Ladies and gentlemen, thank you for holding, and welcome to the Agen Half Year 2018 Results Conference Call. At this moment, all participants are in listen only mode. At the end of the instruction, there will be an opportunity to ask questions. I would now like to hand over the conference to Mr. Peter van Le Doose, the CEO of Allianz.
Go ahead please.
Good afternoon and thank you for joining us today at our first ever earnings call. I'd like to give you a brief update on our performance in the first half of this year. We kept our focus on helping merchants grow and on changing the payments landscape. As a result, we continue to see profitable growth across channels and geographies, and we are very pleased to announce that process volume is €70,000,000 up 40 3 percent year on year. Additionally, first half net revenue is at €156,000,000 up 67% year on year.
We saw solid growth across all geographies, all channels and across the length of the emerging days as the globalization of commerce continues to prove a significant tailwind for us. Unified Commerce continues to develop very positively with 1 month with 120% year on year growth in point of sale traffic, now accounting for online and for more than 9% of total volume. We see our POS volume catching up with a moving target as online sales volumes also grow rapidly. Both profit and cash flow generation remained high and in line with the full year of 2017. Noteworthy, as we invest heavily in the team, the company in tech and commercial roles.
We also continue to invest in marketing to fuel our sales pipeline. We already saw previous investments paying off as we invested significant converts in the pipeline over the first half of this year. Now let's dive into our 3 growth pillars. We have defined there's enterprise, unified commerce and mid market where we saw significant momentum in the first half of this year. In enterprise, we saw strong continued growth both through existing and new merchants with continued load churn and non major merchant losses.
All of these existing merchants are high growth businesses themselves, which we definitely benefited from. We were also able to sign new merch in the first half of this year, such as eBay, Valve and Dot McDonald's. An interesting development here is the increased traction that we've seen in new verticals hospitality, service restaurant chains and supermarkets. These are verticals in which we historically have been less present. A common driver from this blue vertical is the need to quickly adopt shopper friendly mobile payment methods.
It's where we find success and we can invest in equity globally and thus grow. That's due to our single platform. In unified commerce, due to our significant point of sale volume growth, which is up 120% year on year, we now have established ourselves as a significant player. We also launched the Terminal API in the first half of this year. We see this as the future of our in store offering, allowing point of sale merchants sale transactions to pass to bypass the more traditional infrastructure and to be run entirely over the web, the same thing with shopper journeys that our merchants' customers now expect.
We were able to add several merchants to our platform in this segment too, including ASICs, Theory and Flash. It's very promising for us, especially given that we're now able to offer our full unified commerce solution in 37 countries globally, including high growth medium strategic and we added significant mix in the first half of this year. We also continue to invest heavily in the market segment in the first half of this year, and we see this as the next adjacent segment to enterprise. We focus on hiring and specific mid market growth, building up new generation in our marketing teams and on implementing product improvements tailored specifically for this segment. The Chekka Software Development Kit or SDK is one example of this.
It allows merchants, including those lacking signals with resources to come from board to our platform to start processing. Further, we invested in improving the user experience of our product, including the back end, which we call customer area to make sure that it's geared more for business executives than just even specialists. On the surface, the performance is the same. Lastly, for mid market, we have placed increased focus on partnerships, especially with e commerce platforms like Gantto, Netscape and Salesforce. This is where a large portion of mid market merchants can be found.
We didn't sit still on the back of product front either. We've continued innovation to help our merchants. An example of our strategy is our first to market with new time counterfeiter both for Visa and Mastercard. This tool helps our subscription merchants to reduce involuntary churn. This is where subscriptions are lost due to expired credit card details.
Further, we continue to improve our data insight product designed to increase authorization needs while minimizing fraud. To increase the use of machine learning, product teams are now able to spend a large portion of their time focusing on improvement of the product rather than their maintenance. All these innovations are made possible directly by our Sigmund platform. We can implement new technologies globally and at speed. This is a key advantage to us.
