Management
Report
Financial
Statements
Other
Information
Message from the CEO
_____________________
6
Summary
_______________________________
8
Description of business activities
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10
Strategy
_______________________________
11
Discussion of financial results
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15
Financial objectives
______________________
19
People & culture
_________________________
21
Social responsibility
______________________
31
Compliance
____________________________
39
Risk management
_______________________
47
Statement by the Management Board
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66
Corporate governance
____________________
71
Report of the Supervisory Board
____________
80
Compliance with the Dutch Corporate
Governance Code
_______________________
86
Remuneration report
_____________________
88
Financial statement table of contents included
on page 102
Governance
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5
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69
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101
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163
Adyen
Annual Report 2020
page 4
At Adyen, we’ve really been encouraged to make
blocks in our calendar and take time for ourselves
to breathe and recharge. This past year, my team
especially got creative in scheduling activities just
for the sake of collaborating on something fun that
also keeps us productive.
Arielle, Business Controller
—
Adyen
Annual Report 2020
page 6
Dear Shareholders,
In preparation for this note, I read last year’s message. It was a synopsis
of the previous decade and what it meant for Adyen. Little did I realize at
the time that we were on the precipice of great change to all of our lives.
COVID-19 has dominated the last year, also for Adyen.
The week that the news of the pandemic broke through into the
mainstream feels like a long time ago now. I remember we quickly pivoted
from ‘wait and see’ to ‘this requires immediate attention and action’.
Not a week went by between our first discussion on the topic and sending
everyone home indefinitely.
It was a shock for everyone. We’ve built a culture over the years of using each
other to sharpen our ideas — and we saw early on that it’s much easier to walk
to someone’s desk than it is to give each other a call. It took us a while to find
our groove, ensuring everyone had a comfortable working-from-home set-up,
and helping each other prioritize between work and life commitments.
On a positive note, one of the most remarkable things we noticed quickly is
that once everyone on the team was separated by screens, colleagues from
around the world actually felt a lot closer. Replacing face-to-face interactions
with Zoom meetings felt like an equalizer. It no longer really mattered
whether you were in Amsterdam or in Singapore, which made discussions
much more inclusive. Discussing a matter face-to-face in Amsterdam is
limiting in that sense — in the current environment everyone can just ‘click in’
team members from around the world on Zoom.
Staying the course
page 7
Adyen
Annual Report 2020
The pandemic also made us realize how global our scale is at this stage.
COVID-19 didn’t hit equally everywhere, we saw our China team return to
the office, and to travel, as houseplants in European offices went weeks
without water during the first wave in Europe. There is no single shared
reality of what the pandemic has meant to our teams around the world.
The business didn’t lose much momentum, despite this drastic shift. We
have a long-term horizon, we continued to recruit new team members,
and our data centers run remotely. Business as usual for us is adapting
to changing circumstances. Naturally, there were some initial delays
in the rollout of projects, mostly on the merchant end, but nothing that
significantly impacted the business. This is also why we chose to shift to
quarterly reporting for the year, something that is not part of our long-
term approach, to provide transparency around the resilience of the
business during a crisis. We continued to win new business, and to grow,
also in this new environment.
While our own business proved highly resilient during the pandemic,
our merchants’ realities were often very different. The initial impact of
COVID-19 resulted in many sobering conversations. For some sectors -
e.g. in-store retail or airlines - the difference was night and day. We made
sure to keep our focus on helping our merchants in these segments, as
businesses took a nosedive there — with no end date in sight.
That’s a topic that we kept front of mind too: the lack of an end date to the
pandemic’s impact. The danger in a situation like this is to focus on a set
end date, only to be left disappointed when it inevitably shifts. During this
crisis, we focus on our merchants’ problems, on our team’s mental health
and getting out of this as a stronger team — no matter when that end date
will come. This pragmatic approach allows us to keep our speed while the
world around us is changing — we went online and operated as if we had
always run the company that way, and will be able to for as long as we need.
Of course I miss being around the team too. Bumping into people, traveling
to different Adyen offices around the world and meeting our merchants. It’s
an important part of what made the job so much fun — that energy. That’s
something I hear back from many people too, which makes me confident
that we will succeed in coming out of this as a stronger team.
This past year, a year in which, paradoxically, words like new normal
became ubiquitous, was decidedly abnormal. Now, with vaccine roll-outs
across the globe, we are still approaching this as if the end is not yet near,
but I am willing to say that I’m optimistic about the upcoming year and
what it will bring for Adyen.
We’ll stay the course, as we did this past year, and continue to adapt to the
world around us.
Pieter
page 8
Adyen
Annual Report 2020
. . .
*
Historical figures have been adjusted since prior publications of results. For a full reflection of restated figures
since 2018, please refer to note 1.3 of the Consolidated Financial Statements.
Processed volume Net revenue * EBITDA *
Navigating the global regulatory landscape
» Helping our merchants accommodate to the ever-increasing complexity in the regulatory landscape
» Scaling the compliance and integrity functions to support our growth in a complex regulatory space
» Announced Alexander Matthey as CTO and Caoimhe Keogan to join the Supervisory Board
Positively contributing to planet and society
» Offsetting our CO
2
emissions by supporting environmental sustainability projects
» Volunteering globally to provide essential supplies to those in need
» Our checkout product feature, Giving, processing donations globally
Profitable growth amid global pandemic
» Well-diversified merchant base contributing to business resilience
» Acceleration of merchants opting for a unified commerce solution
» Launched IdentityRisk, Network Token Optimization, and mobile Android POS devices
Staying connected as a global team
» Scaling the team to 1,747 FTE in 24 offices in line with our long-term growth approach
» Prioritizing work flexibility and mental health throughout the COVID-19 pandemic
» Onboarding new hires while focusing on the Adyen Formula to safekeep the culture
Margin 59%
.
.
+27%
yOy
.
.
+28%
yOy
.
.
.
+27%
yOy
.
.
Adyen
Annual Report 2020
page 9
A big reason why I work for Adyen is because
of the Formula which keeps us close, even with
colleagues around the world. If all I cared about
were projects, I could work for any other company,
but I care a lot about the spontaneous ideation that
happens in our offices, where everyone’s opinion is
welcomed, no matter what team you’re on.
Jeroen, Designer
—
page 10
Adyen
Annual Report 2020
Description of
business activities
Adyen operates a global payments platform, integrating the full payments
stack — gateway, risk management, processing, issuing, acquiring, and
settlement. Adyen Issuing was launched in 2019, and enables merchants
to provide virtual and physical cards to their customers. Issuing meets
various merchant needs, as it gives them the ability to issue cards for
a variety of uses cases, either online, in-app, and in-store. The Adyen
offering includes a common back-end infrastructure for authorizing
payments across merchants’ sales channels, as well as feature-rich APIs.
The platform services a range of globally-operating merchants across
different verticals, connecting them directly to Visa, Mastercard, and
many other payment methods. Additionally, it provides a high level of
reliability, performance, and data insights.
For this service of payments processing, Adyen earns processing and
settlement fees — gateway and acquiring services, respectively — as
well as some smaller fees related to products or functionalities aimed at
reducing complexity and friction for merchants. For a full breakdown of
fees, refer to Note 2 ‘Revenue and segment reporting’ of the attached
Consolidated Financial Statements for more information.
Merchant
Creditcard
schemes
Gateway Risk management AcquiringProcessing Processing Risk Issuing KYC Printing Authentication Card holder
Adyen Issuing
Figure 1
The Adyen value chain
Adyen
Annual Report 2020
page 11
Strategy
Building with our merchants’ needs in mind is central to our business
strategy. Most of our yearly growth (consistently over 80% from each half-
year period since our IPO in 2018) comes from the growth of merchants
already on our platform when the period began. As such, we measure
success by how we grow together with our merchants.
We are always focused on solving problems for our merchants, especially
as they expand to new geographies and channels. Organically, this has
resulted in Adyen’s culture of incorporating bottom-up workstreams.
The Adyen organization is divided into workstreams, which are comprised
of product, technical, and commercial staff. These workstreams work with
our merchants in a co-creative manner and are thus able to efficiently
prioritize their needs. Company-wide strategy is set on the basis of these
workstreams’ annual objectives, which are almost always subject to change,
ensuring our speed and agility are maintained as we grow.
These workstreams collaborate with our merchants to solve for their
evolving needs. To better serve them, we have identified the following
growth pillars, which help us to identify and categorize our merchants’
needs based on their size and sales channels.
Enterprise
The enterprise segment (e.g. large international businesses) is what the
Adyen platform was built for from day one. The fact that our growth comes
largely from existing enterprise merchants, paired with very low volume
churn, illustrates our success in this space. The more recent evolution in this
segment is the rise of platform-based business models, allowing us to reach
the long tail of the market through enterprise-sized platforms who power
tens of thousands of small businesses.
We see the following as key drivers of future growth in enterprise:
1. Existing merchants: Our merchants' organic growth combined with
expanding our relationships with them (i.e. adding new channels and/
or expanding across geographies) continues to drive a majority of our
growth. This leads to a deepening of our product offering, as well as
an increase in our proportion of transaction volume with our current
merchants (i.e. growth of wallet share).
page 12
Adyen
Annual Report 2020
In every tragedy, it helps to focus on opportunities.
This has been an opportunity to see and guide my
children's learning — it’s an opportunity for them to
observe my spouse and I at work. An opportunity
for Adyen colleagues to connect at a deeper, more
personal level than we could at the office.
Sunil, VP of Product
—
Adyen
Annual Report 2020
page 13
2. New merchants: Adding new merchants to our enterprise portfolio is
another avenue for growth. We have a direct sales approach focused on
onboarding new merchants in all geographies where we are present and
verticals we are targeting, both of which are constantly expanding.
3. Capitalizing on evolution in the industry: Our strength is in our speed and
ability to react to market developments that can help our merchants due
to the way our technology and teams are structured. This ability to adapt
to market shifts gives our merchants an advantage and therefore is an
opportunity for us, especially in an ever-changing environment.
Unified Commerce
Shifting consumer behavior is driving merchants’ desires to present a
single brand across all sales channels (i.e. offline and online). In industries
such as retail, hospitality, and quick-service restaurants, merchants can
no longer afford to have only one option. Our unified commerce offering
is currently focused on providing merchants in verticals such as these
the flexibility to shift seamlessly between sales channels and give their
customers a unified experience.
We believe our success in this space is due to the following:
1. Holistic view of payments: The idea of having a unified, single platform
to process all payments, irrespective of channel, is foundational to
how we have built our technology since the beginning. This approach
allows the collection of data that can deliver unique shopper insights
and simultaneously help to combat fraud. Our back-end infrastructure
page 14
Adyen
Annual Report 2020
for processing and settling payments is the same across all channels,
providing merchants with a holistic overview of all shopper transactions.
2. Seamless shopper journeys across channels: The Adyen platform
enables merchants to offer a uniform experience to shoppers across
all sales channels. This allows merchants to significantly improve the
quality of service to their shoppers — for example, through one-click
payments online or on mobile for shoppers recognized from in-store
visits, improved offer targeting, and through facilitation of home delivery.
With these shifting shopper expectations, businesses are increasingly
pushed to change their approach and meet market demand. We are very
well-positioned to cater to these emerging needs now and in the future.
3. Increased focus on point-of-sale (POS): Since the launch of our POS
offering in 2015, we have seen steady growth mainly due to the outdated
infrastructure in the POS landscape still in place all over the globe.
Because of this, merchants see vast improvements in performance when
implementing our technology. On top of this and of particular importance
due to the COVID-19 pandemic, we have been well-equipped to service
our merchants with safe operations as all of our POS devices facilitate
contactless payments.
Mid-market
Historically, we built the Adyen platform focused on the needs of
enterprise merchants. Now, we are broadening our reach and are ready
to support the growth of businesses in the next adjacent segment to
enterprise, mid-market.
Every merchant on our platform has access to the same performance and
functionality as some of the world's largest businesses. This makes the
platform attractive to both large domestic merchants and local merchants
with international ambitions, allowing them to effectively future-proof
their payments.
With 24 offices worldwide, our continuously expanding global footprint
has been able to provide local presence, payment methods, and expertise
in key markets. This allows us to partner with ambitious businesses
at a relatively early stage of their growth. These businesses will avoid
being hampered by the complexity in business operations that so often
comes with growth — such as adding additional payments channels, or
expanding into new regions.
Adyen
Annual Report 2020
page 15
Discussion of
financial results
The business has proven resilient in 2020. Despite the continued impact
of COVID-19 on the world economy, we experienced substantial growth
as online retail and digital goods volumes surged while stores closed, and
airplanes were grounded. In the ever-shifting reality of a global pandemic,
we focused on meeting our merchants’ needs.
Business resilience and strong
volume contributions amid a
challenging year
Due to strong volume contributions from across our well-diversified
merchant base, the business has proven resilient in 2020. We saw
processed volume for the full year grow at 27%, totaling €303.6 billion.
POS processed volume for the year was €32.2 billion and 11% of total
processed volume, up from €29.2 billion and 12% of total processed
volume in 2019. Lockdown restrictions impacted in-store volume
throughout the year.
54.2
60.1
Latin America
Asia-Pacific
20202019
North America
20202019
424.9
3 47. 6
65.0
50.2
Europe
20202019
20202019
133.0
80.3
page 16
Adyen
Annual Report 2020
Solid net revenue growth
continuing to diversify regionally
Net revenue was €684.2 million for the year, up 28% year-on-year. On net
revenue growth, North America (66%) outpaced APAC (29%), Europe (22%),
and LATAM (11%). The delta in growth rates between regions is mainly
driven by the impact of COVID-19 on our merchant mix.
The business’ resilience was fueled by the continued diversification of our
merchant base across regions. On regional net revenue contributions:
Europe remained the largest contributor, representing 62% of net revenues
– followed by North America (19%), APAC (9%), and LATAM (9%).
Take rate was 22.5 bps, up from 22.3 bps in 2019. Take rate continues
to not be a driver for us, as the low cost of operating the Adyen platform
allows for a focus on incremental net revenue.
Figure 2
Adyen’s net revenue in key regions (by billing address in EUR millions) in 2019 and 2020
Adyen
Annual Report 2020
page 17
Investing in long-term growth
Total operating expenses were €310.3 million in 2020, up 29% year-on-
year, and representing 45% of net revenue. This increase is mainly driven
by employee benefits as we continued to grow the Adyen team. Employee
benefits were €180.0 million for the year, up 47% from €122.4 million in 2019.
Other operating expenses were €101.9 million in 2020, up 7% from €95.1
million in 2019. Of these, sales and marketing expenses were €39.6 million,
up 23% from €32.3 million for 2019 as we continue to invest in brand
awareness and lead generation across regions. When global lockdown
restrictions went into effect, our focus shifted from physical events to
hosting online marketing campaigns.
EBITDA displaying continued
profitability while scaling Adyen
EBITDA for full year 2020 was €402.5 million, up 27% year-on-year from
€316.9 million in 2019. EBITDA margin came in at the 59% in 2020, the
same percentage as for full year 2019.
Net income impacted by other
financial results
Net income was €261.0 million for 2020, up 11% from €234.3 million in 2019.
Full year net income was impacted by the movement in other financial
results, largely caused by the increase in value of the derivative liabilities
as a result of the increase in the Adyen share price.
Solid free cash flow conversion
Free cash flow conversion was €371.1 million in 2020, up 29% from €287.1
million in 2019. Free cash flow conversion ratio was 92% for the year, up
from 91% in 2019.
Low CapEx due to the scalability
of the Adyen platform
For 2020, CapEx were 3% of net revenue, 14% down from 2019, primarily
due to the low cost of operating the single platform.
Adyen
Annual Report 2020
page 18
Setting some rules for myself helps to maintain
a healthy balance — for example, I don’t move my
laptop off my desk, which makes its sole purpose
to be my workspace. Then when I leave the desk,
it’s easier to switch my mind to being at rest. I also
developed a hobby of taking care of plants — it’s
soothing for your eyes and is relaxing in these times.
Manavi, Software Developer
—
page 19
Adyen
Annual Report 2020
Financial objectives
We have set the following financial objectives
1
, wherein EBITDA margin
guidance has been updated since prior publications. Other objectives remain
unchanged since IPO.
Net revenue growth: We aim to continue to grow net revenue and achieve
a CAGR between the mid-twenties and low-thirties in the medium term by
executing our sales strategy.
EBITDA margin: We aim to improve EBITDA margin, and expect this margin to
benefit from our operational leverage going forward and increase to levels above
65% in the long term.
Capital expenditure: We aim to maintain a sustainable capital expenditure level
of up to 5% of our net revenue.
On EBITDA margin — given the substantial growth and operating leverage we
have seen since IPO, combined with our continued focus on the scalability of the
platform, we expect this upward trend to continue to levels over 65% in the long
term. We are still at an early stage of building Adyen, and view the short-term
flexibility to invest in longer-term opportunities key to reaching this objective.
1
Adyen has not defined, and does not intend to define, "medium term" or "long term”. Adyen's medium-
term and long-term financial objectives should not be read as forecasts, projections or expected results
and should not be read as indicating that Adyen is targeting such metrics for any particular year, but are
merely objectives that result from Adyen's pursuit of its strategy. Adyen's ability to meet its medium-
term and long-term objectives is based upon the assumption that Adyen will be successful in executing
its strategy and, furthermore, depends on the accuracy of a number of assumptions involving factors
that are significantly or entirely beyond Adyen 's control and are subject to known and unknown risks,
uncertainties, and other factors that may result in Adyen being unable to achieve these objectives.
Adyen
Annual Report 2020
page 20
We have always built the team with a focus on hiring
the sharpest minds — knowing that we get the best
results if we challenge each other's ideas. This year,
we became even more conscious of the fact that
inclusion is not something that just happens, but
something to actively design for.
Pieter, Co-founder and Chief Executive Officer
—
page 21
Adyen
Annual Report 2020
People & culture
Building the Adyen team for the
long term
To us, winning is more important than ego — we value people for their
skills and what they bring to the company. When building for long-term
success, we need a team that comprises different perspectives to
challenge groupthink.
The way we work with our merchants, and as a team, is guided by the
Adyen Formula. Consisting of eight guiding principles, the Formula
describes our culture and touches upon every aspect of the business.
The Formula fosters speed, which is the foundation of our company.
We think fast. We work fast. We launch fast. The eight principles that make
up this Formula are not permanent — but are constantly evolving to keep
pace with our merchants, our business, and the growth of the team.
The Adyen Formula leads how we recruit, grow, and retain colleagues
around the world. While building this business for the long term, we believe
that maintaining our culture is critical to its continued success.
Adyen
Annual Report 2020
page 22
How talent grows with us
We don’t do pre-set career paths at Adyen. You join, learn, and grow in the way
that best fits you and the business. We look for the right learning opportunities
on an individual level. At Adyen, everyone creates their own path.
Our rule of thumb is to promote internally. Our talent is key to our growth —
and we want them to grow with us. The following initiatives help us to ensure
we scale the Adyen culture as our company grows, while also sustaining our
existing team:
z The Adyen Way of Leading Teams training program provides team
leads with board-led training sessions that teach the mechanics and
philosophy of the Adyen leadership style.
z We offer a wide range of trainings for all employees, including career
development trainings, an international exchange program that actively
encourages people to work across Adyen offices in order to gain
experience and train across teams, geographies, and cultures, and the
Adyen Sales Academy, which aims to further train sales staff across the
regions wherein we are active.
z We run a number of trainings that relate to running Adyen in a safe
and secure way — including mandatory data privacy, security, and
compliance trainings for all staff members.
Formula
The
Adyen Formula
We build to benefit all merchants (not just one)
We make good choices to build an ethical business
and drive sustainable growth for our merchants
We launch fast and iterate
Winning is more important than ego; we work as a
team — across cultures and time zones
We don’t hide behind email, instead we pick up
the phone
We talk straight without being rude
We include different people to sharpen our ideas
We create our own path and won’t be slowed
down by “stewards”
page 23
Adyen
Annual Report 2020
Working as a team during
COVID-19
When we had to move to a working-from-home setting quickly in March,
we were able to move all our activities online after global lockdown
restrictions went into effect. The onboarding and training of new joiners
took place in a work-from-home setting for the majority of the year through
virtual company introduction sessions and online onboarding programs.
In order to account for the lack of in-office interaction and inter-office
travel, we offered a myriad of extracurricular programs, including weekly
educational deep dives into topics led by experts in their fields, ranging
from engineering to social sciences.
During a challenging year, the team has proven highly flexible towards
our merchants and each other. This flexibility will remain invaluable, no
matter what the upcoming years will bring. The shift towards an online
environment also brought valuable learnings. We worked increasingly as a
global team — with videoconferencing acting as an equalizer, it mattered
less whether you were working from home in Singapore or Amsterdam. We
are aware that the current situation is likely to persist for a longer period,
and see the pandemic and its impact on business around the world, our
business and the team as a marathon, not a sprint.
page 24
Adyen
Annual report 2020
“What I truly see when I walk through our offices? That
inclusion is in our DNA — it’s not a choice or option.
There is no room for ignorance. The team consists of over
100 nationalities and the LGBTQ+ community is very
open. We have 24 offices, but are united as one team.
We are all people of Adyen and that is our shared pride.”
Roy, Office Manager
—
Diversity, Equity, and Inclusion
Key to our long-term success is cultivating an inclusive environment — one
designed with equity in mind. This philosophy is also reflected in the Adyen
Formula, wherein we stress the importance of involving others to sharpen our
ideas. The broader the set of philosophies the team encompasses, the better we
can foster innovation and avoid groupthink.
In 2020 we founded the Diversity, Equity, and Inclusion (DEI) working group —
a team of global Adyen colleagues that help identify key areas to improve on from
a DEI perspective. Ever since we founded Adyen, we focused on cultivating a
culture of diversity and inclusion. In 2020, we added equity as a central cultural
value to our approach of building the team. To us, equity means that there’s no
one-size-fits-all approach to building a team - and that each team members’
professional and personal needs should be addressed on an individual level.
We view fostering a culture of Diversity, Equity, and Inclusion as a responsibility
of the entire Adyen team, and for which we hold ourselves accountable. We need
everyone at Adyen to contribute for us to be able to build a team with Diversity,
Equity, and Inclusion at its core.
page 25
Adyen
Annual Report 2020
Figure 3
2020 FTE growth
North America
Boston
4
New York
53 179
San Francisco
Toronto
7
Latin America
Mexico City
8
São PauloSão José
17 72
Asia Pacific
Hong Kong Melbourne Mumbai
3
2
4
Shanghai Singapore Sydney
17
96
26
Tokyo
7
Amsterdam
Total FTE
Europe
London
1,011
1,747
84
Brussels
6
Berlin
36
Madrid
22
Milan
11
Manchester
7
Munich
6
Warsaw
1
Stockholm
25
Paris
43
Adyen
Annual Report 2020
page 26
It’s because we’re all in this together,
including our merchants, that we’re
able to see more color in each others’
lives. Seeing how we’re all struggling
to navigate this new normal has
allowed us to get to know people in a
different way, and has improved the
quality of our relationships.
Wouter, Implementation Manager
—
page 27
Adyen
Annual Report 2020
I recently moved to Amsterdam to
join Adyen, and there were some
challenges to overcome at first — for
example, I didn’t have Wi-Fi or a proper
home office set-up yet. Thankfully, the
virtual onboarding went super well and
I've been fortunate to meet some of my
teammates in person. I'm excited to
meet many more in the future.
Juanma, Motion Designer
—
Adyen
Annual Report 2020
page 28
Designing for inclusion
Based on the DEI working group’s observations, we broadly assessed and
improved several HR processes during the year. In recruitment, we ensured
all job postings are written in gender-neutral language, and focused
intently on increasing our accessibility for historically underrepresented
groups, especially at the earliest stage of the recruitment process, and
implemented company-wide unconscious bias trainings.
In the interviewing process, we focused on minimizing biases through
balanced gender representation in interview panels, and by developing
interview structures that hone in on skills and experience — consciously
veering away from selecting team members based on subjective
personality and/or character traits.
Gender balance is an area in which we actively work to do better, with
current metrics at 34% female team members and 29% of team lead
positions filled up by women, and 16% and 40% in our Management Board
and Supervisory Board, respectively.
Grassroots
With a team consisting of over 100 nationalities and perspectives from
all over the world, there is a lot to learn from each other. Over the course
of building the company, we have seen many employee resource groups
organically emerge. We actively support these bottom-up initiatives, as this is
how most initiatives originate at Adyen — from the company-wide strategy on
down. One example of these is the LGBTQ+ community, Adyen Pride.
“Diversity is one of the core values at Adyen and it is so
crucial that everyone here can express themselves. Here at
Adyen, we offer a safe, supportive environment. We hear all
the different voices and embrace the openness. That is the
community I need to do something for, that is Adyen Pride.”
Fan, Account Manager
—
page 29
Adyen
Annual Report 2020
Inclusion policy
We treat each other fairly and acknowledge differences in individual needs —
regardless of gender, age, race, nationality, beliefs, and/or sexual orientation.
We value skills, regardless of where they have been honed. At Adyen,
inclusion means more than just acceptance. Our approach to creating an
inclusive environment is guided by three core principles that center around
equity — Equal Pay, Equal Chance, and Normal course of life.
z Equal Chance: We acknowledge that there is always the possibility of
unconscious biases playing a role in how choices are made. Therefore,
we train our colleagues to recognize and understand what these might
be and how we can avoid them playing a role in the business decisions
that we make. This ensures that everyone has the same opportunity to
join Adyen and to grow with us as we continue to change the payments
industry with the best talent out there.
z Equal Pay: Same role, same pay — we value all perspectives, so we
see no reason to reward one more than the other. We’re committed
to ensuring equal pay, and make sure this is audited annually so that
we know we’re always upholding this standard. This year’s results
confirmed equal pay amongst genders, globally.
z Normal course of life: There is no one-size-fits-all approach when
dealing with life events such as starting a family or coping with
challenging times that we all inevitably face. We don’t believe in strict
and rigorous policies to guide these themes — we believe in helping
people to navigate these moments. As everyone’s life situation is
different, we maintain a tailor-made approach and strive for flexibility.
Fostering equity, this tailor-made approach has proven highly
important in dealing with the personal circumstances of all team
members on the individual level during the COVID-19 pandemic.
“At Adyen, we are empowered and supported to make
a difference within our company, and I feel lucky for
being able to contribute to that difference in our pride
communities. Adyen Pride is all of our pride. It is and
definitely feels like one community without borders.”
Sergen, Internal Auditor
—
Adyen
Annual Report 2020
page 30
My apartment used to be my refuge, but now that
it’s also my place of work, I go for daily walks and
make the streets and parks of Amsterdam my new
refuge. I’ve grown to really love this routine, and
have learned that whatever happens in the future,
it’s better to focus on what I can control, rather than
waiting for what’s to come.
Tatiana, Software Engineer
—
page 31
Adyen
Annual Report 2020
Social
responsibility
At Adyen, we make good choices to build an ethical business and drive
sustainable growth for our merchants. As such, sustainability has always
been ingrained in everything we do.
We acknowledge that our business contributes to a negative impact on the
environment. In recent years, we took on our responsibility when it comes to
our impact on planet and society, and continue working towards becoming a
more environmentally and socially conscious business, while also supporting
our merchants who share these goals.
To accomplish this, we have established a two-pronged approach — we take
responsibility for our own business operations and we leverage our existing
technology to enable merchants and shoppers to contribute positively to
society and the environment.
It starts with us. Internally, we have our Footprint and Local Initiatives
programs, wherein we take responsibility for the negative impact that
comes with being a globally operating business.
In the Footprint program, we acknowledge that growing a company and
supporting employees in offices around the world leaves behind a footprint.
Consequently, proactively making decisions that compensate for and work
towards reducing our negative impact on the environment has become our
business as usual. In 2019, we have become a carbon neutral company by
offsetting all CO
2
emissions from our activities since foundation. Our strategy
to offset emissions by investing in environmental sustainability projects has
allowed us to maintain our carbon-neutral status, which we renew annually.
The three programs (Adyen Impact, Footprint, Local Initiatives) that
together make up our social responsibility plan are strongly aligned
with the United Nations’ Sustainable Development Goals (SDGs). We
acknowledge the importance of the SDGs as key metrics in the long-term
prosperity of people and planet.
Adyen
Annual Report 2020
page 32
In the Local Initiatives program, we enable and empower our employees
to address locally relevant matters. Over the course of 2020, we expanded
our local initiatives to strengthen our culture of giving back to our
communities. This year, we organized more initiatives across regions to
support a broad range of causes.
Externally, our Impact technology leverages the Adyen platform and helps
our merchants make a positive social and environmental impact. This year
we expanded our Impact product portfolio by building Offsets in Checkout, a
feature of our Checkout product that allows shoppers to carbon compensate
for their purchases. By working together with our merchants and partnering
with charities, we can have a long-term, scalable, and multiplied impact.
Being a tech company in the payments space, we want to make responsible
choices that contribute positively, one payment at a time. Take a deeper look
at how our Footprint, Local Initiatives, and Impact programs help make that a
reality in the following sections.
Footprint
We believe that limiting our environmental impact is part of our license
to operate in today’s society. The more we grow at Adyen, the more we
must consider our impact on the planet. This year, we grew from the
solid groundwork we laid in 2019 and started helping our merchants take
responsibility for the impact of their operations as well by building our
Offsets in Checkout product.
Carbon Neutrality
We proactively work on expanding our sustainability efforts to ensure
we take responsibility for our carbon footprint. We annually conduct
a greenhouse gas (GHG) audit, which measures the amount of CO
2
e
emissions for which we are accountable. Through our partnership
with South Pole, we are able to offset these emissions by supporting
environmental sustainability projects.
To precisely measure Adyen’s GHG emissions, we follow the three scopes
identified by the Greenhouse Gas Protocol: Accounting and Reporting
Standard
2
. Scope 1 and 2 emissions are calculated using data from our
offices across the world, reflecting how we heat and cool our offices
along with the electricity we use. Scope 3 emissions stem from mileage
(air travel and ground transportation), data center energy use, hotel stay
duration, spend on purchased goods, and outsourced activities. To go the
extra mile, we decided to include energy usage derived from the use of
our products: the transactions our merchants’ shoppers carry out on POS
terminals, online and mobile payments.
2
South Pole has calculated Adyen's GHG
footprint for 2019 and 2020 following the
"The Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard -
Revised Edition' and the complementary
'Corporate Value Chain (Scope 3)
Accounting and Reporting Standard'
procedures and principles.
page 33
Adyen
Annual Report 2020
Scope 1 223.62 tCO
2
e
Scope 1 emissions are emissions from sources owned or controlled by us —
such as refrigerants used to heat or cool our offices.
Scope 2 2,341.30 tCO
2
e
Scope 2 emissions cover indirect emissions, such as purchased electricity for
our buildings. To make it tangible: when charging a smartphone at one of our
offices, these emissions tie into scope 2.
Scope 3 6,064.85 tCO
2
e
These emissions stem from activities that are not directly owned or controlled
by Adyen — think of air travel, hotel stays, employees’ homes, and data center
energy consumption.
Figure 4
Adyen’s 2020 operational GHG emissions, measured in tCO
2
e
3
3
The measure for our greenhouse gas
emissions is tonnes of Carbon Dioxide
Equivalents (tCO
2
e) — covering the
six greenhouse gases defined in the
Kyoto Protocol by the United Nations
Framework Convention on Climate
Change. These six gases are carbon
dioxide (CO
2
), methane (CH
4
), nitrous
oxide (N
2
O), hydrofluorocarbons (HFCs),
perufluorocarbons (PFCs) and sulphur
hexafluoride (SF
6
).
COVID-19 impacting our environmental footprint
Normally, the majority of our company’s emissions are due to travel from
visiting each other in our 24 offices and keeping them running. However,
due to the pandemic, we reduced our overall tCO
2
e as reflected in the
audit results above. In gathering these results, we decided to include an
estimation of increased CO
2
emissions coming from our employees’ homes.
As such, we remain a carbon neutral company by offsetting all emissions
from our business operations, including the impact of home offices.
Adyen
Annual Report 2020
page 34
Environmental sustainability projects
This year, the environmental sustainability projects we supported were
focused on the SDGs of climate action, quality education, decent work and
economic growth. Both projects are making significant strides in bringing
lasting solutions to these crucial topics.
TIST Program Empowering subsistence farmers in Uganda
Farming for the survival of an individual or family, also known as subsistence
farming, is commonplace throughout the majority of rural communities in
Uganda. Via education-focused projects, the International Small Group
and Tree Planting Program (TIST) aims to break the cycle of deforestation,
drought, famine, and poverty by empowering populations reliant on
subsistence farming via education-focused projects. These projects
empower and train local farmers in their reforestation and agricultural efforts
— for example, by educating on how to plant trees for maximum protection
from runoff and erosion, and simultaneously conserve water and stabilise
soil to increase crop yields. In terms of building sustainable livelihoods,
participants in the TIST Program receive stipends from the sale of carbon
credits based on the GHG benefits created by their efforts.
Kariba Reforestation and wildlife protection on the shores of Lake
Kariba, Zimbabwe
In recent decades, more than a third of forests have been cleared in
Zimbabwe to make space for subsistence farming and fuelwood, as the
rocky political and economic climate has left many communities with
no other option. The Kariba project protects around 785,000 hectares
on the shores of Lake Kariba from deforestation and land degradation.
This large biodiversity corridor is home to many vulnerable and
endangered species, and prevents 3.5 million tonnes of CO
2
from being
released into the atmosphere annually. The project also supports regional
sustainable development and promotes the independence of local
communities by providing healthcare, clean drinking water and education
on project-related activities such as agricultural practice, beekeeping and
borehole maintenance.
page 35
Adyen
Annual Report 2020
We frequently remind the team to take time for
themselves and make this situation work for them.
That might mean something different for everyone,
there’s no one-size-fits-all approach to dealing with
this situation. For me, that means going outside, and
taking regular bike rides — even when it's raining.
Ingo, Chief Financial Officer
—
Adyen
Annual Report 2020
page 36
Local Initiatives
Our teams live, work and thrive in their local communities, so we want to
address locally relevant issues through employee-led initiatives. We enable
our employees who want to set up grassroots initiatives, ranging from
preparing backpacks for less privileged students to hosting hackathons
for women in tech. Most of the initiatives brought to life started with an
idea from a group of employees to give back. We introduced multiple
local initiative teams around the world this year, fostering our team’s
entrepreneurial spirit to support their communities.
With many people suffering from the COVID-19 pandemic, our teams
around the world gathered to deliver essential goods and equipment
to people in need. Our Berlin, New York, São Paulo, and San Francisco
teams organized drives to collect clothes, toiletries and other supplies
for economically challenged communities. In London, our team switched
their office’s food provider to one that supports local vendors rather than
chains, and gives a meal to a child in India for every meal Adyen orders
through them. Our Paris team frequently volunteered with a local charity
which prepares warm meals for disadvantaged communities.
Additionally, our teams continued to offer our technical expertise to
those with limited access to the workforce. In a normal scenario, our
Amsterdam team would have hosted free coding bootcamps for refugees
in partnership with local NGO Hack Your Future. The curriculum was
quickly adapted to online sessions due to the pandemic, which allowed
Adyen employees from all over the world to participate in training the Hack
Your Future students. In the São Paulo office, our team provided coding
trainings to young students from disadvantaged backgrounds.
Impact Technology
We believe that building an ethical business isn’t optional, and in thinking of
how we can improve our own social responsibility, we wondered how vast an
impact we could have together with our merchants. In recent years, more and
more shoppers are expecting businesses to be socially and environmentally
responsible, and we’re ready to help our merchants meet that expectation
and positively contribute the world through our impact technology.
The donation landscape faces significant friction due to structural problems
in the industry infrastructure. We decided to focus on what we’re good
at, creating seamless experiences for shoppers — now, with an impact
perspective. All of our Impact products are built with Adyen’s core mission to
help merchants meet their business, and now social and environmental, goals.
page 37
Adyen
Annual Report 2020
Giving
Leveraging our existing technology, we built Giving, a checkout product
feature that enables shoppers to donate to the merchants’ charity of
choice with one click online, in-app and in-person. To ensure that the full
donation goes straight to the charity, Adyen absorbs the entire transaction
cost of each donation. Through this feature, we are able to support our
merchants’ sustainability goals, facilitate shoppers’ desires to do good,
and create additional revenue streams for charities supporting at least one
of the United Nations’ SDGs
4
.
While checkout donations are not new, they typically include additional
costs and complexity for merchants, making this seemingly easy choice
to do good less enticing. We believe doing good shouldn’t come with
barriers, so our solution ensures a completely individual donation
following the purchase. This is beneficial to our merchants as it reduces
operational hassle, creates a seamless user experience for shoppers, and
provides a transparent overview of contributions to the charity.
Offsets in Checkout
After offsetting our own carbon emissions in 2019, we began thinking
about how we can help our merchants do the same. As a result, we
built Offsets in Checkout. This product feature enables our merchants’
shoppers to carbon compensate for the purchase of goods at checkout,
providing a simple way for shoppers to support sustainability projects.
Partnering with South Pole, we have created a database which calculates
the exact amount of GHG emissions used for the production and delivery
of goods they are purchasing at that moment, sending that back to
checkout via an easy to implement integration.
We are able to help support our merchants’ sustainability aspirations and
allow them to choose which projects they want to support within South
Pole’s network. Their shoppers’ contributions will be converted into
carbon credits that funnel directly into the projects.
4
Adyen’s social responsibility programs
are aligned with the United Nations’
Sustainable Development Goals (SDGs). We
acknowledge the importance of the SDGs
as key metrics in the long-term prosperity of
people and planet.
Adyen
Annual Report 2020
page 38
As a new father, I’ve been grateful for the
opportunity to see more of my family throughout
all hours of the day. The line between work and
life has blurred over the past year — I can be fully
involved in their lives without compromising
on my work projects.
Ayomide, Java Software Engineer
—
page 39
Adyen
Annual Report 2020
Compliance
The Compliance opportunity
We are building for the long term based on a strong culture of integrous
behavior. To this end, we ensure that compliance forms an integral part
of everyday decision making by integrating a global compliance program
into daily business activities and strategic planning. In light of our growth,
the effectiveness of the compliance program depends on scalable
compliance solutions. Consistent with our core business, this scalability
is achieved primarily through the use of technology and data-driven
solutions, in the pursuit of lasting and sustainable growth.
In addition to the technology-driven approach to compliance, each and
every employee is encouraged to act as the “eyes and ears” of Adyen. This
principle of joint responsibility is reflected in the three-lines-of-defense
model employed as part of Adyen’s governance framework and promoted
openly by both tiers of the Board — tone starts at the top.
The Compliance Handbook and its related policies and procedures
additionally promotes integrous and ethical conduct throughout Adyen.
The Handbook, and associated standards, are communicated initially
through introductory sessions and subsequently promoted on an
ongoing basis, including through annual refresher training sessions. The
Compliance Handbook is applicable to all Adyen employees worldwide.
As a technology company operating within the financial services space,
effectively managing compliance risk not only serves as Adyen’s license
to operate, it also maximizes Adyen’s opportunities in the market and
enhances Adyen’s competitive position by building trust.
We make good choices to build an ethical
business and drive sustainable growth
for our merchants
Adyen Formula
Adyen
Annual Report 2020
page 40
5
Adyen’s definition of Integrity Risk also
includes the related concept of conduct risk.
6
Other Integrity Risk topics such as cyber-
security and fraud are referenced in the Risk
section of this report.
Compliance and integrity
Central to Adyen’s compliance framework is the identification, mitigation
and monitoring of integrity risks, being the risk of inappropriate behavior
of employees and board members or third parties (merchants, suppliers,
advisers) posing a current or future threat to Adyen and/or the proper
functioning of the financial system, that can be attributed to Adyen or
in which Adyen acts imputable. Inappropriate behavior generally refers
to insufficient compliance with relevant rules or regulations, internal
policies and/or the Adyen Formula.
5
To ensure Adyen proactively identifies and effectively mitigates integrity
risks that may affect its business, including to account for evolution with
respect to the product offering, the markets in which Adyen operates
and the general growth as a business, a systematic integrity risk analysis
(SIRA) is performed on an ongoing basis. The SIRA assists Adyen to
identify, mitigate, measure and monitor potential integrity risk scenarios
as described below.
Integrity Risk identification
Adyen identifies a number of integrity-related topics as being core to
maintaining control from a compliance perspective
6
:
z Money laundering
z Terrorist financing
z Circumvention of sanctions legislation
z Corruption (bribery) and conflicts of interest
z Non-compliance with relevant laws and regulations
z Socially unacceptable behavior and market manipulation
z Data privacy
Considerations on how the identified integrity risks could manifest to
impact compliance at Adyen, applicable laws, regulations, industry
standards, and best practice related to payments or financial services
are continually monitored to identify compliance obligations and
standards. Once identified, the obligations and standards are mapped
and translated into principle-based policies and procedures that act as
the starting point for Adyen’s compliance program.
Integrity Risk mitigation
Adyen’s policies and procedures set minimum standards for all
employees, and give direction to business operations in accordance
with business objectives and the Adyen Formula. In 2020, Adyen has
page 41
Adyen
Annual Report 2020
continued to develop and refine principle-based policies, supported
by globally applicable scalable procedures, to combat misuse of the
financial system and build scalable compliance solutions to meet
Adyen’s regulatory obligations as a financial institution. Particular
focus continues to be given to anti-money laundering, counter-terrorist
financing (AML, CFT) and sanctions regulations as further described in
the Risk section of this report.
With specific reference to Integrity Risks associated with Adyen’s
merchant base (and the industries in which such merchants operate),
Adyen maintains a Prohibited and Restricted List in relation to
merchant business models. The Prohibited and Restricted List
acts as an articulation of Adyen’s risk appetite — specifying which
merchants Adyen will do business with based on relevant scheme rules,
regulations, industry standards and Adyen’s own long-term objectives.
The Prohibited and Restricted List was continually updated throughout
2020 to align with developments in scheme rules, regulations and
emerging trends/industries.
To ensure new products, features or markets are appropriately
accounted for in Adyen’s compliance program, a Product Approval and
Review Process (PARP) is undertaken as part of launch preparations.
The purpose of the PARP is to ensure relevant stakeholders can
identify and assess potential risks for both Adyen and its merchants,
and ensures mitigating actions are taken when necessary. In 2020,
numerous PARPs were undertaken in connection with new products or
markets and expansion in existing markets, including by way of example,
the launch of Issuing.
Integrity Risk monitoring
In accordance with the three-lines-of-defense model, teams within the
second line of defense are mandated with an independent position from
which to monitor and advise on the implementation of integrity risk
controls within Adyen. This independent position is warranted by (without
limitation), the power to investigate, challenge and escalate any concerns
without influence from the business.
As part of the ongoing maturity of Adyen’s compliance program, an
independent second line compliance monitoring team was established in
2020, and focused on the development and maintenance of data-driven
monitoring tools to provide oversight on the implementation of integrity
risk controls in a scalable and technology-led manner.
Adyen
Annual Report 2020
page 42
Earlier this year, Pieter sent out a message saying
we should think of our offices like a café that
provides us with a comfortable space to work
and collaborate in, but are not essential to operate
as a business. I do miss going to the office,
but I still feel as much a part of Adyen as I did
before the pandemic.
Sergen, Internal Auditor
—
page 43
Adyen
Annual Report 2020
Regulatory environment, AML/CTF
and sanctions regulation
The global regulatory landscape for payment and financial services is varied
and constantly changing. Still, Adyen continues to see alignment between the
underlying principles and objectives of financial regulation around the globe and
leverages this as the basis for its global compliance program. As a result, Adyen
continues to embrace regulation in building for the long term. Regulation allows
Adyen to continually improve the quality of processes, sharpen thinking and
explore and develop new product opportunities.
