Latest / The Dutch Investors / #60 | Adyen Deep Dive | Who will win in payments? | By TDI-founders Bouke and Mathijs

Transcript

#60 | Adyen Deep Dive | Who will win in payments? | By TDI-founders Bouke and Mathijs · The Dutch Investors

• 0:00
  SPEAKER_02: Hey everyone, welcome back to a brand new episode by the Dutch investors.
• 0:06
  SPEAKER_02: Today we're doing something special.
• 0:09
  SPEAKER_02: We're releasing our Artjan Deep Dive from December 2024, previously only available to our premium members.
• 0:17
  SPEAKER_02: ArtGen has delivered a roughly 14% kegger since going public in 2019.
• 0:23
  SPEAKER_02: It operates in one of the fastest growing industries on the planet.
• 0:27
  SPEAKER_02: Payments with the potential for incredible profitability.
• 0:32
  SPEAKER_02: We wanted to find out whether this Dutch fintech giant is operating right in our own backyard could be that hidden gem we've been looking for.
• 0:42
  SPEAKER_02: Argen is the quiet force behind some of the biggest brands in the world, powering their payments, whether online, in store, or across multiple channels.
• 0:53
  SPEAKER_02: Now, Argen is a company we know all too well.
• 0:57
  SPEAKER_02: We own it, we've talked to employees, and we've been to multiple investor days.
• 1:02
  SPEAKER_02: Our TDI analyst Bauke did an incredible job putting this deep dive together.
• 1:07
  SPEAKER_02: Some of the financials might be a little outdated now, but most of the insights are timeless.
• 1:14
  SPEAKER_02: If you like this episode and want access to our newest exclusive deep dives every 14 days, you can check out thedutchinvestors.com.
• 1:24
  SPEAKER_02: And if you're on the fence, use code GIFT50 for a lifetime 50% discount on any plan.
• 1:32
  SPEAKER_02: In this deep dive, we'll unpack what Agen does, how it makes its money, what makes it so special, about its mode, and what risks might lie ahead.
• 1:42
  SPEAKER_02: So sit back, grab a cup of coffee, and enjoy our full A Gen deep dive.
• 2:12
  SPEAKER_04: So before we begin, what were your initial thoughts about Agen before this analysis?
• 2:19
  SPEAKER_03: Yeah, of course, because I do own the S I thought it was a great company.
• 2:24
  SPEAKER_03: And I know because I've been to three annual meetings that the management is very good, in my opinion.
• 2:31
  SPEAKER_03: They are very long-term thinking, make great capital allocation decisions, and yeah, it's in my opinion one of the only European tech companies that is executing really well.
• 2:43
  SPEAKER_04: Alright, and why did you choose to analyze Agen again?
• 2:46
  SPEAKER_04: Because you have a position for longer time, I guess.
• 2:49
  SPEAKER_03: Yes, and the previous analysis I uh I did was of course payment network visa.
• 2:55
  SPEAKER_03: And I thought I can as well analyze payment service provider Agen.
• 3:00
  SPEAKER_03: I've already stated that it is a position of mine, and it's trading at the same price as a few years ago.
• 3:06
  SPEAKER_03: So maybe the yeah, the valuation is somewhat more attractive.
• 3:10
  SPEAKER_03: Now it's yeah, they have seen growth, but the share price is still the same.
• 3:16
  SPEAKER_03: Um, and mostly I want to gain a deeper understanding of its competitive advantages and determine whether it's reasonably priced, despite this price-to-earnings ratio of 55 right now.
• 3:26
  SPEAKER_04: Alright, that's sounds interesting.
• 3:28
  SPEAKER_04: And before every analysis, well, every one of us, I can say, reads an annual report, uh, goes through the earnings goals, etc.
• 3:38
  SPEAKER_04: But you also read a lot of interviews for this analysis.
• 3:41
  SPEAKER_04: How so?
• 3:43
  SPEAKER_03: Yes, from the outside, Agen's platform and competitive position is quite hard to grasp.
• 3:48
  SPEAKER_03: So I had to get some information from people that know the company really well or worked with Agen.
• 3:54
  SPEAKER_03: So I read over 150 pages of industry experts, former employees, and uh customers of Agen, and that way I got a lot of new and unique information.
• 4:05
  SPEAKER_03: So that was very helpful to me.
• 4:07
  SPEAKER_04: Alright, and now we had the introduction.
• 4:10
  SPEAKER_04: Let's start with the history, which is not that long because Agen was founded in 2006.
