What's so special about Adyen? 💳

Today’s edition of the FinChat Newsletter will cover the big earnings from the week, put Nvidia’s unthinkable rise into perspective, and dive into the secret sauce behind one of the most disruptive companies in the payments industry.

As always, we’re making constant improvements to the look, feel and content in this weekly newsletter. If you’re diggin’ it or have any content ideas for us, let me know by replying to this email.

Let’s get into it.

A busy week in the markets

🦾 Nvidia

With seemingly the whole world watching, Nvidia delivered better than expected fourth quarter results on Wednesday afternoon.

Revenue came in at $22 billion for the quarter, a 265% increase from last year, and perhaps even more impressively, Nvidia generated 61.6% operating margins versus just 20.7% a year ago.

CEO and founder Jensen Huang said “Accelerated computing and generative AI have hit the tipping point.”

Following the report, investor enthusiasm reached new highs, sending the stock up 18% to push the company above a $2 trillion market cap. For context, this makes Nvidia larger than all stocks listed on the Hong Kong Stock Exchange combined!

🏠 Home Depot

The leading home improvement retailer Home Depot reported Q4 results on Tuesday that were slightly ahead of Wall Street’s estimates.

Coming off of several strong years in consumer spending thanks in part to lower interest rates, Home Depot has finally begun to see a bit of a slowdown. Home Depot CEO Ted Decker stated "After three years of exceptional growth for our business, 2023 was a year of moderation.”

CFO Richard McPhail also added that “the pressures we saw in 2023 are receeding”.

The stock is up 25% over the last year, but is still trading a ways off from its all-time highs.

💳 Block

The financial technology company formerly known as Square reported strong results to cap off its 2023 fiscal year.

Block beat expectations on both the top and bottom line and saw continued progress from its two core businesses, Square and Cash App, which delivered a combined 22% gross profit growth for the company.

Importantly, CEO Jack Dorsey implied that he plans to slow operating expense growth significantly in the coming years. As he put it “We’re under our 12,000 people cap… We’re going to operate under this cap until we feel it’s holding us back.”

The heightened focus on profitability appeared to resonate with investors as the stock closed the week up 17%.

🛏️ Booking Holdings

The world’s largest travel company had a mixed 4th quarter.

Revenue and earnings came in above expectations, but the growth in room nights began to slow which has some investors worried about the overall leisure travel market.

Booking, who announced its first-ever quarterly dividend this week, has been a cash flowing machine. This year Booking generated $7 billion in free cash flow and dipped into its balance sheet to repurchase more than $10 billion worth of stock.

With the stock down 7% for the week, Booking now trades at a price to free cash flow multiple of 17x.

Company Spotlight

What makes Adyen so special?

The payments processing industry is littered with competition.

From Stripe to Braintree to Worldpay, there are dozens of options for merchants to choose from.

So why has Adyen gone from $32 billion in total processed volume to nearly $1 trillion in the span of 8 years? Let's take a look:

Founding: To understand Adyen's advantage it's helpful to look at its history. Pieter van der Does and Arnout Schuijff founded a payments company called Bibit in 1999 that was acquired by the Royal Bank of Scotland.

After agreeing to stay on for 2 years, Pieter and Arnout discovered the patchwork of products and efforts going on at some of these larger payment companies. They saw an opportunity to build something new from the ground up that was a single, unified platform. They called it Adyen, which in Sranan Tongo means “Start Again.”

By building everything themselves and not stitching together various acquisitions, they would have a clearer understanding within the organization of how everything worked.

What makes them different? Adyen offers end-to-end payments, data, and financial management in a single solution. Emphasis on "end-to-end".

Unlike traditional payment service providers (PSPs), like Stripe, which rent a Bank Identification Number on behalf of their merchant customers from a separate acquiring bank, Adyen actually owns the banking licenses themselves in most cases.

This not only helps Adyen be more agile but can allow them to have higher authorization rates than most.

Land and Expand: Adyen isn't trying to be the lowest cost provider. But by having superior authorization rates, they're helping their customers earn more money in the long run.

This is why Adyen continues to win volume, especially from its existing customers.

Many large companies will use multiple merchant acquirers so they can toggle payment volume depending on who is better. Adyen’s existing customers like Uber, Spotify, and Wise continue to send more volume to them each and every year, on average.

Shipping Huge Upgrades 🚀

FinChat is quickly becoming the best equity research platform on the internet.

Forget toggling between your dashboard and Investor Relations pages. We now have everything investors need within FinChat.

We just deployed the following upgrades:

• Earnings Audio 🔊 Listen to the earnings call right after the call concludes with the transcript at your fingertips to follow along.

• Earnings Reports 📊 To supplement the conference call audio, you can now check out a company’s earnings report press release from within FinChat.

• Slide Decks: Dig into slide decks from earnings, product launches or investor days right in the beautiful user interface.

You can always refer to our Changelog to stay up to date.

Meme of The Week

Nvidia puts the team on its back

While it might be a bit of an over exaggeration to say Nvidia is propping up the entire global economy, demand for its chips has big implications throughout the rest of the financial world.

Nvidia’s recent surge in revenue is a reflection of the eagerness to invest in AI from companies around the globe. Though the jury is still out on whether or not those investments will be worth it, investors seem to be rewarding companies that talk about AI and back it up with real investments.

Time will tell how long that lasts, but for now, it remains top of mind for investors.