Throughout 2020, key focus areas for Adyen to maintain control and leverage
regulation as an opportunity included:
z Utilizing the growing commonality in the purpose and objective of AML,
CFT and Sanctions regulation to future proof the scalability of Adyen’s core
integrity policies and procedures, including to ensure such policies and
procedures can be applied irrespective of merchant type, merchant location,
or the financial products and services provided to such merchants.
z Supporting Adyen’s expanding global footprint from a regulatory
perspective, including to identify new or changing obligations and
implement appropriate controls, in relation to (without limitation):
| North America and the United Kingdom in relation to preparations
for proposed bank branch authorizations;
| Asia Pacific — new payments/financial licenses or authorizations
for Adyen’s locally operating subsidiaries, owing to both regulatory
change and/or expansion in the activities of such subsidiaries;
| Latin America — increasing regulatory requirements relating to
expansion in the activities of locally operating subsidiaries.
z Investing in data-driven compliance technology to support scalable
compliance efforts, with particular focus on the use of post-event
transaction monitoring systems and machine learning to combat misuse of
the financial system and meet Adyen’s regulatory obligations arising out of
AML, CFT and Sanctions regulation.
z Taking advantage of opportunities created by the Second Payment
Services Directive (PSD2) with particular focus on new Strong Customer
Authentication requirements to reduce fraud within the financial system.
Through the power of a unified platform, Adyen is well positioned to deal with
increasing regulatory complexity. Adyen continues to take a proactive approach
to building relationships with regulators and payment schemes, maintaining
transparent and constructive interactions to build a sustainable business. Adyen
is committed to maintaining and strengthening its global compliance program
to support sustainable business and drive growth for merchants.
Adyen
Annual Report 2020
page 44
Data Privacy
At Adyen, we understand that the trust we have been given by our customers
to process personal data is essential to our business. Building for the long
run entails building a platform that has privacy engrained in its design.
Adyen continues to strive for a global privacy approach, thereby aiming to
ensure a solid privacy governance throughout the world. This governance
is mainly driven by the General Data Protection Regulation (the “GDPR”),
which applies to most of the data processing activities by Adyen. However,
our global presence requires us to take into account local privacy laws as
well, such as the California Consumer Privacy Act (the “CCPA”) and the Lei
Geral de Proteção de Dados (the “LGPD”) in Brazil.
Aside from Adyen’s expanding global footprint and product offering,
the constant developing and changing privacy landscape increases
complexity, requiring Adyen to steadily adapt, improve and strengthen its
processes and procedures. Adyen is committed to further improve and
develop its privacy compliance efforts to support its merchants.
Tax
To help our merchants grow, we focus on long-term, scalable solutions.
As such, responsible tax behavior is an essential element of our
sustainability strategy. The taxes that we pay are an important part of
our contribution to local economies and support the development of the
countries in which we operate.
We pay our taxes in the countries wherein we have a taxable nexus,
dependent on the laws of the respective countries. In line with this
approach and our values, we do not seek refuge in tax havens and when
making decisions we consider the spirit of the law. We support the
principles that are the fundamentals of the OECD’s work on Base Erosion
and Profit Shifting (BEPS), including country-by-country reporting to
tax authorities. We maintain an open relationship with all relevant tax
authorities, which includes that we may conclude a tax agreement.
When it comes to tax, Adyen has a low risk appetite. We operate a global,
scalable tax framework which aims to support the business in its growth,
while simultaneously allowing us to be in control of our tax position. Our
global tax framework covers Adyen’s total tax contribution, both the
corporate income taxes paid and the taxes collected, such as: value added
tax, withholding tax, and payroll tax. More details on the taxes paid and
taxes collected can be found in the financial statements.
page 45
Adyen
Annual Report 2020
Tax governance, control, and risk management
Adyen utilizes a tax control framework to manage and control Adyen’s
global tax risks, compliance requirements, and processes. Having
a robust governance, control, and risk management system for
tax ensures Adyen’s tax strategy and approach to tax are properly
embedded within the organization.
The tax control framework
7
defines the roles and responsibilities
within Adyen when it comes to managing tax risks and ensuring
compliance requirements are met. Compliance with the tax control
framework is effectuated through a set of internal controls for which
evidence is documented and collected on a regular basis. Internal
Audit continuously monitors and tests compliance with the tax control
framework. As part of our internal control processes, we perform an
annual tax in-control statement. We continuously seek for ways to
embed technology in all areas of our tax control framework, including tax
processes and tax data management.
The tax strategy and compliance with the tax control framework are
monitored by the CFO and ultimately the responsibility of the Management
Board. Tax is also regularly discussed in the Audit Committee. We refer to
our Whistleblowing Policy for the mechanism for anyone within Adyen to
report its concerns about unethical or unlawful behavior in relation to tax.
Stakeholder engagement and management of
concerns related to tax
Adyen maintains an open relationship with all relevant tax authorities. We
are open to participate in cooperative compliance agreements in order
to seek an active real-time audit, whereby clearance is obtained for any
significant transactions or tax risks. This may result in Adyen concluding
a tax agreement with a tax authority to get upfront certainty on any tax
implications that may arise.
Adyen typically refrains from public policy advocacy on tax, nor engages
in any lobbying activities related to tax. There is no active involvement in
the development of tax systems, legislation, and administration. Within
Adyen, tax follows the business. Adyen’s tax team is well embedded in the
organization to engage with (external) stakeholders and address any views
and/or concerns.
7
Governed in accordance with the three-
lines-of-defense model as defined in the ‘Risk
management’ section of this Annual Report.
Adyen
Annual Report 2020
page 46
I think the best thing about this situation is that it has
made us more appreciative of time spent together.
Seeing your colleagues every day in the office is
great, and in future situations I will think back of the
past year and remind myself how lucky we are.
Fernando, Head of Investor Relations
—
page 47
Adyen
Annual Report 2020
Risk management
Adyen recognizes that risks are associated with achieving its strategy
and business objectives. Adyen aims to be risk aware without being
unduly risk averse. Adyen therefore actively manages its risks to protect
and grow the company. Adyen has adopted a uniform and systematic
approach for managing risks. Adyen's integral risk management
framework is based on the Enterprise Risk Management (ERM) model as
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in 2017.
Strategy, objective setting,
and risk appetite
Risk management, strategy, and objective-setting work together.
Operational objectives put strategy into practice while serving as a basis
for identifying, assessing, and responding to risk.
Risk appetite defines the amounts and types of risk Adyen is willing
to accept in pursuit of its objectives. A low risk appetite implies a low
acceptable residual risk and therefore requires a stronger risk response
and internal controls. A higher risk appetite may allow for additional
activity and less strong internal controls. Adyen's risk appetite is aligned
with its strategy. Changes in strategy and willingness to assume risks or
external developments may result in an updated risk appetite, which is
ultimately bound by Adyen’s risk capacity.
Adyen has translated its view on risk appetite into risk appetite statements,
which set the overall tone for Adyen's approach to risk taking. In 2020, the
Management Board performed its annual review and updated Adyen’s
risk appetite statements and risk limits, which were approved by the
Supervisory Board.
Adyen
Annual Report 2020
page 48
Risk governance
Adyen has established a risk governance that is consistent with the size
and complexity of the organization and the risk profile of the Company.
Adyen's governance identifies, establishes and reinforces the importance
of oversight responsibilities for risk management. The Supervisory Board
supervises and advises the Management Board. The Audit Committee
is charged with supervising, monitoring, and advising the Management
Board in relation to the functioning of the internal risk management and
control systems.
The Management Board is responsible for maintaining an adequate
system for risk management and internal control. The Management Board
has instituted a Risk Committee to support them with risk management
oversight. The CFO, CLCO, and CTO represent the Management Board
in the Risk Committee. The Corporate Risk and Internal Control team
regularly reports its findings from monitoring Adyen’s risk profile to the
Risk Committee. The Risk Committee keeps the Management Board
informed of the observations, recommendations, and deliberations
on findings regarding risk management and internal control. The Risk
Committee reports any material risk limit breach that would place Adyen at
risk of exceeding its risk appetite, and in particular, of putting in danger the
financial condition of Adyen promptly to the Management Board.
Formula
The
Adyen Way of Being In Control
We always ask why and are critical,
we don’t just tick the box
Your work impacts others, involve them
We evidence our work at the source, we don’t
replicate it
If you see a problem, act on it
We all make mistakes, we seek help
and share as soon as we find out
Always look for improvement, automate
processes continually & challenge the status quo
The formula guides our behavior, policies
support it
page 49
Adyen
Annual Report 2020
Three-lines-of-defense
Adyen has adopted the three-lines-of-defense model, which reflects
the segregation between operations (first line management), the
risk management and compliance functions (second line), and the
independent internal audit function (third line). The first line owns and
manages risks, the second line sets control standards and monitors
adherence to them, and the third line—internal audit—provides assurance
on the adequacy of the first two. The Corporate Risk and Internal Control
team supports the Management Board and Risk Committee with its risk
oversight, management of the risk framework, setting of the relevant risk
management policies, risk appetite, and independent monitoring of key
risks, limits, and controls.
Risk culture
Culture is a key aspect of risk management. People establish the mission,
strategy, and business objectives, and put risk management practices
in place. Adyen believes that a strong culture serves as a safety net to
guide people in making good decisions. Therefore, Adyen promotes and
safeguards the key elements of culture through the Adyen Formula and
the Adyen Way of Being In Control.
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Event identification and risk
assessment
Adyen performs a top-down, company-wide risk assessment at least
annually. The purpose is to assess principal and emerging risks in order
to focus attention on the most significant threats and opportunities. The
Management Board has updated its company-wide risk assessment
in 2020. For a more detailed description of the principal risks, see the
"Risk Factors" section. The top-down, company-wide risk assessment is
complemented by bottom-up risk assessments. For example, at least
once a year, Adyen performs a SIRA.
Adyen continues to expand the use of GRC (governance, risk management,
and compliance) tooling to assess and document the key risks, risk
appetite, key controls, and control test documentation to support the
evaluation of the effectiveness of the control framework. The tooling also
provides Internal Audit with (read-only) access to perform its independent
audits and assign its recommendations to risks and controls.
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Control activities
Adyen uses COSO's Internal Control – Integrated Framework (2013)
as a reference for its design, implementation, and evaluation of control
activities as part of a system of internal control. Adyen has implemented
internal risk management and control systems to manage the risks
effectively and efficiently and to provide reasonable assurance that
objectives can be met. Policies and procedures ensure that employees
understand their role in Adyen's risk and control systems.
Important elements of Adyen’s antifraud measures include oversight
by the Management Board, Internal Audit, Compliance and the Audit
Committee. Prevention of fraud starts with the SIRA to identify potential
fraud risk scenarios. Controls that aim to prevent these scenarios from
occurring, include an anti-fraud policy, employee background screening,
and process-specific fraud risk controls. Controls aimed at the detection
of fraud include system monitoring, auditing, process-specific fraud
risk controls, and a whistleblower policy. Whenever fraud is suspected
or reported, an internal investigation and/or external investigation is
conducted and corrective actions are taken.
Resilience
In 2020, Adyen has merged its business continuity management and
recovery frameworks into one resilience framework, in which Adyen plans
for its course of business under various operational and financial conditions.
During the COVID-19 pandemic, the business continuity protocols allowed
employees to continue their day-to-day activities while adjusting to the
new normal. Adyen staff was fully equipped to work remotely, and have
been doing so without impact to Adyen’s ability to process payments. The
business continuity response and recovery plans have been updated
in 2020 with, amongst others, the lessons learned from the COVID-19
lockdowns. Should there be an abrupt end to the pandemic, it is deemed
not to have an impact on resuming business as usual.
Throughout the pandemic, Adyen’s fee-based business model proved to
be resilient due to the diversification of its merchant base across verticals
and geographies. Illustrative to this resilience is how online retail and
digital goods volumes accelerated, while travel and in-store volumes
slowed down due to global lockdown restrictions. Adyen found its
products to be particularly suited to rapid adaptations during challenging
times. When stores shut down, Adyen was able to help merchants move
volumes online quickly, and in reopening scenarios Adyen has facilitated
several contactless in-store set-ups. Adyen continued to onboard volume
at scale and was able to add merchants to the platform with timelines
largely unaffected by COVID-19. The full effect of the pandemic however,
has not yet trickled down to the real economy and will manifest itself over
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the upcoming years. Governmental support and monetary programs have
cushioned some of the impact for a portion of Adyen’s merchants up to
now, but for some of them the end of the survival horizon may come in
view. Adyen will continue to execute its strategy to diversify the product
and customer portfolio across verticals and geographies to mitigate the
impact from the pandemic.
Stress testing
Adyen uses stress testing to understand the potential impact of stress
events on its business model, capital, and liquidity ratios. The stress
scenarios are based on exceptional but plausible events with an adequate
degree of severity. Adyen also performs stress testing to evaluate the
reliability of capital and liquidity plans under stressed conditions using
scenarios and risk factors prescribed by the regulator. Adyen performs
these tests in accordance with EBA guidelines on stress testing. In 2020,
Adyen’s Internal Capital and Liquidity Adequacy Assessment Process
(ICLAAP) showed that it has a high financial shock absorption capacity
and high capital and liquidity ratios. The COVID-19 pandemic could be
considered a real-life stress test. As discussed earlier, in 2020 the fee-based
business model proved its resilience and continued to generate revenues
and cash, further improving Adyen’s strong capital and cash ratios. More
information on Adyen’s capital and liquidity ratios can be found in the 2020
Transparency and Disclosure Report (Pillar 3) at www.adyen.com/ir.
Effectiveness of risk management
and internal control systems
In compliance with principle 1.2 of the Dutch Corporate Governance Code,
the Management Board is responsible for establishing and maintaining
an adequate system for risk management and internal control. Adyen has
implemented internal control over financial reporting designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
financial reporting standards. In compliance with principle 1.4 of the Dutch
Corporate Governance Code, the Management Board annually evaluates
the effectiveness of the design and operating of its risk management and
control systems. In the third quarter trading update, Adyen reported that its
controls identified a duplicate recording of certain scheme fees that resulted
in an understatement of net revenue, EBITDA, and EBITDA margin figures
with related impact on tax and net income since 2018. These duplicate
bookings were solely accounting related and did not affect any cash
positions, payouts from financial institutions, or payouts and reporting to
merchants. Adyen took remedial actions to avoid these errors in the future.
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Per December 31, 2020, no major failings in the effectiveness of the internal
risk management and control systems were observed, nor were significant
changes to these systems made or major improvements planned. The
Management Board has discussed the evaluation of its risk management
and control systems with the Audit Committee and Supervisory Board.
Risk factors
In compliance with principle 1.4 of the Dutch Corporate Governance Code,
the Management Board has updated its company-wide risk assessment in
2020. This section describes the principal risks that could potentially affect
Adyen. While Adyen believes that the risks described below are the material
risks concerning Adyen's business, they are not the only risks relating to
Adyen. Other risks, facts, or circumstances not presently known to Adyen or
that Adyen currently deem to be immaterial, could individually or cumulatively
prove to be significant and could have a material adverse effect on Adyen's
business, results of operations, financial condition, and prospects.
Strategic and business risk
Adyen accepts strategic and business risk knowing that in order to achieve
its strategic objectives it may consume some amounts of capital investing in
new assets, people, and processes. In pursuance of its strategic objectives
Adyen values a solid financial and capital outlook.
Reputational risk
Adyen has low appetite for reputational risk and aims to avoid actions that
trigger negative international media attention and/or significant reputational
damage. Any negative publicity about Adyen, the quality and reliability of
its products and services, changes to its products and services, its ability
to effectively manage and resolve complaints, its privacy and security
practices, litigation, regulatory activity, and the experience of merchants and
shoppers with its products or services, could adversely affect its reputation
and the confidence in and use of its products and services. Harm to Adyen's
brand can arise from many sources, including failure by Adyen or its
partners to satisfy expectations of service and quality, inadequate protection
of sensitive information, compliance failures and claims, litigation and other
claims, employee misconduct, rumors or false stories, and misconduct
by its partners, service providers, or other counterparties. Adyen wants
to build an ethical and sustainable business and therefore actively
mitigates risks that could negatively affect the Adyen reputation or brand.
Failure to meet carbon-reducing policy goals, for example, could cause
reputational damage and result in low ratings in sustainable investment
indexes, affecting the share price. Adyen prides its commitment to goals
that improve the business and footprint. Refer to the ‘Social Responsibility’
section for an overview of Adyen’s sustainability efforts.
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Competition
Adyen competes against a wide range of businesses, many of which are
larger than Adyen, have a dominant position, or offer other products and
services to shoppers and merchants that Adyen does not offer. Some
competitors have greater merchant bases, volume, scale, resources, and
market share than Adyen, which may provide significant competitive
advantages. Furthermore, Adyen is facing competitive pressure from
non-traditional payments processors and other parties entering the digital
payments industry, which may compete in one or more of the functions
performed in processing merchant transactions. Adyen accepts that
competition could increase as it seeks to increase market share, thereby
potentially reducing profit margins, but not at all cost — if pricing is not
sustainable, then it will not pursue a deal. In general, Adyen is able to
react quickly to market developments due to how its technology and
workstreams are structured.
Disruptive innovation
Adyen expects that rapid and significant advancements in technology
will continue. These changes may be more superior, cheaper, and impair
or render obsolete the products and services Adyen offers. If Adyen is
unable to provide enhancements and new features that achieve market
acceptance or keep pace with rapid technological developments
and evolving industry standards, its business could be materially and
adversely affected. Adyen accepts disruption and innovation as standard
market practices. As such, Adyen continues to build and actively invest
in its single platform solution. Adyen has established workstreams that
continuously work on improving its service offering based on merchants’
needs. Through the setup of the workstreams with product, technical, and
commercial staff, Adyen can work closely with its customers and respond
quickly to their evolving needs. In 2020, Adyen has found its products to be
particularly suited to rapid adaptations during the pandemic.
Access to card networks
The majority of transactions processed on the Adyen platform go through
international credit and debit card networks. In order to access these
card networks to provide acquiring, processing, and issuing services,
Adyen must have the relevant geographically based operating licenses
or memberships. In some markets where it is not feasible or possible for
Adyen to have a direct license with a card network, Adyen has a relationship
with a local financial institution to act as a local sponsor for the license.
Adyen has low appetite for failure to comply with the card network rules or
the deterioration in its relationships with the card networks for any other
reason, which could result in the restriction, suspension, or termination of
Adyen's own licenses, or use of sponsoring banks’ licenses.
Concentration of sales
Some of Adyen's largest merchants provide significant contributions to its
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net revenue. Large merchants typically have arrangements with multiple
payment service providers (primarily in order to mitigate against single-
point-of-failure risk). Large merchants could terminate their contracts or shift
business away, leading to lower processed volumes and net revenues. Adyen
has low to moderate appetite for commercial dependency and therefore
continues to execute its growth strategy to board new merchants from
different verticals on its platform. Adyen believes that it is well-positioned to
grow the business through unified commerce and mid-market merchants,
which it views as adjacent segments to large enterprise merchants.
Macroeconomic conditions
Adyen accepts that entering and operating in markets with some
macroeconomic volatility could lead to financial losses. Uncertainty about
global and regional economic events and conditions, including the economic
impact from an uncontrolled spread of infectious diseases, may result in
shoppers and merchants postponing spending, which could have a material
adverse impact on the demand for Adyen's products and services, including
a reduction in the volume and size of transactions on its payments platform.
In March, Adyen observed a dip in volume driven by the pandemic’s impact
on the travel and in-store retail verticals. The decline in these volumes
stabilized quickly, while online retail and digital goods volumes accelerated
after global lockdown restrictions went into effect. The travel vertical saw
a minor rebound between June and August, primarily due to the easing of
lockdown restrictions across Europe. Simultaneously, in the retail vertical,
in-store volumes rebounded to pre-COVID-19 levels in the third quarter.
The uptick in online volume that followed initial brick-and-mortar store
closures persisted, with e-commerce growing unabated despite recovering
in-store volume. The pandemic has shown how resilient Adyen’s business
model is to instant macroeconomic shocks. However, the pandemic has
not ended yet and it is uncertain how the consequences of prolonged
lockdowns will manifest itself over the upcoming years.
Adyen will lose its ability to automatically passport into the UK market
through the banking license of Adyen due to the United Kingdom leaving
the European Union. In 2020, Adyen formally applied for providing regulated
services through a UK branch license. Until formal authorization in 2021,
Adyen makes use of the Temporary Permission Regime to continue
servicing UK merchants on a cross-border basis without disruption.
Intellectual property rights
As substantially all of Adyen's intellectual property is developed in-house,
the protection of such intellectual property, including Adyen's platforms,
trademarks, copyrights, domain names, trade dress, and trade secrets
is important to the success of its business. Adyen seeks to protect its
intellectual property rights by relying on applicable laws and regulations, as
well as a variety of administrative procedures. Adyen's intellectual property
rights may be contested, circumvented, or found unenforceable or invalid,
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and Adyen may not be able to prevent third-parties from infringing, diluting,
or otherwise violating them. Any failure to adequately protect or enforce
Adyen's intellectual property rights or significant costs incurred in doing so
could diminish the value of its intangible assets.
As the number of products in the technology and payments industries
increases and the functionality of these products further overlaps, Adyen
may become subject to intellectual property infringement and other claims.
The ultimate outcome of any allegation is often uncertain and, regardless of
the outcome, any such claim, with or without merit, may be time-consuming,
result in costly litigation, divert management's time and attention, and
require Adyen to, among others, stop providing transaction processing and
other payment-related services or redesign, stop selling its products or
services, pay substantial amounts to satisfy judgments or settle claims or
lawsuits, pay substantial royalty or licensing fees, or satisfy indemnification
obligations that Adyen has with certain parties with whom Adyen has
commercial relationships.
Operational risk
Adyen recognizes that operational risks are associated with achieving its
business objectives. Operational risk concerns the risk of losses resulting
from inadequate or failed internal processes, people, and systems or from
external events, including legal risk. Adyen has moderate appetite for
operational losses.
Merchants’ potential liability for shopper chargebacks
When shoppers claim that a merchant has not delivered goods or
services as agreed, issuing banks can file chargebacks. Adyen seeks to
offset such chargebacks with the payouts to the merchant, but may not
be able to succeed in full. While Adyen has implemented risk mitigation,
including withholding funds from the payouts to its merchants based on
assumptions and estimates that Adyen believes are reasonable to cover
such eventualities, the measures, including the withheld funds, may not be
sufficient.
The uncertainties associated with the COVID-19 pandemic have led to
financial and economic volatility, especially in certain industries. Adyen’s
MPL team has closely followed the development of the pandemic and
increased its monitoring efforts in early 2020. The team frequently
discussed its observations and recommendations with the Merchant
Risk Committee, Management and Supervisory Board throughout the
year. Although Adyen has observed some administrations in its customer
portfolio due to the persisted lockdown measures, it has not incurred any
material MPL losses due to chargebacks in 2020. The cumulative MPL
losses were well within the set risk appetite.
Availability, connectivity, and performance of products and services
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Adyen has a low appetite for issues in the availability, connectivity, and
performance of the platform. Adyen's systems and those of its third-party
service providers, including data center facilities and communication
networks, have experienced service interruptions in the past and may
experience significant service interruptions in the future. Frequent or
persistent availability, connectivity, or performance issues could cause
current or potential merchants to believe that its systems are unreliable,
leading them to switch to a competitor or to avoid Adyen's products and
services, potentially harming Adyen's reputation and brand permanently.
Moreover, to the extent that any platform failure or similar event results in
damages to Adyen's merchants or their business partners, the merchants
or partners could seek significant compensation or contractual penalties
from Adyen for their losses, which, even if unsuccessful, could likely be
time-consuming and costly for Adyen to address and divert management
attention. Furthermore, frequent or persistent interruptions could lead to
regulatory scrutiny, significant fines and penalties, and/or mandatory and
costly changes to its business practices and could ultimately cause Adyen
to lose existing regulatory licenses or prevent or delay Adyen from obtaining
additional regulatory licenses that Adyen needs to expand its business.
Adyen has built its platform and services to avoid the presence of single
points of failure, and to ensure that sufficient capability exists to continue
normal operations for critical processes despite the loss or unavailability
of corporate resources, from information technology, physical locations or
even personnel and whole departmental structures. The highly available
platform is designed to withstand individual telecommunications, systems
and datacenter instance failures.
During 2020, a cross-functional team closely monitored operations,
including third parties, for potential impact of the COVID-19 pandemic
and operated business continuity plans. Adyen staff was fully equipped
to work remotely, and have been doing so without impact to our payment
processing ability. We have not observed a specific impact on the
availability, connectivity or performance of our platform that can specifically
be contributed to COVID-19.
Information security risk
Adyen and its merchants, partners, and others who use its services,
obtain and process a large amount of sensitive data. Adyen's and its
partners' IT systems may be vulnerable to physical and electronic
breaches, computer viruses and other attacks by cyber-criminals, internet
fraudsters, employees or others. This could lead to, amongst other things,
a leakage of merchants' data, damage related to incursions, destruction of
documents, inability or delays in processing transactions, and unauthorized
transactions. Adyen has a low appetite for information security risk. Any real
or perceived privacy breaches or improper use of, disclosure of, or access to
such data could harm Adyen's reputation as a trusted brand in the handling
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and protection of this data. Although Adyen carries cyber liability insurance
that it believes to be reasonable to cover such eventualities, such insurance
may not be sufficient to cover all potential losses. Adyen’s Security Officer
is responsible for managing the Information Security Program. The goal of
the Information Security Program is to ensure the ongoing confidentiality,
integrity, and availability of data, systems, and processes at Adyen, and
to ensure that specific information security compliance programs are
maintained and externally assessed as appropriate. Adyen undertakes
background checks for new hires. Training is undertaken on IT security
on the first day at Adyen. A follow-up general security introduction, which
addresses privacy and confidentiality policies, must be completed within
two months of start date. Annual refresher training on topics as privacy and
security is mandatory for all employees.
Information security will always remain a structural risk for Adyen, but it
was not necessarily higher in 2020 compared to previous years. Adyen’s
risk-based approach has resulted in an efficient and flexible IT infrastructure,
which enabled an almost seamless transition to the work-from-home
environment following the outbreak of the COVID-19 pandemic. However,
embedding security awareness in the mind of employees, especially new
joiners, was more challenging then before when everybody was working in
the office. In combination with a more prominent company profile, this could
make Adyen more prone to infiltration risk. The security onboarding and
training sessions moved to online. The Security team maintained an internal
webpage to provide additional guidance to stay vigilant and omit websites,
e-mails, or applications related to COVID-19. Furthermore, Security adapted
its monitoring efforts in response to the changed circumstances and further
improved its responsiveness to incidents. Adyen has not observed major
security incidents during 2020.
Third party risk
Vendors and supply chain dependencies could negatively impact Adyen’s
operations and security of data, systems, and services. Adyen has a low
appetite for dependency on third parties in its critical processes. Adyen
strives to minimize outsourcing of activities directly related to its core
processes or platform to avoid dependency on suppliers. Adyen believes
that not being limited by third-party software in its core operations is a key
factor in its ability to rapidly increase the number of transactions that the
platform can process. Adyen has established a Third Parties Policy, which
defines a framework, including clear ownership, for assessing third-party
risk. In 2020, Adyen implemented a centralized contract management tool
to improve visibility into who the company is globally doing business with
and monitor compliance with the policy. Adyen has not observed major data
breaches, operational interruptions, or financial stress at its third parties due
to the COVID-19 pandemic.
Data privacy
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Adyen is subject to several privacy and data protection laws and regulations,
such as the GDPR, CCPA and LGPD (referred to as "privacy laws") relating
to the collection, use, retention, security, processing, and transfer of
personal data about its merchants, their shoppers, third parties and others,
and their transactions in the countries wherein Adyen operates. Throughout
the world these privacy laws are evolving and continuously changing.
Adyen is closely monitoring any changes to new and existing privacy laws.
These changes may affect our current agreements, products, and/or
processing activities. For example, data transfers outside of the European
Economic Area have become more complex and this resulted in additional
requirements for these data transfers. Any failure, or perceived failure, by
Adyen to comply with its privacy policies or with any applicable privacy laws
in one or more jurisdictions could result in proceedings or actions against
Adyen by governmental entities or others, including class action privacy
litigation in certain jurisdictions, significant fines, penalties, judgments, and
reputational damage. Adyen has a low appetite for data privacy risks and
promotes a culture of diligence and high ethical standards with regards to
the collection of information.
Entrepreneurial culture
Adyen is committed to maintaining its entrepreneurial company culture,
which fosters innovation, diversity, and talent, and therefore has a low
appetite for elements threatening this culture. Adyen's entrepreneurial
culture has been one of the primary drivers of its historical growth. As
Adyen continues to grow, it may not be able to maintain its entrepreneurial
culture. If Adyen does not successfully manage its growth, and is not able
to differentiate its business from those of its competitors, drive value
for and retain merchants, or effectively align its resources with its goals
and objectives, Adyen may not be able to compete effectively against its
competitors, leading to declining growth and net revenues. Adyen promotes
and safeguards the key elements of its culture through the Adyen Formula.
Absorbing new hires into the Adyen culture was naturally more difficult
in a working-from-home environment. The onboarding process and the
company introduction sessions moved online in March. Senior management
spent significant time on the online company introductions by hosting Adyen
Formula chats and continued to meet every new hire before they joined the
team. Although the current situation could be likely to persist for a longer
time, Adyen is comfortable growing the company in this environment going
forward with the online efforts to safeguard the unique culture.
Talent
Adyen's future performance substantially depends on the continued
services of key talent and its ability to attract, retain, and motivate such
talent. The loss of services of any of Adyen's key talent or Adyen's inability
to attract highly qualified key talent may adversely affect its operations.
Adyen has low appetite for the loss of key talent and actively manages the
composition and quality of its talent pool.
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The pandemic affected Adyen’s employees in different ways. Management
operated business continuity plans along with travel restrictions and
social distancing guidelines, including working from home for employees.
The Management Board frequently reiterated that working from home
could be the new normal for a longer timespan, to ensure that employees
would create a sustainable situation for themselves. HR maintained an
internal webpage “COVID-19 — Staying connected from home” and
established “Guiding Principles for Working from Home.” The regularly
updated principles followed guidance from the World Health Organization
and local authorities. The Management Board introduced “The Adyen
Work-From-Home Formula” and organized weekly calls with team leads to
monitor employee wellbeing. Our HR department raised awareness with
managers for employees feeling overwhelmed or worried in any way. When
local authorities (temporarily) allowed employees to return to the office,
Management implemented social distancing measures to maintain a safe
working environment. Despite the pandemic forcing the shift to a work-
from-home environment, Adyen has been able to grow the team at higher
pace in 2020 than before.
Adyen strives to hire, promote, and enable underrepresented groups, while
challenging the status quo in the communities in which it operates. In 2020,
Adyen established a Diversity, Equity & Inclusion (DEI) working group that
focuses on improving Adyen’s DEI efforts across the company. This working
group advises and supports Adyen’s broader leadership team to ensure
that we follow up on the DEI initiatives and that we work towards substantial
improvements. This working group is composed of Adyen employees from
across all offices and represents a broad range of backgrounds. For more
information please refer to the People section of this Annual Report.
Integrity risk
Integrity risk is the risk of inappropriate behavior of employees and board
members or third parties (merchants, suppliers, advisers) posing a current
or future threat to Adyen and/or the proper functioning of the financial
system that can be attributed to Adyen or in which Adyen acts imputable.
Inappropriate behavior generally refers to insufficient compliance with
relevant rules or regulations, internal policies, and/or the Adyen Formula.
If Adyen (or a third party it does business with) fails to comply with laws
and regulations, or expectations by the market or society of ethical
business conduct, supervisory authorities may initiate legal and regulatory
proceedings against Adyen. Adyen has a low risk appetite for non-ethical
behavior of its management, employees, and third parties that could
negatively affect Adyen’s reputation or brand, lead to compliance breaches
of laws or regulations or endanger its future existence.
Adyen has no risk appetite for facilitating money laundering or terrorist
financing and therefore sets limits on acceptance of prospective customers
as well as the nature of services offered to accepted customers. Although
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Adyen has policies and procedures that it believes are sufficient to comply
with currently applicable anti-money laundering, anti- corruption, bribery
and sanctions rules and regulations, it cannot guarantee that such policies
and procedures completely prevent situations of money laundering,
terrorism financing or corruption, including actions by Adyen's employees,
merchants, third parties, or other related persons for which Adyen might be
held responsible. Such events may have severe consequences, including
litigation, sanctions, administrative measures, fines, criminal penalties, and
reputational consequences.
In 2020, various regulators issued warnings that organized crime groups
could seize the opportunity to exploit the COVID-19 pandemic by engaging
in new criminal activities to generate, conceal, and launder illicit proceeds.
Companies in industries that were more adversely affected by negative
economic conditions could be more vulnerable to infiltration or takeovers
by criminals. Adyen has continued its efforts to improve the integrity risk
framework including monitoring controls. Adyen has not experienced any
issues to maintain its AML/CFT obligations due to, amongst others, social
distancing measures, reallocation, or re-prioritization of resources away
from AML/CFT activities to other areas.
Tax
Adyen has a low appetite for risk forthcoming from its tax obligations. Adyen
wants to meet its obligation to pay the amount of tax legally due in any
territory, in accordance with rules set by governments. The determination
of Adyen's worldwide provision for income taxes, value-added taxes, and
other tax liabilities requires estimation and significant judgment. Like many
other multinational corporations, Adyen is subject to tax in multiple tax
jurisdictions. Adyen's determination of its tax liability is always subject to
audit and review by applicable domestic and foreign tax authorities. Any
adverse outcome of any such audit or review could have a negative effect
on Adyen's business and the ultimate tax outcome may differ from the
amounts recorded in its financial statements. Adyen has not observed
adverse impact from the COVID-19 pandemic on its ability to report taxes in
a timely and accurate manner. For more information, please refer to ‘Tax’ as
part of the ‘Compliance’ section in this Annual Report.
Financial reporting
Gaps in internal controls could negatively impact the accuracy of our
financial and management reporting. Adyen has a low appetite for errors
in financial reporting and does not accept material misstatements in the
financial statements. Adyen has implemented internal control over financial
reporting designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with financial reporting standards. Due to its
inherent limitations, internal control over financial reporting can’t provide
absolute assurance that a misstatement in our financial statements would be
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prevented or detected. Also, projections of any evaluation of the effectiveness of
internal control over financial reporting to future periods are subject to the risk
that the controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Adyen has not observed adverse impact from the COVID-19 pandemic on its
ability to report to management and regulators in a timely and accurate manner.
Financial risks
Adyen has a limited appetite to incur losses from financial risks.
Credit risk in respect of counterparties, including other financial
institutions.
Credit risk can originate from the risk that a counterparty will not settle the full
value of an obligation — neither when it becomes due, nor thereafter (default
risk), or the risk of losses stemming from on- and off-balance sheet positions
arising from concentrations in exposures to a counterparty or a group of
connected counterparties (concentration risk). Adyen has a low to moderate
credit risk appetite. We make good choices in our financial counterparties and
actively monitor them. Adyen did not see a material increase in counterparty
credit risk due to the COVID-19 pandemic. Adyen has no appetite for exceeding
the regulatory requirements for large exposures. For markets or jurisdictions
that are considered key to successful operations, Adyen seeks to work with at
least two different banks.
Fluctuations in foreign currency exchange rates
The strengthening or weakening of the euro impacts the translation of
Adyen's net revenues generated from its international operations that are
denominated in foreign currencies into the euro. Additionally, in connection
with providing its services in multiple currencies, Adyen generally sets its
foreign exchange rates once per day. Adyen may face financial exposure if
Adyen incorrectly sets its foreign exchange rates or as a result of fluctuations
in foreign exchange rates between the times that Adyen sets them. Given
that Adyen also holds some merchants' and own funds in non-euro
currencies, its financial results are affected by the translation of these non-
euro currencies into euro. While Adyen has measures in place intended to
manage its foreign exchange risk, namely natural hedges and spot trades
for any net open positions, no assurance can be given that fluctuations
in foreign exchange rates will nevertheless have a significant impact on
Adyen's results of operations. Adyen does not accept sizeable losses related
to foreign currency spot trading activities and closely monitors its foreign
currencies positions. Adyen is exposed to foreign exchange risk on its assets
and liabilities denominated in currencies other than the functional currency,
including certain contract assets, its holding of Visa Inc. shares and the
assets and liabilities of its subsidiaries. The majority of these assets to which
Adyen is exposed to foreign currency risk are denominated in US dollars.
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Adyen
Annual Report 2020
Price risk of financial instruments
Adyen's exposure to price risk of financial instruments at fair value arises
from a holding of Visa Inc. shares and a derivative financial liability. Any
movements in the underlying share prices could have a significant impact
on Adyen's financial condition and results of operations. Adyen obtained the
Visa Inc. shares as the result of its previous holding in Visa Europe, which
subsequently was acquired by Visa Inc., which resulted in amongst others
Adyen being issued shares of Visa Inc. as consideration for the acquisition.
Adyen has no appetite to take on additional equity positions and resulting
price risk.
Interest rate risk of cash and cash equivalents
Adyen’s customer centric business model is fee-based and doesn’t depend
on the transformation of assets. Therefore, the low interest rates do not
impact Adyen’s revenues. However, Adyen is exposed to interest rate risk
in the banking book in relation to its high-quality liquid assets: cash held at
central banks and government bonds held to maturity.
Liquidity and funding risk
Liquidity risk is the risk that Adyen could not meet its short- to medium-
term payment and collateral obligations without affecting daily operations.
Adyen has no appetite for not being able to meet its payment and collateral
obligations without affecting daily operations. Funding risk is the risk that
Adyen will not have stable sources of funding in the medium and long term,
resulting in the current or prospective risk that it cannot meet its financial
obligations, such as payments and collateral needs, as they fall due in
the medium to long term, either at all or without increasing funding costs
unacceptably. Adyen aims for a simple, stable, and solid funding position
and monitors its Net Stable Funding ratio.
Secure financing on favorable terms
Adyen has funded its operations since inception primarily through equity
financings. Adyen is currently able to generate sufficient cash to fund
its ongoing operations, but there is no guarantee that Adyen will be able
to continue doing so in the future. Going forward, Adyen may require
additional funding to respond to business opportunities or unforeseen
circumstances and may decide to engage in equity or debt financings or
enter into credit facilities for other reasons, and may not be able to secure
any such debt or equity financing or refinancing on favorable terms in a
timely manner, or at all. If Adyen is unable to obtain adequate financing or
financing on terms satisfactory when it requires it, its ability to continue to
grow or support its business and to respond to business challenges could
be significantly limited.
Refer to Note 12 ‘Financial Risk Management’ of the attached Consolidated
Financial Statements for more information.
Adyen
Annual Report 2020
page 64
Emerging risks
Climate change
Climate and environment-related risks are commonly understood to
comprise two main risk drivers: physical and transition risks. Physical
risk refers to the financial impact of a changing climate. Physical risk is
categorized as “acute” when it arises from extreme events, such as droughts,
floods, and storms, and “chronic” when it arises from progressive shifts,
such as increasing temperatures, sea-level rises, water stress, biodiversity
loss, land use change, habitat destruction, and resource scarcity. This can
directly result in, for example, damage to property or reduced productivity,
or indirectly lead to subsequent events, such as the disruption of supply
chains. Transition risk refers to a financial loss that can result, directly or
indirectly, from the process of adjustment towards a lower-carbon and more
environmentally sustainable economy. This could be triggered, for example,
by a relatively abrupt adoption of climate and environmental policies,
technological progress or changes in market sentiment and preferences.
It is a challenge to estimate the impact of transition risk on Adyen’s
business model. As a result, climate and environment-related risks may be
underestimated. Physical risk could have an adverse impact on Adyen’s
ability to provide services to its customers. Prolonged power outages due to
natural disasters could have a devastating impact on critical infrastructure
used by Adyen and its service providers. Our headquarters are located in
Amsterdam, making the city vulnerable to flood due to the gradual rise of
sea levels. Physical risk could also occur in other locations where our offices
or vendors are located. Adyen’s offices are typically close to its customers
in metropolitan areas, which could make Adyen vulnerable to the adverse
impact from pandemics. Adyen has designed the one single platform
to create redundancy in its critical infrastructure and operations. Adyen
continues to diversify its global customer portfolio to mitigate any reliance
on sectors and markets, which could be more vulnerable to climate-related
and environmental risks. Changing sentiment regarding climate issues,
in the communities in which we operate, could lead to reputational risk.
Refer to the ‘Social Responsibility’ section for more information on our
sustainability efforts. Adyen is planning to further improve risk management,
by including relevant climate-related risks in its risk assessments and stress
testing, fortifying a risk culture to prepare for climate change-related events.
Regulatory environment
Adyen does not only need to comply with laws and regulations in the
jurisdictions in which it operates, but also with laws and regulations with
worldwide application. The laws, regulations and standards are subject
to varying interpretations, in many cases due to their lack of specificity or
unclear application to the business of non-traditional market participants
such as Adyen. As a result, their application in practice may evolve over
time as new guidance is provided by supervisory authorities and the
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Adyen
Annual Report 2020
interpretation of requirements by supervisory authorities and courts may be
further clarified over time. If Adyen's efforts to comply with laws, regulations,
and standards differ from the activities intended by regulatory bodies or
supervisory authorities, they may initiate legal and regulatory proceedings
against Adyen. To ensure that applicable laws and regulations are identified
and mapped to the activities and services Adyen offers in local markets,
Adyen performs ongoing regulatory scanning by regulatory compliance
specialists with validation from external legal counsel.
Although the regulatory environment could lead to more complexity,
Adyen sees this as a business challenge. Adyen believes that the use of
a single platform is best overlaid with a global compliance framework,
whereby Adyen strives for global application of best practices while being
cognizant of the need to implement local deviations where required. As a
result, Adyen is well placed to handle regulatory complexity in a scalable
and sustainable manner. Adyen continues to take a proactive approach to
building relationships with regulators and payment schemes, maintaining
transparent and constructive interactions to build a sustainable business.
Solving the regulatory challenge ahead of competitors could give Adyen a
competitive edge in the market place.
Protectionism
Adyen’s growth strategy is focused on its single platform approach.
Changes in foreign policies and trade laws in certain key markets, including
tariffs and sanctions, could lead to negative impact on the trade levels
and flows of our customers. The changes could also create boundaries to
us. For example, if the use of certain (foreign) payment methods would not
be allowed in a market, or if (foreign) payment service providers would not
be allowed to charge fees for their services under a policy that payments
should be free of charge.
Adyen
Annual Report 2020
page 66
The Management Board of Adyen is responsible for establishing and
maintaining an adequate system for risk management and internal control.
This system is designed to manage risks effectively and efficiently, to provide
reasonable assurance that objectives can be met, that financial and non-
financial reporting is reliable and that laws and regulations are complied with.
Internal control over financial reporting is an integral part of the risk
management and control systems of Adyen. Internal control over financial
reporting is a process to provide reasonable assurance regarding the
reliability of our financial reporting for external purposes in accordance
with IFRS and IFRIC interpretations as endorsed by the European Union
and in accordance with sub article 8 of article 362, Book 2 of the Dutch
Civil Code. Internal control over financial reporting includes:
z Maintaining records that, in reasonable detail, accurately, and fairly
reflect our transactions;
z Providing reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements.
Due to its inherent limitations, internal control over financial reporting is
not intended to provide absolute assurance that a misstatement of our
financial statements would be prevented or detected. Also, projections
of any evaluation of the effectiveness of internal control over financial
reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The Management Board has performed a company-wide risk assessment
and described the principal risks facing the Company in relation to its risk
appetite in the section ‘Risk factors’ of this Annual Report.
The Management Board has assessed the effectiveness of the design and
operation of the risk management and control systems as of December
31, 2020. The results were shared with the Audit Committee and the
Supervisory Board and discussed with the external auditor.
Statement by the
Management Board
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Adyen
Annual Report 2020
Based on the assessment and with reference to best practice provision
1.4.3 of the Dutch Corporate Governance Code, the Management Board
confirms that to the best of its knowledge and belief:
z This Annual Report provides sufficient insights into any failings in the
effectiveness of the internal risk management and control systems
(see section ‘Risk management’);
z The aforementioned systems provide reasonable assurance that the
financial reporting does not contain any material inaccuracies (see
section ‘Risk management’);
z Based on the current state of affairs, it is justified that the financial
reporting is prepared on a going concern basis (see ‘Financial
statements’); and
z This Annual Report states those material risks and uncertainties
that are relevant to the expectation of the company’s continuity for
the period of twelve months after the preparation of this report (see
section ‘Risk Factors’ and ‘Financial statements’).