• 4:15
  SPEAKER_04: And what can you tell us about that starting period?
• 4:18
  SPEAKER_03: As you know, Matthijs, Agen is uh Agen means again or starting again in Surinames, and was founded in 2006, as you said, by Pieter van der Does, who is still co-CEO, and Arnold Schuijf, who left the company.
• 4:35
  SPEAKER_03: Before 2006, Van der Does en Schuijf started another company, BBIT, and this became one of Europe's biggest payment processes.
• 4:43
  SPEAKER_03: And in 2004 it was acquired by the Royal Bank of Scotland and later became World's Pay, a competitor of Agen right now.
• 4:53
  SPEAKER_03: A year after founding the company in 2007, Agen processed its first transaction, and by 2010, it signed its first global merchant.
• 5:02
  SPEAKER_03: Just a year later, in 2011, Agen was already a profitable company.
• 5:08
  SPEAKER_03: Now we go to 2013 and Agen introduced that year Agen Acquiring, and this helped them innovate quickly and attract more large customers like KLM, Vodafone, and SoundCloud.
• 5:19
  SPEAKER_03: That same year they became Facebook payment service provider, and that was a very big win that boosted both revenue and of course their credibility.
• 5:28
  SPEAKER_03: In 2018, Agen went public on the Amsterdam Stock Exchange, valued at around 7 billion at its IPO.
• 5:36
  SPEAKER_03: It's quite funny because yesterday I was reading an article about this and uh I read that the first day where they IPO'd, their stock uh increased over 100%.
• 5:49
  SPEAKER_03: Wow, that's crazy.
• 5:51
  SPEAKER_04: That's a big success.
• 5:53
  SPEAKER_04: I remember actually being in the car.
• 5:55
  SPEAKER_04: I was sitting in the car and I heard it on the radio, and it was one of the moments I think that I realized maybe I shouldn't invest in stocks.
• 6:05
  SPEAKER_03: 100% on one day.
• 6:07
  SPEAKER_03: Of course, that is not durable for every day, but uh yeah, it's very interesting, and also they didn't go to the IPO.
• 6:15
  SPEAKER_03: There's a lot of yeah discussion about that.
• 6:18
  SPEAKER_03: Some people see it as arrogance, but yeah, they saw it just as another workday where they could build at the company instead of go to the uh stock exchange to to yeah ring the bell.
• 6:29
  SPEAKER_04: Yes, so why did they IPO then?
• 6:32
  SPEAKER_04: Because I know one of their large competitors, Stripe, uh they are not a public company.
• 6:38
  SPEAKER_04: So why did AGIN go public?
• 6:40
  SPEAKER_03: Yeah, that's a very good question because they didn't need the money.
• 6:44
  SPEAKER_03: As I said, in 2011 they already were profitable, so they didn't need the money.
• 6:50
  SPEAKER_03: Um, I think it is because some share is just wanted to leave, and also if you are a publicly traded company, your credibility can be somewhat higher, somewhat better.
• 7:01
  SPEAKER_03: So I think it is for those reasons.
• 7:03
  SPEAKER_03: Alright.
• 7:04
  SPEAKER_03: I think I've said everything about the history of Agen, and we uh we can move to the to the business model.
• 7:11
  SPEAKER_03: But Matthäus, of course, you also own shares and you also know quite a lot about the company.
• 7:16
  SPEAKER_03: So if you have something to tell or you think Bauka you missed something, please interrupt me and say what you uh what you have to say.
• 7:23
  SPEAKER_04: I will, no worries.
• 7:25
  SPEAKER_04: So now we had the history, let's start with the business model.
• 7:33
  SPEAKER_04: So now you know more about the history of Agen, which is quite short.
• 7:38
  SPEAKER_04: Can you tell us more about how AGEN actually earns its revenue?
• 7:42
  SPEAKER_03: Yeah, this is where it gets really interesting.
• 7:45
  SPEAKER_03: Yeah, Agen is a payment processor, and what they basically do is they make it possible for businesses to accept payments like credit and debit cards, but but also local payment methods like Fenmo in the United States or Ideal in the Netherlands.
• 8:00
  SPEAKER_03: When you swipe your card, for example, the information goes to a payment network and some banks, so you can pay quickly and safely.
• 8:08
  SPEAKER_03: PSPs, yeah, that is what a payment service provider stands for, help businesses accept payments and improve authorization rates.
• 8:17
  SPEAKER_03: And AGEN uses a land and expand strategy.