Continuing all of this, we also continue to invest in the team in the first half of this year. Net count increased to 768, which is up 40% year on year compared to the first half of twenty seventeen. On behalf of new hires, we remain in big roles, 37% in commercial roles. We continue to deploy our rigorous hiring process with at least one of the Board members interviewing a new Upman employee. We view retention of our culture during our growth trajectory as critical to our business.
Despite the publicity, the IPO proved not to be a distraction. We kept our focus on the business. We held our annual company event in the previous week and this is where we fly everybody from all over the world to Amsterdam, so from all global offices to share knowledge and the team. We may have raised our glasses for a brief moment. As I've said before, we celebrate new regions, new functionality and merchants on our platform.
This concludes my introduction. Thank you for your attention. I would now like to hand over to our CFO, Ingo Arsterhagen to dive deeper into our financial performance.
Thank you, Peter, and good afternoon, everyone. Thank you very much for joining. I would like to take some time to give you a bit more color on the financial results that Peter just introduced. Volume, which is up to €17,000,000,000 a 43 year on year increase, continues to grow rapidly. It is primarily due to existing merchants, merchants that were already on our platform before the start of the year.
However, it's notable that we also continue to add logos to our platform while building out our sales pipeline too. This growth came from across
the unit
of the merchant base. Consequently, we did not see any significant change in merchant concentration versus our full year 2017. When it comes to volume growth, now or in the future, we do not view the size of the potential market as a limiting factor. Net revenue was €156,000,000 a 67% year on year increase. We saw strong growth in Europe and Latin America with net revenue growth of over 15% year on year in both regions in the first half of this year.
Net revenue growth in APAC and North America over the first half year was even stronger, with growth percentages of over 140% in both regions. To us, these figures are proof points of the strength of our single platform, allowing merchants to expand and scale across the globe rapidly. As noted in our IPO objectives, we manage the company on absolute margin and not on take rate. We do this because the margin across additional volume on our platform is effectively 0, and so the drop through is very high. It then leads to a further increase of EBITDA, which was €17,000,000 in the first half of the year.
This is a 23% year on year increase. This was primarily driven by the high net revenue growth and by the expansion of our operations. The EBITDA margin was 45% and in line with our full year 2017 as we continue to invest in the growth of the company through the expansion of our team and building our sales pipeline. It's worth repeating at this point that we are focused on the long term and therefore elect to keep investing in growth instead of maximizing profitability at this point in time. Lastly, on the financials.
Cash flow generation remains high. The conversion ratio of 89% was in line with full year 2017. For your further information, we have also posted a Q2 year on year comparison on our website at agen.com/ir. In light of these results, we would like to reiterate our financial objectives, which remain unchanged from our perspective. On net revenue growth, it is mid-20s to low-30s in the medium term.
And for 2018, we expect net revenue to grow at least 40%. On EBITDA margin, we expect this to benefit from our operating leverage going forward and increase to levels above 55% in the long term. And on CapEx, we aim to maintain a CapEx level of up to 5% of our net revenue. Thanks all for your attention. Victor and I will be happy to take any questions now.
And our first question comes from the line of Sandy Pittsmani of JPMorgan. Please go ahead. Your line is open.
Hello. My question is, clearly, you've shown really, very strong order growth in terms of processed volume in the first half of the year. At the same time, your net 50 growth has been much stronger. Can you comment on the change in the mix of the customers that occurred in the first half given that you clearly are growing net revenue faster than your growth in the process volume. Has there been a shift, for instance, last year, you had 40% of revenues coming from the travel and travel related vertical.
Has that changed in 2018?
Thank you. What we've seen with net revenue growing at a faster pace than volume is mainly related to the fact that in the first half year of last year, we saw a relatively slow start with a lot of one off costs for the temptation of new regions. And that's why you see a bit more net revenue growth than process volume growth. And also, I think in general, the mix has slightly improved. So it's always hard to say just from quarter to quarter how they see horse.