However, the risk management and internal control systems cannot
provide absolute assurance that missing of objectives, misstatements,
fraud or non-compliance with laws and regulations will not occur.
In accordance with Article 5:25c of the Financial Supervision Act, the
Management Board confirms that to the best of its knowledge and belief:
z The financial statements of 2020 give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company; and
z The Annual Report 2020 gives a true and fair view of the position as at
31 December 2020, the development and performance during 2020 of
Adyen, together with a description of the principal risks that Adyen faces.
Amsterdam, the Netherlands, March 9, 2021
P.W. van der Does R. Prins
CEO CCO
I.J. Uytdehaage K. Zaki
CFO COO
M.B. Swart A. Matthey
CLCO CTO
Adyen
Annual Report 2020
page 68
As we continue to grow the team, we prioritize
global events and communication. Virtual tools have
made it so much easier to involve and engage with
the team across all corners of the world. We’ve been
amazed by how the team kept the same focus and
commitment throughout the year, and how global
the team felt in a time without any travel.
Mariëtte, Chief Legal & Compliance Officer
—
Adyen
Annual Report 2020
page 70
It’s unique how Adyen has kept us together. Our
team always sends small gifts and plans events.
These gestures mean a lot, and I don’t feel like we’ve
lost connection with each other. We even schedule
meetings specifically to talk about life and personal
problems, which helps when working together as you
understand each other on a personal level as well.
Pedro, Team Lead, Data Infrastructure
—
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Adyen
Annual Report 2020
Corporate
Governance
A solid, transparent, and seamless corporate governance structure is key
to Adyen. It is consistent with the Adyen Formula and allows us to focus
on growing our business. In setting up and maintaining our governance
structure we are guided by Dutch statutory requirements, the Dutch
Corporate Governance Code (the Code), European Banking Association
(EBA) Guidelines on Internal Governance and international best
practices. As Adyen is operating globally, international developments are
closely monitored.
Adyen’s governance is reflected in its Articles of Association, the
Management Board By-Laws, the Supervisory Board By-Laws, the
Terms of Reference of our Supervisory Board committees and certain
other internal policies and procedures. These documents are available
on Adyen’s website (www.adyen.com/investor-relations/governance).
Management structure
Adyen maintains a two-tier board structure consisting of a Management
Board and a Supervisory Board, each of which have specific
responsibilities. The Management Board is collectively responsible for
the overall management, which includes, among others, developing and
executing Adyen’s strategy and risk management policy, and setting
and achieving Adyen’s objectives. The Supervisory Board oversees and
advises the Management Board, and can give guidance to its general
development. Each board is accountable to the General Meeting for the
performance of its duties.
Adyen
Annual Report 2020
page 72
Management Board
Composition, powers and function
Per December 31, 2020, Adyen’s Management Board is composed of the
following members (the Managing Directors):
Each Managing Director has duties related to their specific area of
responsibilities and expertise. In performing their duties, the Managing
Directors are required to be guided by the best interests of the Company
and the business connected thereto, taking into consideration the
interests of the Company’s stakeholders. The Management Board
By-Laws set out rules regarding the composition, responsibilities and
objectives of the Management Board.
Two new Managing Directors have been appointed per January 1,
2020. Mariëtte Swart took on the position of CLCO (Chief Legal and
Compliance Officer), and Kamran Zaki has taken over the position of
COO (Chief Operating Officer) from Samuel Halse, who left the Company
on March 1, 2020.
As per May 31, 2020, Joop Wijn stepped down as Chief Strategy and Risk
Officer (CSRO). Joop has been granted gardening leave as per February
27, 2020. Since then and until April 2021, Ingo Uytdehaage (CFO) has
assumed the responsibilities for risk management, while Mariëtte Swart
(CLCO) has assumed the responsibilities for security. As per April 1,
2021, all formal responsibilities of the risk management function will be
handed over to Mariëtte Swart via Adyen Management Board approval as
well as Supervisory Board approval.
Arnout Schuijff stepped down as Chief Technology Officer (CTO) as per
January 1, 2021. Alexander Matthey has taken over the position of CTO
after approval of shareholders during the Extraordinary General Meeting
held on February 12, 2021.
Name Year of birth Nationality Gender Position Member since Term
Pieter Willem van der Does 1969 NL Male CEO July 6, 2007 June 2022
Arnout Diederik Schuijff
8
1967 NL Male CTO July 6, 2007 June 2022
Roelant Prins 1975 NL Male CCO September 9, 2009 June 2022
Ingo Jeroen Uytdehaage 1973 NL Male CFO June 1, 2011 June 2022
Kamran Zaki 1973 US Male COO January 1, 2020 January 2024
Mariëtte Bianca Swart 1980 NL Female CLCO January 1, 2020 January 2024
8
Arnout Schuijff decided to step down from
the Management Board per January 1, 2021.
See further details (including information
about Alexander Matthey, CTO) below.
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Adyen
Annual Report 2020
More information on the Management Board can be found at
www.adyen.com/about.
Subject to certain statutory exceptions, the Management Board as a
whole is authorized to represent the Company. Two Managing Directors
acting jointly are also authorized to represent the Company. This reflects
the four-eyes principle that Adyen operates across the organization:
(at least) two Adyen Managing Directors must sign off on significant
business decisions.
Appointment and dismissal
The Articles of Association provide that the Management Board shall
consist of two or more members and that the Supervisory Board determines
the exact number of Managing Directors after consultation with the
Management Board.
Managing Directors will be appointed for a maximum term of four years, after
which they may be reappointed for another four years. The General Meeting
appoints Managing Directors upon a nomination by the Supervisory Board
in accordance with the Articles of Association. The Supervisory Board shall
make one or more nominations to the General Meeting in case a Managing
Director is to be appointed.
In the event that the Supervisory Board has made a nomination, the
resolution of the General Meeting to appoint such nominee shall be adopted
by an absolute majority of the votes cast. However, the General Meeting
may at its discretion appoint a Managing Director other than upon the
nomination of the Supervisory Board, provided that a proposal to appoint
such other person has been put on the agenda of the relevant General
Meeting. A resolution of the General Meeting to appoint a Managing Director
other than in accordance with a nomination of the Supervisory Board, but
in accordance with the agenda for such General Meeting, shall require a
majority of two thirds of the votes cast representing more than half of the
Company's issued share capital.
Adyen is a licensed credit institution, which means that any appointment of a
Managing Director must be approved by the Dutch Central Bank (the DNB).
In connection with its approval procedure, DNB will test the proposed new
Managing Director on integrity and suitability.
The General Meeting may at any time, at the proposal of the Supervisory
Board, suspend or remove a Managing Director with a resolution adopted
by an absolute majority of votes cast. Should the General Meeting wish to
suspend or remove a Managing Director other than in accordance with a
proposal of the Supervisory Board, such suspension or dismissal needs to
be adopted by a majority of two thirds of the votes cast representing more
than half of the Company's issued capital. The Supervisory Board may at
any time suspend but not dismiss a Managing Director. A General Meeting
must be held within three months after a suspension of a Managing
Name Year of birth Nationality Gender Position Member since Term
Pieter Willem van der Does 1969 NL Male CEO July 6, 2007 June 2022
Arnout Diederik Schuijff
8
1967 NL Male CTO July 6, 2007 June 2022
Roelant Prins 1975 NL Male CCO September 9, 2009 June 2022
Ingo Jeroen Uytdehaage 1973 NL Male CFO June 1, 2011 June 2022
Kamran Zaki 1973 US Male COO January 1, 2020 January 2024
Mariëtte Bianca Swart 1980 NL Female CLCO January 1, 2020 January 2024
Adyen
Annual Report 2020
page 74
Director has taken effect, in which meeting a resolution must be adopted
to either terminate or extend the suspension, provided that in the case that
such suspension is not terminated, the suspension does not last longer
than three months in aggregate. The suspended Managing Director must
be given the opportunity to account for his or her actions at that meeting. If
neither such resolution is adopted nor the General Meeting has resolved to
dismiss the Managing Director, the suspension will cease after the period
of suspension has expired.
Supervisory Board
Composition, powers and function
Adyen’s Supervisory Board is composed of the following members (the
Supervisory Directors) as of December 31, 2020:
The Supervisory Board supervises the conduct and policies of the
Management Board and the general course of affairs of the Company
and its business. The Supervisory Board also provides advice to
the Management Board. In performing their duties, the Supervisory
Directors are required to be guided by the interests of Adyen which
includes the interests of the business connected with it, taking into
consideration the interests of the Company’s stakeholders. These
interests are driven by Adyen’s focus on long-term value creation and
its implementation in Adyen’s strategy and culture. The Supervisory
Board also has due regard for corporate social responsibility issues that
are relevant to the Company. The Supervisory Board By-Laws set out
rules regarding the composition, responsibilities and objectives of the
Supervisory Board.
On February 12, 2021, Caoimhe Keogan was appointed as Supervisory
Director during the Extraordinary General Meeting of shareholders.
Following her appointment, she also became a member of the
Nomination and Remuneration Committee. More information on her
background can be found in the ‘Supervisory Board Report’ below.
Name Year of birth Nationality Gender Position Member since Term
Piero Overmars 1964 NL Male Chairman January 20, 2017 January 2025
Delfin Rueda Arroyo 1964 ES Male Member January 20, 2017 January 2022
Joep van Beurden 1960 NL Male Member January 20, 2017 January 2024
Pamela Joseph 1959 US Female Member May 21, 2019 May 2023
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Adyen
Annual Report 2020
Appointment and dismissal
The Articles of Association provide that the Supervisory Board must
consist of three or more individuals, with a maximum of five persons.
The exact number of Supervisory Directors is to be determined by
the Supervisory Board. Only natural persons may be appointed as
Supervisory Director.
Supervisory Directors will be appointed for a maximum term of four
years, after which they may be reappointed for another four years.
Reappointment after eight years shall be motivated in the Supervisory
Board Report. After this term, a Supervisory Director may once again be
reappointed for a term of two years, which can be extended for another
two years. Supervisory Directors are appointed by the General Meeting
upon a nomination of the Supervisory Board in accordance with the
Articles of Association. The Supervisory Board shall make one or more
nominations in case a Supervisory Director is to be appointed.
In the event that the Supervisory Board has made a nomination, the
resolution of the General Meeting to appoint such nominee shall be
adopted by an absolute majority of the votes cast. However, the General
Meeting may at its discretion appoint a Supervisory Director other than
upon the nomination of the Supervisory Board, provided that a proposal
to appoint such other person has been put on the agenda of the relevant
General Meeting. A resolution of the General Meeting to appoint a
Supervisory Director other than in accordance with a nomination of
the Supervisory Board, but in accordance with the agenda for such
General Meeting, shall require a majority of two thirds of the votes cast
representing more than half of the Company's issued share capital. The
Supervisory Board shall appoint one of its members as chairman and
shall appoint one of its members as vice-chairman.
Any appointment of a Supervisory Director must be approved by DNB. In
connection with its approval procedure, DNB will test the proposed new
Supervisory Director on integrity and suitability.
The General Meeting may at any time, at the proposal of the Supervisory
Board, suspend or remove a Supervisory Director with a resolution
adopted by an absolute majority of votes cast. Should the General
Meeting wish to suspend or remove a Supervisory Director other than in
accordance with a proposal of the Supervisory Board, such suspension
or dismissal needs to be adopted by a majority of two thirds of the votes
cast representing more than half of the Company's issued capital.
Adyen
Annual Report 2020
page 76
Supervisory Board committees
The Supervisory Board has appointed from among its members
two permanent committees: a 'Nomination and Remuneration
Committee' and an 'Audit Committee' (the Committees). Each of these
Committees has a preparatory and/or advisory role to the Supervisory
Board. The Committees report their findings to the Supervisory
Board, which is ultimately responsible for all decision making. Terms
of Reference apply for each Committee, which can be found at www.
adyen.com/investor-relations/governance. All Supervisory Directors
have a standing invitation to attend meetings of Committees of which
they are not a member — these Supervisory Directors attend the
meetings of which there are not a member on a regular basis.
Nomination and Remuneration Committee
The Supervisory Board has assigned certain tasks to the Nomination and
Remuneration Committee. This Committee drafts proposals for Adyen’s
remuneration policy, and it proposes the remuneration of the individual
Managing Directors and Supervisory Directors. It analyses developments
of the Code and other applicable laws and regulations, and prepares
proposals for the Supervisory Board on these subjects. It further
advises the Supervisory Board on its duties regarding the selection and
appointment of Managing Directors and Supervisory Directors. The
Committee is also responsible for carrying out annual assessments of
the individual Managing Directors and Supervisory Directors.
Where necessary, the Nomination and Remuneration Committee
prepares proposals for (re)appointments and drafts the selection
criteria for the (re)appointment of Managing Directors and Supervisory
Directors.
The Nomination and Remuneration Committee meets as often as
required for a proper functioning of the Committee. The meetings are
scheduled semi-annually. The Committee consists of at least three
Supervisory Directors. The Committee members are Joep van Beurden
(Chairman), Piero Overmars, and Caoimhe Keogan, who became a
member of the Nomination and Remuneration Committee as of her
appointment on February 12, 2021. The composition and number of
members of the Committee provide for sufficient capacity to carry out
the supervisory functions. The members of the Committee have the
specific skills and experience required to properly carry out their duties.
Adyen’s CEO, CFO and CLCO have a standing invitation for each
Committee meeting. The Company’s HR Director also attends the
meetings of the Committee.
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Adyen
Annual Report 2020
Audit Committee
The Supervisory Board has assigned certain tasks to the Audit
Committee. This Committee supervises the provision of the
Company’s financial information. The Committee issues preliminary
advice to the Supervisory Board regarding the approval of Adyen’s
interim and annual accounts.
It also advises the Supervisory Board on the nomination of the external
auditor, who is appointed by the General Meeting. It is in regular contact
with the internal audit function and the external auditor, and monitors
the auditor’s independence. In addition to advising the Management
Board on tax and finance matters, it is also responsible for supervising
compliance with relevant legislation and regulations.
The Audit Committee meets as often as required for a proper functioning
of the Committee. The meetings are held at least four times a year.
The Committee consists of at least three Supervisory Directors. The
Committee members are Delfin Rueda Arroyo (Chairman), Piero Overmars
and Pamela Joseph. The composition and number of members of the
Committee provide for sufficient capacity to carry out the supervisory
functions. The members of the Audit Committee have the specific skills
and experience required to properly carry out their duties.
Adyen’s CEO, CFO and CLCO have a standing invitation for each
Committee meeting. The Company’s internal auditor and external
auditor also attend meetings of the Committee.
General Meeting, shares and shareholders
Extraordinary General Meeting
On January 20, 2020, an Extraordinary General Meeting was held
to reappoint Joep van Beurden as Supervisory Director. He was
reappointed for a period of 4 years, ending January 2024.
General Meetings
Adyen holds a General Meeting of shareholders within six months of
the end of the financial year. The agenda for this meeting includes (i) the
adoption of the annual accounts, (ii) the content of the Annual Report, (iii)
the remuneration policy and remuneration of the Supervisory Board, (iv)
the release from liability of the members of the Management Board and
the Supervisory Board for their performance during the financial year, (v)
the policy of the Company on additions to reserves and on distributions of
profits, (vi) any proposal to distribute profits, (vii) the auditor’s report, and
(viii) any other proposals placed on the agenda by the Management Board.
General Meetings can be held as often as the Management Board or the
Supervisory Board deem necessary. A General Meeting is also convened
in case of a decision entailing a significant change in the identity or
Adyen
Annual Report 2020
page 78
character of the Company or its business. One or more shareholders
representing at least the statutory threshold of 3% of the voting rights
may request that the Management Board places items on the agenda of
a General Meeting. Such a request must be honored by the Management
Board provided that the request is received in writing at least 60 days
before the date of such a meeting.
The Annual General Meeting of 2020 was held on May 26, 2020. Aside from
the topics of this meeting as listed above, Piero Overmars was re-appointed
as Chairman and member of the Supervisory Board for a period of four years,
effective January 20, 2021.
Our next annual General Meeting will be held on June 3, 2021.
Voting rights
Each share reflects one vote in the General Meeting. Subject to certain
exceptions provided by Dutch law or the Articles of Association, resolutions
of the General Meeting are passed by an absolute majority of votes cast.
Votes can be cast at the General Meeting either in person or by proxy.
Amendment to the Articles of Association
The General Meeting may pass a resolution to amend the Articles of
Association with an absolute majority of the votes cast. A proposal to
amend the Articles must be made by the Management Board and must
be approved by the Supervisory Board. When a proposal to amend the
Articles of Association is made to the General Meeting, the intention to
propose such resolution must be stated in the relevant notice convening
the General Meeting.
Issue of shares
Shares can only be issued pursuant to a resolution of the General
Meeting, unless the General Meeting has designated this authority to the
Management Board. During the Annual General Meeting held on May 26,
2020, the General Meeting granted the Management Board – subject to the
Supervisory Board’s approval – the authority to issue ordinary shares or to
grant rights to subscribe for ordinary shares for a term of 18 months as of
May 26, 2020 for up to 10% of the total number of shares issued at the time
of the General Meeting for any purpose. Hence, within the aforementioned
limit shares can be issued by a decision of the Management Board, which
allows the Management Board to react promptly when for example a
business opportunity arises which requires such issuance. This decision
must be approved by the Supervisory Board. Any issuance exceeding the
aforementioned limit needs approval by the General Meeting.
In addition, the General Meeting granted the Management Board – subject
to the Supervisory Board’s approval – the authority to restrict or exclude
applicable pre-emptive rights when issuing ordinary shares or granting rights
to subscribe for ordinary shares for a term of 18 months as of May 26, 2020.
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Adyen
Annual Report 2020
Repurchase of shares
Shares can only be repurchased by Adyen pursuant to a resolution of
the General Meeting and subject to any required regulatory approvals.
The General Meeting may designate the authority to repurchase shares
to the Management Board. During the General Meeting held on May 26,
2020, the shareholders granted the Management Board – subject to the
Supervisory Board’s approval – the authority to acquire shares in the
capital of the Company, either through purchase on a stock exchange or
otherwise. The authority applies for a term of 18 months as of May 26,
2020, under the following conditions: the repurchase (i) may constitute
up to 10% of the total number of shares issued at the time of the General
Meeting; (ii) provided that the Company will not hold more shares in stock
than 10% of the issued share capital; and (iii) at a price not less than the
nominal value of the shares and not higher than 110% of the opening price
at Euronext Amsterdam at the date of the acquisition. Any repurchases
exceeding these limits need approval by the General Meeting.
Issued capital and shareholdings
Adyen’s issued capital and voting rights are notified to the AFM from time
to time. This reporting can be found in the register issued capital on
www.afm.nl. Shareholders owning 3% or more of the issued capital and/
or voting rights of a listed company must report this to the Dutch Authority
for the Financial Markets (AFM) as soon as the threshold is reached or
exceeded. This reporting by shareholders can be found in the ‘Register of
substantial holdings and gross short positions' at www.afm.nl.
Adyen
Annual Report 2020
page 80
The Supervisory Board is pleased to present its report for 2020 — a
challenging year for society and many businesses due to the COVID-19
pandemic. In 2020, the Adyen platform processed €303.6 billion,
growing 27% year-on-year. Adyen has proven resilient due to the further
diversification of its merchant base across geographies and verticals,
despite the difficult macroeconomic environment continuing to be a
disrupting factor to many of its merchants. In 2020, Adyen was able to grow
and onboard the team from a distance, totaling 1,747 FTE as of December
31, 2020.
This report includes a more specific description of the Supervisory Board’s
activities during the financial year 2020 and other relevant information on its
functioning.
Composition
Adyen has established a two-tier board structure consisting of the
Management Board and the Supervisory Board, as explained in the section
‘Governance’ of this Annual Report. The Supervisory Board functions as a
separate corporate body and is fully independent from the Management
Board. The composition of the Supervisory Board is such that members
are able to act independently of one another, the Management Board and
any particular interest and allows for properly carrying out all Supervisory
Board tasks, including staffing of committees. The Supervisory Board is
capable of assessing the broad outline of the overall policy of the Company
and of the most important risks incurred. The background, knowledge and
expertise of each Supervisory Director adds to the Board’s effectiveness,
enabling it to fulfil its duties in the Company’s best interest.
As of December 31, 2020, the Supervisory Board is composed of four
members — Piero Overmars (Chairman), Delfin Rueda Arroyo, Joep van
Beurden and Pamela Joseph. On February 12, 2021, Caoimhe Keogan was
appointed as Adyen’s fifth Supervisory Director.
Piero Overmars serves as a member of the Supervisory Boards of
Amsterdam UMC and Dura Vermeer Groep NV. Previously, he served as
a member of the Management Board of Randstad Beheer B.V. and was
Report of the
Supervisory Board
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Annual Report 2020
Chairman of the Supervisory Boards of Nutreco and SNS Reaal. He also
served as President of the Nyenrode Foundation, following an extensive
career at ABN Amro that culminated in a Board Member position. Piero
Overmars holds an MBA from Nyenrode Business University. Delfin
Rueda Arroyo serves as CFO and Vice-Chair of the Executive Board and
Management Board of NN Group, and is a member of the Supervisory
Board of Allfunds Bank S.A.U. Previously, he was CFO and member of the
Management Board of ING Insurance, following an extensive career at
Andersen Consulting, UBS, JP Morgan and Atradius. Delfin Rueda Arroyo
holds a master degree in Economic Analysis and Quantitative Economics
from the Complutense University of Madrid (Spain). He also holds an MBA
from the Wharton School, University of Pennsylvania (USA).
Joep van Beurden is CEO and member of the Executive Board of Kendrion
and member of the Supervisory Board of the Twente University of
Technology (the Netherlands). In additions to these positions, Joep serves
as a member of the Advisory Board of PlantLab. Previously, he served as
CEO of CSR Plc. (UK) and NexWave Inc. (France), following a career at
Royal Dutch Shell, McKinsey, Philips and Canesta Inc. Joep van Beurden
holds a degree in Applied Physics from Twente University of Technology.
Pamela Joseph is CEO and member of the Management Board of
Clearent, holds a position as Chair of the Board of Directors of TransUnion
and is a non-executive member in the Board of Directors of Paychex. In
addition to these positions, Pamela serves as Operating Partner at Advent
International. Previously, she served U.S. Bank corp. Payment Services
as a Vice-Chairman, and prior to that Elavon as President and COO. She
started her career at Wells Fargo Bank and VISA International. She holds a
degree in Business Administration from the University of Illinois (USA).
Caoimhe Keogan serves as CPO (Chief People Officer) for Aveva
Group plc. Previously, she served as Chief People Officer for
Moneysupermarket Group plc, and as SVP People, Places & Community
at SoundCloud. Prior to these roles, she was Senior HR Business Partner
at Google. Caoimhe Keogan holds a degree in Occupational Psychology
from Queen’s University Belfast (UK).
Supervisory Board meetings
The Supervisory Board convened for eight meetings, of which two were
held at the offices of Adyen, and six were held via videoconferencing due to
the COVID-19 pandemic. The meetings were held in the months February,
March, April, May, October and December. Members of the Management
Board also attended these Supervisory Board meetings.
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Annual Report 2020
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In 2020, Pamela Joseph was absent at one Supervisory Board meeting.
Her attendance rate was therefore 83%. The attendance rate of the other
Supervisory Directors was 100%.
The Supervisory Board meets at a minimum each half year before the
publication of the half-yearly results, and discusses these results with the
Management Board, as well as the draft press release and auditor’s report
on the procedures performed. These documents are first discussed in the
Audit Committee meeting prior to the Supervisory Board meeting.
In addition to the regular agenda for the Supervisory Board meeting –
which includes topics such as risk management, business performance,
strategic updates and the development of the financials – the Supervisory
Board discussed diversity, culture, social responsibility and sustainability,
the accounting error as published in the Q3 Trading Update, compliance
with relevant legislations, relations with regulators, brand positioning
and the preparation and evaluation of the Annual General Meeting of
Shareholders. Furthermore, deep dive session on specific topics relevant
to Adyen’s business were held, such as Issuing, Customer Relations and
Operational Excellence.
The Supervisory Board also discussed Adyen’s strategy including its
workstreams and reviewed proposed annual and other financial reporting.
In 2020, the Supervisory Directors completed trainings on data privacy,
security and compliance.
The Company Secretary attended all Supervisory Board meetings and
Committee meetings, and acted as the secretary of the Supervisory Board
and its committees. The Chairman of the Supervisory Board met regularly
during the year with the CEO and other Managing Directors to discuss the
performance of the company and projects as part of executing the strategy.
The Supervisory Directors also interacted individually and collectively with
Managing Directors outside the formal Supervisory Board meetings.
In 2020, there were no conflicts of interest between Adyen and Managing
Directors or Supervisory Directors.
Committee reporting
The Supervisory Board has established two Committees, as further
explained in the chapter ‘Governance’: The Nomination and Remuneration
Committee and the Audit Committee. The main considerations and
conclusions of each Committee were shared with the full Supervisory Board.
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Nomination and Remuneration Committee
The duties and composition of the Nomination and Remuneration
Committee are described in the section ‘Governance’ of this Annual Report.
The Nomination and Remuneration Committee convened twice in 2020.
All Committee members attended all meetings. The Committee has
reviewed the composition of the Supervisory Board and Management
Board. The Committee monitored and analyzed developments of the
Code and applicable laws and regulations in relation to remuneration
policies, reviewed Adyen’s Remuneration Policy and its execution for
compliance with the Code and the Dutch Act on Remuneration Policies
Financial Undertakings (Wet beloningsbeleid financiële ondernemingen)
as implemented in the Dutch Financial Supervision Act (Wet op het
financieel toezicht). For more information on the Remuneration Policy,
please refer to the section ‘Remuneration Report’ of this Annual Report.
The Nomination and Remuneration Committee leads the evaluation of
the performance of the individual Managing Directors and Supervisory
Directors. During the evaluation the Committee took note of the Managing
Directors’ views on their own remuneration. The Committee drafted
proposals to the Supervisory Board for the remuneration of the individual
Managing Directors and Supervisory Directors. The Nomination and
Remuneration Committee has drawn up a plan for the succession of the
Managing Directors and the Supervisory Directors.
In 2020, the remuneration policy for the Management Board and
Supervisory Board was reviewed to ensure compliance with the EU’s
revised Shareholders Rights Directive (SRD2) following its implementation
in Dutch law on December 1, 2019. No substantive changes were included
in the revised remuneration policy — the changes included adding an
explanation to the level of support in society and the external environment
the Company operates in, internal remuneration ratios and the wages and
employment conditions of the employees of the Company. The revised
remuneration policy considers the relevant statutory provisions and
competitive market practices. The remuneration policy was adopted by
the Annual General Meeting of Shareholders on May 26, 2020.
Audit Committee
The duties and composition of the Audit Committee are described in the
section ‘Governance’ of this Annual Report.
In 2020, the Audit Committee convened for four regular meetings. The
Committee discussed the quarterly results and the financial statements.
Furthermore, the Committee discussed reports from internal and external
auditors, reviewed the Annual Report, the H1 and H2 Shareholder Letter
including the relevant press releases and the Q1 2020 and Q3 2020
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Annual Report 2020
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Trading Updates, and discussed the overall internal control environment.
The Committee also discussed other topics including the accounting
adjustment as published in the Q3 2020 Trading Update, compliance,
governance, ICLAAP, SREP, tax, information security, legal, risk,
merchants’ potential liability, and treasury. The members of the Committee
met with the internal and external auditors outside the Committee
meetings to ensure all relevant information was discussed. The Committee
evaluated the performance and remuneration of the external auditor.
All Committee members, the internal auditor and the external auditor
attended all meetings held in 2020.
Diversity
The Supervisory Board values and promotes diversity, both within
the Supervisory Board and the Management Board, as within Adyen
in general. Differences in amongst others educational background,
nationality, age, race, gender, experiences and beliefs are vital to the
business, enabling the Boards and the Company to look at issues and
opportunities differently and to respond to challenges in new ways.
Diversity is a key driver for innovation and allows Adyen to attract and
retain the most talented and smart people. This standpoint has also been
embedded in the Adyen Inclusion Policy — please refer to the ‘People and
culture’ section of this Annual Report.
The Supervisory Board aims for a balance in its composition with respect
to gender, nationality, age, experience and affinity with the nature and
culture of the business of Adyen in all countries where it is active. In line
with the Company’s Inclusion Policy and the adoption of the legislative
proposal introducing stricter gender diversity measures for Dutch listed (in
line with the SER’s guideline on Supervisory Board composition), Caoimhe
Keogan has been appointed as Supervisory Director in the Extraordinary
General Meeting which was held on February 12, 2021. The Supervisory
Board now consists of 40% women.
Independence
Throughout the year, three Supervisory Directors – Piero Overmars
(Chairman), Delfin Rueda, and Pamela Joseph – were independent from
the Company within the meaning of Best Practice Provision 2.1.7, 2.1.8
and 2.1.9 of the Code. One Supervisory Board Director, Joep van Beurden,
has acted as an advisor to the Company in the years preceding his
appointment in 2017, and is therefore considered not to be independent
within the meaning of Best Practice Provision 2.1.8 (iii) of the Code. The
Supervisory Board is, as a body, independent as defined in the Code.
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Performance assessment
In 2020, the Supervisory Board has assessed its performance and
composition and that of its committees. This assessment was facilitated
by Focus Orange, an external advisory firm, and focused on organizational
learning. In preparation, Focus Orange conducted interviews with each
member of the Supervisory Board, the CEO, the CFO and the CLCO, as
well as the Company Secretary. Focus Orange included the (anonymized)
individual observations with regards to the functioning of the Supervisory
Board and its relationship with the Management Board in its evaluation
report. The outcomes of the assessment have been discussed with the
Supervisory Board and the Management Board. The evaluation concludes,
among others, that the relationship between the Supervisory Board and
the Management Board can be described as transparent and cooperative,
and the mix between formal and informal Supervisory Board relations
and interactions is balanced and as such has proven to be instrumental
to effective functioning of the Supervisory Board. The functioning of the
Supervisory Board fully complies with the relevant principles and best
practices as set out in the Dutch Corporate Governance Code. Following
the positive assessment of the Supervisory Board and as part of continuous
improvement, points for follow up are proposed, and include:
z The Supervisory Board aims to maintain the balance between the
Supervisory Board’s formal and informal processes.
z The Supervisory Board would like to convene in additional bilateral
discussions and meetings with fellow Supervisory Directors and the
Supervisory Board as a body, aside from the regular Supervisory
Board meetings.
Financial statements
The Financial Statements for the year ended December 31, 2020, were
prepared by the Management Board and approved by the Supervisory
Board. The Report of the Independent Auditor, PricewaterhouseCoopers
Accountants N.V. (PwC) is included in the Independent Auditor’s Report
in the ‘Other Information’ section of the Financial Statements. The
Supervisory Board recommends that the General Meeting adopts these
Financial Statements.
Appreciation
Looking back at 2020, the Supervisory Board would like to thank all
Adyen employees for their contribution during a challenging year in many
aspects. The Supervisory Board is proud to see the team was able to shift
towards a working-from-home environment — proving highly flexible
during the global pandemic, while continuing to serve the interests of
merchants, shareholders and other stakeholders of Adyen.
Adyen
Annual Report 2020
page 86
Adyen acknowledges the importance of good corporate governance.
The Company agrees with the general approach and with the majority
of the provisions of the Code
9
. As such, it fully complies with the Code
with the exception of:
Best practice provision 2.1.5 of the Code, which provides that the
Supervisory Board should draw up a diversity policy for the composition
of the Management Board and Supervisory Board, addressing concrete
targets relating to diversity, and best practice provision 2.1.6 of the Code,
which provides that the corporate governance statement should explain
the diversity policy and the way it is implemented in practice. Adyen
deviates from best practices 2.1.5 and 2.1.6 as no concrete targets were
set on diversity for 2020. Concrete goals and targets will be set in 2021 to
build a team with Diversity, Equity and Inclusion at its core — Adyen values
and promotes diversity within its Management and Supervisory Board,
and its wider organization, as reflected in this Annual Report. In 2020, the
Diversity, Equity, and Inclusion (DEI) committee was founded, which helps
with identifying key areas to improve from a DEI perspective. With several
initiatives aimed at HR processes and unconscious bias trainings, Adyen
actively steers on a balanced workforce in relation to Diversity, Equity and
Inclusion, with current metrics at 34% female team members and 29% of
team lead positions filled up by women, and 16% in the Management Board,
respectively. In line with the Company’s Inclusion Policy and the adoption
of the legislative proposal introducing stricter gender diversity measures
for Dutch listed (in line with the SER’s guideline on Supervisory Board
composition), Caoimhe Keogan is appointed as Supervisory Director on
February 12, 2021. The Supervisory Board now consists of 40% women.
Compliance with the
Dutch Corporate
Governance Code
9
For the full version of the Dutch Corporate
Governance Code 2016 please refer to
www.mccg.nl
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Adyen
Annual Report 2020
Best practice provision 4.3.3 of the Code, which provides that the general
meeting of shareholders of a company not having statutory two-tier status
(structuurregime) may pass a resolution to cancel the binding nature of a
nomination for the appointment of a member of the Management Board or
of the Supervisory Board and/or a resolution to dismiss a member of the
Management Board or of the Supervisory Board by an absolute majority
of the votes cast. It may be provided that this majority should represent a
given proportion of the issued capital, which proportion may not exceed
one-third. However, Adyen applies a higher proportion of one-half, which
follows from a previous arrangement with Adyen’s shareholders.
Adyen
Annual Report 2020
page 88
Remuneration
Report
This remuneration report explains how the remuneration policy for the
Management Board and Supervisory Board as approved by the General
Meeting in 2020 was put into practice in 2020. Part of this is an overview
of the remuneration awarded or due to individual Managing Directors.
Adyen remuneration policy
The objective of our remuneration policy is to recruit and retain the best
talent worldwide by offering competitive payment structures that take
account of our strategy to focus on our merchants’ growth, changing the
payment landscape and having fun while doing so.
Our remuneration policies are consistent with, and promote, sound and
effective risk management and are always aligned with our strategy and
the Adyen Formula to create long-term value for our company and our
merchants. As such, our remuneration policy does not contain incentives
that exclusively benefit staff members themselves or encourage improper
risk-taking.
The remuneration policy of Adyen is published on the Company’s website.
There have been no deviations from the remuneration policy or the
procedure for its implementation in the financial year 2020.
Equal pay
We value all perspectives, so we see no reason to reward one more than
the other — same role, same pay. We are committed to ensuring equal pay,
therefore this is included in our annual equal pay audit, to safeguard and
uphold this standard.
Remuneration package
The size of an individual remuneration package is based on the scope of
responsibilities, the employee’s experience and performance, and the local
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Annual Report 2020
market circumstances, which varies depending on country.
The total remuneration of individual staff members, including the Managing
and Supervisory Directors, is determined by considering the long-term
strategy of Adyen and aimed at ensuring a sustainable and durable company
for stakeholders.
The remuneration of the Management Board is reviewed annually and any
adjustment of the remuneration will be in accordance with the remuneration
policy. Remuneration decisions such as pay increases will take account of the
individual Managing Directors delivering on specific areas of focus, including
sustainability and the Adyen Formula, as well as company performance.
A remuneration package may consist of a base salary, share-related
remuneration, pension entitlements and other emoluments. For certain
employees a remuneration package may also include variable remuneration.
Adyen has the right pay mix in place to mitigate short-term orientation and
contribute to the long-term performance of the company. This is specifically
achieved by awarding staff members, including the Management Board, with
(long-term) share-related remuneration. The purpose of the share-based
payments is to put staff members in a financial ownership-like position
where shares are concerned and for them to obtain an economic interest
in the pursuit of Adyen’s long-term objectives such as sustainable growth,
development, profitability, and financial success of Adyen.
Variable remuneration
Adyen observes the laws and regulations applicable to the company,
which includes the remuneration regulations as provided in the Act on
Remuneration policy Financial Undertakings (Wet beloningsbeleid financiële
ondernemingen) and the EBA Guidelines on Sound Remuneration Policies
(EBA Guidelines) (the Remuneration Regulations). Adyen's remuneration
policy is in line with the Remuneration Regulations.
Certain employees may be rewarded with variable remuneration. Variable
remuneration, if awarded, will at all times not exceed the fixed to variable
remuneration ratios as provided in the Remuneration Regulations.
In the financial year 2020, Adyen has not rewarded any variable remuneration
to the members of the Management Board or any other staff identified as
“Identified Staff” (staff that is considered to have a material impact on the
risk profile of Adyen). Adyen does not award variable remuneration to the
Supervisory Directors. In accordance with the Remuneration Regulations,
variable remuneration will be subject to hold back and claw back instruments.
As no variable remuneration has been awarded to the members of the
Management Board or the Supervisory Board in the financial year 2020, no
variable remuneration has been adjusted or clawed back in accordance with
these instruments.
Adyen
Annual Report 2020
page 90
The total global company-wide amount of variable remuneration awarded over
2020 was EUR 17,092,364 (2019: EUR 16,661,986) compared to total staff
expenses of EUR 180,013,967 (2019: EUR 122,446,852).
Identified staff
In 2020 there were 21 employees (2019: 21) identified as “Identified Staff”.
None of these employees was entitled to a performance related bonus in
2020. As such Adyen avoids short-term focus and incentives for all staff that is
considered to have a material impact on our business, including the Managing
Directors, thereby contributing to the long-term performance and value
creation of the company.
Total annual remuneration
In 2020 there were no employees to whom total annual remuneration
(including employer pension contributions and any severance payments
made) of EUR 1 million or more was awarded.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee consists of three (3)
Supervisory Directors as determined by the Supervisory Board. The duties
of the Nomination and Remuneration Committee are described in the
‘Governance’ section of this Annual Report.
The current remuneration policy for the Management Board and the
Supervisory Board and remuneration of the Managing Directors and fees
for the members of the Supervisory Board was adopted at the shareholders
meeting on May 26, 2020.
Remuneration for the Management Board
The remuneration policy that applies to the Managing Directors is in line with
the remuneration policy that applies to all staff. Adyen’s Management Board
remuneration is consistent with and promotes a sound and effective risk
management and has always been aligned with Adyen’s strategy to create
long-term value for its merchants. It is thus set up with the aim to contribute to
Adyen's long-term goals. As such, the remuneration policy does not contain
incentives that exclusively benefit Managing Directors themselves.
The remuneration of the Managing Directors is determined by the Supervisory
Board with due observance of the remuneration policy as adopted by the
General Meeting.
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The Managing Directors provide the Nomination and Remuneration
Committee with their individual views with regard to the amount and structure
of their own remuneration. In 2020 base salaries of the Managing Directors
were increased with 8%, in line with the average salary increase of an Adyen
employee in 2019.
The Management Board’s remuneration is compared to AEX companies. The
Management Board remuneration is below the median of the benchmark.
This discrepancy is accepted for the current Managing Directors. To attract
future Managing Directors, the remuneration package for new Managing
Directors may be adjusted to the market.
In line with the revised Dutch Corporate Governance Code, Adyen
performed a scenario analysis and back-test on Management Board
remuneration. All scenarios resulted in the same outcome as the
remuneration of the Managing Directors is not linked to variable
remuneration elements. The internal ratio of the Managing Directors’
remuneration and that of a representative reference group was determined.
For this ratio, Adyen deems most relevant the total direct compensation of
the CEO compared to the average total direct compensation of all Adyen
employees worldwide. For the CEO a ratio of 7:1 applies (2019: [7:1]). For the
other Managing Directors, a ratio of 6:1 applies (2019: [5:1]).
Remuneration Management Board
The total remuneration received by the Management Board in 2020
amounted to EUR 3,546,977.
As Adyen N.V. became a listed company in June 2018, management
remuneration related to years 2018, 2019 and 2020 are disclosed in this
report instead of five years required by Dutch Civil Code.
2020 2019 2018
Salaries and short-term employee benefits 3,252,768 2,773,786 2,962,042
Share-based payments 104,166 209,069 214,101
Post-employment benefits 96,278 82,335 32,661
Total 3,546,977 3,065,190 3,208,804
Adyen
Annual Report 2020
page 92
The table below provides an overview of the remuneration of each individual
Managing Director for the financial year 2020, 2019 and 2018:
Sam Halse left Adyen per February 29, 2020. Joop Wijn left Adyen per May 31,
2020.
Due to an administrative mistake, both the 2020 pension contribution and
8% increase of the Management Board remuneration over 2019 were not
included and thus reported incorrectly in the 2019 Annual Report. The correct
amounts are shown in the table above.
2020 (in EUR) Base salary
12
Pension and social
security contributions
Share-based
compensation Variable income
Total Remuneration
2020
Pieter van der Does 596,796 15,968 - - 612,764
Arnout Schuijff
10
291,589 15,968 - - 307,557
Roelant Prins 484,822 15,968 - - 500,790
Ingo Uytdehaage 561,804 15,968 - - 577,772
Sam Halse 65,234 821 - - 66,055
Joop Wijn 248,777 6,653 87,112
13
- 342,542
Kamran Zaki 656,000 15,617 - - 671,617
Mariëtte Swart
11
347,746 15,968 104,166
14
- 467,880
Total 3,252,768 102,931 191,278 - 3,546,977
2019 (in EUR) Base salary
12
Pension and social
security contributions
Share-based
compensation
13
Variable income
Total Remuneration
2019
Pieter van der Does 553,310 16,467 - - 569,777
Arnout Schuijff
10
270,474 16,467 - - 286,941
Roelant Prins 449,630 16,467 - - 466,097
Ingo Uytdehaage 520,910 16,467 - - 537,377
Sam Halse 426,152 - - - 426,152
Joop Wijn 553,310 16,467 209,069 - 778,846
Total 2,773,786 82,335 209,069 - 3,065,190
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Annual Report 2020
10
Part-time percentage 60%
11
Part-time percentage 90%
12
This amount includes allowances.
13
This amount equals the total expenses
recognized by Adyen during the
financial year in relation to share-based
compensation, based on the vesting
schedule for options granted and the fair
value of the option at grant date, as further
detailed in the Financial Statements.
14
Share-based fixed remuneration awarded in
depository receipts
15
Variable income in cash relates to
performance in the preceding calendar year.
2018 (in EUR) Base salary
12
Pension and social
security contributions
Share-based
compensation
13
Variable income
in cash
15
Total Remuneration
2018
Pieter van der Does 512,305 7,426 - 85,000 604,731
Arnout Schuijff
10
250,602 3,229 - 41,400 295,231
Roelant Prins 416,305 6,815 - 69,000 492,120
Ingo Uytdehaage 482,510 6,974 - 80,000 569,484
Sam Halse 403,252 - 5,032 52,491 460,775
Joop Wijn 512,510 8,216 209,069 56,667 786,462
Total 2,577,484 32,661 214,101 384,558 3,208,804
Adyen
Annual Report 2020
page 94
Variable remuneration
As of 2018, Adyen does not award variable remuneration to the Managing
Directors.
Employee stock options awarded in previous years
The table below provides an overview of the options per December 31, 2020
that have been granted to Managing Directors as part of their share-based
compensation:
2019 Grant date
Number of Options
Vested
Number of Options
Non-Vested
Number of Options
expected to Vest
Pieter van der Does - - - -
Arnout Schuijff - - - -
Roelant Prins 2014 48,266 - -
Ingo Uytdehaage 2014 80,632 - -
Sam Halse 2015 17,829 - -
Joop Wijn 2017 20,154 6,719 6,719
2020 Grant date
Number of Options
Vested
Number of Options
Non-Vested
Number of Options
expected to Vest
Pieter van der Does - - - -
Arnout Schuijff - - - -
Roelant Prins 2014 24,133 - -
Ingo Uytdehaage 2014 40,633 - -
Kamran Zaki 2014 80,391 - -
Mariëtte Swart 2015 4,000 - -
2018 Grant date
Number of Options
Vested
Number of Options
Non-Vested
Number of Options
expected to Vest
Pieter van der Does - - - -
Arnout Schuijff - - - -
Roelant Prins 2014 72,378 - -
Ingo Uytdehaage 2014 120,632 - -
Sam Halse 2014 24,072 - -
2015 24,727 - -
Joop Wijn 2017 26,875 37,625 37,625
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The stock options held by Ingo Uytdehaage and Roelant Prins are due to expire
December 1, 2021. Ingo Uytdehaage and Roelant Prins have instructed ABN
Amro to gradually sell the remaining stock options in the period running from
July 1, 2019 (i.e. after expiry of the Post-IPO Shareholders’ lock-up period)
until December 1, 2021. The stock options shall be sold on a monthly basis, in
portions equally divided over the 3 (three) calendar years, with due observation
of a 15% daily trading-cap. The stock options held by Kamran Zaki are due to
expire January 1, 2022. Kamran has instructed ABN Amro to sell to cover in
order to exercise and hold the remainder of his stock option portfolio. As per the
instruction, the stock options shall be sold at any given market-price. Upon each
sale, appropriate notifications shall be made via the AFM register.
