the U.K. It's a new payment method and still at this moment, quite small.
I see.
The restaurants, we support restaurants via their existing platforms. We focus on payments, and we are not building the platforms for the restaurants.
Understood. If I could just follow up on open banking. From your response, I take it that you will stay 100% focused on merchants and not build out more of a consumer-facing network. I am just curious how you might extend your business model with the Netherlands banking license. Is that license really intended to be used for things like same-day settlement to cash?
Yeah, if you look at the reasons to get the banking license, it's to improve our services to merchants. That has been the reason, to be in a clear regulatory framework, to be able to do indeed same-day payout, also to be in a clear regulatory framework to help marketplaces. We didn't do that to start building consumer methods ourselves.
Understood. Thank you very much.
Our next question comes from the line of Daniel Swart of Kempen & Co. Please go ahead. Your line is open.
Hi. Good afternoon. Thanks for taking the time for the question. A bit more general strategic question. Do you have a specific licensing strategy? What about regions? Are you planning to obtain also direct acquiring capabilities in the U.S. amongst your branch license application? Second question is just out of curiosity, what's the average transaction size these days compared when you IPOed?
All right. Our licensing strategy, we follow our merchants. We look where it's useful to apply for license. It's a constant process. We didn't announce any new licenses now, but it could well be that in the next update, there will be new licenses. It's not an objective in itself. Objective is the highest level to merchants, and indeed, often that can be followed by a license, but in some regions, that's not opportune to pursue. Regarding ATV, we do not disclose the average transaction value.
Thanks.
Okay. This was our last question. I would now like to hand over to Pieter for closing remarks.
I would like to round off this earnings call by thanking you for participating. Should you have any additional questions, please reach out to our investor relationships team.
Ladies and gentlemen, this concludes the Adyen First Half 2019 Results Call. You may now disconnect your lines, and have a nice day.