And then Ingo, just one more question. I mean, you're still guiding to 40% plus revenue growth for 60% long term, you're not changing your guidance. But given the strong 60% year on year growth in the first half, why are you not more bullish for the full year? You think that the comps were much more difficult in the second half, which is why you are wondering the market or is something changing in the second half? Because at this point, you look very much in position to beat that 40% plus significantly.
Yes.
I think it's a good point. It's at least 40%. I think that's the way how we look at it. Of course, because the first half of the year last year was relatively slow, The second half year last year was relatively good. So we have a higher base to compete with.
But we're very confident in the development of the company for the second half of this year. That's also why we said we should at least 40%.
Thank you. Thank you. Our next question comes from
the line of Joshua Massa of Morgan Stanley. Please go ahead. Your line is now open.
Hey, afternoon guys and congrats on the quarter. Two questions from me, please. The first one is around the point of sale volumes. Clearly, very impressive growth there. How many of these customers that you're doing the merchant that you're working with on this are sort of new customers versus existing e comm merchants that are looking to backfill into offline space?
2nd question is on the merchant wins that you have disclosed in the first half. Have you identified like a total addressable volume for these merchants? And then how would you expect to ramp up to the volumes of those guys? Thank you.
All right. Thank you for your question. With the sales, something else happened than what we expected. We thought that we would convert existing merchants to also handle their traffic from store, so from point of sale terminal, expand out differently. Point of sale tends to be new wins.
So that volume is impressible to new customers and growth there is either getting more stores online or signing of new merchants. The second part of your question is regarding addressable unified commerce part of the business, we see that that's not something that's showing our growth.
Okay. And just one more, sorry guys. The volumes that you process, I think you've not you haven't been acquiring all of those volumes, I think it's around 60%. That changed over the first half of this year at all?
I think it's below for instance, point of sale volume is always required to us. That part of the business is oddly acquired. And the other part you're referring to, some of our business is not that required by the airlines. And so that's the part that are all moving factors. If we sign up more airlines or if we signed up more storage, then that all moves the needle in different directions.
Thank you. Thank you.
Our next question comes from the line of Ron Sveinrich of ABN AMRO. Please go ahead. Your line is now open.
Good afternoon, gentlemen. I have a few quick questions. Start off with cost growth. When I look into the other operating expenses, the housing costs have gone up well, have doubled basically since the second half last week to €5,700,000 Is that a new run rate? Or would this is there a one off in there?
And the same, the system marketing costs, they were up 50% since second half of last year. And is this a special push? And should that come back down? And or again, is this in the run rate? And on your FTE growth, I understood earlier that you were aiming for a deceleration in FTE growth going forward.
However, in 2017, you added 200 FTEs and then you added 100 FTEs in the first half of this year. So if you could maybe give some guidance for the second half of the year and in 2019? And then finally, on the take rates, you've said that growth
is mainly driven by existing customers and
that point of sales has outgrown the online business. Both these items should actually be negative for take rates, if my understanding is correctly. And furthermore, you said there's no change in concentrations also there. That's not that the, let's say, meat market is outgrowing the large customers. So could you give a little bit more insight on what is driving the uptick in tankers up
then to
CAGR or even now? Thank you.
Let me start and then hand off some of them because you asked multiple questions. Yes, sorry about that. Which is okay, of course. Let me start with HR. We are investing in growth.
And if we see that we have been able to attract a lot of talented people. So it's slightly higher because we were more successful in attracting talented people and we are investing in the business. So that explains a slightly higher cost there. Regarding marketing, we have been conservative with marketing in the past. And indeed, we are stepping up here a little bit also with mid market, which is more marketing dependent than what we feel we need for the corporate segment.
So yes, we will be operating at a slightly higher level than we were doing in the past. Ingo, do you want to add to the other questions?
Absolutely. Thank you, Peter. So on the housing cost the new number is indeed the new run rate. Of course, with expanding the team, we find bigger offices around the globe. So the cost of housing is increasing.
And your question on take rate, it's a mixed effect. And I think that always makes it difficult. I think a very important picture is a lot of one off costs in the first half of last year, which were negatively impacting the take rate. And that's why you're also seeing improvements this year.