Share and Depositary Receipt holdings
The table below reflects the equity position directly or indirectly held by the
Managing Directors as per December 31, 2020, 2019 and 2018:
Shareholdings (aggregate number of Shares and/or Depositary Receipts
2020 2019 2018
Pieter van der Does 1,022,539 1,202,987 1,415,278
Arnout Schuijff 1,371,655 1,613,589 1,898,339
Roelant Prins 287, 3 0 9 338,011 338,011
Ingo Uytdehaage 195,182 229,570 229,570
Sam Halse N/A - -
Joop Wijn
16
8,061 2,156 2,156
Kamran Zaki 21,440 - -
Mariëtte Swart 52 - -
16
2020 vesting until May 31, 2020
(termination date)
Adyen
Annual Report 2020
page 96
Pension
As from January 2017, all Dutch Managing Directors participate in the Collective
Defined Contribution (CDC) pension plan, with respect to their salary up to
EUR 110,111 gross per year for 2020 (2019: EUR 107,593). On behalf of each
Managing Director, Adyen pays a contribution of 4% of the pensionable salary –
being 12 times the monthly fixed salary plus holiday pay up to the fiscally allowed
maximum minus a deductible – for the accrual of old age pension benefits as
well as the administration costs. If and as far as fiscally allowed, each Managing
Director has the possibility to make additional contributions in order to accrue
additional pension capital.
Kamran Zaki participates in a 401k retirement plan in the US, for which Adyen
provides an employer match of up to 2%.
Insurance
All Managing Directors are insured under an insurance policy taken out by Adyen
against damages resulting from their conduct when acting in their capacities as
directors.
All Dutch Managing Directors are insured for the risk of death and disability, for
which Adyen pays the insurance premiums.
Service and Severance Agreements
All Managing Directors have entered into a service agreement (overeenkomst
van opdracht) with Adyen N.V. effective as of the date of the listing of Adyen,
whereby Kamran Zaki is currently assigned to Adyen Inc. The terms and
conditions of these service agreements have been aligned with the Dutch
Corporate Governance Code. The service agreements will be entered into for a
term of 4 years. The service agreements provide for a severance of one annual
base salary if the Managing Director is not re-appointed or otherwise terminated
by Adyen (for any reason other than urgent cause within the meaning of article
7:678 of the Dutch Civil Code (dringende reden)), in accordance with the Dutch
Corporate Governance Code. In the financial year 2020, no severance payment
has been paid to any Managing Director.
page 97
Adyen
Annual Report 2020
Loans
No loans, advance payments and guarantees have been granted to or on behalf
of the Managing Directors.
The below table shows the comparative remuneration and company
performance over the last two reported financial years:
Remuneration Supervisory Board
The total remuneration received by the Supervisory Board in 2020 amounted
to EUR 292,705 (2019: EUR 240,000). The table below provides an overview of
the remuneration of the Supervisory Board for the financial year 2018, 2019 and
2020. In addition to the remuneration, expenses incurred by the Supervisory
Directors in the performance of their duties are reimbursed in full:
Annual change
Director's remuneration
2020 vs 2019 2019 vs 2018 Remark
Pieter van der Does 42,987 (34,954)
Arnout Schuijff 20,616 (8,290)
Roelant Prins 34,693 (26,023)
Ingo Uytdehaage 40,395 (32,107)
Kamran Zaki 671,617 -
17
Mariëtte Swart 467,880 -
17
Company Performance (in EUR ‘000)
Net revenues 149,900 160,855
EBITDA 82,245 110,464
Average remuneration comparative on FTE basis (in EUR)
Wages and Salaries / FTE 1,702.66 1,688.69
17
Became Managing Directors as per 2020
2020 2019 2018
Salaries and short-term employee
benefits
292,705 240,000 176,000
Share-based payments - - 5,000
Total 292,705 240,000 181,000
Adyen
Annual Report 2020
page 98
The table below provides an overview of the remuneration of each
Supervisory Director for the financial year 2019 and 2020. In addition to the
remuneration, expenses incurred by the members of the Supervisory Board
in the performance of their duties are reimbursed in full.
Share-based compensation
The table below provides an overview of the aggregate number of Shares and/
or Depositary Receipts as per December 31, 2020, 2019 and 2018. These
have been granted to Supervisory Directors as part of their share-based
compensation before Adyen became a listed company.
As the Supervisory Directors are not allowed to be remunerated via
share-based compensation after the listing of Adyen in 2018, the annual
remuneration per Supervisory Directors with unvested Options that expired
as per June 1, 2018 was increased by €30,000 to €80,000 for Piero Overmars
and to €60,000 for Joep van Beurden per year starting at that date.
2020 2019
(in EUR)
Remuneration
in cash
Share-based
compensation
Total
Remuneration
Remuneration
in cash
Share-based
compensation
Total
Remuneration
Piero Overmars 90,200 - 90,200 80,000 - 80,000
Delfin Rueda Arroyo 69,000 - 69,000 60,000 - 60,000
Joep van Beurden 66,000 - 66,000 60,000 - 60,000
Pamela Joseph 67,505 - 67,505 40,000 - 40,000
Total 292,705 - 292,705 240,000 - 240,000
Shareholdings (aggregate number of Shares and/or Depositary Receipts)
2020 2019 2018
Piero Overmars 1,094 1,094 1,094
Delfin Rueda Arroyo - - -
Joep van Beurden* 1,719 1,719 1,719
Pamela Joseph - - -
page 99
Adyen
Annual Report 2020
Additionally, Piero Overmars and Joep van Beurden committed not to sell,
transfer or otherwise dispose of any Shares and/or Depositary Receipts,
during the term of their appointment.
Insurance
The Supervisory Directors of Adyen are insured under an insurance policy
taken out by Adyen against damages resulting from their conduct when
acting in their capacities as supervisory directors.
Loans
No loans, advance payments and guarantees have been granted to or on
behalf of the Supervisory Directors
Adyen
Annual Report 2020
page 100
I work in my daughter’s old bedroom where I’ve
hung frames with positive affirmations that remind
us good things never come from comfort zones.
Even though this year had its difficulties, it is great to
work at a company where people share that mind set
and make the best out of it, as a team.
Tess, VP Account Management
—
Consolidated Financial Statements
Company Financial Statements
Consolidated Statement of Comprehensive Income
__________________________________
104
Consolidated Balance Sheet
______________________________________________________
105
Consolidated Statement of Changes in Equity
_______________________________________
106
Consolidated Statement of Cash Flows
_____________________________________________
108
Notes to the Consolidated Financial Statements
_____________________________________
109
Key Disclosures
________________________________________________________________
113
2. Revenue and segment reporting
________________________________________________
113
3. Inventories
_________________________________________________________________
119
4. Employee benefit expense
_____________________________________________________
119
5. Other operating expenses
______________________________________________________
123
6. Other financial results
_________________________________________________________
123
7. Income tax
_________________________________________________________________
125
8. Capital management
_________________________________________________________
128
9.CRR/CRD IV Regulatory Capital
__________________________________________________
129
10. Cash and cash equivlents
_____________________________________________________
129
11. Financial instruments
________________________________________________________
130
12. Financial risk management
____________________________________________________
133
Other disclosures
_______________________________________________________________
136
13. Intangible assets
____________________________________________________________
136
14. Plant and equipment
_________________________________________________________
137
15. Trade, other receivables, and receivables from merchants and financial institutions
___________
138
16. Trade, other payables, and payables to merchants and financial institutions
_________________
139
17. Leases
____________________________________________________________________
140
18. Other contingent assets, liabilities and commitments
_________________________________
141
19. Related party transactions
____________________________________________________
141
20. New and amended standards adopted
____________________________________________
142
21. Audit fees
_________________________________________________________________
142
22. Compensation of key management
______________________________________________
143
23. Share information
___________________________________________________________
145
24. Tax reporting
_______________________________________________________________
145
___________________________________________________________________________________
103
___________________________________________________________________________________
148
Company Statement of Comprehensive Income ______________________________________ 149
Company Balance Sheet __________________________________________________________ 150
Company Statement of Changes in Equity ___________________________________________ 151
Company Statement of Cash Flows _________________________________________________ 153
Notes to the Company financial statements __________________________________________ 154
Basis of preparation ______________________________________________________________ 154
25. Correction of prior year error _______________________________________________________________ 154
26. Company - Revenue ______________________________________________________________________ 155
27. Company - Employee benefits _____________________________________________________________ 155
28. Company - Other operating expenses _______________________________________________________ 155
29. Company - Other financial results __________________________________________________________ 156
30. Company - Plant and equipment ___________________________________________________________ 156
31. Company – Leases _______________________________________________________________________ 157
32. Company - Investments in consolidated subsidiaries on equity method __________________________ 158
33. Company – Trade, other receivables, and receivables from merchants and financial institutions ____ 160
34. Shareholders’ equity _____________________________________________________________________ 160
35. Dividends paid ___________________________________________________________________________ 160
36. Company – Trade, other payables, and payables to merchants and financial institutions ___________ 160
37. Directors’ remuneration ___________________________________________________________________ 161
38. Audit fees _______________________________________________________________________________ 161
39. Contingencies and commitments __________________________________________________________ 161
40. Proposed profit appropriation ______________________________________________________________ 161
41. Events after balance sheet date ____________________________________________________________ 161
page 104
Adyen
Annual Report 2020
3
Consolidated Statement of Comprehensive Income
For the years ended December 31, 2020 and 2019 Restated*
(all amounts are in EUR thousands unless otherwise stated)
N
N
o
o
t
t
e
e
2
2
0
0
2
2
0
0
22001199
RReessttaatteedd**
Revenue 2 3,641,389 2,656,774
Costs incurred from financial institutions 2 (2,935,182 ) (2,105,929 )
Costs of goods sold 3 (22,007 ) (16,545 )
Net revenue
Wages and salaries 4 (151,440 ) (100,450 )
Social securities and pension costs 4 (28,574 ) (21,997 )
Amortization and depreciation 13,14,17 (28,567 ) (22,326 )
Other operating expenses 5 (101,889 ) (95,113 )
Other income
Income before net finance income/(expense) and income taxes
Finance income
Finance expense
10,17
(9,406 ) (4,633 )
Other financial results 6 (42,661 ) 4,560
Net finance income/(expense)
(50,733 ) 261
Income before income taxes
Income taxes 7 (62,161 ) (60,593 )
Net income for the year
Net income attributable to owners of Adyen N.V.
Other comprehensive income
Items that may be reclassified to profit or loss
Currency translation adjustments subsidiaries
(11,764 ) (81 )
Other comprehensive income for the year (11,764 ) (81 )
Total comprehensive income for the year
(attributable to owners of Adyen N.V.)
Earnings per share (in EUR)
- Net profit per share - Basic 23 8.63 7.88
- Net profit per share - Diluted 23 8.51 7.67
The accompanying notes are an integral part of these consolidated financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 1.3).
Adyen
Annual Report 2020
page 105
4
Consolidated Balance Sheet
As at December 31, 2020, 2019 Restated*, and January 1, 2019 Restated*
(all amounts are in EUR thousands unless otherwise stated)
Note
December 31,
2020
December 31,
2019
Restated*
January 1,
2019
Restated*
Intangible assets 13 9,970 7,640 5,059
Plant and equipment 14 35,746 30,219 23,921
Right-of-use assets 17 124,328 59,695 -
Other financial assets at FVPL 11 20,883 44,088 30,378
Contract assets 2.2 124,113 140,000 140,791
Deferred tax assets 7 106,337 71,633 8,297
Total non-current assets
Inventories 3 19,548 7,020 7,864
Receivables from merchants and financial institutions 15 883,939 443,333 355,596
Trade and other receivables 15 75,079 46,927 42,334
Current income tax receivables 7 8,794 -
Financial asset at amortized cost
Other financial assets at amortized cost 11 12,238 13,031 9,842
Cash and cash equivalents 10 2,737,486 1,745,388 1,231,916
Total current assets
Total assets
Share capital 8 304 301 296
Share premium 8 194,608 179,296 160,209
Treasury shares
(4,804 )
Other reserves
Retained earnings
Total equity attributable to owners of Adyen N.V.
Derivative liabilities 11 68,400 35,800 23,800
Deferred tax liabilities 7 23,924 26,214 23,777
Lease liability 17 118,051 50,903 -
Total non-current liabilities
Payables to merchants and financial institutions 16 2,588,863 1,459,226 1,162,329
Trade and other payables 16 111,547 88,105 32,495
Lease liability 17 13,434 10,791 -
Current income tax payables 7 16,108 19,601 15,479
Deferred revenue
Total current liabilities
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 1.3).
page 106
Adyen
Annual Report 2020
Adyen
Annual Report 2020
5
Consolidated Statement of Changes in Equity
For the years ended December 31, 2020 and 2019 Restated*
(all amounts are in EUR thousands unless otherwise stated)
Note
Share
capital
Share
premium
Treasury
shares
Other reserves
Retained
earnings
Total equity
Legal
reserves
Share-
based
payment
reserve
Warrant
reserve
Balance - January 1, 2019 (as previously
reported)
Adjustment for correction of error
1.3.1
Balance - January 1, 2019 (restated) 296 160,209 (4,804 )
Net income for the year (restated)
Currency translation adjustments
(81 )
(81 )
Total comprehensive income for the year
(restated)
-
(81 ) -
Adjustments:
Intangible assets
(2,581 ) -
Other adjustments
(13 ) -
(2,594 ) -
Transactions with owners in their capacity as owners:
Statutory tax rate change
(818 ) 818 -
Deferred tax on share-based compensation 7
Repurchase of depositary receipts
(18,323 )
(18,323 )
Options exercised
(4,346 )
Proceeds on issuing shares 8 5 15,332
Movement resulting from treasury shares
(846 ) 23,127
Share-based payments 4.3
Balance - December 31, 2019 301 179,296 -
Adyen
Annual Report 2020
page 107
7
Consolidated Statement of Cash Flows
For the years ended December 31, 2020, and 2019 Restated*
(all amounts are in EUR thousands unless otherwise stated)
NNoottee
22002200
22001199
RReessttaatteedd**
Income before income taxes
323,180
294,877
Adjustments for:
- Finance income
(1,334)
(334)
- Finance expenses
9,406
4,633
- Other financial results
6
42,661
(4,560)
- Depreciation of plant and equipment
14
11,230
9,022
- Amortization of intangible fixed assets
13
2,465
2,192
- Depreciation of right-of-use assets
17
14,872
11,112
- Share-based payments
4
7,994
3,125
Changes in working capital:
- Inventories
3
(12,528)
844
- Trade and other receivables
15
(15,213)
(4,593)
- Receivables from merchants and financial institutions
15
(440,606)
(87,737)
- Payables to merchants and financial institutions
16
1,129,637
296,897
- Trade and other payables
16
14,279
55,610
- Deferred revenue
-
(364)
- Redemption financial assets at amortized cost
-
4,418
- Amortization of contract assets
2.2
10,641
2,133
Cash generated from operations
1,096,684
587,275
Interest received
1,334
334
Interest paid
(9,406)
(4,633)
Income taxes paid
(71,965)
(53,521)
Net cash flows from operating activities
1,016,647
529,455
Purchases of financial assets at amortized cost
11
(13,355)
(10,073)
Redemption of financial assets at amortized cost
11
13,088
7,275
Purchases of plant and equipment
14
(17,097)
(15,186)
Capitalization of intangible assets
13
(4,795)
(4,773)
Net cash used in investing activities
(22,159)
(22,757)
Proceeds from issues of shares
8
12,832
15,332
Sale of depositary receipts (treasury shares)
-
22,281
Repurchase of depositary receipts (treasury shares)
-
(18,323)
Lease payments
17
(9,439)
(9,932)
Net cash flows from financing activities
3,393
9,358
Net increase in cash, cash equivalents and bank overdrafts
997,881
516,056
Cash, cash equivalents and bank overdrafts at beginning of the year
1,745,388
1,231,916
Exchange losses on cash, cash equivalents and bank overdrafts
(5,783)
(2,584)
Cash, cash equivalents and bank overdrafts at end of the year
10
2,737,486
1,745,388
The accompanying notes are an integral part of these consolidated financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 1.3).
6
Note
Share
capital
Share
premium
Other reserves
Retained
earnings
Total
equity
Legal
reserves
Share-
based
payment
reserve
Warrant
reserve
Balance - January 1, 2020
Net income for the year
Currency translation adjustments
(11,764 )
(11,764 )
Total comprehensive income for the year -
(11,764 ) -
Adjustments:
Intangible assets
(2,330 ) -
Other adjustments
(1,165 ) 1,165
Transactions with owners in their capacity as owners:
Deferred tax on share-based compensation 7
(321 )
Options exercised
(2,795 )
Proceeds on issuing shares 8 3 12,838
Share-based payments 4.3
Balance - December 31, 2020
The accompanying notes are an integral part of these consolidated financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 1.3).
page 108
Adyen
Annual Report 2020
7
Consolidated Statement of Cash Flows
For the years ended December 31, 2020, and 2019 Restated*
(all amounts are in EUR thousands unless otherwise stated)
N
N
o
o
t
t
e
e
2
2
0
0
2
2
0
0
22001199
RReessttaatteedd**
Income before income taxes
Adjustments for:
- Finance income
(1,334 ) (334 )
- Finance expenses
- Other financial results 6 42,661 (4,560 )
- Depreciation of plant and equipment 14 11,230 9,022
- Amortization of intangible fixed assets 13 2,465 2,192
- Depreciation of right-of-use assets 17 14,872 11,112
- Share-based payments 4 7,994 3,125
Changes in working capital:
- Inventories 3 (12,528 ) 844
- Trade and other receivables 15 (15,213 ) (4,593 )
- Receivables from merchants and financial institutions 15 (440,606 ) (87,737 )
- Payables to merchants and financial institutions 16 1,129,637 296,897
- Trade and other payables 16 14,279 55,610
- Deferred revenue
(364 )
- Redemption financial assets at amortized cost
- Amortization of contract assets
2.2 10,641 2,133
Cash generated from operations
Interest received
Interest paid
(9,406 ) (4,633 )
Income taxes paid
(71,965 ) (53,521 )
Net cash flows from operating activities
Purchases of financial assets at amortized cost
11
(13,355 ) (10,073 )
Redemption of financial assets at amortized cost
11
Purchases of plant and equipment
14
(17,097 ) (15,186 )
Capitalization of intangible assets
13
(4,795 ) (4,773 )
Net cash used in investing activities (22,159 ) (22,757 )
Proceeds from issues of shares
8 12,832 15,332
Sale of depositary receipts (treasury shares)
Repurchase of depositary receipts (treasury shares)
(18,323 )
Lease payments
17 (9,439 ) (9,932 )
Net cash flows from financing activities
Net increase in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts at beginning of the year
Exchange losses on cash, cash equivalents and bank overdrafts
(5,783 ) (2,584 )
Cash, cash equivalents and bank overdrafts at end of the year 10 2,737,486 1,745,388
The accompanying notes are an integral part of these consolidated financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 1.3).
Adyen
Annual Report 2020
page 109
8
Notes to the Consolidated Financial Statements
General Information
Adyen N.V. (hereinafter ‘Adyen’, ‘the Company’, or ‘the Group’) is a licensed Credit Institution by De Nederlandsche
Bank (the Dutch Central Bank) and registered in the Netherlands under the company number 34259528. The Credit
Institution license includes the ability to provide cross-border services in the European Economic Area. Adyen
shares are traded on Euronext Amsterdam, where the Company is part of the AEX Index.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards and IFRIC interpretations as endorsed by the European Union (EU-IFRS) and in accordance with sub
articles 8 and 9 of article 362, Book 2 of the Dutch Civil Code. The financial statements comply with IFRS as issued
by the International Accounting Standards Board (IASB). All amounts in the notes to the consolidated financial
statements are stated in thousands of EUR, unless otherwise stated.
Impact of COVID-19:
In connection with the COVID-19 pandemic, and its effect on the macroeconomic landscape, Management has
assessed the impact it is having on Adyen business. Many countries around the world, including those Adyen has a
presence in, have been taking measures designated to limit the continued spread of COVID-19, including the
closure of workplaces, restricting travel, prohibiting assembling, closing international borders and quarantining
populated areas. Despite these restrictions, Adyen had business continuity protocols in place that allowed the
Company to continue the day-to-day activities while adjusting to this new normal. By Q1 2020, Adyen staff were fully
equipped to work remotely, and have been doing so without impact to the Company’s payment processing ability.
Moreover, Adyen did not cease its hiring or capital expenditure activities as the Company continued to invest in
long-term growth.
Adyen’s merchants operate across many sectors and geographies, and have been impacted in varying degrees by
the pandemic. For example, online retail and digital goods volumes accelerated while travel and in-store volumes
slowed down following lockdown restrictions. Due to Adyen’s diverse merchant portfolio, net revenue growth
continued in line with the prior year (refer to note 2.4). Moreover, EBITDA margin and net cash position improved,
showing the overall resilience of the Adyen business model.
Management has assessed the impact of the COVID-19 pandemic on the realizability of assets that rely on future
profitability, such as deferred tax asset positions. The diversified nature of Adyen’s business model has allowed for
continued net revenue and EBITDA growth throughout the year and contributed to consolidating a positive outlook
for future profitability of the Company. As a result, recoverability of the deferred tax asset and valuation of our other
assets remains unchanged. During 2020, Management reassessed the expected credit loss model for trade and
other receivables, with no changes to the accounting policy disclosed in the financial statements for the year ended
December 31, 2019. In addition, Adyen did not see a material increase in counterparty credit risk, nor recognized
material losses related to its merchant portfolio. All topics mentioned above continue to be monitored timely due to
the fast-changing environment linked to the pandemic.
9
1.1 Consolidation
Adyen N.V. directly or indirectly owns 100% of the shares of, and therefore controls all entities included in these
consolidated financial statements (refer to note 32 for a full list of entities included in scope of consolidation of these
financial statements).
Adyen has offices in the Netherlands, Brazil, Singapore, United Kingdom, Canada, Australia, South Korea, Hong
Kong, Mexico, China, New Zealand, Malaysia, India, Japan, Poland, United Arab Emirates, and the United States,
with branches in Germany, France, and Sweden and representative offices in Belgium, Italy and Spain. The address
of Adyen’s N.V. registered office is Simon Carmiggeltstraat 6-50, 1011 DJ Amsterdam, the Netherlands.
Accounting policy – Consolidation
The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which Adyen acquires
control and they are deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealized gains on transactions between group
companies are eliminated.
page 110
Adyen
Annual Report 2020
9
1.1 Consolidation
Adyen N.V. directly or indirectly owns 100% of the shares of, and therefore controls all entities included in these
consolidated financial statements (refer to note 32 for a full list of entities included in scope of consolidation of these
financial statements).
Adyen has offices in the Netherlands, Brazil, Singapore, United Kingdom, Canada, Australia, South Korea, Hong
Kong, Mexico, China, New Zealand, Malaysia, India, Japan, Poland, United Arab Emirates, and the United States,
with branches in Germany, France, and Sweden and representative offices in Belgium, Italy and Spain. The address
of Adyen’s N.V. registered office is Simon Carmiggeltstraat 6-50, 1011 DJ Amsterdam, the Netherlands.
Accounting policy – Consolidation
The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which Adyen acquires
control and they are deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealized gains on transactions between group
companies are eliminated.
Adyen
Annual Report 2020
page 111
10
1.2. Significant accounting policies, estimates and judgements and new and amended
standards Adopted by the Group
The table below provides an overview of what the significant and new accounting policies are and where they are
included in these financial statements. It further provides an overview of how accounting policies together with
significant accounting estimates and judgements are connected throughout the notes to these financial statements.
In the 2020 financial statements, Adyen adopted amendments issued and made effective from January 1, 2020.
Adyen has assessed that the implementation had no impact on its current accounting policies. Details of the overall
impact assessment of the first-time application on January 1, 2020 of new amendments is disclosed in note 20.1
‘New standards adopted by Adyen’.
For the assessment whether a disclosure is relevant to users of these financial statements the following was
considered: the amount in question is significant in size and/or nature, importance for understanding the results of
Adyen or explaining the impact of significant changes in Adyen’s business and whether judgement is involved.
Accounting Policies
Significant Accounting Estimates
or Judgments
What it is
Accounting policies considered relevant for understanding the
financial statements, or required to be disclosed by law or IFRS
These accounting policies involve a
higher degree of judgement or
complexity. The estimates applied are
more likely to be materially adjusted
due to inaccurate estimates and/or
assumptions applied
Where
Provided per note to the financial statements. The notes are
organized into the following sections:
Key disclosures: provide a
breakdown of individual line
items in the financial
statements that users of the
financial statements consider
most relevant;
2. Revenue and segment reporting
3. Inventories
4. Employee benefit expense
(including share-based payments)
5. Other operating expenses
6. Other financial results
7. Income tax
2. Revenue - Principal versus agent for
revenue out of settlement fees
7. Income tax – Recognition of
deferred taxes related to share-based
compensation
Capital, investment and
financial risk management: key
information relating to Adyen’s
capital management,
explanations regarding
financial instruments and
financial risk management;
8. Capital management
9. CRR / CRD IV Regulatory
Capital
10. Cash and cash equivalents
11. Financial instruments
12. Financial risk management
11. Financial instruments – fair value
accounting of financial liabilities
Other: information on items
required to be disclosed to be
compliant with EU-IFRS and
other legal requirements.
Notes 13 – 41
11
1.3. Correction of prior year error
During 2020, Adyen determined that since 2018, fees charged to Adyen for refused or cancelled transactions had
been erroneously recognized twice in the accounting books. These relate to certain costs charged by card schemes
for transactions which are not fully completed (i.e. either refused, or initially authorized and then cancelled or
expired). This fee is passed on by Adyen to the merchant, which, in the normal course of business, would translate
into the recognition of a cost and revenue amount for Adyen. Since 2018, the fees for refused or cancelled
transactions were erroneously double booked as costs. As this type of fee is not related to settlement, there was no
cash component of the transaction and, as such, payouts to merchants were not affected.
As a result, the line items “costs incurred from financial institutions” and “payables to merchants and financial
institutions” have been overstated and “current income tax expense” and “current income tax payables” have been
understated which overall led to understatement of net revenue and equity.
The error has been corrected in this year’s financial statements by restating each of the affected financial statement
line items for prior periods on the consolidated and company financial statements. The following tables summarize
the impact on Adyen’s consolidated balance sheet and statement of comprehensive income.
1.3.1. Adjustment to the consolidated statement of balance sheet (extract)
31/12/19
Adjustment
31/12/19
01/01/19
Adjustment
01/01/19
(Previously
Reported)
(Restated)
(Previously
Reported)
(Restated)
Payables to merchants and financial
institutions
1,521,377
(62,151)
1,459,226
1,186,861
(24,532)
1,162,329
Current income tax payables
7,463
12,138
19,601
10,715
4,764
15,479
Total current liabilities
1,627,736
(50,013)
1,577,723
1,230,435
(19,768)
1,210,667
Net Assets
868,321
50,013
918,334
582,404
19,768
602,172
Retained earnings
559,494
50,013
609,507
357,231
19,768
376,999
Total equity attributable to the
owners of Adyen N.V.
868,321
50,013
918,334
582,404
19,768
602,172
1.3.2. Adjustment to the consolidated statement of comprehensive income (extract)
31/12/19
Adjustment
31/12/19
(Previously
Reported)
(Restated)
Costs incurred from financial institutions
(2,143,548)
37,619
(2,105,929)
Net revenue
496,681
37,619
534,300
Income before income taxes
257,258
37,619
294,877
Income taxes
(53,219)
(7,374)
(60,593)
Net income for the year
204,039
30,245
234,284
Earnings per share (in EUR)
- Net profit per share - Basic
6.86
1.02
7.88
- Net profit per share - Diluted
6.68
0.99
7.67
page 112
Adyen
Annual Report 2020
11
1.3. Correction of prior year error
During 2020, Adyen determined that since 2018, fees charged to Adyen for refused or cancelled transactions had
been erroneously recognized twice in the accounting books. These relate to certain costs charged by card schemes
for transactions which are not fully completed (i.e. either refused, or initially authorized and then cancelled or
expired). This fee is passed on by Adyen to the merchant, which, in the normal course of business, would translate
into the recognition of a cost and revenue amount for Adyen. Since 2018, the fees for refused or cancelled
transactions were erroneously double booked as costs. As this type of fee is not related to settlement, there was no
cash component of the transaction and, as such, payouts to merchants were not affected.
As a result, the line items “costs incurred from financial institutions” and “payables to merchants and financial
institutions” have been overstated and “current income tax expense” and “current income tax payables” have been
understated which overall led to understatement of net revenue and equity.
The error has been corrected in this year’s financial statements by restating each of the affected financial statement
line items for prior periods on the consolidated and company financial statements. The following tables summarize
the impact on Adyen’s consolidated balance sheet and statement of comprehensive income.
1.3.1. Adjustment to the consolidated statement of balance sheet (extract)
31/12/19
Adjustment
31/12/19 01/01/19
Adjustment
01/01/19
(Previously
Reported)
(Restated)
(Previously
Reported)
(Restated)
Payables to merchants and financial
institutions
1,521,377 (62,151) 1,459,226 1,186,861 (24,532) 1,162,329
Current income tax payables 7,463 12,138 19,601 10,715 4,764 15,479
Total current liabilities 1,627,736 (50,013) 1,577,723 1,230,435 (19,768) 1,210,667
Net Assets 868,321 50,013 918,334 582,404 19,768 602,172
Retained earnings 559,494 50,013 609,507 357,231 19,768 376,999
Total equity attributable to the
owners of Adyen N.V.
868,321 50,013 918,334 582,404 19,768 602,172
1.3.2. Adjustment to the consolidated statement of comprehensive income (extract)
31/12/19
Adjustment
31/12/19
(Previously
Reported)
(Restated)
Costs incurred from financial institutions
(2,143,548) 37,619 (2,105,929)
Net revenue
496,681 37,619 534,300
Income before income taxes
257,258 37,619 294,877
Income taxes
(53,219) (7,374) (60,593)
Net income for the year
204,039 30,245 234,284
Earnings per share (in EUR)
- Net profit per share - Basic
6.86 1.02 7.88
- Net profit per share - Diluted
6.68
0.99
7.67
Adyen
Annual Report 2020
page 113
12
Key Disclosures
In relation to our strategy, as outlined in the Directors report, Adyen’s management considers the following
disclosures as key in understanding its financial performance or position.
2. Revenue and segment reporting
The Adyen platform integrates the full payments stack (gateway, risk management, processing, acquiring and settlement)
with a common back-end infrastructure for authorizing. The company derives revenue from settling and processing
payments, sales of goods such as the sale of point of sale (POS) terminals, and other payment specific services.
The breakdown of revenue from contracts with customers per type of goods or service is as follows:
Types of goods or service
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
e
s
s
t
t
a
a
t
t
e
e
d
d
Settlement fees
3,293,512
2,372,579
Processing fees
217,208
176,140
Sales of goods
19,353
14,653
Other services
111,316
93,402
Total revenue from contracts with customers 3,641,389 2,656,774
Costs incurred from financial institutions
(2,935,182)
(2,105,929)
Costs of goods sold
(22,007)
(16,545)
Net revenue 684,200 534,300
Net revenue
Adyen’s total revenue contains scheme fees, interchange and mark-up for which Adyen acts as a principal. The
Management Board however, monitors net revenue (net of interchange and scheme fees (costs incurred from
financial institutions), and costs of goods sold) as a performance indicator. Adyen considers net revenue to provide
additional insight, together with total revenue, to its users to evaluate the nature and financial effects of the business
Accounting policy – Revenue from contracts with customers
Adyen has the following sources of revenue from contracts with customers:
(I) Settlement fees: Fees paid by merchants, usually as percentage of the transaction value, where Adyen
offers acquiring services. These fees are recognized as revenue when a payment transaction has been
completed by means of settlement with a merchant. Settlement fees include interchange and payment
network fees and other costs incurred from financial institutions. Adyen adopts a transparent pricing
model and charges fees to merchants based on its own incurred costs plus a mark-up for its acquiring
services, as contractually agreed between each merchant and Adyen.
(II) Processing fees: Fixed fee per transaction paid by merchants for the use of Adyen’s platform and
recognized as revenue when transaction is initiated via the Adyen payment platform.
(III) Sales of goods: Adyen satisfies the performance obligations to deliver the ownership of the POS
terminals and related accessories upon transfer of control of the terminal to the merchant. Adyen
considers this performance obligation to be distinct from its payment services. As a result, the revenues
for the sale of POS terminals and related accessories are recognized at that point in time.
(IV) Other services: Foreign exchange service fees and third party commission which are deemed other
services, are recognized at point in time. Services transferred over time relate to the amortization of
deferred revenue for services provided as part of the merchant contract (note 2.1) and terminal services
fees as part of the unified commerce offering.
13
activities in which it engages and the economic environments in which it operates. Net revenue is a non-IFRS
measure (reference is made to note 2.4 for further explanation on the non-IFRS measures reported by Adyen).
The breakdown of revenue from contracts with customers based on timing is as follows:
Timing of revenue recognition
22002200
22001199
Goods and services transferred at a point in time
3,634,151
2,650,160
Services transferred over time
7,238
6,614
Total revenue from contracts with customers
3,641,389
2,656,774
Key Judgement – Principal versus Agent for revenue out of settlement fees
Adyen contracts with third parties (financial institutions and network scheme providers) that provide
services to enable Adyen’s payment processing and acquiring services to merchants, for which
interchange and payment network fees are charged to Adyen. Adyen adopts a transparent pricing model
and charges fees to merchants based on its own incurred costs plus a mark-up.
Adyen applied its judgment in determining whether it has control of the full payment service before the
service is transferred to its merchants, and, in consequence, whether the Company is acting as agent or
principal in relation to the settlement fees charged to merchants.
Adyen is primarily responsible for fulfilling the promise to provide payment transaction services. Although
Adyen contracts with third parties to facilitate the interchange of funds between the issuer and merchant,
Adyen is ultimately responsible for ensuring that the services are performed and are acceptable to the
merchant. Adyen integrates the elements provided by third parties and its own services, in order to
execute payment transactions, and Adyen is responsible for its contractual terms with merchants. Adyen
is thus considered to control the full payment service before the service is transferred to merchants.
Settlement fees – Adyen is the principal
For all payment processing services Adyen provides to the merchants, it retains the exposure to financial
institutions and payment networks for the interchange and payment network fees, other costs incurred
from financial institutions as well as a mark-up charged by Adyen. As such Adyen concluded it acts as
Principal for the aforementioned fees and as such are recognized based on this conclusion
.
Accounting policy – Revenue recognized at a point in time and over time
All processing and settlement fees, together with the sales of goods are recognized as revenue when the
services are rendered or the ownership of the goods is transferred (‘goods and services transferred at a
point in time’). In addition to the aforementioned revenue streams, Adyen provides terminal replacement
services included in ‘other services’, for which revenue is recognized over a period of time. Adyen
recognizes revenue for these services on a straight-line basis over the contract term.
page 114
Adyen
Annual Report 2020
13
activities in which it engages and the economic environments in which it operates. Net revenue is a non-IFRS
measure (reference is made to note 2.4 for further explanation on the non-IFRS measures reported by Adyen).
The breakdown of revenue from contracts with customers based on timing is as follows:
Timing of revenue recognition
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Goods and services transferred at a point in time
3,634,151
2,650,160
Services transferred over time
7,238
6,614
Total revenue from contracts with customers 3,641,389 2,656,774
Key Judgement – Principal versus Agent for revenue out of settlement fees
Adyen contracts with third parties (financial institutions and network scheme providers) that provide
services to enable Adyen’s payment processing and acquiring services to merchants, for which
interchange and payment network fees are charged to Adyen. Adyen adopts a transparent pricing model
and charges fees to merchants based on its own incurred costs plus a mark-up.
Adyen applied its judgment in determining whether it has control of the full payment service before the
service is transferred to its merchants, and, in consequence, whether the Company is acting as agent or
principal in relation to the settlement fees charged to merchants.
Adyen is primarily responsible for fulfilling the promise to provide payment transaction services. Although
Adyen contracts with third parties to facilitate the interchange of funds between the issuer and merchant,
Adyen is ultimately responsible for ensuring that the services are performed and are acceptable to the
merchant. Adyen integrates the elements provided by third parties and its own services, in order to
execute payment transactions, and Adyen is responsible for its contractual terms with merchants. Adyen
is thus considered to control the full payment service before the service is transferred to merchants.
Settlement fees – Adyen is the principal
For all payment processing services Adyen provides to the merchants, it retains the exposure to financial
institutions and payment networks for the interchange and payment network fees, other costs incurred
from financial institutions as well as a mark-up charged by Adyen. As such Adyen concluded it acts as
Principal for the aforementioned fees and as such are recognized based on this conclusion
.
Accounting policy – Revenue recognized at a point in time and over time
All processing and settlement fees, together with the sales of goods are recognized as revenue when the
services are rendered or the ownership of the goods is transferred (‘goods and services transferred at a
point in time’). In addition to the aforementioned revenue streams, Adyen provides terminal replacement
services included in ‘other services’, for which revenue is recognized over a period of time. Adyen
recognizes revenue for these services on a straight-line basis over the contract term.
Adyen
Annual Report 2020
page 115
14
2.1. Long-term merchant contract
In 2018 Adyen entered into a long-term contract with eBay for the provision of payment services that resulted in the
initial recognition of contract assets settled with a cash advance and issue of warrants over Adyen’s shares. The
following accounting elements were recognized as a result of the contractual agreements.
Element
Accounting treatment
Note reference
Contract assets
Contract assets are initially recognized at cost on the balance sheet, and
subsequently amortized against revenue (settlement fees) in profit or loss
on a pro rata basis in line with the fulfilment of the expected payment
services performance obligation. The contract assets are separated into a
monetary and non-monetary component and are assessed for impairment
annually with reference to the remaining (net) benefits from the long-term
merchant contract.
The USD "monetary item" is translated at each balance sheet date at the
EUR/USD spot rate and is assessed for impairment under the expected
credit loss model. Exchange movements on the "monetary item" is
recognized in profit or loss (other financial results).
2.2. Contract assets
Settled by:
1. Cash advance
Cash consideration is treated as part of incremental costs of obtaining the
merchant contract ('contract assets').
2.2. Contract assets
2. Warrants
Derivative liabilities relating to the warrants are recognized initially at fair
value and are subsequently stated on the balance sheet at fair value, with
movements recognized in profit or loss (other financial results). The
warrants vest in four tranches, each linked to a milestone of processed
payments volume. Each milestone is deemed achieved at the moment that
the processed merchant volume exceeds the milestone amount in a single
calendar year following the Issue date (January 31, 2018). Only two warrant
tranches may vest in a single calendar year, and upon vesting, each entitles
the warrant holder to acquire 1.25% of Adyen's issue-date diluted share
volume at any time prior to the warrant expiration date (January 31, 2025).
As per December 31, 2020 and 2019, none of the four warrant tranches
related to the derivative liabilities vested.
After the IPO (on June 13, 2018), the derivative liabilities relating to
tranches 1 and 2 were reclassified as a warrant reserve in equity in the
amount of EUR 68.2 million. As per December 31, 2020, the warrant equity
reserve was carried at historic cost (net of deferred tax) while the derivative
liabilities relating to tranches 3 and 4 were carried at fair value on Adyen's
balance sheet.
8. Derivative liabilities and
Warrant reserve;
11. Accounting policy -
Derivative liabilities.
15
2.2. Contract assets
The contract assets were assessed for impairment at year-end with reference to the remaining (net) benefits from
the long-term merchant contract. Management derived its best estimate of the future (net) revenue from expected
payments volumes and fees determined in the merchant contract, net of directly attributable costs to fulfil the
remaining payment service obligations. The contract assets were not impaired at December 31, 2020 and 2019 as
the remaining estimated (net) benefits from the merchant contract exceeded the contract assets balance at year-
end.
The monetary component of the contract assets is in scope of impairment under IFRS 9; however, due to low credit
risk, the expected credit loss on the contract asset is deemed not significant.
The following table summarizes the movement in the contract assets balance:
Contract assets
Monetary
component
Non-monetary
component
Total contract
assets
Balance - January 1, 2019
61,306
79,485
140,791
Movements:
Amortization for the period
(1,561)
(572)
(2,133)
Exchange differences
1,342
-
1,342
Balance - December 31, 2019
61,087
78,913
140,000
Movements
Amortization for the period
(8,184)
(2,457)
(10,641)
Exchange differences (note 6)
(5,246)
-
(5,246)
Balance - December 31, 2020
47,657
76,456
124,113
Accounting policy – Contract assets
Recognition and measurement
If a fee or commission (a consideration) is not paid in connection with any distinct goods or services, it
should be considered part of the total transaction price of a contract with a customer. As a result, this fee
or commission should be deducted from revenue when revenue is recognized for providing the services
to the customer. These considerations are recognized as contract assets in the balance sheet.
Amortization and Impairment
The contract assets are assessed for impairment annually with reference to the remaining (net) benefits
from the long-term merchant contract. An impairment loss is recognized if the carrying amount of the
contract assets are higher than the estimated remaining benefits in the merchant contract, net of directly
attributable costs to fulfil the remaining payment service obligations. The contract assets are amortized
and booked to revenue (settlement fees) on a pro rata basis in line with the fulfilment of the expected
payment services performance obligation.
For the monetary component of the contract asset, Adyen applies the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables,
other financial assets measured at amortized cost and the contract asset.
page 116
Adyen
Annual Report 2020
15
2.2. Contract assets
The contract assets were assessed for impairment at year-end with reference to the remaining (net) benefits from
the long-term merchant contract. Management derived its best estimate of the future (net) revenue from expected
payments volumes and fees determined in the merchant contract, net of directly attributable costs to fulfil the
remaining payment service obligations. The contract assets were not impaired at December 31, 2020 and 2019 as
the remaining estimated (net) benefits from the merchant contract exceeded the contract assets balance at year-
end.
The monetary component of the contract assets is in scope of impairment under IFRS 9; however, due to low credit
risk, the expected credit loss on the contract asset is deemed not significant.
The following table summarizes the movement in the contract assets balance:
Contract assets
Monetary
component
Non-monetary
component
Total contract
assets
Balance - January 1, 2019
61,306
79,485
140,791
Movements:
Amortization for the period
(1,561)
(572)
(2,133)
Exchange differences 1,342 -
1,342
Balance - December 31, 2019
61,087
78,913
140,000
Movements
Amortization for the period
(8,184)
(2,457)
(10,641)
Exchange differences (note 6) (5,246) -
(5,246)
Balance - December 31, 2020 47,657 76,456 124,113
Accounting policy – Contract assets
Recognition and measurement
If a fee or commission (a consideration) is not paid in connection with any distinct goods or services, it
should be considered part of the total transaction price of a contract with a customer. As a result, this fee
or commission should be deducted from revenue when revenue is recognized for providing the services
to the customer. These considerations are recognized as contract assets in the balance sheet.
Amortization and Impairment
The contract assets are assessed for impairment annually with reference to the remaining (net) benefits
from the long-term merchant contract. An impairment loss is recognized if the carrying amount of the
contract assets are higher than the estimated remaining benefits in the merchant contract, net of directly
attributable costs to fulfil the remaining payment service obligations. The contract assets are amortized
and booked to revenue (settlement fees) on a pro rata basis in line with the fulfilment of the expected
payment services performance obligation.
For the monetary component of the contract asset, Adyen applies the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables,
other financial assets measured at amortized cost and the contract asset.
Adyen
Annual Report 2020
page 117
16
2.3. Segment reporting
The following table summarizes Adyen’s geographical breakdown of its revenue based on the billing location as
requested by the merchant for the periods indicated:
Revenue - Geographical breakdown 2020 2019
Europe 1,629,384 1,445,069
North America 1,511,470 799,442
Asia-Pacific 263,678 205,457
Latin America 231,330 201,240
Rest of the World 5,527 5,566
Total revenue from contracts with customers 3,641,389 2,656,774
Large customers
For the year ended December 31, 2020, as measured by revenue, Adyen's top 10 merchants represent 38% of revenue
(2019: 33%). In 2020 and 2019 there were no single customers that on an individual level accounted for more than
10% of the total revenue.
For the year ended December 31, 2020, as measured by net revenue, Adyen's top 10 merchants represent 20% of net
revenue (2019 Restated: 25%). There were no customers with individually more than 10% of the total net revenue
(2019 Restated: nil).
Non-current assets
At December 31, 2020 EUR 301 million of the non-current assets were carried by Adyen N.V. (2019: EUR 254 million).
Based on the location of the Adyen offices the following geographical breakdown of non-current assets is prepared.
Non-current assets - Geographical breakdown
2020
2019
Netherlands 300,939
254,330
Rest of the World 120,438
98,945
Non-current assets
421,377 353,275
Accounting policy – Segment Reporting
An operating segment is a component of an entity that engages in business activities from which it earns
revenues and incurs expenses. The operating results of each segment are regularly reviewed by the entity’s
Chief Operating Decision Maker (“CODM”) in order to make decisions about resources to be allocated to the
segment and assess its performance and for which discrete financial information is available.
Adyen has identified the Management Board as the CODM who is responsible for the assessment of the
allocation of resources and performance of the operating segments identified. Based on Adyen’s business
and operating model, Adyen has identified a single operating and reporting segment: ‘Payment services’.
Payment services
The total revenue earned from Adyen’s only operating and reporting segment contains settlement fees,
processing fees, other fees and sales of goods. The Management Board monitors net revenue (net of
interchange, scheme fees and costs of goods sold) as a performance indicator. As a result, Adyen
considers net revenue to provide insight to its users to evaluate the nature and financial effects of the
business activities in which it engages and the economic environments in which it operates. Net revenue
is a non-IFRS measure (reference is made to note 2.4 for further explanation on the non-IFRS measures
reported by Adyen).
As a result of the entity wide disclosure requirements of IFRS 8, a geographical breakdown is provided.
17
2.4. Non-IFRS financial measures
Non-IFRS financial measures are disclosed in addition to the statement of comprehensive income, in order to provide
relevant information to better understand underlying business performance of the Company. Furthermore, Adyen has
provided guidance on several of these non-IFRS measures. Adyen reports on the following additional financial
measures that are directly derived from the consolidated statement of comprehensive income or statement of cash
flows:
- Net revenue: Revenue net of interchange, scheme fees (“costs incurred from financial institutions”), and costs
of goods sold;
The following table summarizes Adyen’s geographical breakdown and the year-on-year growth of its net revenue,
based on the billing location as requested by the merchant for the periods indicated:
Net revenue - Geographical breakdown and year-on-year growth
2020
2019
Restated
Europe
424,878
22%
347,632
42%
North America
132,959
66%
80,250
51%
Asia-Pacific
64,950
29%
50,179
36%
Latin America
60,082
11%
54,225
46%
Rest of the World
1,331
-34%
2,014
41%
Total net revenue
684,200
28%
534,300
43%
- EBITDA: “Income before net finance income/(expense) and income taxes” less “amortization and depreciation”
on the consolidated statement of comprehensive Income;
- EBITDA margin: EBITDA as a percentage of net revenue;
- CapEx: Capital expenditures consisting of the line items "purchases of plant and equipment" and "capitalization
of intangible assets" on the consolidated statement of cash flows;
- Free cash flow: EBITDA less CapEx and “lease payments” on the consolidated statement of cash flows;
- Free cash flow conversion ratio: free cash flow as a percentage of EBITDA.
Selected non-IFRS financial measures
2020
2019
Restated
Income before net finance income/(expense) and income taxes
373,913
294,616
Amortization and depreciation
28,567
22,326
EBITDA
402,480
316,942
Net revenue
684,200
534,300
EBITDA margin (%)
59%
59%
Purchases of plant and equipment
17,097
15,186
Capitalization of intangible assets
4,795
4,773
CapEx
21,892
19,959
EBITDA
402,480
316,942
CapEx
(21,892)
(19,959)
Lease payments
(9,439)
(9,932)*
Free cash flow
371,149
287,051
Free cash flow
371,149
287,051
EBITDA
402,480
316,942
Free cash flow conversion ratio (%)
92%
91%
*2019 comparatives have been updated to reflect the definition of free cash flow adopted in the current year by
adjusting for lease payments. The effect was a decrease in free cash flow of EUR 9,932.
page 118
Adyen
Annual Report 2020
17
2.4. Non-IFRS financial measures
Non-IFRS financial measures are disclosed in addition to the statement of comprehensive income, in order to provide
relevant information to better understand underlying business performance of the Company. Furthermore, Adyen has
provided guidance on several of these non-IFRS measures. Adyen reports on the following additional financial
measures that are directly derived from the consolidated statement of comprehensive income or statement of cash
flows:
- Net revenue: Revenue net of interchange, scheme fees (“costs incurred from financial institutions”), and costs
of goods sold;
The following table summarizes Adyen’s geographical breakdown and the year-on-year growth of its net revenue,
based on the billing location as requested by the merchant for the periods indicated:
Net revenue - Geographical breakdown and year-on-year growth
2020
2019
Restated
Europe 424,878 22% 347,632 42%
North America
132,959
66%
80,250
51%
Asia-Pacific 64,950 29%
50,179
36%
Latin America 60,082 11%
54,225
46%
Rest of the World 1,331 -34%
2,014
41%
Total net revenue 684,200 28% 534,300 43%
- EBITDA: “Income before net finance income/(expense) and income taxes” less “amortization and depreciation”
on the consolidated statement of comprehensive Income;
- EBITDA margin: EBITDA as a percentage of net revenue;
- CapEx: Capital expenditures consisting of the line items "purchases of plant and equipment" and "capitalization
of intangible assets" on the consolidated statement of cash flows;
- Free cash flow: EBITDA less CapEx and “lease payments” on the consolidated statement of cash flows;
- Free cash flow conversion ratio: free cash flow as a percentage of EBITDA.
Selected non-IFRS financial measures 2020
2019
Restated
Income before net finance income/(expense) and income taxes 373,913 294,616
Amortization and depreciation 28,567 22,326
EBITDA 402,480 316,942
Net revenue 684,200 534,300
EBITDA margin (%) 59% 59%
Purchases of plant and equipment 17,097 15,186
Capitalization of intangible assets 4,795 4,773
CapEx 21,892 19,959
EBITDA 402,480 316,942
CapEx (21,892) (19,959)
Lease payments (9,439) (9,932)*
Free cash flow 371,149 287,051
Free cash flow 371,149 287,051
EBITDA 402,480 316,942
Free cash flow conversion ratio (%) 92% 91%
*2019 comparatives have been updated to reflect the definition of free cash flow adopted in the current year by
adjusting for lease payments. The effect was a decrease in free cash flow of EUR 9,932.
Adyen
Annual Report 2020
page 119
18
3. Inventories
Inventories relate to the point of sale (POS) terminals in connection with the roll out of the Unified Commerce
strategy.
Inventories
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Balance - January 1 7,020 7,864
Purchases during the year (products for resale)
35,086 16,221
Costs of goods sold
(22,007) (16,545)
Expense recognized in other operating expenses
(551) (520)
Balance - December 31 19,548 7,020
During 2020, Adyen performed an impairment test on inventories and determined that the net realizable value of
part of its inventories was lower than its cost due to technological obsolescence of older POS equipment. Therefore,
a write-off of EUR 551 (2019: EUR 520) was recognized under miscellaneous operating expenses.
4. Employee benefit expense
The average number of fulltime equivalents (FTE) during the year was approximately 1,465 FTE (2019: 1,028 FTE)
with main expansions of our operations in the EU and US. From those hired during 2020, 42% were in tech roles,
43% in commercial roles and 15% in staff or supporting functions.
At the end of the reporting period the regional breakdown of FTE per office is as follows:
FTE per office
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Amsterdam 1,011 660
San Francisco
179
126
Singapore 96 78
London 84 63
São Paulo 72 56
New York 53 41
Paris 43 33
Berlin
36
32
Other 173 93
Total 1,747 1,182
For representation of the FTE per subsidiary, refer to note 24.2.
Accounting policy – Inventories
Inventories are measured at the lower of cost or net realizable value. The cost of inventories is based on
the first-in, first-out method (FIFO) and includes expenditure incurred in acquiring the inventories and
other costs incurred in bringing them to their existing location and condition. Net realizable value is
defined by Adyen as the estimated re-sell price in the ordinary course of business.
The carrying amount of inventories is recognized as an expense when the inventories are sold or written
off, unless they form part of the cost of another asset.
19
4.1. Employee benefits
The employee benefit expense can be specified as follows:
Employee benefits
2020
2019
Salaries and wages
141,355
96,977
Share-based compensation
10,085
3,473
Total wages and salaries
151,440
100,450
Social securities
24,792
19,520
Pension costs - defined contribution plans
3,782
2,477
Total social securities and pension costs
28,574
21,997
Reference is made to note 22 ‘Compensation of key management’ for the remuneration of the Management Board
and Supervisory Board.
4.2. Post-employment benefit obligations
The expected contributions to the pension benefit plans for 2021 are EUR 4,950 (2019: EUR 3,688).
Accounting policy – Post-employment benefit obligations
Post-employment benefits are employee benefits (other than termination benefits and short-term
employee benefits) that are payable after the completion of employment.
The Adyen group companies operate various pension schemes. The entitlement of the employees under
the company’s pension plans are all classified as defined contribution plans.
For defined contribution plans, the Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further
payment obligations once the contributions have been paid. The contributions are recognized as
employee benefit expense when they are due.
Accounting policy – Employee benefits
Employee benefits are all forms of consideration given by an entity in exchange for services rendered by
employees or for the termination of employment, except when they are related to share based payments
(refer to note 4.3).
page 120
Adyen
Annual Report 2020
19
4.1. Employee benefits
The employee benefit expense can be specified as follows:
Employee benefits
2020 2019
Salaries and wages 141,355 96,977
Share-based compensation 10,085 3,473
Total wages and salaries
151,440
100,450
Social securities 24,792 19,520
Pension costs - defined contribution plans 3,782 2,477
Total social securities and pension costs
28,574
21,997
Reference is made to note 22 ‘Compensation of key management’ for the remuneration of the Management Board
and Supervisory Board.
4.2. Post-employment benefit obligations
The expected contributions to the pension benefit plans for 2021 are EUR 4,950 (2019: EUR 3,688).
Accounting policy – Post-employment benefit obligations
Post-employment benefits are employee benefits (other than termination benefits and short-term
employee benefits) that are payable after the completion of employment.
The Adyen group companies operate various pension schemes. The entitlement of the employees under
the company’s pension plans are all classified as defined contribution plans.
For defined contribution plans, the Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further
payment obligations once the contributions have been paid. The contributions are recognized as
employee benefit expense when they are due.
Accounting policy – Employee benefits
Employee benefits are all forms of consideration given by an entity in exchange for services rendered by
employees or for the termination of employment, except when they are related to share based payments
(refer to note 4.3).
Adyen
Annual Report 2020
page 121
20
4.3. Share-based payments
The share-based compensation consists of both equity- and cash-settled compensation expenses. A specification
of the expenses is presented in the following table:
Share-based compensation
2020 2019
Equity-settled 922 2,020
Cash-settled 9,163 1,453
Total 10,085 3,473
Adyen considers its employees and culture as core to its growth. As part of the total remuneration package, Adyen
has two types of share-based compensation:
I. Equity-settled option plan (granted until 2018);
II. Cash-settled share-based payment plan (granted from 2018 onwards).
These plans are described in more detail below:
I. Equity-settled option plan
The maximum aggregate number of Depository Receipts in respect to which options shall be granted is 1,312,500
1
.
Of the outstanding options, 136,445 options (2019: 270,700) are exercisable. The exercise price of share options
outstanding at year end ranges from EUR 11 to EUR 106 (2019: EUR 11 to EUR 106). No options were granted
during the year ended December 31, 2020 (2019: nil). The fair value of options granted was determined using the
Black-Scholes valuation model as at each grant date. At December 31, 2020, the weighted average grant date fair
value is equal to EUR 65.42 (2019: EUR 65.42) and the weighted average remaining expected option life is 0.78
years (2019: 1.12 years).
1
Amounts in this paragraph are not rounded to the nearest thousand.
Accounting policy – Equity-settled options
Adyen has an option plan for directors and employees. Exercisable options provided participants the
opportunity to exchange Depositary Receipts at an exercise price. The exercise price of the granted options
is equal to the market price of the shares at grant date. Subject to the employee and directors’ continued
employment with Adyen, options will vest over a period of four years. The vesting period starts on the grant
date. Subject to the employees’ continued employment with Adyen N.V., 25% of the options will vest on the
first anniversary of the grant date. The remaining 75% of the options will then vest monthly, in equal
proportions at the end of each month, over the following 36 months. Options can be exercised at any time
from the vesting date until the 8th anniversary of the grant date. Adyen has no legal or constructive
obligation to repurchase or settle the options in cash.
21
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
2020
2019
Share options outstanding
Weighted average
exercise price (in
EUR) per share
option
Number of options
(thousands)
Weighted average
exercise price (in
EUR) per share
option
Number of options
(thousands)
At January 1
30.48
655
35.96
1,170
Forfeited
82.77
(17)
89.72
(8)
Exercised
38.62
(294)
29.76
(507)
At December 31
39.20
344
30.48
655
II. Cash-settled share-based payment plan
In 2020 a total of 7,707
2
phantom shares (2019: 5,083) were granted. The share price at December 31, 2020 is EUR
1,905 per phantom share. The fair value of the liability recognized resulting from the phantom shares is EUR 8,227
(2019: EUR 1,197).
2
Amounts in this paragraph are not rounded to the nearest thousand.
Accounting policy – Cash-settled share-based payment plan
Adyen has established a phantom share plan (cash-settled share-based payment plan) for newly hired
directors and employees. The phantom shares are granted at the underlying market price of Adyen shares
at grant date. Subject to the employee’s continued employment with Adyen N.V., the phantom shares will
vest over a period of four years from the grant date. 25% of the phantom shares will vest on the first
anniversary of the grant date. The remaining 75% of the phantom shares will then vest yearly (25%) until all
are vested after four years.
Adyen recognizes a cost over the vesting period and a corresponding liability based on the market price of
Adyen’s shares. The liability is measured at fair value through profit or loss using the market price of
Adyen’s shares at balance sheet date with remeasurements on each reporting date. Changes in the fair
value are recognized as “share-based compensation”.
The expense reflecting the recognition of the grant date fair value and changes in fair value of the
phantom share plan is presented as wages and salaries in the statement of comprehensive income.
page 122
Adyen
Annual Report 2020
21
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
2020
2019
Share options outstanding
Weighted average
exercise price (in
EUR) per share
option
Number of options
(thousands)
Weighted average
exercise price (in
EUR) per share
option
Number of options
(thousands)
At January 1
30.48
655
35.96
1,170
Forfeited 82.77 (17)
89.72 (8)
Exercised 38.62 (294) 29.76 (507)
At December 31 39.20 344 30.48 655
II. Cash-settled share-based payment plan
In 2020 a total of 7,707
2
phantom shares (2019: 5,083) were granted. The share price at December 31, 2020 is EUR
1,905 per phantom share. The fair value of the liability recognized resulting from the phantom shares is EUR 8,227
(2019: EUR 1,197).
2
Amounts in this paragraph are not rounded to the nearest thousand.
Accounting policy – Cash-settled share-based payment plan
Adyen has established a phantom share plan (cash-settled share-based payment plan) for newly hired
directors and employees. The phantom shares are granted at the underlying market price of Adyen shares
at grant date. Subject to the employee’s continued employment with Adyen N.V., the phantom shares will
vest over a period of four years from the grant date. 25% of the phantom shares will vest on the first
anniversary of the grant date. The remaining 75% of the phantom shares will then vest yearly (25%) until all
are vested after four years.
Adyen recognizes a cost over the vesting period and a corresponding liability based on the market price of
Adyen’s shares. The liability is measured at fair value through profit or loss using the market price of
Adyen’s shares at balance sheet date with remeasurements on each reporting date. Changes in the fair
value are recognized as “share-based compensation”.
The expense reflecting the recognition of the grant date fair value and changes in fair value of the
phantom share plan is presented as wages and salaries in the statement of comprehensive income.
Adyen
Annual Report 2020
page 123
22
5. Other operating expenses
The other operating expenses can be specified as follows:
Other operating expenses
2020 2019
Sales and marketing costs 39,612 32,276
Advisory costs 15,891 12,738
IT costs 14,024 11,662
Travel and other staff expenses 7,644 21,657
Contractor costs
5,978
2,049
Office costs 2,988 3,123
Housing costs 3,170 2,716
Miscellaneous operating expenses 12,582 8,892
Total other operating expenses
101,889
95,113
6. Other financial results
The other financial results can be broken down in the following categories:
Other financial results 2020 2019
Exchange gains/(losses) (note 6.1) (11,066) 2,850
Fair value re-measurement of financial instruments:
Derivative liabilities (note 6.2) (32,600) (12,000)
Other financial assets at fair value through profit or loss (note 6.3) 1,005 13,710
Total other financial results (42,661) 4,560
6.1. Exchange gains/(losses)
The exchange losses recognized during the year relates to realized and unrealized translation losses on monetary
assets and liabilities. Exchange losses in 2020 mainly relate to the contract assets (EUR 5,246 – refer to note 2.2
‘Contract assets’), other financial assets at FVPL (EUR 1,064 – refer to note 6.3 ‘Other financial assets at fair value
through profit or loss’), and other financial assets at amortized cost (EUR 1,006 – refer to note 11 ‘Financial
instruments’).
Accounting policy – Operating expenses
Operating expenses are recognized in the period when they occur.
23
6.2. Derivative liabilities
As part of the merchant contract referred to in note 2.1 ‘Long-term merchant contract’, Adyen recognized derivative
liabilities measured at fair value through profit or loss. The nature of the derivative liabilities is described in more
detail in note 11 ‘Financial instruments’. For 2020, EUR 32,600 (2019: EUR 12,000) is recognized in “other financial
results” due to the re-measurement of the fair value of the derivative liabilities. The change in fair value of the
derivative liabilities is mainly linked to the Adyen share price increase over the year as well as a change in the
estimate of the probability of vesting.
6.3. Other financial assets at fair value through profit or loss (‘FVPL’) (Visa Inc. preferred
shares)
Adyen has classified and measured the convertible preferred Visa Inc. shares as a financial instrument at fair value
through profit or loss. For 2020, the effect on other financial results is a loss of EUR 59 relating to an exchange loss
of EUR 1,064 and fair value gain of EUR 1,005 (2019: net gain of EUR 13,710). Refer to note 11 ‘Financial
instruments’ for more detail on the other financial assets at FVPL.
Accounting policy – Functional currency and foreign currency translation
The functional currency of Adyen N.V. is the Euro as the Euro area is the primary economic environment in
which Adyen operates. The financial statements of entities that have a functional currency different from
that of Adyen N.V. (“foreign operations”) are translated into Euros as follows:
- Assets, equity and liabilities – at the closing rate at the date of the statement of financial position;
- Income and expenses – at the average rate of the period (as this is considered a reasonable
approximation of the actual rates prevailing at the transaction dates).
Foreign currency differences are recognized in other comprehensive income and are presented within
equity in the legal reserves.
Monetary items
Monetary items are units of currency held and assets and liabilities to bereceived or paid in a fixed or
determinable number of units of currency. Monetary assets and liabilities denominated in foreign
currencies are retranslated into Adyen’s functional currency at the rates prevailing on the balance sheet
date. Exchange rate differences resulting from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the statement of comprehensive income within “other financial results”.
Non-monetary items
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are measured at
fair value through profit or loss and are retranslated at the date that the fair value is determined.
page 124
Adyen
Annual Report 2020
23
6.2. Derivative liabilities
As part of the merchant contract referred to in note 2.1 ‘Long-term merchant contract’, Adyen recognized derivative
liabilities measured at fair value through profit or loss. The nature of the derivative liabilities is described in more
detail in note 11 ‘Financial instruments’. For 2020, EUR 32,600 (2019: EUR 12,000) is recognized in “other financial
results” due to the re-measurement of the fair value of the derivative liabilities. The change in fair value of the
derivative liabilities is mainly linked to the Adyen share price increase over the year as well as a change in the
estimate of the probability of vesting.
6.3. Other financial assets at fair value through profit or loss (‘FVPL’) (Visa Inc. preferred
shares)
Adyen has classified and measured the convertible preferred Visa Inc. shares as a financial instrument at fair value
through profit or loss. For 2020, the effect on other financial results is a loss of EUR 59 relating to an exchange loss
of EUR 1,064 and fair value gain of EUR 1,005 (2019: net gain of EUR 13,710). Refer to note 11 ‘Financial
instruments’ for more detail on the other financial assets at FVPL.
Accounting policy – Functional currency and foreign currency translation
The functional currency of Adyen N.V. is the Euro as the Euro area is the primary economic environment in
which Adyen operates. The financial statements of entities that have a functional currency different from
that of Adyen N.V. (“foreign operations”) are translated into Euros as follows:
- Assets, equity and liabilities – at the closing rate at the date of the statement of financial position;
- Income and expenses – at the average rate of the period (as this is considered a reasonable
approximation of the actual rates prevailing at the transaction dates).
Foreign currency differences are recognized in other comprehensive income and are presented within
equity in the legal reserves.
Monetary items
Monetary items are units of currency held and assets and liabilities to bereceived or paid in a fixed or
determinable number of units of currency. Monetary assets and liabilities denominated in foreign
currencies are retranslated into Adyen’s functional currency at the rates prevailing on the balance sheet
date. Exchange rate differences resulting from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the statement of comprehensive income within “other financial results”.
Non-monetary items
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are measured at
fair value through profit or loss and are retranslated at the date that the fair value is determined.
Adyen
Annual Report 2020
page 125
24
7. Income tax
7.1. Income tax expense
The tax on Adyen’s income before income taxes differs from the amount that would arise using the statutory tax rate
in the Netherlands. The effective tax rate (“ETR”) of Adyen for the year ended December 31, 2020 is 19.23% (2019
Restated: 20.55%) which differs from the statutory tax rate in the Netherlands of 25% (2019: 25%) due to the
application of the innovation box, tax rate differences on foreign operations and other adjustments (such as non-
deductible expenses). The innovation box is a Dutch tax incentive whereby a portion of qualifying profits derived
from innovative activities are taxed at a lower rate than the headline corporate tax rate in the Netherlands. The
effective tax rate decreased for the year ended December 31, 2020, mainly due to the application of the innovation
box regime. Further detail on the innovation box, Adyen’s total tax contribution and country-by country reporting are
included in note 24.
Effective tax calculation
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
e
s
s
t
t
a
a
t
t
e
e
d
d
Income before income taxes
323,180
294,877
Statutory tax rate in the Netherlands (%)
25% 25%
Income taxes based on statutory tax rate in the Netherlands
80,795
73,719
Tax effects of:
Innovation box
(18,381) (13,029)
Change in tax rate
2,150 (602)
Tax rate differences on foreign operations
(497)
(374)
Other adjustments (such as prior year and non-deductible amounts)
(1,906) 879
Effective tax amount 62,161 60,593
The breakdown between current and deferred income taxes for the year ended December 31, 2020 and 2019 is
disclosed below:
Income taxes
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
e
s
s
t
t
a
a
t
t
e
e
d
d
Current income tax expense 69,915 61,305
Deferred income tax income (7,754) (712)
Total income taxes 62,161 60,593
The breakdown between current income tax receivables and payables as at December 31, 2020 and 2019 is
disclosed below:
Current income tax receivables/(payables)
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
e
s
s
t
t
a
a
t
t
e
e
d
d
Current income tax receivables
8,794 -
Current income tax payables
(16,108)
(19,601)
Accounting policy – Current income tax expense
Current income tax expense is the expected tax payable on the taxable income for the year, using tax
rates enacted or substantively enacted, at the end of the reporting period, and any adjustment to tax
payable in respect of previous years.
25
7.2. Deferred income taxes
In 2019, the Dutch Government substantively enacted a change in the statutory tax rate, decreasing it from 25% in
2019 to 21.7% in 2021. During 2020, this statutory change was reversed meaning that the statutory tax rate will
remain 25% going forward. As a result, Adyen has remeasured the relevant deferred tax balances as per December
31, 2020, using the updated headline statutory tax rate (25%) and has made an adjustment to the deferred tax
position based on the updated information. The impact of the remeasurement is accounted for in the consolidated
statement of comprehensive income.
The below movement schedule includes the changes in deferred taxes with the respective impact in equity and profit
or loss:
Balance
January 1,
2019
Recognized in
profit or loss
Recognized
in equity
Effects of foreign
exchange
Balance
December 31,
2019
Deferred tax assets:
Derivative liabilities
4,879
2,890
7,769
Windfall tax benefit
1,153
32,029
(72)
33,110
Tax losses carried forward
553
28,615
(5)
29,163
Temporary differences
1,712
357
(478)
1,591
Total deferred tax assets
8,297
3,247
60,644
(555)
71,633
Deferred tax liabilities:
Other financial assets at FVPL
(7,594)
(1,973)
(9,567)
Contract assets
(16,020)
(299)
(16,319)
Temporary differences
(163)
(263)
98
(328)
Total deferred tax liabilities
(23,777)
(2,535)
-
98
(26,214)
Net deferred tax assets /
(liabilities)
(15,480)
712
60,644
(457)
45,419
Accounting policy – Deferred income taxes
Deferred income taxes arise, in general, as a result of temporary differences between tax and
commercial accounting treatment. Deferred income tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is realized or the liabilities is settled. The
applied rates are based on tax rates and tax laws that have been enacted or substantively enacted at the
balance sheet date.
In some tax jurisdictions, Adyen is granted a tax deduction (i.e. an amount that is deductible in
determining taxable profit) that relates to remuneration settled by options over Adyen’s shares. The
amount of that tax deduction may differ from the related cumulative remuneration expense, and may
arise in a later accounting period. In the event where tax deductions exceed the remuneration expense,
Adyen recognizes a deferred tax position with the impact presented directly in equity.
Deferred tax assets are recognized by Adyen to the extent that it is probable that future taxable profits
will be availableagainst which they can be utilised.
In connection with the long-term contract with eBay (refer to note 2.1 ‘Long-term merchant contract’),
Adyen has recognised derivative liabilities and contract assets. The deferred tax positions on these
items are in-substance linked in relation to the merchant contract, and are presented on a gross basis
in the balance sheet.
page 126
Adyen
Annual Report 2020
25
7.2. Deferred income taxes
In 2019, the Dutch Government substantively enacted a change in the statutory tax rate, decreasing it from 25% in
2019 to 21.7% in 2021. During 2020, this statutory change was reversed meaning that the statutory tax rate will
remain 25% going forward. As a result, Adyen has remeasured the relevant deferred tax balances as per December
31, 2020, using the updated headline statutory tax rate (25%) and has made an adjustment to the deferred tax
position based on the updated information. The impact of the remeasurement is accounted for in the consolidated
statement of comprehensive income.
The below movement schedule includes the changes in deferred taxes with the respective impact in equity and profit
or loss:
Balance
January 1,
2019
Recognized in
profit or loss
Recognized
in equity
Effects of foreign
exchange
Balance
December 31,
2019
Deferred tax assets:
Derivative liabilities 4,879 2,890
7,769
Windfall tax benefit 1,153
32,029 (72) 33,110
Tax losses carried forward
553
28,615
(5)
29,163
Temporary differences 1,712 357
(478)
1,591
Total deferred tax assets
8,297
3,247
60,644
(555)
71,633
Deferred tax liabilities:
Other financial assets at FVPL (7,594) (1,973)
(9,567)
Contract assets (16,020) (299)
(16,319)
Temporary differences
(163)
(263)
98
(328)
Total deferred tax liabilities (23,777) (2,535) -
98 (26,214)
Net deferred tax assets /
(liabilities)
(15,480) 712 60,644 (457) 45,419
Accounting policy – Deferred income taxes
Deferred income taxes arise, in general, as a result of temporary differences between tax and
commercial accounting treatment. Deferred income tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is realized or the liabilities is settled. The
applied rates are based on tax rates and tax laws that have been enacted or substantively enacted at the
balance sheet date.
In some tax jurisdictions, Adyen is granted a tax deduction (i.e. an amount that is deductible in
determining taxable profit) that relates to remuneration settled by options over Adyen’s shares. The
amount of that tax deduction may differ from the related cumulative remuneration expense, and may
arise in a later accounting period. In the event where tax deductions exceed the remuneration expense,
Adyen recognizes a deferred tax position with the impact presented directly in equity.
Deferred tax assets are recognized by Adyen to the extent that it is probable that future taxable profits
will be availableagainst which they can be utilised.
In connection with the long-term contract with eBay (refer to note 2.1 ‘Long-term merchant contract’),
Adyen has recognised derivative liabilities and contract assets. The deferred tax positions on these
items are in-substance linked in relation to the merchant contract, and are presented on a gross basis
in the balance sheet.
Adyen
Annual Report 2020
page 127
26
Balance
January 1,
2020
Recognized
in profit or loss
Recognized
in equity
Effects of foreign
exchange
Balance
December 31,
2020
Deferred tax assets:
Derivative liabilities
7,769 9,331
17,100
Windfall tax benefit
33,110
10,521 303
43,934
Tax losses carried forward
29,163 547 21,638 (8,263)
43,085
Temporary differences
1,591 627
2,218
Total deferred tax assets
71,633
10,505
32,159
(7,960)
106,337
Deferred tax liabilities:
Other financial assets at FVPL (9,567) (1) 5,041
(4,527)
Contract assets (16,319) (2,795)
(19,114)
Temporary differences (328) 45
(283)
Total deferred tax liabilities (26,214) (2,751) 5,041 -
(23,924)
Net deferred tax assets 45,419 7,754 37,200 (7,960) 82,413
I. Deferred tax assets
As part of the deferred tax assets recognized during the year, an amount of EUR 43,085 (2019: EUR 29,163) relates
to net operating losses carried forward. The increase in this balance relates primarily to share-based compensation
excess deduction (windfall benefit) taken in the United States, explained in more detail later in this section. Further,
EUR 17,100 (2019: EUR 7,769) of the deferred tax assets relates to the recognized derivative liabilities.
In addition to the deferred tax asset in the United States, Adyen recognized a deferred tax asset in the United
Kingdom of EUR 4,056 (2019: EUR 1,711).
The full deferred tax asset related to future tax deductions and carryforward losses related to the share-based
compensation excess deduction was recognized directly in equity in the amount of EUR 32,159 (2019: EUR 60,119).
Management has assessed the impact of the COVID-19 pandemic on the realizability of the deferred tax assets as it
relies on future profitability. Based on the continued net revenue and EBITDA growth throughout the year, as well as
Significant accounting estimate: Deferred tax asset linked to windfall benefits
During 2020, Adyen has reassessed the recoverability of deferred tax asset on windfall benefits linked to
the share-based compensation plan in the United States. As carryforward losses have no expiration
date, Adyen continues to recognize a deferred tax asset that will be realized against future profits, on a
going concern basis. The balance of deferred tax position relating to options exercised in 2020 and
previous years is EUR 41,806 (2019: EUR 28,380). Moreover, Adyen has recognized a deferred tax asset
in the amount of EUR 40,463 (2019: EUR 31,739) relating to future tax deductions on vested options,
not yet exercised. This windfall benefit, has been recognized assuming all options granted to date will
be exercised within the 8th anniversary of the grant date (grant date + 7 years). The deferred tax asset
only relates to the Federal
tax deductions as there is no statutory limitation to the period in which these
losses can be utilized. An amount of EUR 12,659 (EUR 8,056) related to deferred State taxes was not
recognised as of December 31, 2020, due to its finite carrying period and uncertainly around the
recoverability of the asset.
27
the positive outlook of future profitability of the Company, the deferred tax assets shown on the balance sheet were
considered to be fully recoverable.
II. Deferred tax liability
The deferred tax liability consists mainly of the deferred tax on the Visa Inc. preferred stock of EUR 4,527 (2019: EUR
9,567) and the non-monetary part of the contract asset EUR 19,114 (2019: EUR 16,319).
The deferred tax assets and liabilities are presented as non-current on the Adyen balance sheet.
8. Capital management
Adyen’s objective when managing capital is to safeguard its ability to continue as a going concern. Furthermore,
Adyen ensures that it meets regulatory capital requirements at all times.
In 2020, 295,289
3
(2019: 507,056) additional shares were issued. The additional issued shares were a result of
exercises of options granted to employees. The paid up and called share capital increased to EUR 303,562 (2019:
EUR 300,609) resulting in a total of 30,356,236 (2019: 30,060,947) ordinary shares (nominal value EUR 0.01 per
share). In 2020, the total number of authorized shares was 80,000,000 (2019: 80,000,000).
The following reserves are considered to be non-distributable: legal reserves (in accordance with Dutch Law), share-
based payment reserve, warrant reserve, and total comprehensive income for the current period (in accordance with
regulatory capital requirements). The total of distributable reserves amounts to EUR 790,775 (2019 restated: EUR
554,820). The legal reserves restricted for distribution in accordance with Dutch Law amounts to EUR 14,853 (2019:
43,616) – refer to company statement of changes in equity.
Net income is added to retained earnings reserve and the current dividend policy is not to pay dividends, as retained
earnings are used to support and finance the growth strategy of the company.
Derivative liabilities and Warrant reserve
In relation to the warrants granted to eBay (refer to note 2.1 ‘Long-term merchant contract’), Adyen has classified
the first two tranches as an equity instrument within ‘warrant reserve’ for the amount of EUR 53,401, net of EUR
14,799 deferred tax assets (2019: EUR 53,401, net of EUR 14,799 deferred tax assets). The derivative liabilities
relating to the first two tranches was measured at fair value through profit or loss before being de-recognized and
reclassified to equity. Equity instruments are not subsequently remeasured to fair value.
The remaining derivative liabilities relating to tranches 3 and 4 are measured at fair value with a closing balance of
EUR 68,400 as per end of December 2020 (2019: 35,800). Fair value movements are presented within ‘other
financial results’ in profit or loss. Reference is made to note 11 ‘Financial Instruments’ for further details on the
accounting treatment of the derivative liabilities.
3
Amounts in this paragraph are not rounded to the nearest EUR thousand.
Accounting policy – Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of equity
instruments are shown in equity as a deduction, net of tax, from the proceeds.
page 128
Adyen
Annual Report 2020
27
the positive outlook of future profitability of the Company, the deferred tax assets shown on the balance sheet were
considered to be fully recoverable.
II. Deferred tax liability
The deferred tax liability consists mainly of the deferred tax on the Visa Inc. preferred stock of EUR 4,527 (2019: EUR
9,567) and the non-monetary part of the contract asset EUR 19,114 (2019: EUR 16,319).
The deferred tax assets and liabilities are presented as non-current on the Adyen balance sheet.
8. Capital management
Adyen’s objective when managing capital is to safeguard its ability to continue as a going concern. Furthermore,
Adyen ensures that it meets regulatory capital requirements at all times.
In 2020, 295,289
3
(2019: 507,056) additional shares were issued. The additional issued shares were a result of
exercises of options granted to employees. The paid up and called share capital increased to EUR 303,562 (2019:
EUR 300,609) resulting in a total of 30,356,236 (2019: 30,060,947) ordinary shares (nominal value EUR 0.01 per
share). In 2020, the total number of authorized shares was 80,000,000 (2019: 80,000,000).
The following reserves are considered to be non-distributable: legal reserves (in accordance with Dutch Law), share-
based payment reserve, warrant reserve, and total comprehensive income for the current period (in accordance with
regulatory capital requirements). The total of distributable reserves amounts to EUR 790,775 (2019 restated: EUR
554,820). The legal reserves restricted for distribution in accordance with Dutch Law amounts to EUR 14,853 (2019:
43,616) – refer to company statement of changes in equity.
Net income is added to retained earnings reserve and the current dividend policy is not to pay dividends, as retained
earnings are used to support and finance the growth strategy of the company.
Derivative liabilities and Warrant reserve
In relation to the warrants granted to eBay (refer to note 2.1 ‘Long-term merchant contract’), Adyen has classified
the first two tranches as an equity instrument within ‘warrant reserve’ for the amount of EUR 53,401, net of EUR
14,799 deferred tax assets (2019: EUR 53,401, net of EUR 14,799 deferred tax assets). The derivative liabilities
relating to the first two tranches was measured at fair value through profit or loss before being de-recognized and
reclassified to equity. Equity instruments are not subsequently remeasured to fair value.
The remaining derivative liabilities relating to tranches 3 and 4 are measured at fair value with a closing balance of
EUR 68,400 as per end of December 2020 (2019: 35,800). Fair value movements are presented within ‘other
financial results’ in profit or loss. Reference is made to note 11 ‘Financial Instruments’ for further details on the
accounting treatment of the derivative liabilities.
3
Amounts in this paragraph are not rounded to the nearest EUR thousand.
Accounting policy – Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of equity
instruments are shown in equity as a deduction, net of tax, from the proceeds.
Adyen
Annual Report 2020
page 129
28
9.CRR/CRD IV Regulatory Capital
The following table displays the composition of regulatory capital as at December 31, 2020. The regulatory capital is
based on the CRR/CRD IV scope of consolidation, which is the same as the IFRS scope of consolidation.
Own funds 2020
2019
Restated
EU-IFRS Equity as reported in consolidated balance sheet
1,218,134
918,334
Net profit not included in CET1 Capital (not yet eligible) (261,019) (234,284)
Regulatory adjustments:
Warrant reserve (53,401) (53,401)
Intangible assets (9,970) (7,640)
Deferred tax asset that rely on future profitability
(93,788)
(61,725)
Prudent valuation (89) (80)
Total own funds 799,867 561,204
10. Cash and cash equivalents
As per December 31, 2020, EUR 1,479,313 (2019: EUR 1,005,265) represents cash held at central banks. During
the year ended December 31, 2020, the cash held at central banks incurred negative interest in the amount of EUR
4,863 (2019: EUR 2,428). Had the interest rate at central banks been 0.1% higher/(lower), the interest incurred on
cash held at central banks would decrease/(increase) by 1,479 (2019: 1,005).
Adyen cash which is surplus to regulatory requirements, operational needs and which is not held at central banks is
invested in interest bearing short-term deposits with financial institutions and is exposed to credit risk with these
counterparties. Adyen actively manages concentration risk and it is Adyen’s policy that all commercial banks where
cash and cash equivalents are held have a credit rating in the A categories of Moody’s/S&P. No defaults occurred
during the year and management does not expect any losses from non-performance by these counterparties.
Accounting policy – Cash and cash equivalents
Adyen’s cash and cash equivalents are measured at amortized cost and are included in current assets
due to their short-term nature.
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits
held at call with banks, other short-term highly liquid investments with original maturities of three
months or less and bank overdrafts. Adyen presents interest paid/received and dividends received as
operating cash flows. Due to the short duration of the cash and cash equivalents (less than 3 months),
the fair value approximates the carrying value.
29
11. Financial instruments
Accounting policy – Financial instruments
CCllaassssiiffiiccaattiioonn
Adyen classifies its financial assets in the following measurement categories, those to be measured:
• subsequently at fair value through profit or loss (‘FVPL’), and
• at amortized cost.
The classification depends on Adyen’s business model for managing the financial assets and the
contractual terms of the cash flows. For assets measured at FVPL, gains and losses are recorded in
profit or loss.
Financial liabilities
Adyen initially classifies financial instruments as a liability or equity instrument based on the terms of
the contractual arrangement, and subsequently reassesses the accounting treatment on changes in
circumstances. The derivative liabilities are classified as financial liabilities measured at fair value
through profit or loss (refer to note 2.1 'Long-term merchant contract'). The derivative liabilities may be
derecognized and classified as equity instruments contingent on uncertain future events linked to
milestones of processed payments volume with eBay.
MMeeaassuurreemmeenntt
At initial recognition, Adyen measures a financial asset at its fair value plus, in the case of a financial
asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with
embedded derivatives are considered in their entirety when determining whether their cash flows are
solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on Adyen’s business model for managing the
asset and the cash flow characteristics of the asset. Adyen measures its debt instruments as follows:
• Amortized cost: Held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows, where those cash flows represent solely payments of
principal and interest. Interest income from these financial assets is included in finance
income using the effective interest rate method.
Financial assets and liabilities at fair value through profit or loss
• Assets that do not meet the criteria for amortized cost or fair value through other
comprehensive income (‘FVOCI’) are measured at FVPL. A gain or loss is subsequently
measured at FVPL and gains or losses are recognized in profit or loss and presented net within
other financial results for the period in which it arises.
IImmppaaiirrmmeenntt
Adyen assesses on a forward-looking basis the expected credit losses associated with its debt
instruments carried at amortized cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade receivables and contract assets, the group
applies the simplified approach, which requires expected lifetime losses to be recognized from initial
recognition of the assets.
Instruments in scope on the balance sheet of Adyen include: cash and cash equivalents, receivables
from merchants and financial institutions, trade receivables, other receivables and contract asset
classified as monetary item. The expected credit loss model is designed to measure the pattern of
improvement or deterioration in the credit quality of the debt instruments. The measurement basis
consists of two categories
• Category 1: Expected credit losses (12 months)
• Category 2: Lifetime expected credit losses
page 130
Adyen
Annual Report 2020
29
11. Financial instruments
Accounting policy – Financial instruments
C
C
l
l
a
a
s
s
s
s
i
i
f
f
i
i
c
c
a
a
t
t
i
i
o
o
n
n
Adyen classifies its financial assets in the following measurement categories, those to be measured:
• subsequently at fair value through profit or loss (‘FVPL’), and
• at amortized cost.
The classification depends on Adyen’s business model for managing the financial assets and the
contractual terms of the cash flows. For assets measured at FVPL, gains and losses are recorded in
profit or loss.
Financial liabilities
Adyen initially classifies financial instruments as a liability or equity instrument based on the terms of
the contractual arrangement, and subsequently reassesses the accounting treatment on changes in
circumstances. The derivative liabilities are classified as financial liabilities measured at fair value
through profit or loss (refer to note 2.1 'Long-term merchant contract'). The derivative liabilities may be
derecognized and classified as equity instruments contingent on uncertain future events linked to
milestones of processed payments volume with eBay.
M
M
e
e
a
a
s
s
u
u
r
r
e
e
m
m
e
e
n
n
t
t
At initial recognition, Adyen measures a financial asset at its fair value plus, in the case of a financial
asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with
embedded derivatives are considered in their entirety when determining whether their cash flows are
solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on Adyen’s business model for managing the
asset and the cash flow characteristics of the asset. Adyen measures its debt instruments as follows:
• Amortized cost: Held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows, where those cash flows represent solely payments of
principal and interest. Interest income from these financial assets is included in finance
income using the effective interest rate method.
Financial assets and liabilities at fair value through profit or loss
• Assets that do not meet the criteria for amortized cost or fair value through other
comprehensive income (‘FVOCI’) are measured at FVPL. A gain or loss is subsequently
measured at FVPL and gains or losses are recognized in profit or loss and presented net within
other financial results for the period in which it arises.
I
I
m
m
p
p
a
a
i
i
r
r
m
m
e
e
n
n
t
t
Adyen assesses on a forward-looking basis the expected credit losses associated with its debt
instruments carried at amortized cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade receivables and contract assets, the group
applies the simplified approach, which requires expected lifetime losses to be recognized from initial
recognition of the assets.