Sorry, could I if you say negative cost in the first half, how would that run through your take rates specifically? For
instance, if you think about all the implementation fees that we had to pay, which is expense through core from financial institutions. So that impacts the net revenues.
Okay. Clear. And then maybe if I could one final thing, that's purely on disclosure. Could you disclose the number of transactions in
the first half of the year? We haven't seen a change in ATV, but I would to calculate it back by heart now. Okay. I'm looking at you. Do you have that?
But I know the ATV, it did change materially.
So it's you can discuss that. It's around 2,500,000,000 transactions. Okay. Thank you.
Thank you. Our next question comes from the line of Gerardus Vos of Barclays. Please go ahead. Your line is now open.
Good afternoon, Ingo and Peter. Just a couple of questions. Just coming back on the yield, the 23 basis points for I think both in Q1 and Q2. Is it fair to assume that that will remain roughly around that kind of level in the second half? Then secondly, on
the seasonality, last year was quite
a pronounced seasonality between kind of first half, second half, and 45% in H1 and the rest of the remaining in the second half. Do you expect something similar or should I read from the kind of commentary that it is more kind of equal divided this year? And on the mid markets, I guess, this is probably a simple change in your business model with greater level of indirect. We also see a lot more demand for integration software enabled kind of payment in that market. Is that something you want to do yourself and therefore provide personalized kind of software?
Or would you go via partnerships? And then finally, on the competition and following the merger of Vantaf and Worldpay, what have you seen in the key competitor have are they coming back? Or are you still kind of busy with integration? What would you be hearing from the market? Thank you.
All right. Let me start with a few answering a few questions and then handing it over to our CFO, Ingo. The seasonality of the business, there is another month, but there is also a heavy influence, which we cannot really prognour as to when merchants give us more volume. We have a lot of merchants that work with this in some regions and see it outperforms in terms of regions. So it tends to be lumpy and constantly difficult to predict.
Some of our merchants, yes, are happy to see seasonality. But on the top, that's difficult to say that it's not an exact science. Market mergers that we're technically looking for are the ones which are already boarding on our platform and we try to make it as pleasant for them as for the corporate merchants. And we have made changes to the platform to make it easier accessible for them. And if we look at merchants which are typically operating international or at scale and that we can't be on the Magento and the other platforms, which I mentioned.
And you're not looking for the true SME merchant, which needs an all in one solution service now plan and to develop that. On the competition, we see a lot of activity there. You all have a lot of experience in this payment field. And we think that the lessons which we all learned from it is that if you run on a single platform and the release is applicable for all your merchants over all channels, it puts you in such a strategic position with the whole strategy of acquiring and merging and then there is multiple platforms trying to service your merchants and that's not our strategy and that's how we look at the development of our competition. Hugo, do you want to add on the other questions?
Yes, sure. Thank you, Peter. I think the main question on take rates and then how the 23 basis points will develop towards the future. I think it's very much also related to your question on how we compare to competition. I think we manage our business on getting more volume from our existing merchants with tier pricing.
And therefore, take rate is less important. We have a global platform, and if a merchant onboards more volume on this global platform, we give them lower pricing, which could negatively impact the take rate. We think it's a very healthy development because absolute margins is the way how we manage this business. If we get more volume and the total invoice to a merchant increases, is a net positive for us. And that's our stance on it and I'm concerned about that because our drop through rate is basically 100% on an additional transaction.
So it's hard to say whether we can keep 23 basis points. I hope that a couple of our really good merchants keep even more volume, and they get to the next tier and get lower pricing because that's net positive for the company.
Sure. Thank you.
Thank you. Our next question comes from the line of Nishna Jati of Deutsche Bank. Please go ahead. Your line is open.