Instruments in scope on the balance sheet of Adyen include: cash and cash equivalents, receivables
from merchants and financial institutions, trade receivables, other receivables and contract asset
classified as monetary item. The expected credit loss model is designed to measure the pattern of
improvement or deterioration in the credit quality of the debt instruments. The measurement basis
consists of two categories
• Category 1: Expected credit losses (12 months)
• Category 2: Lifetime expected credit losses
Adyen
Annual Report 2020
page 131
30
The financial instruments as at each balance sheet date are summarized in the table below. For those measured at
fair value, to provide an indication about the reliability of the inputs used in determining fair value, Adyen has
classified its financial instruments into the levels described in the accounting policies above. All other financial
instruments on the balance sheet meet the requirements of the contractual cash flow and characteristics test to be
measured at amortized cost. Furthermore, the classification is based on the business model test. As a result, the
classification is consistent with how the business is managed and is in line with risk management strategies and
how this is reported to key management. Adyen’s exposure to various risks associated with the financial instruments
is discussed in note 12.
Accounting policy – Financial instruments (continued)
The Adyen Treasury policy only allows exposures to financial institutions with sound credit quality rating
and limits the exposure to a maximum amount. As a result, Adyen applies the low credit risk
simplification; hence all assets are considered to be in stage 1 and a 12-month expected credit loss is
applied.
Lifetime expected credit losses are applied for trade and other receivables. For these instruments
operational simplifications can be applied; hence it eliminates the need to calculate a 12-month
expected credit losses or to measure increases in credit risk for the instrument. The loss allowance for
trade receivables are measured at initial recognition, and throughout the total duration, equal to lifetime
expected credit losses.
As the average duration of the instruments in scope for impairment calculation is below 10 days, no
forward-looking elements are included in the expected credit loss assessment.
In the event of no reasonable expectation of recovering the financial asset, the Adyen Credit Committee
decides on whether a write-off should take place for the entirety or portion of the outstanding amount.
F
F
a
a
i
i
r
r
v
v
a
a
l
l
u
u
e
e
m
m
e
e
a
a
s
s
u
u
r
r
e
e
m
m
e
e
n
n
t
t
For financial instruments measured at fair value, Adyen categorizes the fair value measurement in its
entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the
entire measurement. Adyen categorizes fair valuation inputs on the following basis:
• Level 1: The fair value of financial instruments traded in active markets is based on quoted
market prices at the end of the reporting period.
• Level 2: The fair value of financial instruments that are not traded in an active market is
determined using valuation techniques which maximise the use of observable market data and
rely as little as possible on entity-specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2.
• Level 3: If one or more of the significant inputs is not based on observable market data, the
instrument is included in level 3.
31
Financial instruments
Note
Measurement policy
2020
2019 Restated
Financial assets:
Other financial assets at FVPL
FVPL – level 2
20,883
44,088
Contract assets – monetary component
2.2
Amortized cost
47,657
61,087
Receivables from merchants and financial
institutions
15
Amortized cost
883,939
443,333
Trade and other receivables
15
Amortized cost
75,079
46,927
Other financial assets at amortized cost
Amortized cost
12,238
13,031
Cash and cash equivalents
10
Amortized cost
2,737,486
1,745,388
Total
3,777,282
2,353,854
Financial liabilities:
Derivative liabilities
FVPL – level 2
68,400
35,800
Lease liability
17
Amortized cost
131,485
61,694
Payables to merchants and financial
institutions
16
Amortized cost
2,588,863
1,459,226
Trade and other payables
16
Amortized cost
111,547
88,105
Total
2,900,295
1,644,825
Other financial assets at FVPL (Visa Inc. preferred shares)
Adyen has recognized and classified the convertible (‘Series C’) preferred Visa Inc. shares within the FVPL category.
The fair value of the level 2 preferred shares in Visa Inc. is based on the quoted price of Visa Inc. common shares,
adjusted for lack of marketability, multiplied by an initial conversion rate of preferred shares into common shares.
The conversion rate may fluctuate in the future. The adjustment for lack of marketability is determined using an
option pricing model technique which relies on observable market data of the underlying Visa Inc. common shares,
as well as a presumed length of holding period restriction on the preferred shares.
During the current year, Visa Inc. effected a partial conversion of 50% of the Series C preferred stock into Series A
preferred stock. The Series A preferred stock are convertible into Visa Inc. common stock and are freely tradeable
upon conversion. Adyen converted and sold all Series A preferred stock prior to the current year-end at fair market
value. At year-end, Adyen recognized the proceeds receivable within trade and other receivables for the amount of
EUR 23,145. No conversion took place in 2019.
The Visa Inc. preferred shares carry the right to receive discretionary dividend payments presented as “other
income” in the statement of comprehensive income (2020: EUR 310; 2019: EUR 202).
Other financial assets at amortized cost (US and UK Government Bonds)
Adyen has the intent and ability to hold the bonds to maturity and Adyen, therefore, applies a hold-to-collect
business model. The fair value (level 1) of these debt instruments at amortized cost approximates the carrying value
due to the short-term nature of the instruments.
During the year ended December 31, 2020, Adyen recognized finance income of EUR 281 and exchange losses of
EUR 1,006 relating to the bonds (2019: EUR 264 finance income and EUR 356 exchange gains, respectively).
Derivative liabilities
As part of the eBay contract previously mentioned (refer to note 2.1 ‘Long-term merchant contract’), Adyen
recognized derivative liabilities measured at fair value through profit or loss, classified as a level 2 fair value instrument.
The derivative liabilities balance as per December 31, 2020 is EUR 68,400 (2019: EUR 35,800) are valued using a
Black-Scholes option pricing model (“OPM”) technique. The OPM takes into consideration various observable
market and contractual data as well as management estimates, including the probability of vesting based on
achievement of milestones in line with the fulfilment of the payment services to be provided to eBay. A sensitivity
analysis to Adyen’s share price is provided in note 12 ‘Financial risk management’.
The change in fair value of the derivative liabilities is mainly linked to the Adyen share price increase over the year as
well as a change in estimate of the probability of vesting. Reference is made to note 6 ‘Other financial results’ for the
recognition of the movement of the derivative liabilities.
page 132
Adyen
Annual Report 2020
31
Financial instruments Note Measurement policy 2020 2019 Restated
Financial assets:
Other financial assets at FVPL FVPL – level 2 20,883 44,088
Contract assets – monetary component 2.2 Amortized cost 47,657
61,087
Receivables from merchants and financial
institutions
15 Amortized cost 883,939
443,333
Trade and other receivables 15 Amortized cost 75,079
46,927
Other financial assets at amortized cost Amortized cost 12,238
13,031
Cash and cash equivalents 10 Amortized cost 2,737,486
1,745,388
Total 3,777,282
2,353,854
Financial liabilities:
Derivative liabilities FVPL – level 2
68,400
35,800
Lease liability
17
Amortized cost
131,485
61,694
Payables to merchants and financial
institutions
16 Amortized cost 2,588,863
1,459,226
Trade and other payables
16
Amortized cost
111,547
88,105
Total 2,900,295 1,644,825
Other financial assets at FVPL (Visa Inc. preferred shares)
Adyen has recognized and classified the convertible (‘Series C’) preferred Visa Inc. shares within the FVPL category.
The fair value of the level 2 preferred shares in Visa Inc. is based on the quoted price of Visa Inc. common shares,
adjusted for lack of marketability, multiplied by an initial conversion rate of preferred shares into common shares.
The conversion rate may fluctuate in the future. The adjustment for lack of marketability is determined using an
option pricing model technique which relies on observable market data of the underlying Visa Inc. common shares,
as well as a presumed length of holding period restriction on the preferred shares.
During the current year, Visa Inc. effected a partial conversion of 50% of the Series C preferred stock into Series A
preferred stock. The Series A preferred stock are convertible into Visa Inc. common stock and are freely tradeable
upon conversion. Adyen converted and sold all Series A preferred stock prior to the current year-end at fair market
value. At year-end, Adyen recognized the proceeds receivable within trade and other receivables for the amount of
EUR 23,145. No conversion took place in 2019.
The Visa Inc. preferred shares carry the right to receive discretionary dividend payments presented as “other
income” in the statement of comprehensive income (2020: EUR 310; 2019: EUR 202).
Other financial assets at amortized cost (US and UK Government Bonds)
Adyen has the intent and ability to hold the bonds to maturity and Adyen, therefore, applies a hold-to-collect
business model. The fair value (level 1) of these debt instruments at amortized cost approximates the carrying value
due to the short-term nature of the instruments.
During the year ended December 31, 2020, Adyen recognized finance income of EUR 281 and exchange losses of
EUR 1,006 relating to the bonds (2019: EUR 264 finance income and EUR 356 exchange gains, respectively).
Derivative liabilities
As part of the eBay contract previously mentioned (refer to note 2.1 ‘Long-term merchant contract’), Adyen
recognized derivative liabilities measured at fair value through profit or loss, classified as a level 2 fair value instrument.
The derivative liabilities balance as per December 31, 2020 is EUR 68,400 (2019: EUR 35,800) are valued using a
Black-Scholes option pricing model (“OPM”) technique. The OPM takes into consideration various observable
market and contractual data as well as management estimates, including the probability of vesting based on
achievement of milestones in line with the fulfilment of the payment services to be provided to eBay. A sensitivity
analysis to Adyen’s share price is provided in note 12 ‘Financial risk management’.
The change in fair value of the derivative liabilities is mainly linked to the Adyen share price increase over the year as
well as a change in estimate of the probability of vesting. Reference is made to note 6 ‘Other financial results’ for the
recognition of the movement of the derivative liabilities.
Adyen
Annual Report 2020
page 133
32
12. Financial risk management
Adyen’s activities bring exposure to a variety of financial risks. Risk management is the responsibility of Adyen’s
management. Adyen applies a risk-aware but not overly risk-averse approach towards risk management. Adyen’s
Integral Risk Management Framework (IRMF), which is based on COSO’s Enterprise Risk Management (ERM)
model, defines a uniform and systematic approach for managing risks across Adyen. The main sources of financial
risk to Adyen are considered in the table below:
Source of risk and risk description
Risk mitigation
Remaining risk
Liquidity risk
Minimal
Liquidity risk is the risk that Adyen
could not meet its short-term
payment obligations.
Adyen actively monitors its liquidity risk. However, the majority of the
balance sheet, excluding merchant funds, for both assets and
liabilities has a maturity date of less than three months on an
undiscounted contractual basis. The remaining balances with a
different maturity date (as mentioned specifically in the notes of
these financial statements) are not considered material, including
lease liabilities (refer to note 17).
The balance sheet positions related to merchant fund flows are
considered not to impose liquidity risk as these cash balances and
related payables are interrelated from a liquidity perspective. For the
majority of its merchants, Adyen only settles merchant payables after
the cash is collected from the card schemes. Accelerated pay-out
schedules for individual merchants are more than balanced by
liquidity from merchants with default pay-out schedules and liquidity
via settlement by payment methods.
Adyen holds a liquidity buffer based on the Liquidity Coverage Ratio
(LCR), accompanied by a survival period metric, to mitigate the
residual risk. The survival period is determined by dividing the sum of
cash and cash equivalents, receivables from and payables to
merchants and financial institutions, by total operating expenses for
the period. The survival period is set at a minimum of six months and
Adyen's survival period as at December 31, 2020 is 40 months
(2019: 37 months). Given the maturity of the assets and liabilities on
balance sheet, as well as Adyen's liquidity buffer and survival period
metric, the Company has sufficiently mitigated liquidity risk.
Due to the short-
term character
of Adyen’s
balance sheet,
the remaining
liquidity risk
remains within
Adyen’s risk
appetite.
MMaarrkkeett rriisskkss
MMiinniimmaall
Foreign exchange risk
Adyen operates internationally and
is exposed to foreign exchange
risk arising from various currency
exposures. Foreign exchange risk
arises on recognized assets and
liabilities, principally trade and
merchant flow related receivables
and payables, and investments in
foreign operations.
Management actively manages the foreign exchange risk resulting in
limited exposure to foreign exchange risks. USD and GBP are the
most significant non-functional currency exposures as at December
31, 2020 and 2019. The following table highlights the net exposure
to these monetary item currencies as well as the impact on profit or
loss resulting from a 10% shock (positive or negative) of the
respective significant currency against the Euro. All short-term
financial instruments have been excluded in this exposure given the
quick settlement times, and hence, limited foreign exchange risk on
these instruments.
The resulting
overall impact of
an immediate
10% shock on all
currencies
excluding USD
and GBP
remains within
Adyen’s risk
appetite.
33
Currency
Net exposure
10% shock
December 31, 2019
USD
EUR 114 million
EUR 11.4 million
GBP
EUR 4 million
EUR 0.4 million
December 31, 2020
USD
EUR 77 million
EUR 7.7 million
GBP
EUR 4 million
EUR 0.4 million
The balance sheet positions related to merchant fund flows are not
considered for the determination of foreign exchange risks. The
merchant funds have a natural match in currencies between
receivables and payables or a very short duration. This significantly
reduces the foreign exchange risk.
Adyen holds liquidity buffers in various currencies to ensure that it
will be able to meet payment obligations to merchants, thereby
mitigating liquidity risk arising from failed FX transactions.
Interest rate risk
Interest rate risk on financial
instruments could arise from
adverse movements in underlying
interest rates.
Interest rate risk arising from maturity and tenor mismatches in
assets and liabilities is limited and therefore considered not to be
material to Adyen, as some assets are interest bearing whereas all
liabilities are non-interest-bearing.
Adyen is not financed with external debt, which could present
interest rate risk. Although significant liabilities towards merchants
are present, these liabilities are non-interest bearing and are settled
at short notice.
The cash balances of Adyen are not significantly exposed to interest
rate risk as this cash is used to settle the current liabilities towards
the merchants at short notice. The nominal values of the bonds held-
to-maturity are minimal compared to the total financial instruments
on the Adyen balance sheet, are short-term in nature and are held-
to-collect contractual cash flows leading to minimal interest rate risk.
As a result of the
nature of the
products on the
Adyen balance
sheet the
remaining
interest rate risk
remains within
Adyen’s risk
appetite.
Equity price risk
The risk that the fair value of
equities decreases as a result of
changes in the levels of equity
indices and the value of individual
stocks.
The Group’s exposure to equity securities price risk arises from
investment in Visa Inc. preferred shares, which are classified in the
consolidated balance sheet as other financial assets at FVPL. The
exposure consists of potential financial losses due to movements in
the share price of Visa Inc.
Two tranches of the long-term merchant contract with eBay are
classified in the balance sheet as derivative liabilities. The exposure
is affected by share price movements of Adyen shares.
Adyen carried out a sensitivity analysis on the Visa Inc. preferred
shares and derivative liabilities, respectively. A 5% increase
(decrease) in the underlying Visa Inc. and Adyen share price would
result in the following increase (decrease) in the balance sheet item
and income before income taxes, all other circumstances considered
equal:
The remaining
equity price risk
is considered
limited as Adyen
has no other
equity
instruments on
its balance
sheet.
page 134
Adyen
Annual Report 2020
33
Currency
Net exposure
10% shock
December 31, 2019
USD
EUR 114 million
EUR 11.4 million
GBP
EUR 4 million
EUR 0.4 million
December 31, 2020
USD
EUR 77 million
EUR 7.7 million
GBP
EUR 4 million
EUR 0.4 million
The balance sheet positions related to merchant fund flows are not
considered for the determination of foreign exchange risks. The
merchant funds have a natural match in currencies between
receivables and payables or a very short duration. This significantly
reduces the foreign exchange risk.
Adyen holds liquidity buffers in various currencies to ensure that it
will be able to meet payment obligations to merchants, thereby
mitigating liquidity risk arising from failed FX transactions.
Interest rate risk
Interest rate risk on financial
instruments could arise from
adverse movements in underlying
interest rates.
Interest rate risk arising from maturity and tenor mismatches in
assets and liabilities is limited and therefore considered not to be
material to Adyen, as some assets are interest bearing whereas all
liabilities are non-interest-bearing.
Adyen is not financed with external debt, which could present
interest rate risk. Although significant liabilities towards merchants
are present, these liabilities are non-interest bearing and are settled
at short notice.
The cash balances of Adyen are not significantly exposed to interest
rate risk as this cash is used to settle the current liabilities towards
the merchants at short notice. The nominal values of the bonds held-
to-maturity are minimal compared to the total financial instruments
on the Adyen balance sheet, are short-term in nature and are held-
to-collect contractual cash flows leading to minimal interest rate risk.
As a result of the
nature of the
products on the
Adyen balance
sheet the
remaining
interest rate risk
remains within
Adyen’s risk
appetite.
Equity price risk
The risk that the fair value of
equities decreases as a result of
changes in the levels of equity
indices and the value of individual
stocks.
The Group’s exposure to equity securities price risk arises from
investment in Visa Inc. preferred shares, which are classified in the
consolidated balance sheet as other financial assets at FVPL. The
exposure consists of potential financial losses due to movements in
the share price of Visa Inc.
Two tranches of the long-term merchant contract with eBay are
classified in the balance sheet as derivative liabilities. The exposure
is affected by share price movements of Adyen shares.
Adyen carried out a sensitivity analysis on the Visa Inc. preferred
shares and derivative liabilities, respectively. A 5% increase
(decrease) in the underlying Visa Inc. and Adyen share price would
result in the following increase (decrease) in the balance sheet item
and income before income taxes, all other circumstances considered
equal:
The remaining
equity price risk
is considered
limited as Adyen
has no other
equity
instruments on
its balance
sheet.
Adyen
Annual Report 2020
page 135
34
Balance sheet item
Carrying
amount
5% underlying
share price
movement
December 31, 2019
Visa Inc. preferred
shares
EUR 44 million
EUR 2 million
Derivative liabilities
EUR 36 million
EUR 2 million
December 31, 2020
Visa Inc. preferred
shares
EUR 21 million
EUR 1 million
Derivative liabilities
EUR 68 million
EUR 3 million
In addition, Adyen’s Treasury policy does not allow purchasing
additional equity positions (excluding treasury shares).
CCrreeddiitt rriisskkss
MMiinniimmaall
Counterparty default risk
The counterparty default (credit)
risk relates to receivables from
financial institutions regarding
settled payment transactions.
A default of financial institution
counterparties could have a
negative impact on Adyen’s
financial results.
Adyen cash which is surplus to regulatory requirements and
operational needs is invested in interest bearing short-term deposits
with financial institutions and is exposed to credit risk with these
counterparties.
The credit risk exposure per financial institution is maximized to EUR
150 million or 25% of Adyen’s eligible capital, whichever is the
highest, provided that the financial institution has a credit rating in
the A categories of Moody’s/S&P or, if not available, its equivalent
from other rating agencies. For financial institutions with lower credit
ratings the credit risk per financial institution is maximized to EUR 75
million under business-as-usual conditions.
As per December 31, 2020, EUR 1,479,313 (2019: EUR 1,005,265)
represents cash held at central banks, representing 54% of the cash
and cash equivalents balance.
Excluding the cash held at central banks, Adyen’s top 10 exposures
are held at institutions with credit rating A or higher, representing
83% of the remaining balance of cash and cash equivalents, and
receivables from merchants and financial institutions.
Adyen has exposure to various financial institutions globally. In order
to mitigate the counterparty exposure to one of its partners in Brazil,
Adyen has setup a collateral account in which Brazilian Government
bonds were deposited by a partner financial institution. As per
December 31, 2020 the total collateral was EUR 37,533 (BRL
239,091) (2019: EUR 51,685 (BRL 233,486)).
No defaults occurred during the year and management does not
expect any losses from non-performance by these counterparties.
The remaining
credit risk
remains within
Adyen’s risk
appetite.
Concentration risk
Risk of losses stemming from on-
and off-balance sheet positions
arising from concentrations in
exposures to an issuer or a group
of connected issuers.
Adyen actively manages concentration risk by distributing its cash
over bank accounts at multiple banks. If needed cash can be held at
accounts with central banks. Adyen continues to monitor its
merchant funds flows at partner banks, and that are not settled
through accounts held at the central bank, to ensure compliance
with the large exposure limit.
The remaining
credit risk
remains within
Adyen’s risk
appetite.
35
Other disclosures
13. Intangible assets
Adyen’s intangible assets relate to expenses capitalized on the internal development of the Adyen’s payment
platform.
Intangible assets
22002200
22001199
Internally generated software
Cost
15,022
10,249
Accumulated amortization
(7,382)
(5,190)
Balance - January 1
7,640
5,059
Additions
4,795
4,773
Amortization for the year
(2,465)
(2,192)
Total as at December 31
9,970
7,640
Cost
19,817
15,022
Accumulated amortization
(9,847)
(7,382)
Total as at December 31
9,970
7,640
Accounting policy – Intangible assets
The intangible assets are stated at cost less accumulated amortization and include internally generated
software with finite useful lives. These assets are capitalized and subsequently amortized on a straight-
line basis in the statement of comprehensive income over the period with an estimated useful life of 5
years. Intangible assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The useful life is assessed on an annual
basis.
page 136
Adyen
Annual Report 2020
35
Other disclosures
13. Intangible assets
Adyen’s intangible assets relate to expenses capitalized on the internal development of the Adyen’s payment
platform.
Intangible assets
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Internally generated software
Cost
15,022
10,249
Accumulated amortization
(7,382)
(5,190)
Balance - January 1
7,640
5,059
Additions
4,795
4,773
Amortization for the year
(2,465)
(2,192)
Total as at December 31
9,970
7,640
Cost
19,817
15,022
Accumulated amortization
(9,847)
(7,382)
Total as at December 31
9,970
7,640
Accounting policy – Intangible assets
The intangible assets are stated at cost less accumulated amortization and include internally generated
software with finite useful lives. These assets are capitalized and subsequently amortized on a straight-
line basis in the statement of comprehensive income over the period with an estimated useful life of 5
years. Intangible assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The useful life is assessed on an annual
basis.
Adyen
Annual Report 2020
page 137
36
14. Plant and equipment
Plant and equipment 2020 2019
Plant and equipment
Cost 55,587 40,414
Accumulated depreciation (25,368) (16,493)
Balance - January 1 30,219 23,921
Additions 17,097 15,186
Disposals (38) (377)
Depreciation for the year (11,230) (9,022)
Other changes (e.g. exchange differences) (302) 511
Balance - December 31 35,746 30,219
Cost 70,040 55,587
Accumulated depreciation (34,294) (25,368)
Balance - December 31 35,746 30,219
The additions during the year mainly relate to hardware equipment such as laptops for employees and servers for
data centers. Adyen did not recognize an impairment loss or reversal of impairment loss of plant and equipment
during the year (2019: nil).
Accounting policy – Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation. Repairs and maintenance costs
are charged to the statement of comprehensive income during the period in which they are incurred.
The major categories of plant and equipment namely hardware equipment are assessed to have a
useful life of 5 years. Plant and equipment are depreciated on a straight-line basis and are tested for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The useful life is assessed on an annual basis.
37
15. Trade, other receivables, and receivables from merchants and
financial institutions
15.1. Trade, other receivables, and receivables from merchants and financial institutions
Trade, other receivables, and receivables from merchants and financial institutions
22002200
22001199
Trade and other receivables
79,918
50,155
Less: Allowance for expected credit losses
(4,839)
(3,228)
Trade receivables - Net
75,079
46,927
Receivables from merchants and financial institutions
883,939
443,333
Total
959,018
490,260
Trade and other receivables
These receivables are held with merchants that have not been subtracted from settlement.
Receivables from merchants and financial Institutions
22002200
22001199
Receivables from financial institutions
833,657
406,714
Receivables from merchants
50,282
36,619
Balance – December 31
883,939
443,333
Receivables from financial institutions
Receivables from financial institutions include balances due from schemes and other financial institutions regarding
transactions processed which will be settled within a short-term, as well as bank accounts which are controlled by
Adyen but do not meet the definition of cash and cash equivalents and are therefore classified as receivables from
financial institutions.
Receivables from merchants
As part of the accelerated Sales Day Payout product, Adyen settles a full sales day of transactions to merchants
before the funds from financial institutions are fully received. Therefore, Adyen is entitled to a receivable from all
merchants which have opted to use this form of settlement. The receivable relates to balances of merchants to be
settled by schemes, with an average duration of less than 10 days. As at December 31, 2020, the receivables from
Sales Day Payout have a balance of EUR 50,282 (2019: 36,619).
Adyen assesses, on a forward-looking basis, the expected credit losses and concluded the impact of expected credit
losses on receivables from merchants is not significant.
Accounting policy – Trade and other receivables
Trade receivables are amounts due from merchants for payment services performed. If collection is
expected in less than one year they are classified as current assets. Trade and other receivables are
classified at amortized cost, initially recognized at fair value and subsequently measured at amortized cost
less impairments for expected credit losses. Due to the short duration of the receivables (average less
than 3 months) the fair value approximates the carrying value.
page 138
Adyen
Annual Report 2020
37
15. Trade, other receivables, and receivables from merchants and
financial institutions
15.1. Trade, other receivables, and receivables from merchants and financial institutions
Trade, other receivables, and receivables from merchants and financial institutions
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Trade and other receivables 79,918 50,155
Less: Allowance for expected credit losses (4,839) (3,228)
Trade receivables - Net 75,079 46,927
Receivables from merchants and financial institutions 883,939 443,333
Total 959,018 490,260
Trade and other receivables
These receivables are held with merchants that have not been subtracted from settlement.
Receivables from merchants and financial Institutions
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Receivables from financial institutions 833,657 406,714
Receivables from merchants 50,282 36,619
Balance – December 31 883,939 443,333
Receivables from financial institutions
Receivables from financial institutions include balances due from schemes and other financial institutions regarding
transactions processed which will be settled within a short-term, as well as bank accounts which are controlled by
Adyen but do not meet the definition of cash and cash equivalents and are therefore classified as receivables from
financial institutions.
Receivables from merchants
As part of the accelerated Sales Day Payout product, Adyen settles a full sales day of transactions to merchants
before the funds from financial institutions are fully received. Therefore, Adyen is entitled to a receivable from all
merchants which have opted to use this form of settlement. The receivable relates to balances of merchants to be
settled by schemes, with an average duration of less than 10 days. As at December 31, 2020, the receivables from
Sales Day Payout have a balance of EUR 50,282 (2019: 36,619).
Adyen assesses, on a forward-looking basis, the expected credit losses and concluded the impact of expected credit
losses on receivables from merchants is not significant.
Accounting policy – Trade and other receivables
Trade receivables are amounts due from merchants for payment services performed. If collection is
expected in less than one year they are classified as current assets. Trade and other receivables are
classified at amortized cost, initially recognized at fair value and subsequently measured at amortized cost
less impairments for expected credit losses. Due to the short duration of the receivables (average less
than 3 months) the fair value approximates the carrying value.
Adyen
Annual Report 2020
page 139
38
15.2. Impairments of financial assets at amortized cost
Adyen uses a provision matrix when calculating the loss allowance on trade receivables. During the year Adyen
added EUR 2,312 (2019: EUR 1,828) to its trade receivable loss allowance based on the calculations from its IFRS 9
expected credit loss model for trade receivables. The expected credit loss model was updated at year-end to reflect
reasonable and supportable information available on credit risk of the trade receivables balance. The impact of
COVID-19 on the expected credit loss allowance was not significant and the increase in the loss allowance year-
over-year is mainly driven by an increase in the trade receivables balance. Adyen wrote off trade receivables
balances for an amount of EUR 2,357 (2019: nil). Adyen did not reverse any impairment losses in 2019 and 2020.
No financial assets are past due except for trade receivables. As at December 31, 2020, trade receivables of EUR
15,383 (2019: EUR 22,653) were not past due, EUR 24,822 were past due (2019: EUR 27,502) of which EUR 9,409
is less than 3 months (2019: EUR 13,144) and EUR 2,357 impaired (2019: nil). The average duration of the overdue
trade receivables is 3 months (2019: 3 months).
16. Trade, other payables, and payables to merchants and financial
institutions
Trade, other payables, and payables to merchants and financial institutions
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
e
s
s
t
t
a
a
t
t
e
e
d
d
Trade payables 8,308 9,458
Taxes and social security 42,482 43,709
Accrued employee benefits 31,390 18,959
Accrued liabilities and other debts 21,140 14,783
Cash-settled share-based payment plan 8,227 1,196
T
T
r
r
a
a
d
d
e
e
a
a
n
n
d
d
o
o
t
t
h
h
e
e
r
r
p
p
a
a
y
y
a
a
b
b
l
l
e
e
s
s
1
1
1
1
1
1
,
,
5
5
4
4
7
7
8
8
8
8
,
,
1
1
0
0
5
5
Payables to merchants and financial institutions
2,588,863 1,459,226
T
T
o
o
t
t
a
a
l
l
2
2
,
,
7
7
0
0
0
0
,
,
4
4
1
1
0
0
1
1
,
,
5
5
4
4
7
7
,
,
3
3
3
3
1
1
The payables to merchants and financial institutions relate to interchange and scheme fees payable and do not
constitute borrowings. The payables to merchants include the Merchant Potential Liability (‘MPL’) reserve as part of
Adyen’s MPL risk mitigation. When Adyen acts as an acquirer, it is liable to settle eligible chargebacks with card
networks. To cover for this inherent risk, Adyen withholds funds from the payouts to merchants, estimated as the
amount of transaction volume for which issuers could potentially submit a chargeback and Adyen has to take
financial responsibility. These MPL reserves amounted to EUR 377,598 as per December 31, 2020 (2019: EUR
230,527).
Taxes and social security mainly relate to VAT payables and wage taxes relate to Adyen employees.
Adyen has recognized liabilities measured at fair value through profit or loss that are related to the cash-settled
share-based payment plan (refer to note 4.3 ‘Share-based payments’).
Accounting policy – Trade and other payables
Payables are obligations initially recognized at fair value and subsequently measured at amortized cost
to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Payables are classified as current liabilities if payment is due within one year or less. Due to the very
short duration of the payables (average less than 3 months) the fair value approximates the carrying
value.
39
17. Leases
Adyen’s leases relate to offices and data centers across locations where it operates. During 2020, due to its rapid
growth, Adyen has signed a new contract for a second office location in the city of Amsterdam.
The new building, which is located in the city center of Amsterdam, had its contract initiated on April 15, 2020, with a
15-year non-cancellable term and no extension period considered on initial recognition. Payments will take place on
a monthly basis, starting February 2022; therefore, the total lease liability outstanding is disclosed as non-current.
Right-of-use assets
2020
2019
Offices and data centers
Cost
70,849
62,625
Accumulated depreciation
(11,154)
-
Balance - January 1
59,695
62,625
Additions
81,308
8,712
Depreciation for the period
(14,872)
(11,112)
Other movements (e.g. exchange differences)
(1,803)
(530)
Balance - December 31
124,328
59,695
Recognized right-of-use asset
149,732
70,849
Accumulated depreciation
(25,404)
(11,154)
Balance - December 31
124,328
59,695
Lease liability
2020
2019
Balance - January 1
61,694
62,625
Additions
81,308
8,712
Lease instalments
(11,493)
(11,087)
Interest expense
2,054
1,155
Other movements (e.g. exchange differences)
(2,078)
289
Balance - December 31
131,485
61,694
Current portion
13,434
10,791
Non-current portion
118,051
50,903
Accounting policy – Leases
Adyen assesses if a lease exists or a contract contains a lease at the contract inception date, concluding
whether an asset is identifiable and Adyen has control to direct its use and all related economic
benefits. A right-of-use asset and a lease liability are recognized at the lease commencement date,
which can differ from contract inception date.
The lease liability is initially measured by bringing to present value all future lease payments, discounted
by an incremental borrowing rate, in case no interest rate is available for the contract.
At initial recognition, the right-of-use-asset amounts to the initial lease liability. Right-of-use-assets are
depreciated on a straight-line basis over the lease term and tested for impairment whenever events or
changes in circumstances indicates that the carrying amount may not be recoverable. Interest on lease
liability is recognized as an expense in the statement of comprehensive income.
Short-term (less than 12 months) and small value lease contracts are expensed in the statement of
comprehensive income on a straight-line basis over the lease term.
All leases entered are related offices and data centers, being these based on fixed payment and term.
page 140
Adyen
Annual Report 2020
39
17. Leases
Adyen’s leases relate to offices and data centers across locations where it operates. During 2020, due to its rapid
growth, Adyen has signed a new contract for a second office location in the city of Amsterdam.
The new building, which is located in the city center of Amsterdam, had its contract initiated on April 15, 2020, with a
15-year non-cancellable term and no extension period considered on initial recognition. Payments will take place on
a monthly basis, starting February 2022; therefore, the total lease liability outstanding is disclosed as non-current.
Right-of-use assets
2020 2019
Offices and data centers
Cost
70,849 62,625
Accumulated depreciation
(11,154) -
Balance - January 1
59,695 62,625
Additions
81,308 8,712
Depreciation for the period
(14,872) (11,112)
Other movements (e.g. exchange differences)
(1,803) (530)
Balance - December 31
124,328 59,695
Recognized right-of-use asset
149,732 70,849
Accumulated depreciation
(25,404) (11,154)
Balance - December 31
124,328 59,695
Lease liability
2020 2019
Balance - January 1
61,694 62,625
Additions
81,308 8,712
Lease instalments
(11,493) (11,087)
Interest expense
2,054 1,155
Other movements (e.g. exchange differences)
(2,078) 289
Balance - December 31
131,485 61,694
Current portion
13,434 10,791
Non-current portion
118,051 50,903
Accounting policy – Leases
Adyen assesses if a lease exists or a contract contains a lease at the contract inception date, concluding
whether an asset is identifiable and Adyen has control to direct its use and all related economic
benefits. A right-of-use asset and a lease liability are recognized at the lease commencement date,
which can differ from contract inception date.
The lease liability is initially measured by bringing to present value all future lease payments, discounted
by an incremental borrowing rate, in case no interest rate is available for the contract.
At initial recognition, the right-of-use-asset amounts to the initial lease liability. Right-of-use-assets are
depreciated on a straight-line basis over the lease term and tested for impairment whenever events or
changes in circumstances indicates that the carrying amount may not be recoverable. Interest on lease
liability is recognized as an expense in the statement of comprehensive income.
Short-term (less than 12 months) and small value lease contracts are expensed in the statement of
comprehensive income on a straight-line basis over the lease term.
All leases entered are related offices and data centers, being these based on fixed payment and term.
Adyen
Annual Report 2020
page 141
40
During the year, short-term and small value leases expensed in other operating expenses amounted to EUR 1,080
(2019: 517).
As of December 31, the future minimum lease payments are as follows:
Minimum future lease payments 2020 2019
Within 1 year 11,126 11,815
Between 1 and 2 years 16,294 10,520
Between 2 and 3 years 15,141 8,848
Between 3 and 4 years 14,845 8,003
Between 4 and 5 years
14,412
7,687
Later than 5 years 74,841 18,926
Total 146,659 65,799
18. Other contingent assets, liabilities and commitments
Adyen has no contingent liabilities in respect to legal claims.
Adyen N.V. and Adyen International B.V. are a fiscal unity for income tax purposes. Under the Dutch Tax Collection
Act, the members of the fiscal unity are jointly and severally liable for any taxes payable by the fiscal unity.
In the United States, Adyen holds licenses to operate as a money transmitter (or its equivalent), which, among other
things, subjects Adyen to reporting requirements, bonding requirements, limitations on the investment of customer
funds and inspection by state regulatory agencies.
Adyen has EUR 32,344 of outstanding bank guarantees and letters of credit as at December 31, 2020 (2019: EUR
23,892). In addition, Adyen has an intra-day credit facility of EUR 307 million which is not used as at December 31,
2020 (2019: EUR 274 million).
Adyen has setup a collateral account in which Brazilian Government bonds were deposited by a partner financial
institution, in order to decrease its exposure to this counterparty in Brazil. As at December 31, 2020 the total
collateral was EUR 37,533 (BRL 239,091) (2019: EUR 51,685 (BRL 233,486)).
19. Related party transactions
During 2020, Adyen identified related party transactions that took place with Stichting Administratiekantoor Adyen
(STAK), employees and Supervisory Directors. The transactions with employees and STAK are related to options
exercised, and the transactions with Supervisory Board are related to remuneration for services rendered
throughout the year (refer to note 22.2 ‘Remuneration Supervisory Board’). The outstanding balances as per
December 31, 2020 and 2019 are:
Related party transactions
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Supervisory Board
(52) (97)
Employees (STAK)
20 18
The Management Board and Supervisory Board remuneration is disclosed in note 22 ‘Compensation of key
management’.
There were no other transactions with related parties in 2020 (2019: nil).
41
20. New and amended standards adopted
20.1. New standards adopted by Adyen
Standards, amendments to published standards and interpretations (collectively, “amendments”) that are
applicable and effective.
Adyen has adopted the following amendments issued and made effective from January 1, 2020:
- Amendments to IFRS 3, ‘Business combinations’ – Definition of a business;
- Amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8, ‘Accounting policies, changes in
accounting estimates and errors’ – Definition of material;
- Amendments to IFRS 9, IAS 39 and IFRS 17 – Interest rate benchmark reform.
- Amendments to reference to the Conceptual Framework in IFRS
Adyen has taken into consideration the changes of each one of the above-mentioned amendments and concluded
that the amendments do not have a material impact on the financial statements.
20.2. Amendments to existing standards that are applicable to the Company but not yet
effective
Certain amendments have been published that are not mandatory for December 31, 2020 reporting period and have
not been early adopted by the Company. The Company has assessed the amendments to become effective in 2021,
and onwards, to have no material impact on its financial statements.
21. Audit fees
21.1. Fees to the auditor
The audit fees were expensed in the statement of comprehensive income during the reporting period.
The fees listed below relate to the procedures applied to Adyen and its consolidated group entities by accounting
firms and external independent auditors as referred to in section 1(1) of the Audit Firms Supervision Act (“Wet
toezicht accountantsorganisaties-Wta”) as well as by the Dutch and foreign-based accounting firms, including their
tax services and advisory groups. These fees relate to the audit of the 2020 financial statements, regardless of
whether the work was performed during the financial year.
21.2. Summary of services rendered by the auditor, in addition to the audit of the financial
statements
Our auditor, PwC Accountants, has rendered the following services to Adyen and its controlled entities during 2020
and 2019:
2020
2019
PwC
Accountants
Other PwC
firms*
Total
PwC
Accountants
Other PwC
firms*
Total
Audit of financial statements
706
293
999
825
221
1,046
Other audit services
93
-
93
139
-
139
Tax services
-
-
-
-
7
7
Total
799
293
1,092
964
228
1,192
*Other PwC firms refer to PwC member firms outside of the Netherlands.
Other services than the Audit of the financial statements refer to services rendered outside of the European Union.
page 142
Adyen
Annual Report 2020
41
20. New and amended standards adopted
20.1. New standards adopted by Adyen
Standards, amendments to published standards and interpretations (collectively, “amendments”) that are
applicable and effective.
Adyen has adopted the following amendments issued and made effective from January 1, 2020:
- Amendments to IFRS 3, ‘Business combinations’ – Definition of a business;
- Amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8, ‘Accounting policies, changes in
accounting estimates and errors’ – Definition of material;
- Amendments to IFRS 9, IAS 39 and IFRS 17 – Interest rate benchmark reform.
- Amendments to reference to the Conceptual Framework in IFRS
Adyen has taken into consideration the changes of each one of the above-mentioned amendments and concluded
that the amendments do not have a material impact on the financial statements.
20.2. Amendments to existing standards that are applicable to the Company but not yet
effective
Certain amendments have been published that are not mandatory for December 31, 2020 reporting period and have
not been early adopted by the Company. The Company has assessed the amendments to become effective in 2021,
and onwards, to have no material impact on its financial statements.
21. Audit fees
21.1. Fees to the auditor
The audit fees were expensed in the statement of comprehensive income during the reporting period.
The fees listed below relate to the procedures applied to Adyen and its consolidated group entities by accounting
firms and external independent auditors as referred to in section 1(1) of the Audit Firms Supervision Act (“Wet
toezicht accountantsorganisaties-Wta”) as well as by the Dutch and foreign-based accounting firms, including their
tax services and advisory groups. These fees relate to the audit of the 2020 financial statements, regardless of
whether the work was performed during the financial year.
21.2. Summary of services rendered by the auditor, in addition to the audit of the financial
statements
Our auditor, PwC Accountants, has rendered the following services to Adyen and its controlled entities during 2020
and 2019:
2020 2019
PwC
Accountants
Other PwC
firms*
Total
PwC
Accountants
Other PwC
firms*
Total
Audit of financial statements 706 293 999 825 221 1,046
Other audit services 93 - 93 139 - 139
Tax services - - - - 7 7
Total 799 293 1,092 964 228 1,192
*Other PwC firms refer to PwC member firms outside of the Netherlands.
Other services than the Audit of the financial statements refer to services rendered outside of the European Union.
Adyen
Annual Report 2020
page 143
42
2020 2019
Other audit services required by law or regulatory requirement
Statutory audits of controlled entities 999
1,009
Audit of the regulatory returns to be submitted to the Dutch Central Bank -
37
Other audit services
Assurance engagement ISAE 3402 report 93
139
Tax services
Tax compliance services -
7
Total for the year 1,092 1,192
22. Compensation of key management
22.1. Remuneration Management Board
Adyen identifies the Management Board as the only key management personnel. The total remuneration received by
the Management Board in 2020 amounted to EUR 3,547 (2019: EUR 3,065).
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Salaries and short-term employee benefits
3,253 2,774
Share-based payments
191 209
Post-employment benefits 103 82
Total 3,547 3,065
Variable remuneration
As of 2018 and in line with (i) the Act on Remuneration Policies in Financial Enterprises (Wet beloningsbeleid
financiële ondernemingen), and (ii) the Guidelines on Remuneration Policies and Practices as formally adopted on
December 10, 2010 by the Committee of European Banking Supervisors, Adyen does not award variable
remuneration to the Managing Directors. As the application of such rules and principles may include an assessment
and interpretation of the remuneration restrictions, it cannot be excluded that a competent supervisory authority
takes a different view on the correct application thereof in specific cases (although there is currently no indication
that a competent supervisory authority will take such position).
Pension
4
As from January 2017, all Dutch members of the Management Board participate in the Collective Defined
Contribution (CDC) pension plan, with respect to their salary up to EUR 110,111 gross per year for 2020 (2019: EUR
107,593). On behalf of each Managing Director, Adyen pays a contribution of 4% of the pensionable salary - being
12 times the monthly fixed salary plus holiday pay up to the fiscally allowed maximum minus a deductible - for the
accrual of old age pension benefits as well as the administration costs. If and as far as fiscally allowed, each
Managing Director has the possibility to make additional contributions in order to accrue additional pension capital.
Kamran Zaki participates in a 401k retirement plan in the United States, for which Adyen provides an employer
match of up to 2%.
Insurance
All Managing Directors are insured under an insurance policy taken out by Adyen against damages resulting from
their conduct when acting in their capacities as directors.
All Dutch Managing Directors are insured for the risk of death and disability, for which Adyen pays the insurance
premiums.
4
Amounts in this paragraph are not rounded to the nearest EUR thousand.
43
Service and Severance Agreements
All Managing Directors have entered into a service agreement (Overeenkomst van Opdracht) with Adyen N.V.
effective as of the date of the listing of Adyen, while Kamran Zaki is currently assigned to Adyen Inc. The terms and
conditions of these service agreements have been aligned with the Dutch Corporate Governance Code. The service
agreements will be entered into for a term of 4 years.
The service agreements provide for a severance of one annual base salary if the Managing Director is not re-
appointed or otherwise terminated by Adyen (for any reason other than urgent cause within the meaning of article
7:678 of the Dutch Civil Code (dringende reden)), in accordance with the Dutch Corporate Governance Code.
Loans
No loans, advance payments and guarantees have been granted to or on behalf of the Managing Directors.
22.2. Remuneration Supervisory Board
The total remuneration received by the Supervisory Board in 2020 amounted to EUR 293 (2019: EUR 240). The table
below provides an overview of the remuneration of Supervisory Directors for the financial year 2020. In addition to the
remuneration, expenses incurred by the Supervisory Directors in the performance of their duties are reimbursed in
full:
22002200
22001199
Salaries and short-term employee benefits
293
240
Total
293
240
Insurance
The Supervisory Directors of Adyen are insured under an insurance policy taken out by Adyen against damages
resulting from their conduct when acting in their capacities as directors.
Loans
No loans, advance payments and guarantees have been granted to or on behalf of the Supervisory Directors.
page 144
Adyen
Annual Report 2020
43
Service and Severance Agreements
All Managing Directors have entered into a service agreement (Overeenkomst van Opdracht) with Adyen N.V.
effective as of the date of the listing of Adyen, while Kamran Zaki is currently assigned to Adyen Inc. The terms and
conditions of these service agreements have been aligned with the Dutch Corporate Governance Code. The service
agreements will be entered into for a term of 4 years.
The service agreements provide for a severance of one annual base salary if the Managing Director is not re-
appointed or otherwise terminated by Adyen (for any reason other than urgent cause within the meaning of article
7:678 of the Dutch Civil Code (dringende reden)), in accordance with the Dutch Corporate Governance Code.
Loans
No loans, advance payments and guarantees have been granted to or on behalf of the Managing Directors.
22.2. Remuneration Supervisory Board
The total remuneration received by the Supervisory Board in 2020 amounted to EUR 293 (2019: EUR 240). The table
below provides an overview of the remuneration of Supervisory Directors for the financial year 2020. In addition to the
remuneration, expenses incurred by the Supervisory Directors in the performance of their duties are reimbursed in
full:
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
Salaries and short-term employee benefits
293 240
Total 293 240
Insurance
The Supervisory Directors of Adyen are insured under an insurance policy taken out by Adyen against damages
resulting from their conduct when acting in their capacities as directors.
Loans
No loans, advance payments and guarantees have been granted to or on behalf of the Supervisory Directors.
Adyen
Annual Report 2020
page 145
44
23. Share information
Share information 2020
2019
Restated
Net income attributable to owners of Adyen N.V. (in EUR '000) 261,019 234,284
Weighted average number of ordinary shares for the period 30,246,923
29,732,937
Dilutive effect of share options - share-based payments (note 4.3) 420,676
794,693
Weighted average number of ordinary shares for diluted net profit for the period 30,667,599
30,527,630
1) Net profit per share – basic 8.63 7.88
2) Net profit per share - diluted 8.51 7.67
24. Tax reporting
24.1. Total tax contribution
Adyen is liable to pay corporate income tax in the countries in which it has a taxable presence. Since Adyen’s first
global expansion in 2012, Adyen has been characterized as a centralized organization for corporate income tax
purposes. Key business activities are performed in the Netherlands and sales support activities are performed by local
Adyen offices. In response to this centralized organization, transfer pricing agreements have been established based
on the applicable OECD principles.
Adyen is responsible for the collection and payment of taxes connected with its services and products sold, on
behalf of employees, or service providers. Corporate income tax, VAT and payroll taxes are main sources of
government income. Considering the importance of these taxes for local governments, Adyen bears a responsibility
to maintain a compliant global tax framework. Adyen’s tax team closely monitors local regulations and Adyen’s
product offerings to remain compliant.
24.2. Country-by-country reporting
The following table provides a country-by-country overview to support that taxes are paid in the country wherein
Adyen has an economic nexus. To serve this purpose, the table covers per country with an active Adyen establishment
the main activity, number of FTEs per year-end, operating expenses, income before tax, direct tax expense, VAT
contribution, payroll taxes and the total tax contribution. The table is prepared using consolidated accounts only, local
statutory financials and actual tax contributions may deviate from the amount disclosed. The full list of participating
interests as referred to in Article 414, Book 2 of the Dutch Civil Code can be found in note 32 ‘Investments in
consolidated subsidiaries on equity method’ of the company financial statements.
Accounting policy – Earnings per share
Adyen presents basic and diluted earnings per share (EPS) data for its ordinary shares. The calculation
of EPS is as follows:
1) Basic EPS: dividing the net income attributable to owners of Adyen N.V. by the weighted
average number of ordinary shares outstanding during the period.
2) Diluted EPS: determined by adjusting the basic EPS for the effects of all dilutive potential
ordinary shares which passed on contractual conditions (e.g. vesting), only related to
share options. As per December 31, 2020 and 2019, none of the four warrant tranches
related to the derivative liabilities vested. Reference is made to note 8 ‘Capital
management’.
45
Country and
Subsidiary
Main activity
Ending
FTE
Total
Operating
Expense
Income
Before Tax
Direct Tax
Expense
VAT
Payroll
Taxes
Total Tax
Contribution
Netherlands-
Adyen N.V. and
Adyen
International B.V.
Head office -
Payment
service
provider
1,011
161,784
296,439
60,931
81,020
106,332
248,283
Adyen UK Ltd
Sales office
91
14,147
5,283
(372)*
(322)
6,023
5,329
Adyen France
Sales office
43
7,923
980
422
2,038
3,780
6,240
Adyen N.V. -
German Branch
Sales office
42
5,848
1,981
508
-
3,951
4,459
Adyen Nordic
Filial
Sales office
25
5,527
2,233
509
-
2,823
3,332
Adyen N.V.,
Spain Rep Office
Sales office
22
2,999
1,341
511
1,600
1,006
3,117
Adyen N.V.,
Belgium Rep
Office
Sales office
6
781
417
74
-
381
455
Adyen N.V., Italy
Rep Office
Sales office
11
1,743
464
323
-
445
768
Adyen N.V.,
Polish Rep Office
Sales office
1
-
-
-
-
-
-
Adyen Middle
East Limited
Sales office
-
21
(21)
-
-
-
-
United States-
Adyen Inc.,
Adyen Services
Inc. And Adyen
Nevada Inc.
Sales and
support office
236
67,106
7,923
(2,415)*
-
73,638
71,223
Adyen Brasil
Ltda.
Sales office
89
14,042
1,515
357
4,497
3,463
8,317
Adyen Mexico
SAdeCV
Sales office
8
631
422
227
1,343
181
1,751
Adyen Canada
Ltd
Sales office
7
1,241
295
75
3,723
128
3,926
Adyen Singapore
PTE Ltd
Sales and
support office
96
13,759
1,565
417
4,340
846
5,603
Adyen Australia
Pty Limited
Sales and
support office
29
6,718
1,034
331
4,402
1,264
5,997
Adyen (China)
Software
Technology Co.
Ltd.
Sales office
17
3,244
376
95
198
629
922
Adyen Japan K.K
Sales and
support office
7
1,620
187
60
-
286
346
Adyen Hong
Kong Ltd
Sales office
4
441
525
32
-
-
32
Adyen India
Technology
Services Private
Limited
Sales office
2
510
61
18
36
93
147
Adyen New
Zealand Ltd.
Sales office
-
164
5
16
1,619
39
1,674
Adyen Malaysia
Sdn. Bhd
Sales office
-
30
163
42
75
-
117
Adyen Korea
Chusik Hoesa
Inactive
-
8
(8)
-
-
-
-
Total
1,747
310,287
323,180
62,161
104,569
205,308
372,038
* Adyen Inc. and Adyen UK Ltd are not subject to Income Tax expense in 2020 as they benefit from the share-based
compensation windfall benefit (refer to note 7.2).
page 146
Adyen
Annual Report 2020
45
Country and
Subsidiary
Main activity
Ending
FTE
Total
Operating
Expense
Income
Before Tax
Direct Tax
Expense
VAT
Payroll
Taxes
Total Tax
Contribution
Netherlands-
Adyen N.V. and
Adyen
International B.V.
Head office -
Payment
service
provider
1,011 161,784
296,439 60,931 81,020 106,332 248,283
Adyen UK Ltd
Sales office
91
14,147
5,283
(372)*
(322)
6,023
5,329
Adyen France
Sales office
43
7,923
980
422
2,038
3,780
6,240
Adyen N.V. -
German Branch
Sales office 42 5,848 1,981 508 -
3,951 4,459
Adyen Nordic
Filial
Sales office 25 5,527 2,233 509 -
2,823 3,332
Adyen N.V.,
Spain Rep Office
Sales office 22 2,999 1,341 511 1,600 1,006 3,117
Adyen N.V.,
Belgium Rep
Office
Sales office 6 781 417 74 -
381 455
Adyen N.V., Italy
Rep Office
Sales office 11 1,743 464 323 -
445 768
Adyen N.V.,
Polish Rep Office
Sales office 1 -
-
-
-
-
-
Adyen Middle
East Limited
Sales office -
21 (21) -
-
-
-
United States-
Adyen Inc.,
Adyen Services
Inc. And Adyen
Nevada Inc.
Sales and
support office
236 67,106 7,923 (2,415)* -
73,638 71,223
Adyen Brasil
Ltda.
Sales office 89 14,042 1,515 357 4,497 3,463 8,317
Adyen Mexico
SAdeCV
Sales office 8 631 422 227 1,343 181 1,751
Adyen Canada
Ltd
Sales office 7 1,241 295 75 3,723 128 3,926
Adyen Singapore
PTE Ltd
Sales and
support office
96 13,759 1,565 417 4,340 846 5,603
Adyen Australia
Pty Limited
Sales and
support office
29 6,718 1,034 331 4,402 1,264 5,997
Adyen (China)
Software
Technology Co.
Ltd.
Sales office 17 3,244 376 95 198 629 922
Adyen Japan K.K
Sales and
support office
7 1,620 187 60 -
286 346
Adyen Hong
Kong Ltd
Sales office 4 441 525 32 -
-
32
Adyen India
Technology
Services Private
Limited
Sales office 2 510 61 18 36 93 147
Adyen New
Zealand Ltd.
Sales office -
164 5 16 1,619 39 1,674
Adyen Malaysia
Sdn. Bhd
Sales office -
30 163 42 75 -
117
Adyen Korea
Chusik Hoesa
Inactive -
8 (8) -
-
-
-
Total
1,747
310,287
323,180
62,161
104,569
205,308
372,038
* Adyen Inc. and Adyen UK Ltd are not subject to Income Tax expense in 2020 as they benefit from the share-based
compensation windfall benefit (refer to note 7.2).
Adyen
Annual Report 2020
page 147
46
24.3. Innovation box
Adyen set out to build a payment platform capable of meeting the rapidly evolving needs of fast-growing global
businesses. Continuous innovation and technology are critical to meet the changing payment industry dynamics
and the needs of our merchants. Governments worldwide facilitate innovative research and development (R&D)
activities through grants and tax incentives. One of the facilities offered by the Dutch government is the Dutch
innovation box. Following the application of the innovation box, profits attributable to qualifying innovations are
taxed at a Dutch corporate income tax rate of 7%, opposed to the corporate income tax rate of 25%. As Adyen strives
to continuously innovate its payment platform, Adyen applies the innovation box in order to reinvest those benefits in
the further development of the platform and growth of the company.
Adyen concluded an agreement with the Dutch tax authorities to obtain upfront certainty on the percentage of
taxable profit that qualifies for the innovation box. Based on this agreement the innovation box benefit is directly
linked with the number of hours spent by developers on R&D projects.
47
Company Financial Statements
Adyen
Annual Report 2020
page 149
48
Company Statement of Comprehensive Income
For the years ended December 31, 2020 and 2019 Restated*
(all amounts in EUR thousands unless otherwise stated)
N
N
o
o
t
t
e
e
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
e
s
s
t
t
a
a
t
t
e
e
d
d
*
*
Revenue 26 3,171,197 2,293,656
Costs incurred from financial institutions 26 (2,610,741) (1,858,623)
Costs of goods sold 26 (20,071) (15,009)
Net revenue 540,385 420,024
Wages and salaries 27 (85,505) (54,628)
Social securities and pension costs 27 (14,542) (12,541)
Amortization and depreciation
13,30,31 (20,545) (14,727)
Other operating expenses 28 (66,356) (58,968)
Other income
286 196
Income before net finance income/(expense) and income taxes 353,723 279,356
Finance income
1,248 326
Finance expense
(8,987) (4,316)
Other financial results 29 (42,203) 6,853
Net finance income/(expense)
(49,942) 2,863
Share of the profit of investments in subsidiaries
32 20,516 12,284
Income before income taxes 324,297 294,503
Income taxes
(63,278) (60,219)
Net income for the year 261,019 234,284
Net income attributable to owners of Adyen N.V.
261,019 234,284
Other comprehensive income
Items that may be reclassified to profit or loss
Currency translation adjustments subsidiaries
(11,764) (81)
Other comprehensive income for the year
(11,764) (81)
Total comprehensive income for the year
(attributable to owners of Adyen N.V.)
249,255 234,203
The accompanying notes are an integral part of these company financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 25).
49
Company Balance Sheet
As at December 31, 2020, 2019 Restated*, and January 1, 2019 Restated*
(all amounts in EUR thousands unless otherwise stated; and before profit appropriation)
Note
DDeecceemmbbeerr 3311,,
22002200
DDeecceemmbbeerr 3311,,
22001199 RReessttaatteedd**
JJaannuuaarryy 11,, 22001199
RReessttaatteedd**
Intangible assets
13
9,970
7,640
5,059
Plant and equipment
30
27,686
23,482
18,139
Right-of-use assets
31
104,251
35,619
-
Other financial assets at FVPL
11
20,883
44,088
30,378
Contract assets
2.2
124,113
140,000
140,791
Deferred tax assets
17,100
7,769
4,879
Investments in consolidated subsidiaries on equity method
32
139,150
98,147
23,903
Total non-current assets
443,153
356,745
223,149
Inventories
16,055
5,614
6,656
Receivables from merchants and financial institutions
33
790,271
299,618
277,066
Trade and other receivables
33
200,535
103,269
58,362
Current income tax receivables
-
-
4,418
Other financial assets at amortized cost
11
12,238
13,031
9,842
Cash and cash equivalents
2,458,038
1,603,580
1,146,916
Total current assets
3,477,137
2,025,112
1,503,260
Total assets
3,920,290
2,381,857
1,726,409
Share capital
8
304
301
296
Share premium
8
194,608
179,296
160,209
Treasury shares
-
-
(4,804)
Legal reserves
14,853
43,616
29,366
Other reserves
151,435
120,135
62,890
Retained earnings
595,915
340,702
203,301
Net income for the year
261,019
234,284
150,914
Total equity attributable to owners of Adyen N.V.
1,218,134
918,334
602,172
Derivative liabilities
11
68,400
35,800
23,800
Deferred tax liabilities
23,640
25,886
23,615
Lease liability
31
102,647
31,120
-
Total non-current liabilities
194,687
92,806
47,415
Payables to merchants and financial institutions
36
2,406,651
1,266,808
1,034,976
Trade and other payables
36
77,988
78,474
27,516
Lease liability
31
7,349
5,243
-
Current income tax payables
15,481
20,192
13,966
Deferred revenue
-
-
364
Total current liabilities
2,507,469
1,370,717
1,076,822
Total liabilities and equity
3,920,290
2,381,857
1,726,409
The accompanying notes are an integral part of these company financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 25).
page 150
Adyen
Annual Report 2020
49
Company Balance Sheet
As at December 31, 2020, 2019 Restated*, and January 1, 2019 Restated*
(all amounts in EUR thousands unless otherwise stated; and before profit appropriation)
Note
DDeecceemmbbeerr 3311,,
22002200
DDeecceemmbbeerr 3311,,
22001199 RReessttaatteedd**
JJaannuuaarryy 11,, 22001199
RReessttaatteedd**
Intangible assets
13 9,970 7,640 5,059
Plant and equipment
30 27,686 23,482 18,139
Right-of-use assets
31 104,251 35,619 -
Other financial assets at FVPL
11 20,883 44,088 30,378
Contract assets
2.2 124,113 140,000 140,791
Deferred tax assets
17,100 7,769 4,879
Investments in consolidated subsidiaries on equity method 32 139,150 98,147 23,903
Total non-current assets 443,153 356,745 223,149
Inventories
16,055 5,614 6,656
Receivables from merchants and financial institutions
33 790,271 299,618 277,066
Trade and other receivables
33 200,535 103,269 58,362
Current income tax receivables
-
-
4,418
Other financial assets at amortized cost
11 12,238 13,031 9,842
Cash and cash equivalents
2,458,038 1,603,580 1,146,916
Total current assets 3,477,137 2,025,112 1,503,260
Total assets
3,920,290 2,381,857 1,726,409
Share capital
8 304 301 296
Share premium
8 194,608 179,296 160,209
Treasury shares
-
-
(4,804)
Legal reserves 14,853 43,616 29,366
Other reserves
151,435 120,135 62,890
Retained earnings 595,915 340,702 203,301
Net income for the year
261,019 234,284 150,914
Total equity attributable to owners of Adyen N.V. 1,218,134 918,334 602,172
Derivative liabilities
11 68,400 35,800 23,800
Deferred tax liabilities
23,640 25,886 23,615
Lease liability
31 102,647 31,120 -
Total non-current liabilities
194,687 92,806 47,415
Payables to merchants and financial institutions
36 2,406,651 1,266,808 1,034,976
Trade and other payables
36 77,988 78,474 27,516
Lease liability
31 7,349 5,243 -
Current income tax payables
15,481 20,192 13,966
Deferred revenue
-
-
364
Total current liabilities 2,507,469 1,370,717 1,076,822
Total liabilities and equity 3,920,290 2,381,857 1,726,409
The accompanying notes are an integral part of these company financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 25).
Adyen
Annual Report 2020
page 151
50
Company Statement of Changes in Equity
For the years ended December 31, 2020 and 2019 Restated*
(all amounts are in EUR thousands unless otherwise stated)
N
N
o
o
t
t
e
e
S
S
h
h
a
a
r
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c
c
a
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a
a
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L
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a
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t
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s
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r
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v
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s
s
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t
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a
a
i
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d
d
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a
a
r
r
n
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i
i
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s
s
T
T
o
o
t
t
a
a
l
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e
q
q
u
u
i
i
t
t
y
y
S
S
h
h
a
a
r
r
e
e
-
-
b
b
a
a
s
s
e
e
d
d
p
p
a
a
y
y
m
m
e
e
n
n
t
t
r
r
e
e
s
s
e
e
r
r
v
v
e
e
W
W
a
a
r
r
r
r
a
a
n
n
t
t
r
r
e
e
s
s
e
e
r
r
v
v
e
e
Balance - January 1, 2019 (as previously
reported)
296 160,209 (4,804)
29,366
8,671
54,219
334,447 582,404
Adjustment for correction of error
19,768 19,768
Balance - January 1, 2019 (restated) 296 160,209 (4,804)
29,366
8,671
54,219
354,215 602,172
Net income for the year (restated)
234,284 234,284
Currency translation adjustments
(81)
(81)
Total comprehensive income for the year
(restated)
-
-
-
(81) -
-
234,284 234,203
Adjustments:
Other financial assets at FVPL movement to legal
reserve
11,737
(11,737) -
Intangible assets
2,581
(2,581) -
Other adjustments
13
(13) -
-
-
-
14,331
-
-
(14,331) -
Transactions with owners in their capacity as owners:
Statutory tax rate change
(818) 818 -
Deferred tax on share-based compensation 7
255
60,389
60,644
Repurchase of depositary receipts
(18,323)
(18,323)
Options exercised
4,346
(4,346)
-
Proceeds on issuing shares 8 5 15,332
15,337
Movement resulting from treasury shares
(846) 23,127
22,281
Share-based payments 4.3
2,020
2,020
5 19,087 4,804 -
58,063 (818) 818 81,959
Balance - December 31, 2019
301 179,296 -
43,616
66,734
53,401
574,986 918,334
page 152
Adyen
Annual Report 2020
51
N
N
o
o
t
t
e
e
S
S
h
h
a
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s
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R
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t
t
a
a
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i
n
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d
d
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a
a
r
r
n
n
i
i
n
n
g
g
s
s
T
T
o
o
t
t
a
a
l
l
e
e
q
q
u
u
i
i
t
t
y
y
S
S
h
h
a
a
r
r
e
e
-
-
b
b
a
a
s
s
e
e
d
d
p
p
a
a
y
y
m
m
e
e
n
n
t
t
r
r
e
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s
s
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e
r
r
v
v
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W
W
a
a
r
r
r
r
a
a
n
n
t
t
r
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s
s
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r
r
v
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e
e
Balance - January 1, 2020
301 179,296 43,616 66,734 53,401 574,986
918,334
Net income for the year
261,019
261,019
Currency translation adjustments
(11,764)
(11,764)
Total comprehensive income for the year -
-
(11,764) -
-
261,019
249,255
Adjustments:
Other financial assets at FVPL movement to legal reserve (17,404)
17,404
Intangible assets
2,330
(2,330) -
Other adjustments
(1,165) 1,165
5,095
5,095
-
-
(16,239) 1,165 -
20,169
5,095
Transactions with owners in their capacity as owners:
Statutory tax rate change
(760)
760 -
Deferred tax on share-based compensation 7
(321)
32,159
31,838
Options exercised
2,795
(2,795)
-
Proceeds on issuing shares 8 3 12,838
12,841
Share-based payments 4.3
771
771
3 15,312 (760) 30,135 -
760
45,450
Balance - December 31, 2020 304 194,608 14,853 98,034 53,401 856,934
1,218,134
The accompanying notes are an integral part of these company financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 25).
Adyen
Annual Report 2020
page 153
52
Company Statement of Cash Flows
For the years ended December 31, 2020 and 2019 Restated*
(all amounts in EUR thousands unless otherwise stated)
N
N
o
o
t
t
e
e
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
R
R
e
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s
s
t
t
a
a
t
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d
d
*
*
Income before income taxes
324,297 294,503
Adjustments for:
- Finance income
(1,248) (326)
- Finance expenses
8,987 4,316
- Other financial results 29 42,203 (6,853)
- Depreciation of plant and equipment 30 8,824 6,974
- Amortization of intangible fixed assets 13 2,465 2,192
- Depreciation of right-of-use assets 31 9,258 5,561
- Share of the profit of investments in subsidiaries 32 (20,516) (12,284)
- Share-based payments
3,026 1,735
Changes in working capital:
- Inventories
(10,441) 1,042
- Trade and other receivables 33 (83,473) (44,907)
- Receivables from merchants and financial institutions 33 (490,653) (22,552)
- Payables to merchants and financial institutions 36 1,139,843 231,832
- Trade and other payables
(3,274) 50,958
- Deferred revenue
-
(364)
- Redemption financial assets at amortized cost
-
4,418
- Amortization of contract assets
2.2 10,641 2,133
Cash generated from operations
939,939 518,378
Interest received
1,248 326
Interest paid
(8,987) (4,316)
Income taxes paid
(70,648) (52,415)
Net cash flows from operating activities 861,552 461,973
Purchases of financial assets at amortized cost 11 (13,355) (10,073)
Redemption of financial assets at amortized cost 11 13,088 7,275
Purchases of plant and equipment 30 (13,563) (12,461)
Capitalization of intangible assets 13 (4,795) (4,773)
Net cash used in investing activities
(18,625) (20,032)
Proceeds from issues of shares 8 12,832 15,332
Sale of depositary receipts (treasury shares) -
22,281
Repurchase of depositary receipts (treasury shares) -
(18,323)
Lease payments
31 (4,257) (5,481)
Net cash flows from financing activities 8,575 13,809
Net increase in cash, cash equivalents and bank overdrafts
851,502 455,750
Cash, cash equivalents and bank overdrafts at beginning of the year
1,603,580 1,146,916
Exchange gains on cash, cash equivalents and bank overdrafts
2,956 914
Cash, cash equivalents and bank overdrafts at end of the year 2,458,038 1,603,580
The accompanying notes are an integral part of these company financial statements.
*The comparative information is restated as a result of the correction of an accounting error (refer to note 25).
53
Notes to the Company financial statements
Basis of preparation
The company financial statements have been prepared in accordance with International Financial Reporting
Standards and IFRIC interpretations as endorsed by the European Union (EU-IFRS) and in accordance with sub
articles 8 and 9 of article 362, Book 2 of the Dutch Civil Code.
The principles in the company financial statements are the same as those stated for the consolidated financial
statements unless stated otherwise.
25. Correction of prior year error
During 2020, Adyen determined that since 2018, fees for refused or cancelled transactions had been erroneously
recognized twice in the accounting books. These relate to certain costs charged by card schemes for transactions
which are not fully completed (i.e. either refused, or initially authorized and then cancelled or expired). This fee is
passed on by Adyen to the merchant, which, in the normal course of business, would translate into the recognition of
a cost and revenue amount for Adyen. Since 2018, these fees for refused or cancelled transactions were erroneously
double booked. As this type of fee is not related to settlement, there was no cash component of the transaction and,
as such, payouts to merchants were not affected.
As a result, the line items “costs incurred from financial institutions” and “payables to merchants and financial
institutions” have been overstated and “current income tax expense” and “current income tax payables” have been
understated which overall led to understatement of net revenue and equity.
The error has been corrected in this year’s financial statements by restating each of the affected financial statement
line items for prior periods on the consolidated and company financial statements. The following tables summarize
the impact on Adyen’s company balance sheet and statement of comprehensive income.
25.1. Adjustment to the company balance sheet (extract)
3311//1122//1199
Adjustment
3311//1122//1199
0011//0011//1199
Adjustment
0011//0011//1199
(Previously
reported)
(Restated)
(Previously
reported)
(Restated)
Payables to merchants and financial
institutions
1,328,959
(62,151)
1,266,808
1,059,508
(24,532)
1,034,976
Current income tax payables
8,054
12,138
20,192
9,202
4,764
13,966
Total current liabilities
1,420,730
(50,013)
1,370,717
1,096,590
(19,768)
1,076,822
Net Assets
868,321
50,013
918,334
582,404
19,768
602,172
Retained earnings
320,934
19,768
340,702
203,301
-
203,301
Net income for the year
204,039
30,245
234,284
131,146
19,768
150,914
Total equity attributable to the
owners of Adyen N.V.
868,321
50,013
918,334
582,404
19,768
602,172
page 154
Adyen
Annual Report 2020
53
Notes to the Company financial statements
Basis of preparation
The company financial statements have been prepared in accordance with International Financial Reporting
Standards and IFRIC interpretations as endorsed by the European Union (EU-IFRS) and in accordance with sub
articles 8 and 9 of article 362, Book 2 of the Dutch Civil Code.
The principles in the company financial statements are the same as those stated for the consolidated financial
statements unless stated otherwise.
25. Correction of prior year error
During 2020, Adyen determined that since 2018, fees for refused or cancelled transactions had been erroneously
recognized twice in the accounting books. These relate to certain costs charged by card schemes for transactions
which are not fully completed (i.e. either refused, or initially authorized and then cancelled or expired). This fee is
passed on by Adyen to the merchant, which, in the normal course of business, would translate into the recognition of
a cost and revenue amount for Adyen. Since 2018, these fees for refused or cancelled transactions were erroneously
double booked. As this type of fee is not related to settlement, there was no cash component of the transaction and,
as such, payouts to merchants were not affected.
As a result, the line items “costs incurred from financial institutions” and “payables to merchants and financial
institutions” have been overstated and “current income tax expense” and “current income tax payables” have been
understated which overall led to understatement of net revenue and equity.
The error has been corrected in this year’s financial statements by restating each of the affected financial statement
line items for prior periods on the consolidated and company financial statements. The following tables summarize
the impact on Adyen’s company balance sheet and statement of comprehensive income.
25.1. Adjustment to the company balance sheet (extract)
3311//1122//1199
Adjustment
3311//1122//1199
0011//0011//1199
Adjustment
0011//0011//1199
(Previously
reported)
(Restated)
(Previously
reported)
(Restated)
Payables to merchants and financial
institutions
1,328,959 (62,151) 1,266,808 1,059,508 (24,532) 1,034,976
Current income tax payables
8,054
12,138
20,192
9,202
4,764
13,966
Total current liabilities
1,420,730 (50,013) 1,370,717 1,096,590 (19,768) 1,076,822
Net Assets 868,321 50,013 918,334 582,404 19,768 602,172
Retained earnings 320,934 19,768 340,702 203,301 -
203,301
Net income for the year 204,039 30,245 234,284 131,146 19,768 150,914
Total equity attributable to the
owners of Adyen N.V.
868,321 50,013 918,334 582,404 19,768 602,172
Adyen
Annual Report 2020
page 155
54
25.2. Adjustment to the company statement of comprehensive income (extract)
31/12/2019
Adjustment
31/12/19
(Previously
reported)
(Restated)
Costs incurred from financial institutions (1,896,242) 37,619 (1,858,623)
Net revenues 382,405 37,619 420,024
Income before income taxes 256,884 37,619 294,503
Income taxes (52,845) (7,374) (60,219)
N
N
e
e
t
t
i
i
n
n
c
c
o
o
m
m
e
e
f
f
o
o
r
r
t
t
h
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y
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a
a
r
r
2
2
0
0
4
4
,
,
0
0
3
3
9
9
3
3
0
0
,
,
2
2
4
4
5
5
2
2
3
3
4
4
,
,
2
2
8
8
4
4
26. Company - Revenue
Types of goods or service 2020
2019
Restated
Settlement fees 2,875,955 2,050,267
Processing fees 178,851 143,190
Sales of goods 17,929 13,753
Other services 98,462 86,446
TToottaall rreevveennuuee ffrroomm ccoonnttrraaccttss wwiitthh ccuussttoommeerrss
33,,117711,,119977
22,,229933,,665566
Costs incurred from financial institutions (2,610,741) (1,858,623)
Costs of goods sold (20,071) (15,009)
N
N
e
e
t
t
r
r
e
e
v
v
e
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n
n
u
u
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5
5
4
4
0
0
,
,
3
3
8
8
5
5
4
4
2
2
0
0
,
,
0
0
2
2
4
4
27. Company - Employee benefits
Employee benefits 2020 2019
Salaries and wages 81,478 52,892
Share-based compensation 4,027 1,736
T
T
o
o
t
t
a
a
l
l
w
w
a
a
g
g
e
e
s
s
a
a
n
n
d
d
s
s
a
a
l
l
a
a
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r
i
i
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s
s
8
8
5
5
,
,
5
5
0
0
5
5
5
5
4
4
,
,
6
6
2
2
8
8
Social securities 11,852 10,915
Pension costs - defined contribution plans 2,690 1,626
TToottaall ssoocciiaall sseeccuurriittiieess aanndd ppeennssiioonn ccoossttss
1144,,554422
1122,,554411
28. Company - Other operating expenses
Other operating expenses 2020 2019
Sales and marketing costs 17,583 12,963
Advisory costs 12,779 10,259
IT costs 12,226 9,990
Contractor costs
5,822
1,904
Travel and other staff expenses 4,803 13,311
Office costs 1,923 1,960
Housing costs 2,400 2,423
Miscellaneous operating expenses
8,820
6,158
Total other operating expenses 66,356 58,968
55
29. Company - Other financial results
Other financial results
2020
2019
Exchange gains/(losses) (note 29.1)
(10,608)
5,143
Fair value re-measurement of financial instruments
Derivative liabilities (refer to note 6.2)
(32,600)
(12,000)
Financial instruments at fair value through profit or loss (note 6.3)
1,005
13,710
Total other financial results
(42,203)
6,853
29.1. Exchange gains/(losses)
The exchange losses recognized during the year relates to realized and unrealized translation losses on monetary
assets and liabilities. Exchange losses in 2020 mainly relate to contract assets (EUR 5,246 – refer to note 2.2
‘Contract assets’), other financial assets at FVPL (EUR 1,064 – refer to note 6.3 ‘Other financial assets at fair value
through profit or loss’), and other financial assets at amortized cost (EUR 1,006 – refer to note 11 ‘Financial
instruments’).
30. Company - Plant and equipment
Plant and equipment
2020
2019
Plant and equipment
Cost
43,241
31,152
Accumulated depreciation
(19,759)
(13,013)
Balance - January 1
2233,,448822
1188,,113399
Additions
13,563
12,461
Disposals
(535)
(144)
Depreciation for the year
(8,824)
(6,974)
Balance - December 31
2277,,668866
2233,,448822
Cost
54,549
43,241
Accumulated depreciation
(26,863)
(19,759)
Balance - December 31
2277,,668866
2233,,448822
page 156
Adyen
Annual Report 2020
55
29. Company - Other financial results
Other financial results 2020 2019
Exchange gains/(losses) (note 29.1) (10,608) 5,143
Fair value re-measurement of financial instruments
Derivative liabilities (refer to note 6.2)
(32,600)
(12,000)
Financial instruments at fair value through profit or loss (note 6.3) 1,005 13,710
Total other financial results
(42,203)
6,853
29.1. Exchange gains/(losses)
The exchange losses recognized during the year relates to realized and unrealized translation losses on monetary
assets and liabilities. Exchange losses in 2020 mainly relate to contract assets (EUR 5,246 – refer to note 2.2
‘Contract assets’), other financial assets at FVPL (EUR 1,064 – refer to note 6.3 ‘Other financial assets at fair value
through profit or loss’), and other financial assets at amortized cost (EUR 1,006 – refer to note 11 ‘Financial
instruments’).
30. Company - Plant and equipment
Plant and equipment 2020 2019
Plant and equipment
Cost 43,241 31,152
Accumulated depreciation (19,759) (13,013)
Balance - January 1
2
2
3
3
,
,
4
4
8
8
2
2
1
1
8
8
,
,
1
1
3
3
9
9
Additions
13,563
12,461
Disposals (535) (144)
Depreciation for the year (8,824) (6,974)
Balance - December 31
2
2
7
7
,
,
6
6
8
8
6
6
2
2
3
3
,
,
4
4
8
8
2
2
Cost 54,549 43,241
Accumulated depreciation (26,863) (19,759)
Balance - December 31
2
2
7
7
,
,
6
6
8
8
6
6
2
2
3
3
,
,
4
4
8
8
2
2
Adyen
Annual Report 2020
page 157
56
31. Company – Leases
Adyen’s leases relate to offices and data centers across locations where it operates.
Right-of-use assets
2020
2019
Offices and data centers
Cost
41,180 35,697
Accumulated depreciation
(5,561) -
Balance - January 1
3
3
5
5
,
,
6
6
1
1
9
9
3
3
5
5
,
,
6
6
9
9
7
7
Additions
77,890 5,483
Depreciation for the period
(9,258) (5,561)
B
B
a
a
l
l
a
a
n
n
c
c
e
e
-
-
D
D
e
e
c
c
e
e
m
m
b
b
e
e
r
r
3
3
1
1
1
1
0
0
4
4
,
,
2
2
5
5
1
1
3
3
5
5
,
,
6
6
1
1
9
9
Recognized right-of-use asset
119,070 41,180
Accumulated depreciation
(14,819) (5,561)
B
B
a
a
l
l
a
a
n
n
c
c
e
e
-
-
D
D
e
e
c
c
e
e
m
m
b
b
e
e
r
r
3
3
1
1
1
1
0
0
4
4
,
,
2
2
5
5
1
1
3
3
5
5
,
,
6
6
1
1
9
9
Lease liability
2020 2019
Balance - January 1 36,363 35,697
Additions
77,890 5,483
Lease instalments
(5,918) (5,481)
Interest expense
1,661 664
Balance - December 31 109,996 36,363
Current portion
7,349 5,243
Non-current portion
102,647 31,120
Accounting policy – Leases
Adyen assesses if a lease exists or a contract contains a lease at the contract inception date, concluding
whether an asset is identifiable, and Adyen has control to direct its use and all related economic
benefits. A right-of-use asset and a lease liability are recognized at the lease commencement date,
which can differ from contract inception date.
The lease liability is initially measured by bringing to present value all future lease payments, discounted
by an incremental borrowing rate, in case no interest rate is available for the contract.
At initial recognition, the right of use asset amounts to the initial lease liability. Right of use assets are
tested for impairment whenever events or changes in circumstances indicates that the carrying amount
may not be recoverable.
Short-term (less than 12 months) and small value lease contracts are expensed in statement of
comprehensive income on a straight-line basis over the lease term.
All leases entered are related offices and data centers, being these based on fixed payment and term.
57
As of December 31, the future minimum lease payments are as follows:
Minimum future lease payments
2020
2019
Within 1 year
5,394
5,856
Between 1 and 2 years
11,358
5,214
Between 2 and 3 years
11,014
4,478
Between 3 and 4 years
11,014
4,134
Between 4 and 5 years
10,849
4,134
Later than 5 years
73,927
15,385
Total
123,556
39,201
32. Company - Investments in consolidated subsidiaries on equity
method
Investments in consolidated subsidiaries on equity method
22002200
22001199
BBaallaannccee -- JJaannuuaarryy 11
9988,,114477
2233,,990033
Share of the profit of investments in subsidiaries
20,516
12,284
Currency translation adjustments subsidiaries
(11,764)
(81)
Share of changes in equity of investments in subsidiaries
32,251
62,041
BBaallaannccee -- DDeecceemmbbeerr 3311
113399,,115500
9988,,114477
During 2020, the main driver of the changes in investments balance related to an amount of EUR 32,159 (2019:
60,119) recognized directly in equity connected with future tax deductions and carry forward losses on subsidiaries
in the United States and the United Kingdom. Refer to note 7 ‘Income taxes’ in the consolidated financial statements
for more detail.
Accounting policy – Investments in consolidated subsidiaries
Adyen’s investment in consolidated subsidiaries is initially recorded at cost and subsequently
accounted for using the equity method. Dividends received from the investees are recognized as a
reduction in the carrying amount of the investment. Goodwill is currently not applicable.
Adyen’s share of the results of the investees is reported in the company statement of comprehensive
income and its share of movements in other comprehensive income is recognized in other
comprehensive income.
Investments are reviewed for impairment at least annually or whenever events or circumstances
indicate that the carrying amount may not be recoverable.
page 158
Adyen
Annual Report 2020
57
As of December 31, the future minimum lease payments are as follows:
Minimum future lease payments 2020 2019
Within 1 year 5,394 5,856
Between 1 and 2 years 11,358 5,214
Between 2 and 3 years 11,014 4,478
Between 3 and 4 years 11,014 4,134
Between 4 and 5 years
10,849
4,134
Later than 5 years 73,927 15,385
Total 123,556
39,201
32. Company - Investments in consolidated subsidiaries on equity
method
Investments in consolidated subsidiaries on equity method
2
2
0
0
2
2
0
0
2
2
0
0
1
1
9
9
B
B
a
a
l
l
a
a
n
n
c
c
e
e
-
-
J
J
a
a
n
n
u
u
a
a
r
r
y
y
1
1
9
9
8
8
,
,
1
1
4
4
7
7
2
2
3
3
,
,
9
9
0
0
3
3
Share of the profit of investments in subsidiaries
20,516 12,284
Currency translation adjustments subsidiaries
(11,764) (81)
Share of changes in equity of investments in subsidiaries
32,251
62,041
B
B
a
a
l
l
a
a
n
n
c
c
e
e
-
-
D
D
e
e
c
c
e
e
m
m
b
b
e
e
r
r
3
3
1
1
1
1
3
3
9
9
,
,
1
1
5
5
0
0
9
9
8
8
,
,
1
1
4
4
7
7
During 2020, the main driver of the changes in investments balance related to an amount of EUR 32,159 (2019:
60,119) recognized directly in equity connected with future tax deductions and carry forward losses on subsidiaries
in the United States and the United Kingdom. Refer to note 7 ‘Income taxes’ in the consolidated financial statements
for more detail.
Accounting policy – Investments in consolidated subsidiaries
Adyen’s investment in consolidated subsidiaries is initially recorded at cost and subsequently
accounted for using the equity method. Dividends received from the investees are recognized as a
reduction in the carrying amount of the investment. Goodwill is currently not applicable.
Adyen’s share of the results of the investees is reported in the company statement of comprehensive
income and its share of movements in other comprehensive income is recognized in other
comprehensive income.
Investments are reviewed for impairment at least annually or whenever events or circumstances
indicate that the carrying amount may not be recoverable.
Adyen
Annual Report 2020
page 159
58
Adyen N.V. – Subsidiaries
Name
Legal Seat
Ownership percentage
Adyen International B.V.
Amsterdam, The Netherlands
100%
Adyen Inc.
San Francisco, CA, USA
100%
Adyen N.V. – Branches
Name
Branch location
Adyen N.V., German branch
Berlin, Germany
Adyen France
Paris, France
Adyen Nordic Filial
Stockholm, Sweden
Adyen N.V. – Representative offices
Name Branch location
Adyen B.V., Belgian Rep Office Brussels, Belgium
Adyen Italy Rome, Italy
Adyen N.V., Spain Rep Office
Madrid, Spain
Adyen N.V., Polish Rep Office
Warsaw, Poland
Adyen International B.V. – Subsidiaries
Name Legal Seat
Direct and indirect
ownership percentage
Adyen Services Inc. Dover, DE, USA 100%
Adyen Nevada Inc. Las Vegas, NV, USA 100%
Adyen do Brazil Ltda São Paulo, Brazil 100%
Adyen Singapore PTE. LTD. Singapore, Singapore 100%
Adyen UK Limited London, United Kingdom 100%
Adyen Hong Kong Limited Hong Kong, Hong Kong SAR 100%
Adyen Australia PTY Limited Sydney, Australia 100%
Adyen Canada Ltd. Saint John, Canada 100%
Adyen Korea Chusik Hoesa Seoul, Republic of Korea 100%
Adyen Mexico, S.A. de C.V. Mexico City, Mexico 100%
Adyen Nordic AB Stockholm, Sweden 100%
Adyen (China) Software Technology Co. Ltd. Shanghai, China 100%
Adyen New Zealand Ltd. Auckland, New Zealand
100%
Adyen Malaysia Sdn. Bhd Kuala Lumpur, Malaysia
100%
Adyen Iberia SLU Madrid, Spain
100%
Adyen GmbH Berlin, Germany
100%
Adyen India Technology Services Private Limited New Delhi, India
100%
Adyen Japan K.K. Tokyo, Japan
100%
Adyen Middle East Limited Dubai, United Arab Emirates
100%
59
33. Company – Trade, other receivables, and receivables from
merchants and financial institutions
Receivables fall due in less than one year except for deposits transferred to financial institutions.
Trade, other receivables, and receivables from merchants and financial institutions
2020
2019
Trade and other receivables
205,073
106,376
Less: Allowance for expected credit losses
(4,538)
(3,107)
TTrraaddee rreecceeiivvaabblleess -- NNeett
220000,,553355
110033,,226699
Receivables from merchants and financial Institutions
790,271
299,618
TToottaall
999900,,880066
440022,,888877
In 2020, EUR 89,420 (2019: EUR 80,765) related to receivables from group companies. Intercompany receivables
and payables fall within the scope of IFRS 9 ‘Financial Instruments’. The outstanding amounts as per December 31,
2020 and 2019 relate to transactions linked to the usage of Adyen platform which took place throughout the year at
arm’s length conditions. Considering the maturity of the intercompany balances and the financial position of the
Adyen group, the credit risk is considered not significant. As a result, the impact of expected credit losses on
intercompany balances is not significant.
34. Shareholders’ equity
Refer to the company statement of changes in equity for the movements in shareholders’ equity.
The legal reserves include all exchange rate differences arising from the translation of the net investment in foreign
entities. The total of distributable reserves amounts to EUR 790,775 (2019 restated: EUR 554,820). The other
reserves are restricted for distribution, being the legal reserves, in amount of EUR 14,853 (2019: 43,616), legally
non-distributable in accordance with Dutch Law. Besides the beforementioned exchange rate differences these
relate to revaluation of balance sheet positions that require revaluation reserves.
35. Dividends paid
No dividend has been paid in the years presented.
36. Company – Trade, other payables, and payables to merchants
and financial institutions
Trade, other payables, and payables to merchants and financial institutions
2020
2019 Restated
Trade payables
6,798
8,875
Taxes and social security
31,401
42,243
Accrued employee benefits
18,072
13,950
Accrued liabilities and other debts
18,239
12,716
Cash-settled share-based payment plan
3,478
690
TTrraaddee aanndd ootthheerr ppaayyaabblleess
7777,,998888
7788,,447744
Payables to merchants and financial institutions
2,406,651
1,266,808
TToottaall
22,,448844,,663399
11,,334455,,228822
All current liabilities fall due in less than one year. The fair value of the current liabilities approximates the book value
due to its short-term character.
In 2020, EUR 14,010 (2019: EUR 14,324) related to payables to group companies.
page 160
Adyen
Annual Report 2020
59
33. Company – Trade, other receivables, and receivables from
merchants and financial institutions
Receivables fall due in less than one year except for deposits transferred to financial institutions.