I have 2 questions. First of all, again on your take rate. How should we think about the evolution of your take rate from here? I'm just wondering if there is a scenario where we can and your take rate could trend up over time because we can see that some of your peers have recently turned some more positive in the development of on the
development of their
own taste as they sell additional like solid added services and so on. Secondly, I wanted to know if you can give us an update on where you currently see churn and when your next larger contracts are up for renewal. And lastly, I want to know on your guided revenue growth for 2018 medium term. Can you give us a feeling on how much of that do you see happen with existing customer versus the new contract wins?
All right.
To continue on take rates, I think the of course, what we just discussed on how we see the business going forward with more big customers, given more volume that could have an equity impact on take rate. At the same time, there's also a positive development, which is, of course, that we're investing in the mid market. Mid market has slightly higher margins, so that has a positive impact on long term take rate. And that's exactly why we don't really manage the company on take rate. It's more like an outcome than an input variable for us.
So I think that's how we look at take rate as a company. On churn, I think the key message for our sales return is we're so much focused on making sure that our customers stay happy with us, that they get the services they want, that we develop new functionality with them, that we have basically contracts that are for an indefinite period of time that they can cancel on a monthly basis. It keeps us honest, and that's how we like to work with customers. So there are no big contracts for the whole because we basically work for them for the long term. That's how we look at that.
And if you talk about revenue and revenue growth, most of our revenue growth comes from existing merchants. So if you look at the start of this year and the growth since then, about 50% of that growth is coming from existing merchants. And of course, we manage carefully on getting new wins on the platform life because they are basically insurance policy for the years after. So it's finding that right balance. It's always the short term growth that's mostly fueled by existing merchants.
Thank you. Our next question
comes from the line of George Sakhia of Berenberg. Please go ahead. Your line is open.
Hi, thanks for taking my question guys. So you talked about some of the new verticals in which you're gaining some traction such as hospitality, restaurant chains and supermarkets. If you could give us some color on which geographies, the size of merchants which you're able to gain, just some information out for you at least?
Yes, I can it is a very interesting trend for us to see that merchants in those verticals are looking for getting to the new needs of their shoppers and that makes ABN a very relevant player. So because of that we have been able to sign up a few merchants. These merchants so in terms of volume, I'm not going to say I of course cannot comment on the specific merchants. What I really like about it is that we have seen if you're active in the segment that other companies in that segment also are using their services. So it has proven to unlock that segment.
We have done a pilot with a supermarket which has been getting a lot of attention where they're looking at giving shoppers ways to buy with their mobile phones. So there's enormous attention to the change in the needs of consumers that means that the carrier becomes less static and more interesting for us.
Okay, great. Thank you.
Thank you. Our next question comes from the line of David Togut of Evercore ISI. Please go ahead. Your line is open.
Thank you. Good afternoon. A few
questions please.
First, on your Netherlands banking license, could you comment on any plans you have to offer open banking related services in Continental Europe when PSD2 comes into effect in the fall of next year? And then second, could you quantify for us your existing process volume in the second half of this year and in 2019 from your new contract with eBay? Thank you.
All right. Thank you for those questions. Banking license, let me put that into perspective. For a company with the growth of ASEAN, it is important to be in a very clear regulatory framework. And one of the reasons why we moved to the banking guidance is to be in a clear regulatory framework.
Yes, it opens up additional services which we can do. Your question would you do services to consumers which are possible under PSD2? I think other companies will do services to consumers and we will help the merchants working to produce those new payment methods. So we won't use our banking license for that. Regarding eBay as a customer, Ingo, do you want to say something about that?
Sure. I think what eBay has also publicly announced is that they focus on a launch in basically mid-twenty 20. But until that time, they have a contract with PayPal. So that's also we work closely with them, and we will see the volume coming through in the years up to 2020. We don't expect to keep in volumes until then.
And I think in general, we're not dependent upon eBay for our volume growth. So there are many other customers going live on our platform. Of course, eBay is a great customer to have on our platform. We see many other successful companies being onboarded.
Thank you very much.
Thank you. Our next question comes from the line of Sanjay Sakhrani of Citi. Please go ahead. Your line is open.