Trade, other receivables, and receivables from merchants and financial institutions 2020 2019
Trade and other receivables 205,073 106,376
Less: Allowance for expected credit losses (4,538) (3,107)
T
T
r
r
a
a
d
d
e
e
r
r
e
e
c
c
e
e
i
i
v
v
a
a
b
b
l
l
e
e
s
s
-
-
N
N
e
e
t
t
2
2
0
0
0
0
,
,
5
5
3
3
5
5
1
1
0
0
3
3
,
,
2
2
6
6
9
9
Receivables from merchants and financial Institutions 790,271 299,618
T
T
o
o
t
t
a
a
l
l
9
9
9
9
0
0
,
,
8
8
0
0
6
6
4
4
0
0
2
2
,
,
8
8
8
8
7
7
In 2020, EUR 89,420 (2019: EUR 80,765) related to receivables from group companies. Intercompany receivables
and payables fall within the scope of IFRS 9 ‘Financial Instruments’. The outstanding amounts as per December 31,
2020 and 2019 relate to transactions linked to the usage of Adyen platform which took place throughout the year at
arm’s length conditions. Considering the maturity of the intercompany balances and the financial position of the
Adyen group, the credit risk is considered not significant. As a result, the impact of expected credit losses on
intercompany balances is not significant.
34. Shareholders’ equity
Refer to the company statement of changes in equity for the movements in shareholders’ equity.
The legal reserves include all exchange rate differences arising from the translation of the net investment in foreign
entities. The total of distributable reserves amounts to EUR 790,775 (2019 restated: EUR 554,820). The other
reserves are restricted for distribution, being the legal reserves, in amount of EUR 14,853 (2019: 43,616), legally
non-distributable in accordance with Dutch Law. Besides the beforementioned exchange rate differences these
relate to revaluation of balance sheet positions that require revaluation reserves.
35. Dividends paid
No dividend has been paid in the years presented.
36. Company – Trade, other payables, and payables to merchants
and financial institutions
Trade, other payables, and payables to merchants and financial institutions 2020 2019 Restated
Trade payables 6,798
8,875
Taxes and social security 31,401
42,243
Accrued employee benefits 18,072
13,950
Accrued liabilities and other debts
18,239
12,716
Cash-settled share-based payment plan 3,478
690
TTrraaddee aanndd ootthheerr ppaayyaabblleess
7777,,998888
7
7
8
8
,
,
4
4
7
7
4
4
Payables to merchants and financial institutions
2,406,651 1,266,808
TToottaall
2
2
,
,
4
4
8
8
4
4
,
,
6
6
3
3
9
9
1
1
,
,
3
3
4
4
5
5
,
,
2
2
8
8
2
2
All current liabilities fall due in less than one year. The fair value of the current liabilities approximates the book value
due to its short-term character.
In 2020, EUR 14,010 (2019: EUR 14,324) related to payables to group companies.
Adyen
Annual Report 2020
page 161
60
37. Directors’ remuneration
For an overview of the directors’ remuneration, reference is made to note 22 ‘Compensation of key management’ of
the consolidated financial statements.
38. Audit fees
For an overview of the audit fees, reference is made to note 21 ‘Audit fees’ of the consolidated financial statements.
39. Contingencies and commitments
Adyen has no contingent liabilities in respect to legal claims.
Adyen has EUR 20,092 of outstanding bank guarantees and letters of credit as at December 31, 2020 (2019: EUR
23,892). In addition, Adyen has an intra-day credit facility of EUR 267 million which is not used as at December 31,
2020 (2019: EUR 272 million).
Adyen N.V. and Adyen International B.V. are a fiscal unity for income tax purposes. Under the Dutch Tax Collection
Act, the members of the fiscal unity are jointly and severally liable for any taxes payable by the fiscal unity. Pursuant to
the Collection of State Taxes Act, the company and its subsidiary are both severally and jointly liable for the tax payable
by the combination.
40. Proposed profit appropriation
Awaiting the decision by the shareholders, management proposes the income for the year to be added to retained
earnings in shareholder’s equity.
41. Events after balance sheet date
There were no events after the reporting period that impact the 2020 consolidated and company financial statements.
61
Amsterdam, March 9, 2021
P.S. Overmars D. Rueda Arroyo
Chairman Supervisory Board Supervisory Director
J.A.J. van Beurden P.A. Joseph
Supervisory Director Supervisory Director
P.W. van der Does R. Prins I.J. Uytdehaage
CEO CCO CFO
M.B. Swart K. Zaki A. Matthey
CLCO COO CTO
page 162
Adyen
Annual Report 2020
61
Amsterdam, March 9, 2021
P.S. Overmars D. Rueda Arroyo
Chairman Supervisory Board Supervisory Director
J.A.J. van Beurden P.A. Joseph
Supervisory Director Supervisory Director
P.W. van der Does R. Prins I.J. Uytdehaage
CEO CCO CFO
M.B. Swart K. Zaki A. Matthey
CLCO COO CTO
Adyen
Annual Report 2020
page 164
62
Other information
Provisions in the Articles of Association relating to profit appropriation
The Articles of Association of Adyen provide that the appropriation of the net income for the year is decided upon at
the Annual General Meeting of Shareholders.
For the preferred dividends the Annual General Meeting of Shareholders can elect to pay out the annual dividend on
these shares or to add the dividend to the class reserve.
Independent auditor’s report
Please refer to the next page.
2P6S4AKNWHAC-1741125424-407
PricewaterhouseCoopers Accountants N.V., Thomas R. Malthusstraat 5, 1066 JR Amsterdam, P.O. Box 90357,
1006 BJ Amsterdam, the Netherlands
T: +31 (0) 88 792 00 20, F: +31 (0) 88 792 96 40, www.pwc.nl
‘PwC’ is the brand under which PricewaterhouseCoopers Accountants N.V. (Chamber of Commerce 34180285), PricewaterhouseCoopers Belastingadviseurs N.V.
(Chamber of Commerce 34180284), PricewaterhouseCoopers Advisory N.V. (Chamber of Commerce 34180287), PricewaterhouseCoopers C ompliance Services B.V.
(Chamber of Commerce 51414406), PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. (Chamber of Commerce 54226368),
PricewaterhouseCoopers B.V. (Chamber of Commerce 34180289) and other companies operate and provide services. These services are governed by General Terms
and Conditions (‘algemene voorwaarden’), which include provisions regarding our liability. Purchases by these companies are governed by General Terms and Conditions
of Purchase (‘algemene inkoopvoorwaarden’). At www.pwc.nl more detailed information on these companies is available, including these General Terms and Conditions
and the General Terms and Conditions of Purchase, which have also been filed at the Amsterdam Chamber of Commerce.
Independent auditor’s report
Financ i al St atem en ts
31 Dec em ber 2020
1 Janu ary 2020
Adye n N. V.
Contr ole
Goedkeurend
31001542A053
KVK
Kvk N ummer ui t D B ( nog te d oen)
Creat e SBR E xte nsi on
1.0
Amst erdam
9 Marc h 2021
To: the general meeting and the supervisory board of Adyen N.V.
Report on the financial statements 2020
Our opinion
In our opinion:
• the consolidated financial statements of Adyen N.V. together with its subsidiaries (‘the Group’)
give a true and fair view of the financial position of the Group as at 31 December 2020 and of its
result and cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of
the Dutch Civil Code;
• the company financial statements of Adyen N.V. (‘the Company’) give a true and fair view of the
financial position of the Company as at 31 December 2020 and of its result for the year then
ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2020 of Adyen N.V., Amsterdam.
The financial statements include the consolidated financial statements of the Group and the company
financial statements.
The consolidated financial statements comprise:
• the consolidated balance sheet as at 31 December 2020;
• the following statements for 2020: the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows; and
• the notes to the consolidated financial statements, comprising significant accounting policies
and other explanatory information.
The company financial statements comprise:
• the company balance sheet as at 31 December 2020;
• the following statement for 2020: the company statement of comprehensive income for the year
then ended;
• the notes to the company financial statements, comprising the accounting policies applied and
other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS
and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial
statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.
H2 2019 Shareholder letter
page 165
2P6S4AKNWHAC-1741125424-407
PricewaterhouseCoopers Accountants N.V., Thomas R. Malthusstraat 5, 1066 JR Amsterdam, P.O. Box 90357,
1006 BJ Amsterdam, the Netherlands
T: +31 (0) 88 792 00 20, F: +31 (0) 88 792 96 40, www.pwc.nl
‘PwC’ is the brand under which PricewaterhouseCoopers Accountants N.V. (Chamber of Commerce 34180285), PricewaterhouseCoopers Belastingadviseurs N.V.
(Chamber of Commerce 34180284), PricewaterhouseCoopers Advisory N.V. (Chamber of Commerce 34180287), PricewaterhouseCoopers C ompliance Services B.V.
(Chamber of Commerce 51414406), PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. (Chamber of Commerce 54226368),
PricewaterhouseCoopers B.V. (Chamber of Commerce 34180289) and other companies operate and provide services. These services are governed by General Terms
and Conditions (‘algemene voorwaarden’), which include provisions regarding our liability. Purchases by these companies are governed by General Terms and Conditions
of Purchase (‘algemene inkoopvoorwaarden’). At www.pwc.nl more detailed information on these companies is available, including these General Terms and Conditions
and the General Terms and Conditions of Purchase, which have also been filed at the Amsterdam Chamber of Commerce.
Independent auditor’s report
Financ i al St atem en ts
31
Decem ber 2020
1 Janu ary
2020
Adye n N. V.
Contr ole
Goedkeurend
31001542A053
KVK
Kvk N ummer ui t D B ( nog te d oen)
Creat e SBR E xte nsi on
1.0
Amst erdam
9 Marc h
2021
To: the general meeting and
the supervisory board of Adyen N.V.
Report on the financial statements 2020
Our opinion
In our opinion:
• the consolidated financial statements of Adyen N.V. together with its subsidiaries (‘the Group’)
give a true and fair view of the financial position of the Group as at 31 December 2020 and of its
result and cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of
the Dutch Civil Code;
• the company financial statements of Adyen N.V. (‘the Company’) give a true and fair view of the
financial position of the Company as at 31 December 2020 and of its result for the year then
ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2020 of Adyen N.V., Amsterdam.
The financial statements include the consolidated financial statements of the Group and the company
financial statements.
The consolidated financial statements comprise:
• the consolidated balance sheet as at 31 December 2020;
• the following statements for 2020: the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows; and
• the notes to the consolidated financial statements, comprising significant accounting policies
and other explanatory information.
The company financial statements comprise:
• the company balance sheet as at 31 December 2020;
• the following statement for 2020: the company statement of comprehensive income for the year
then ended;
• the notes to the company financial statements, comprising the accounting policies applied and
other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS
and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial
statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.
H2 2019 Shareholder letter
page 166
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 2 of 14
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing.
We have further described our responsibilities under those standards in the section
‘Our responsibilities for the audit of the financial statements’ of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of Adyen N.V. in accordance with the European Union Regulation on specific
requirements regarding statutory audit of public-interest entities, the ‘Wet toezicht
accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de
onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional
Accountants, a regulation with respect to independence) and other relevant independence regulations
in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels
accountants’ (VGBA, Dutch Code of Ethics).
Our audit approach
Overview and context
Adyen N.V. is a fast-growing payment service provider with a banking licence in the Netherlands.
The Company provides services around the globe and has subsidiaries in multiple countries.
The Company has a centralised approach in managing its global operations (which includes the
underlying control activities as well as the respective financial administration). We considered these
factors in determining our group audit scope and approach as set out in the section ‘The scope of our
group audit’.
The financial year was characterised by the impact of the COVID-19 outbreak (see note ‘Basis of
preparation’ to the consolidated financial statements), the continuing growth of processed volumes,
revenue and net income for the year, and the assessment of the actual performance of the long-term
merchant contract (as disclosed in note 2.1 of the consolidated financial statements). The actual
performance of this long-term merchant contract is relevant input for the management board’s
assessment of the valuation of the derivative liabilities, which is a key audit matter. The valuation of
the derivative liabilities is also considered by the management board (‘management’) as a significant
accounting estimate (see note 1.2 to the consolidated financial statements).
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. We considered where management made important
judgements, for example, in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain.
The global COVID-19 pandemic and related government restriction measures impacted the Group’s
processed volumes in varying degrees, depending on sector and territory, and required staff to work
from home. We considered the impact of the pandemic on our audit approach, including our scoping,
materiality, and risk assessment. We concluded this to be an area of focus, that is not considered as a
key audit matter. We assessed the impact on significant management accounting judgements,
including future business and cash flow projections underpinning impairment assessments, deferred
tax asset recoverability and the going-concern assumption.
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 3 of 14
We also considered the risk of fraud inherent to increased remote working. In terms of the execution of
our audit, we considered the impact of the travel and other restrictions on our audit and on the review
and supervision of our team. Our team largely worked remotely and digitally, supported by video
meetings and PwC’s digital tooling. We increased the frequency of communication between the
Company and our team. While maintaining compliance with local health regulations, we performed a
physical inspection of point-of-sale equipment inventory.
As part of our evaluation of the audit, we identified three key audit matters. We identified the design
and effectiveness of IT general controls as a key audit matter since all revenue generating activities are
processed on the payment platform operated by the Company. Another matter we identified to be key
in our audit relates to revenue, as we consider revenue (growth) a key financial indicator for investors
and other stakeholders of the Company. We had additional focus for the inherent risk we identified
that revenue might be overstated. The last key audit matter relates to the classification and valuation
of the derivative liabilities. The classification and valuation of the derivative liabilities are dependent
on multiple factors, one of which is the actual performance of the long-term merchant contract.
The classification assessment and the fair value estimation of the derivative liabilities are complex
accounting matters and require significant judgement by management.
In 2020, a prior period error was identified in relation to the overstatement of costs to financial
institutions and payables to merchants and financial institutions. The root cause of this error and the
presentation and disclosure of the restatement as included in note 1.3 to the consolidated financial
statements have therefore been an area of focus but are not considered as a key audit matter.
As in all our audits, we also addressed the risk of management override of controls, including
evaluating whether there was evidence of bias by the management board that may represent a risk of
material misstatement due to fraud. We ensured that the audit team has the appropriate skills and
competences which are needed for the audit of a payment service provider. We therefore included
specialists in the areas of IT, current and deferred income tax, valuation of derivative financial
instruments and specialists in the area of forensic investigation in our team. The outline of our audit
approach was as follows:
Materiality
• Overall materiality: €12,406,700.
Audit scope
• We conducted all audit work in the Netherlands. All locations around
the globe were in scope of our audit performed.
• Audit coverage: 100% of consolidated revenue, 100% of consolidated
income before income taxes and 100% of consolidated assets.
Key audit matters
• Design and effectiveness of IT general controls.
• Risk of overstatement of revenue.
• Valuation and classification of derivative liabilities.
H2 2019 Shareholder letter
page 167
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 3 of 14
We also considered the risk of fraud inherent to increased remote working. In terms of the execution of
our audit, we considered the impact of the travel and other restrictions on our audit and on the review
and supervision of our team. Our team largely worked remotely and digitally, supported by video
meetings and PwC’s digital tooling. We increased the frequency of communication between the
Company and our team. While maintaining compliance with local health regulations, we performed a
physical inspection of point-of-sale equipment inventory.
As part of our evaluation of the audit, we identified three key audit matters. We identified the design
and effectiveness of IT general controls as a key audit matter since all revenue generating activities are
processed on the payment platform operated by the Company. Another matter we identified to be key
in our audit relates to revenue, as we consider revenue (growth) a key financial indicator for investors
and other stakeholders of the Company. We had additional focus for the inherent risk we identified
that revenue might be overstated. The last key audit matter relates to the classification and valuation
of the derivative liabilities. The classification and valuation of the derivative liabilities are dependent
on multiple factors, one of which is the actual performance of the long-term merchant contract.
The classification assessment and the fair value estimation of the derivative liabilities are complex
accounting matters and require significant judgement by management.
In 2020, a prior period error was identified in relation to the overstatement of costs to financial
institutions and payables to merchants and financial institutions. The root cause of this error and the
presentation and disclosure of the restatement as included in note 1.3 to the consolidated financial
statements have therefore been an area of focus but are not considered as a key audit matter.
As in all our audits, we also addressed the risk of management override of controls, including
evaluating whether there was evidence of bias by the management board that may represent a risk of
material misstatement due to fraud. We ensured that the audit team has the appropriate skills and
competences which are needed for the audit of a payment service provider. We therefore included
specialists in the areas of IT, current and deferred income tax, valuation of derivative financial
instruments and specialists in the area of forensic investigation in our team. The outline of our audit
approach was as follows:
Materiality
• Overall materiality: €12,406,700.
Audit scope
• We conducted all audit work in the Netherlands. All locations around
the globe were in scope of our audit performed.
• Audit coverage: 100% of consolidated revenue, 100% of consolidated
income before income taxes and 100% of consolidated assets.
Key audit matters
• Design and effectiveness of IT general controls.
• Risk of overstatement of revenue.
• Valuation and classification of derivative liabilities.
H2 2019 Shareholder letter
page 168
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Materiality
The scope of our audit is influenced by the application of materiality, which is further explained in the
section ‘Our responsibilities for the audit of the financial statements’.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall materiality for the financial statements as a whole as set out in the table below.
These, together with qualitative considerations, helped us to determine the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and to
evaluate the effect of identified misstatements, both individually and in aggregate, on the financial
statements as a whole and on our opinion.
Overall group
materiality
€12,406,700 (2019: €10,000,000).
Basis for determining
materiality
We used our professional judgement to determine overall materiality. As a basis for
our judgement, we used 5% of income before income taxes (adjusted for the
derivative liabilities revaluation) based on interim condensed consolidated
financial statements (as at 30 June 2020) as published by the Group on
20 August 2020. The adjustment for the derivative liabilities revaluation and using
interim financial information mean that we effectively applied an overall
materiality of 3.8% of income before income taxes (2019: 3.9%).
Rationale for
benchmark applied
We used income before income taxes as the primary benchmark, a generally
accepted auditing practice, based on our analysis of the common information needs
of users of the financial statements. On this basis, we believe that income before
income taxes is an important metric for the financial performance of the Group and
is widely used within the industry.
We changed our basis for determining materially this year through excluding the
derivative liabilities revaluation since the revaluation does not reflect the actual
performance of the Group and has a strong linkage with the share price of
Adyen N.V. When the share price increases, this leads to an increase of the
valuation of the derivative liability and vice versa (also see sensitivity analysis in
note 12 to the consolidated financial statements). Excluding the revaluation from
the materiality benchmark aligns the annual materiality development with the
actual performance of the Group.
Furthermore, we capped our overall materiality with the Group’s interim financial
information to make sure that the extent of our audit procedures is sufficient while
expecting further growth of the Group. We annualised the income before income
taxes that is included in the Group’s interim financial information as the basis for
our materiality. We furthermore considered materiality based on the actual
numbers in the financial statements and, based on our professional judgement, still
considered the materiality set to be appropriate.
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
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Component
materiality
The Group manages and administrates transactions and operations (including
control activities) centrally, in Amsterdam. This means we are able to audit all
transactions and operations ourselves, in Amsterdam.
We therefore consider all activities (regardless of the legal subsidiaries in which
transactions are recorded) to be part of one component, which is the financial
information presented in the consolidated financial statements (for the group as a
whole). We therefore did not allocate separate component materiality.
We also take misstatements and/or possible misstatements into account that, in our judgement, are
material for qualitative reasons.
We agreed with the supervisory board that we would report to them misstatements identified during
our audit above €620,300 (2019: €500,000) as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
The scope of our group audit
Adyen N.V. is the parent company of a group of entities. The financial information of this Group is
included in the consolidated financial statements of Adyen N.V.
We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the
financial statements for us to be able to give an opinion on the financial statements as a whole, taking
into account the management structure of the Group, the nature of operations of its components, the
accounting processes and controls, and the markets in which the components of the Group operate.
Adyen manages and administers all transactions and operations (including control activities) centrally,
in Amsterdam. We therefore consider all activities (regardless of the legal subsidiaries in which
transactions are recorded) to be part of one component, which is the financial information presented
in the consolidated financial statements (for the group as a whole).
In total, in performing these procedures, we achieved the following coverage on the financial line
items:
Revenue
100%
Total assets
100%
Profit before tax
100%
The group engagement team thus performed the audit work for the Group. By adopting this approach
and performing the procedures, we have been able to obtain sufficient and appropriate audit evidence
on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
the audit of the financial statements. We have communicated the key audit matters to the supervisory
board. The key audit matters are not a comprehensive reflection of all matters identified by our audit
and that we discussed. In this section, we described the key audit matters and included a summary of
the audit procedures we performed on those matters.
H2 2019 Shareholder letter
page 169
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
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Component
materiality
The Group manages and administrates transactions and operations (including
control activities) centrally, in Amsterdam. This means we are able to audit all
transactions and operations ourselves, in Amsterdam.
We therefore consider all activities (regardless of the legal subsidiaries in which
transactions are recorded) to be part of one component, which is the financial
information presented in the consolidated financial statements (for the group as a
whole). We therefore did not allocate separate component materiality.
We also take misstatements and/or possible misstatements into account that, in our judgement, are
material for qualitative reasons.
We agreed with the supervisory board that we would report to them misstatements identified during
our audit above €620,300 (2019: €500,000) as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
The scope of our group audit
Adyen N.V. is the parent company of a group of entities. The financial information of this Group is
included in the consolidated financial statements of Adyen N.V.
We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the
financial statements for us to be able to give an opinion on the financial statements as a whole, taking
into account the management structure of the Group, the nature of operations of its components, the
accounting processes and controls, and the markets in which the components of the Group operate.
Adyen manages and administers all transactions and operations (including control activities) centrally,
in Amsterdam. We therefore consider all activities (regardless of the legal subsidiaries in which
transactions are recorded) to be part of one component, which is the financial information presented
in the consolidated financial statements (for the group as a whole).
In total, in performing these procedures, we achieved the following coverage on the financial line
items:
Revenue
100%
Total assets
100%
Profit before tax
100%
The group engagement team thus performed the audit work for the Group. By adopting this approach
and performing the procedures, we have been able to obtain sufficient and appropriate audit evidence
on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
the audit of the financial statements. We have communicated the key audit matters to the supervisory
board. The key audit matters are not a comprehensive reflection of all matters identified by our audit
and that we discussed. In this section, we described the key audit matters and included a summary of
the audit procedures we performed on those matters.
H2 2019 Shareholder letter
page 170
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 6 of 14
We addressed the key audit matters in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon. We do not provide separate opinions on these matters or on
specific elements of the financial statements. Any comment or observation we made on the results of
our procedures should be read in this context.
The valuation of the deferred tax asset was no longer considered a key audit matter. During 2020, no
new (material) tax assets were recognised and no facts and circumstances were identified that
impacted the valuation of the tax assets.
Key audit matter
Our audit work and observations
Design and effectiveness of
IT general controls
The design and
operating effectiveness of IT general
controls is of significance to the Group. The financial
accounting and reporting of the Group is largely
dependent on the payment platform, since the most
significant line items in the balance sheet (cash and
cash equi
valents, receivables
from financial institutions
and payables to merchants) and the statement of
comprehensive income (revenues and costs incurred
from financial institutions) are recorded on the
payment platform.
In particular, the adequate design and
operating
effectiveness of the payment platform and relevant
IT
general controls are significant for the accurate and
complete processing of occurred transactions.
Based on the above considerations, we considered
IT
general controls as a key audit matter in our audit.
Our audit work included, amongst others,
understanding, evaluating and testing, on a quarterly
basis, the relevant IT general controls, with the
assistance of our IT auditors, to the extent relevant for
our audit. These comprised of the
following key audit
activities at the Group:
•
Computer operations ensuring reliability of
IT systems: We tested the design and operating
effectiveness of controls which were implemented
to ensure that back-
up and recovery processes have
been established by the Company and that local
back-ups (per individual datacentre) were made
and stored cross-datacentre. Our test results
demonstrated that production data were replicated
across the individual datacentres. Finally, we
inspected that on an annual basis, the business
continuity plan of the Company was tested for
operating effectiveness.
•
Access management and segregation of duties over
IT systems: We tested the design and operating
effectiveness of controls, which were implemented
to ensure that logical access to programmes and
data was limited to authorised personnel.
We verified that the Group implemented controls
to ensure, amongst others, the complete and
accurate processing of user rights of joiners,
movers and leavers, the periodic review of user
accounts, the review of database actions and
limitation of administrator accounts throughout
the application, database and network.
•
Change management procedures for software and
infrastructural changes: We tested the design and
operating effectiveness of relevant controls, which
were implemented to ensure that the development
and maintenance of software was properly
authorised, peer reviewed, approved (both
manually and automated) and documented prior to
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 7 of 14
Key audit matter
Our audit work and observations
implementation in the production environment
and noted no exceptions.
• Cybersecurity: We obtained an understanding of
the Group’s approach to enhancing cyber security
and evaluated the design and effectiveness of
related internal control measures. We focused on
the areas to the extent relevant for the purpose of
our audit of the financial statements.
We furthermore noticed as part of our work performed
that the Group was sufficiently equipped to work
remotely and has been doing so without material
impact on the ability to process payments. We conclude
that we could rely on the IT general controls of the
Group for the purpose of our audit.
Risk of overstatement of revenue
Revenue is disclosed in note 2 to the consolidated
financial statements
The Group’s services operate on the payment platform.
Independent of whether payments are submitted
online, by mobile or through point-of-sale terminals,
there is one integrated platform on which customers are
being served and transactions are being processed.
As such, this key audit matter should be read and
considered in conjunction with the key audit matter on
IT general controls.
The revenues that the Group generated related to
processing fees, settlement fees and fees for other
services in connection with processed payments.
For this purpose, the Company agreed with customers
to charge rates per transaction and by type of activity.
Revenue is recorded on the basis that the Company acts
as a principal for payment processing services it
provides to merchants. Therefore, revenue related to
processing and settlement fees are reported on a gross
basis (as disclosed in note 2 to the consolidated
financial statements).
The Company recognised substantial growth in revenue
over the previous years and has a focus on (medium
term) revenue growth. We deem revenue to be a key
financial indicator on which the performance of
management is measured by stakeholders in the
Company.
Our audit work included, amongst others, an evaluation
of management’s design and operating effectiveness of
controls that mitigate the risk of overstatement of
revenue:
• standing data maintenance covering the accuracy
of customer contracts;
• transaction handling relating to automated
capturing and authorisation of payments;
• automated settlement for matching of bank
statements and collecting and matching refunds
and chargebacks;
• payment pay-out process covering the automated
generating, processing and authorisation of pay-
out batches; and
• automated process over invoicing to customers.
Based on our audit procedures on these activities,
we determined that we could rely on these controls for
the purpose of our audit.
In addition to testing the operating effectiveness of
these controls on revenue recognition and IT general
controls as summarised in the separate key audit
matter on IT general controls, we also performed
substantive procedures:
• On a sample basis, we tested the accuracy of
contractual rates captured in the payment system
by comparing these with signed customer
agreements.
• We performed media scans for ‘bad news’ to
identify potential fictitious revenue.
H2 2019 Shareholder letter
page 171
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 7 of 14
Key audit matter
Our audit work and observations
implementation in the production environment
and noted no exceptions.
•
Cybersecurity: We obtained an understanding of
the Group’s approach to enhancing cyber security
and evaluated the design and effectiveness of
related internal control measures. We focused on
the areas to the extent relevant for the purpose of
our audit of the financial statements.
We
furthermore noticed as part of our work performed
that the Group
was sufficiently equipped to work
remotely and ha
s been doing so without material
impact
on the ability to process payments.
We conclude
that we could rely on the IT general controls of the
Group for the purpose of our audit.
Risk of overstatement
of revenue
R
evenue is disclosed in note 2 to the consolidated
financial statements
The Group’s services operate on the payment platform.
Independent of whether payments are submitted
online, by mobile or through point
-of-sale terminals,
there is one integrated platform on which customers are
being s
erved and transactions are being processed.
As
such, this key audit matter should be read and
considered in conjunction with the key audit matter on
IT general controls.
The revenues that the Group generated related to
processing fees, settlement fees and
fees for other
services in connection with processed payments.
For
this purpose, the Company agreed with customers
to
charge rates per transaction and by type of activity.
Revenue is recorded on the basis that the Company acts
as a principal for payment
processing services it
provides
to merchants. Therefore, revenue related to
processing and settlement fees
are reported on a gross
basis
(as disclosed in note 2 to the consolidated
financial statements
).
The Company recognised substantial growth in revenue
over the previous years and ha
s a focus on (medium
term)
revenue growth. We deem revenue to be a key
financial indicator on which the performance of
management is measured by stakeholders in the
Company.
Our audit work included, amongst others, an evaluation
of management’s design and
operating effectiveness of
controls that mitigate the risk of overstatement of
revenue:
•
standing data maintenance covering the accuracy
of customer contracts;
•
transaction handling relating to automated
capturing and authorisation of payments;
•
automated settlement for matching of bank
statements and collecting and matching refunds
and chargebacks;
•
payment pay-out process covering the automated
generating, processing and authorisation of pay-
out batches; and
•
automated process over invoicing to customers.
Ba
sed on our audit procedures on these activities,
we
determined that we could rely on these controls for
the purpose of our audit.
In addition to testing the operating effectiveness of
these controls on revenue recognition and IT general
controls as summar
ised in the separate key audit
matter on IT general controls, we also performed
substantive procedures:
•
On a sample basis, we tested the accuracy of
contractual rates captured in the payment system
by comparing these with signed customer
agreements.
•
We performed media scans for ‘bad news’ to
identify potential fictitious revenue.
H2 2019 Shareholder letter
page 172
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 8 of 14
Key audit matter
Our audit work and observations
Based on these facts and circumstances, we con
sidered
the significant risk of overstatement
of revenue
(relating to the risk of overstatement and occurrence of
revenues) as a key audit matter in our audit.
•
We independently obtained and requested bank
confirmations.
•
We inspected and evaluated contracts of parties
engaged to perform acquiring activities.
•
We evaluated and assessed recorded revenue
against the requirements included in IFRS
including management’s assessment in which it
concluded that for its payment services it acts as a
principal.
•
We performed analytical procedures on the top ten
merchants on a monthly basis to assess the
correlation between transaction volumes and
recognised total revenue.
•
We reconciled the recognised revenue in the
financial statements to the payment service
platform.
•
We tested the manual reconciliation between
the payment service platform and the financial
statements.
We did not identify material exceptions and we found
management’s revenue recognition in the financial
statements to be supported by the available evidence.
Valuation and classification of derivative
liabilities
The
derivative liabilities are disclosed in note 11 to the
consolidated financial statements
During 2018, the Company entered into a
warrant
contract
with a merchant with the prospect that
significant online sales volumes will be sen
t to the
Company in the fut
ure for payment processing through
the payment platform.
The merchant is entitled to acquire a fixed number of
shares in a series of four
tranches for cash, at a
specified price per share upon the terms and conditions
in the agreement. The ability to exer
cise a warrant is
linked to meeting significant milestones with respect to
processed volume on a calendar year basis.
Adyen
N.V. reassessed the classification of the
derivative financial liabilities and reclassified two
warrant tranches (‘tranches’)
that were recorded as
derivative financial liabilities as equity instruments in
accordance with IAS 32 in
2018. As at 31 December
2020 no tranches have vested.
We, with the assistance of our accounting specialists,
have assessed the Company’s accounting treatment of
the
tranches as at balance sheet date, which includes
the derivative liabilities as well as the equity
instruments.
Also, with the assistance of our
valuation expert, we
performed independent procedures on the valuation
performed by the Company’s management expert on
the tranche conditions. Our audit work included the
following substantive audit procedures:
•
We evaluated the valuation methodology applied
by the Company’s management expert.
•
We evaluated the competence, capabilities,
objectivity and work of management’s independent
valuator.
•
We tested the completeness and adequacy of the
valuation inputs applied by the Company’s
management expert that incl
uded, amongst others,
the discount for the lack of marketability of the
financial instruments
, the expected volatility of the
Company’s share price and the probability of
achieving the performance targets specific to the
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 9 of 14
Key audit matter
Our audit work and observations
As at 31 December 2020, the same two tranches remain
to be recorded as equity (for an amount of
€53.4 million) as these will be convertible into a fixed
number of ordinary shares at an amount that will only
be fixed in the future upon achievement of certain
contractual contingent events. The other two tranches
are recorded as financial liabilities for management’s
point estimate amount at €68.4 million.
The key assumptions, as applied by the Company’s
management expert, include the expected volatility of
the Company’s share price, the discount for the lack of
marketability of the financial instruments and the
probabilities of specific performance targets being
achieved. The volatility of the Company’s share price
accounts for most of the recorded fair value change of
the tranches in 2020. The sensitivity of this assumption
is disclosed in note 12 to the financial statements.
During 2020, the share price of Adyen N.V. went up by
161%, which further increased the estimation
uncertainty of the underlying assumptions (as the
valuation of the tranches has a direct link with share
price developments).
Given the related estimation uncertainty and
complexity involved in determining the fair value,
we determined this to be a key audit matter.
various tranches, during the contractual duration
of the underlying warrant agreement.
• Together with our valuation experts, we performed
an independent assessment of the key
assumption’s contribution to the total fair value of
the derivative liabilities and found the outcome to
be reasonable.
We found that the assumptions used in the valuation of
the tranches by the Company are reasonable when
compared to relevant market data. Furthermore, we
agree with the method used and the calculations made
as part of the assessment of the valuation.
Based on our assessment, we concur with management
that no facts and circumstances are available which
would require changes in the classification of the
tranches.
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains
other information that consists of:
• management report;
• governance (which also includes the remuneration report);
• the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
Based on the procedures performed as set out below, we conclude that the other information:
• is consistent with the financial statements and does not contain material misstatements;
• contains the information that is required by Part 9 of Book 2 and the sections 2:135b and 2:145
subsection 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit
of the financial statements or otherwise, we have considered whether the other information contains
material misstatements.
H2 2019 Shareholder letter
page 173
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Page 9 of 14
Key audit matter
Our audit work and observations
As at
31 December 2020, the same two tranches
remain
to be
recorded as equity (for an amount of
€53.
4 million) as these will be convertible into a fixed
number of ordinary shares at an amount that will only
be fixed in the future upon achievement of certain
contractual contingent events
. The other two tranches
are recorded as financial liabilities
for management’s
point estimate
amount at €68.4 million.
The key assumptions, as applied by the Company’s
management expert, include the expected volatility of
the Company’s share price, the discount for the lack of
marketability of the
financial instruments and the
probabilities of specific performance targets being
achieved.
The volatility of the Company’s share price
accounts for
most of the recorded fair value change of
the
tranches
in 2020. The sensitivity of this assumption
is disclosed in
note 12 to the financial statements.
During 2020
, the share price of Adyen N.V. went up by
161%
, which further increased the estimation
uncertainty of the underlying assumptions (as the
valuation of the
tranches has a direct link with share
price
developments).
Given the related estimation uncertainty and
complexity involved in determining the fair value
,
we
determined this to be a key audit matter.
various tranches, during the contractual duration
of the underlying warrant agreement.
•
Together with our valuation experts, we performed
an independent assessment of the key
assumption’s contribution to the total fair value of
the derivative liabilities and found the outcome to
be reasonable.
We found that the assumptions used in the valuation of
the
tranches by the Company are reasonable when
compared to relevant market data
. Furthermore, we
agree with the method used and the calculations made
as part of the assessment of the valuation.
Based on our assessment, we
concur with management
that no facts and circumstances are available which
would require changes in the classification of the
tranches.
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains
other information that consists of:
• management report;
• governance (which also includes the remuneration report);
• the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
Based on the procedures performed as set out below, we conclude that the other information:
• is consistent with the financial statements and does not contain material misstatements;
• contains the information that is required by Part 9 of Book 2 and the sections 2:135b and 2:145
subsection 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit
of the financial statements or otherwise, we have considered whether the other information contains
material misstatements.
H2 2019 Shareholder letter
page 174
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 10 of 14
By performing our procedures, we comply with the requirements of Part 9 of Book 2 and section
2:135b subsection 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures
was substantially less than the scope of those performed in our audit of the financial statements.
The management board is responsible for the preparation of the other information, including the
management report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil
Code and the remuneration report in accordance with the sections 2:135b and 2:145 subsection 2 of
the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Our appointment
We were re-appointed as auditors of Adyen N.V. on 26 May 2020 during the shareholders’ meeting.
We were initially appointed as the external auditor of Adyen B.V. during 2009. Furthermore, the
Company became a public-interest entity (‘PIE’) in April 2017 after the Company obtained a banking
licence. The audit of the 2020 financial statements therefore represents the fourth year of
uninterrupted engagement appointment as external auditor of Adyen N.V.
European Single Electronic Format (ESEF)
Adyen N.V. has prepared the annual report, including the financial statements, in ESEF. The
requirements for this format are set out in the Commission Delegated Regulation (EU) 2019/815 with
regard to regulatory technical standards on the specification of a single electronic reporting format
(these requirements are hereinafter referred to as: the RTS on ESEF).
In our opinion, the annual report prepared in XHTML format, including the partially tagged
consolidated financial statements as included in the reporting package by Adyen N.V., has been
prepared in all material respects in accordance with the RTS on ESEF.
Management is responsible for preparing the annual report, including the financial statements, in
accordance with the RTS on ESEF, whereby management combines the various components into a
single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether
the annual report in this reporting package, is in accordance with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (Royal Netherlands Institute of Chartered
Accountants), included amongst others:
• Obtaining an understanding of the entity’s financial reporting process, including the preparation
of the reporting package.
• Obtaining the reporting package and performing validations to determine whether the reporting
package, containing the Inline XBRL instance document and the XBRL extension taxonomy
files, has been prepared, in all material respects, in accordance with the technical specifications
as included in the RTS on ESEF.
• Examining the information related to the consolidated financial statements in the reporting
package to determine whether all required taggings have been applied and whether these are in
accordance with the RTS on ESEF.
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 11 of 14
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as
referred to in article 5(1) of the European Regulation on specific requirements regarding statutory
audit of public-interest entities.
Services rendered
The services, in addition to the audit, that we have provided to the Company and its controlled entities,
for the period to which our statutory audit relates, are disclosed in note 21 to the financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of the management board and the supervisory board
for the financial statements
The management board is responsible for:
• the preparation and fair presentation of the financial statements in accordance with EU-IFRS
and with Part 9 of Book 2 of the Dutch Civil Code; and for
• such internal control as the management board determines is necessary to enable the
preparation of the financial statements that are free from material misstatement, whether due to
fraud or error.
As part of the preparation of the financial statements, the management board is responsible for
assessing the Company’s ability to continue as a going concern. Based on the financial reporting
frameworks mentioned, the management board should prepare the financial statements using the
going-concern basis of accounting unless the management board either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so. The management board
should disclose events and circumstances that may cast significant doubt on the Company’s ability to
continue as a going concern in the financial statements.
The supervisory board is responsible for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain
sufficient and appropriate audit evidence to provide a basis for our opinion. Our objectives are to
obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we
may not detect all material misstatements. Misstatements may arise due to fraud or error. They are
considered to be material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial statements.
Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the
effect of identified misstatements on our opinion.
H2 2019 Shareholder letter
page 175
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 11 of 14
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as
referred to in article 5(1) of the European Regulation on specific requirements regarding statutory
audit of public-interest entities.
Services rendered
The services, in addition to the audit, that we have provided to the Company and its controlled entities,
for the period to which our statutory audit relates, are disclosed in note 21 to the financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of the management board and the supervisory board
for the financial statements
The management board is responsible for:
• the preparation and fair presentation of the financial statements in accordance with EU-IFRS
and with Part 9 of Book 2 of the Dutch Civil Code; and for
• such internal control as the management board determines is necessary to enable the
preparation of the financial statements that are free from material misstatement, whether due to
fraud or error.
As part of the preparation of the financial statements, the management board is responsible for
assessing the Company’s ability to continue as a going concern. Based on the financial reporting
frameworks mentioned, the management board should prepare the financial statements using the
going-concern basis of accounting unless the management board either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so. The management board
should disclose events and circumstances that may cast significant doubt on the Company’s ability to
continue as a going concern in the financial statements.
The supervisory board is responsible for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain
sufficient and appropriate audit evidence to provide a basis for our opinion. Our objectives are to
obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we
may not detect all material misstatements. Misstatements may arise due to fraud or error. They are
considered to be material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial statements.
Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the
effect of identified misstatements on our opinion.
H2 2019 Shareholder letter
page 176
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 12 of 14
A more detailed description of our responsibilities is set out in the appendix to our report.
Amsterdam, 9 March 2021
PricewaterhouseCoopers Accountants N.V.
Original has been signed by R.E.H.M. van Adrichem RA
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 13 of 14
Appendix to our auditor’s report on the financial statements
2020 of Adyen N.V.
In addition to what is included in our auditor’s report, we have further set out in this appendix our
responsibilities for the audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout
the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence
requirements. Our audit consisted, among other things of the following:
• Identifying and assessing the risks of material misstatement of the financial statements, whether
due to fraud or error, designing and performing audit procedures responsive to those risks,
and obtaining audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the intentional override of internal control.
• Obtaining an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
• Evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the management board.
• Concluding on the appropriateness of the management board’s use of the going-concern basis of
accounting, and based on the audit evidence obtained, concluding whether a material
uncertainty exists related to events and/or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report
and are made in the context of our opinion on the financial statements as a whole. However,
future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluating the overall presentation, structure and content of the financial statements, including
the disclosures, and evaluating whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Considering our ultimate responsibility for the opinion on the consolidated financial statements,
we are responsible for the direction, supervision and performance of the group audit. In this context,
we have determined the nature and extent of the audit procedures for components of the Group to
ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole. Determining factors are the geographic structure of the Group, the significance and/or risk
profile of group entities or activities, the accounting processes and controls, and the industry in which
the Group operates. On this basis, we selected group entities for which an audit or review of financial
information or specific balances was considered necessary.
We communicate with the supervisory board regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit. In this respect, we also issue an additional report to the audit
committee in accordance with article 11 of the EU Regulation on specific requirements regarding
statutory audit of public-interest entities. The information included in this additional report is
consistent with our audit opinion in this auditor’s report.
H2 2019 Shareholder letter
page 177
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 13 of 14
Appendix to our auditor’s report on the financial statements
2020 of Adyen N.V.
In addition to what is included in our auditor’s report, we have further set out in this appendix our
responsibilities for the audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout
the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence
requirements. Our audit consisted, among other things of the following:
• Identifying and assessing the risks of material misstatement of the financial statements, whether
due to fraud or error, designing and performing audit procedures responsive to those risks,
and obtaining audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the intentional override of internal control.
• Obtaining an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
• Evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the management board.
• Concluding on the appropriateness of the management board’s use of the going-concern basis of
accounting, and based on the audit evidence obtained, concluding whether a material
uncertainty exists related to events and/or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report
and are made in the context of our opinion on the financial statements as a whole. However,
future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluating the overall presentation, structure and content of the financial statements, including
the disclosures, and evaluating whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Considering our ultimate responsibility for the opinion on the consolidated financial statements,
we are responsible for the direction, supervision and performance of the group audit. In this context,
we have determined the nature and extent of the audit procedures for components of the Group to
ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole. Determining factors are the geographic structure of the Group, the significance and/or risk
profile of group entities or activities, the accounting processes and controls, and the industry in which
the Group operates. On this basis, we selected group entities for which an audit or review of financial
information or specific balances was considered necessary.
We communicate with the supervisory board regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit. In this respect, we also issue an additional report to the audit
committee in accordance with article 11 of the EU Regulation on specific requirements regarding
statutory audit of public-interest entities. The information included in this additional report is
consistent with our audit opinion in this auditor’s report.
H2 2019 Shareholder letter
page 178
Adyen N.V. - 2P6S4AKNWHAC-1741125424-407
Page 14 of 14
We provide the supervisory board with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
action taken to eliminate threats or safeguards applied.
From the matters communicated with the supervisory board, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, not communicating the
matter is in the public interest.