Thank you. I've got a question on the middle market opportunity. How quickly do you expect it to be distributed in a meaningful way? Which regions is the opportunity most prevalent? And how much of the costs are in the run rate today as far as the initiative launch is concerned?
I think for the mid market, if you look at where we are at the moment is that we saw mid market merchants already onboard on our platform. And what we said, okay, this is a very logical next step to go from them and make a couple of our a part of our product offering a better gear towards them. So we improved the customer area. We launched an SDK for mid market merchants. And as a next step, we're going to our marketing and sales team.
So if you think about how it exactly could pan out in the future, it's too early to tell, but we're seeing a lot of traction here in Europe, and we expect also in other regions around the world to get traction in the near future. The thing is, and if you think about the type of expenses that we have, it's mainly the sales force hunting new mid market customers. It's the same platform, so there's no additional platform cost. And I think the improvements that we make to benefit mid market is something that also others benefit from. So it's not an investment that is lost.
It's always a positive for us.
Follow-up questions, just 2 on model related questions. 1, were there any specific FX impacts to the that were that impacted the numbers? And then secondly, could you just talk about how you philosophically think about free cash flow and the uses of capital? Thanks.
Well, I think if you
look at the FX, the FX income is growing based on the growth of the company, so no specific new situations or developments. And if you think about excess cash, I think we are in a very healthy position. We invest a lot in the growth of the company. We have a dividend policy where we will not pay out dividends until further notice. And we think it's a very healthy way of building a company at this in this high growth pace.
Our next question comes from the line of Andy Lachspar of Kempen and Co.
Most of the questions have been answered before. I just want to know about the unified commerce and market segment. Can you just play some sort of geographical overview of what geography that you're growing in currently? And what is the spread over here?
I'm sorry, I got the first part. The question about the could you repeat it please?
Yes. So about the mid market segment and the unified commerce, you could give a geographical breakdown of this one?
For the unified commerce, it's always limited to where we can accept point of sale transactions. So that's a growing footprint, which started off in Europe and then rolled out also in the U. S. And we are expanding that which is due that we added for example Singapore to that. That's ongoing.
In the mid market, there are specific markets where we saw that merchants were signing up which didn't have all the corporate aspects of our large merchant base and where we felt that we could make changes to the product and make it easier. Again, to what Bingo said, for us, these are changes to a platform where which are limited to making the interface more accessible to not specific finance people, but more to business oriented people. We don't need to change the product. We need to make it easier to connect to. And those are the things which we have done.
So the efforts are minimal and it gives a much easier path for merchants to sign up. We will commit ourselves to certain regions.
Okay. Thank you very much. Thank you.
And our next question comes from the line of Atitja Machinco of Bank of America Merrill Lynch. Please go ahead. Your line is open.
Yes. Good afternoon. Thanks for letting me go. I had four questions. Firstly, just on the customer wins in the half year, could you give us some color as to what level of volumes these customers can bring as a ramp in the medium Secondly, can you give us an update on the construction of faster settlement services?
How is that going? And what is the level of traction you're seeing? And then I have 2 more follow ups. All right.
Customer volume, the size of the customers that we sign, we don't like to base. So we never try to get our merchants into a contract where they commit themselves to do very quickly full rollouts. Sometimes we see it happening. But what it means is we have contracts where we need to outperform the competition to get full volume. So for all those contracts, it's in general, it's where that is up to the merchant how much volume they give us.
And we have a track record of increasing the share of wallet within those merchants. Faster settlement, yes, it's something which we are looking at. It's very early days for that. So there's no guidance on that.
Okay, understood. And then just looking into the second half, in the first half, you saw very strong growth in North America and APAC. How should we think about growth on a geographical basis? Will it be similar to what we saw in the first half? Do you expect some changes in terms of the geographic mix?
And then I just quickly on the EBITDA margins. Working backwards from your first half numbers, it looks like your margins went down on a sequential basis from 1Q to 2Q. And I know it's different from gross margins on a quarterly basis, but I wondered if you might be able to give us some color on how you're thinking internally about margins into the second half?
Okay. I'd like to look at net revenues and where they come from going forward. Of course, the growth in APAC and North America is very promising, and we see no reason why that would change. Of course, in Europe, we started the company. So there, we have a new base, and you can see that relative growth numbers are a bit lower than North America.
But I think it's fair to assume that, that mix will not change significantly. Then only with our margin, we can see building the company. So if you're asking how I look at my monthly financial results, I only look basically at last at EBITDA. I first look at sales pipeline and net revenues, but before I look at actually the EBITDA, the reason for that is that most of our cost is related to the team, and we're very much talent focused. Like we said, we want to make sure that we hire the right people.
And if we see the opportunities to hire great talent, we hire them. And that could cause, of course, a bit more cost in a certain quarter. We think it's a long term, if you look at the scalability of this platform, most of our cost is to deem The revenues or the volumes is basically unrelated to the size of the team. So you see a lot of potential operating leverage in this business, and that's what we focus on. And that's also basically the case for the second half of the year.
If we see great talent to be added to the team, we will. We certainly think that we will benefit from economies of scale.
Okay, understood. Thank you.
And maybe to add one point. In Q2, of course, and Q1, we had one off costs related to the IPO between €3,000,000 and €4,000,000 So that's also impacting
EBIT. Understood. Thank you. Thank you.
Thank you. Our next question comes from the line of Alexander Foehr of Exane BNP Paribas. Please go ahead. Your line is open.
Hi, good afternoon. Thanks for taking my question. I've got 2 actually. The first one is in terms of value added by region. I mean, could you help us understand the change in the value chain you provide in North America over the last 12 months.
The reason I'm asking is because it feels like your cost of sales in North America is cutting down a lot. So I was just wondering if you're having more and more acquiring from your customers over there. Is there any obvious explanation that we should think of? And the second question is in terms of the fee or being sponsorship fee that you might have incurred in H1 2018. I suppose there would be things related to Canada, for instance, anything like that was quite a bit, which you expect the trade to keep creeping up over H2?
Thank you very much.
Okay, thank you. Let me take one step. If you look at our business model and how we've started the company, we started off in Europe with our own Visa and Mastercard licenses. In some regions of the world, when we saw that we were successful in Europe, we started a few years later, for instance, in North America, where we had a rent to bin setup, where we rent to bin from another financial institution. That's the reason why the growth in North America also started later.
So it takes a bit more time to build that market and to get more volume on the platform. And that's also why you see that net revenue still has a lower base compared to Europe. We have a lot of expectations, of course, of the region given the market size. Net revenue there is key for us because if you look at how our business model works, how we support gross revenues, it includes the interchange and the scheme fees. And the interchange and scheme fees really vary per region.
So the interchange fees in North America are much higher than, for instance, in Europe. And that's why you see a real difference in regions on the growth level versus the net level. And that's also why we manage the company on a net level.
Then if you look at
the geographical splits that we provided for net revenues, we always look at the billing address. So let's take a very international company that we work with in many regions. Then we send several invoices, an invoice for the North American business, an invoice for the European business and the European invoices recognized as European revenue, while the North American invoices recognized as North American revenue. So that's also something, I think, to understand. So the main driver is where we have this full stack platform.
And I think that's where the good news also kicks in because we have that full end to end platform now in Europe, U. S, Brazil, Australia, Singapore. And because we have that opportunity, we're able to grow the volumes with our merchants. It's the same platform for the moment that they are live in Europe. They can easily also turn on the U.
S. And for the regions where we have to work with a BIM partnership and then relating to your second question, we pay some fees, which is on a per transaction level, but I don't expect any additional implementation fees at the moment.
As that was the last question, I'd like to hand over to Ingo for closing comments.
I would like to round up this earnings call by thanking you for participating. Should you have any additional questions, please reach out to our Investor Relations team to further help you. Thank you very much.
Ladies and gentlemen, this concludes the ending half year twenty eighteen results call. You may now disconnect your line. Have a nice day.