• 8:20
  SPEAKER_03: They start by offering a few products and processing a small portion of a customer's payments, and over time they build trust, increase wallet share, and add more products.
• 8:30
  SPEAKER_03: And this strategy works.
• 8:32
  SPEAKER_03: Right now, over 80% of Agen's recent revenue growth comes from existing customers, and their churn rate is under 1%.
• 8:41
  SPEAKER_03: So that are really great numbers.
• 8:45
  SPEAKER_03: Yeah, that's fantastic.
• 8:46
  SPEAKER_04: And for the ones who do not know what an authorization rate is, in my eyes it's the percentage of payments that is accepted, right?
• 8:56
  SPEAKER_03: Yes, that's right.
• 8:57
  SPEAKER_03: If you have uh an authorization rate of 95%, basically out of 100 payments, 95 payments succeed and five payments fail, and that can be because of they detect fraud or they detect um you have too less money on your on your card or whatever, maybe the card is expired.
• 9:17
  SPEAKER_03: That can all be reasons for a lower authorization rate.
• 9:21
  SPEAKER_04: Yeah.
• 9:22
  SPEAKER_04: And because you also did the visa analysis recently, could you briefly explain the connection between AGEN and Visa?
• 9:30
  SPEAKER_03: Agen stands on the acquiring side.
• 9:33
  SPEAKER_03: So um they stand, of course, not at the customer side, but at the merchant side of the payment, and the payment flows through Agen, goes to Visa to the issuing bank of the uh of the customer, and after that it flows back the information or the the money flows back through the payment network like Visa or MasterCard to Agen and then to the acquiring bank.
• 10:00
  SPEAKER_03: So that is basically yeah, it's quite complex, but that's basically how that works.
• 10:05
  SPEAKER_04: Yeah, as you said, the industry is quite hard to grasp, but I think you explained it great in your analysis as well.
• 10:10
  SPEAKER_04: So um so who is Agen processes these payments?
• 10:14
  SPEAKER_04: Can you name the few customers of Agen?
• 10:17
  SPEAKER_03: Yes, of course.
• 10:17
  SPEAKER_03: Agen focuses on large enterprises.
• 10:20
  SPEAKER_03: So, unlike for example, Stripe or Molly, which focus mostly on smaller businesses, Agen's Tech Stack and Sales Team are designed for global giants, and their single platform handles all development and integrations.
• 10:33
  SPEAKER_03: Agen doesn't customize for individual customers, they only make changes if multiple customers need it.
• 10:40
  SPEAKER_03: To stay close to their clients, Agen has dozens of account managers who work with companies like Here They Come, McDonald's, eBay, Booking, Uber, Microsoft, Amazon, IKEA, and Meta.
• 10:52
  SPEAKER_03: So only the largest businesses are basically clients of Agen.
• 10:58
  SPEAKER_04: Yes, so they do not make very tailor-made specific solutions for customers because they try to keep it as standardized as possible, right?
• 11:06
  SPEAKER_04: Yes, that's 100% true.
• 11:09
  SPEAKER_04: And do you think that Agen is uniquely positioned to keep those customers?
• 11:14
  SPEAKER_04: Like what gives them an advantage over its competitors to keep companies like Microsoft or Booking on board?
• 11:20
  SPEAKER_03: Yes, Agen stands out as a financial technology platform because it combines data from both in-store and online payments.
• 11:27
  SPEAKER_03: And that is something most competitors can't do.
• 11:30
  SPEAKER_03: And why?
• 11:31
  SPEAKER_03: Unlike Agen, most competitors aren't built on a single platform, making it harder to bundle and organize data efficiently.
• 11:39
  SPEAKER_03: This leads to slower processes and more complexity.
• 11:43
  SPEAKER_03: And Agen also holds banking licenses in Europe, the United States, the United Kingdom, and for a few months even in India.
• 11:51
  SPEAKER_03: They've never made an acquisition and opt to build the technologies in-house, and this allows them to iterate quickly and build the best solutions for the customers.
• 12:01
  SPEAKER_03: And you see this with companies like Stripe or Braintree.
• 12:05
  SPEAKER_03: They yeah, they have acquired, even like Stripe, which is commonly known as the strongest competitor of Agen, they've done yeah, maybe five between five and ten acquisitions and all those technologies they have to integrate in-house, and that's yeah, basically slows them down when they want to uh innovate.
• 12:24
  SPEAKER_03: So that is an advantage Agen really has.
• 12:28
  SPEAKER_03: One thing to add here is when your payment is processed to Agen, they manage the entire payment stack.
• 12:35
  SPEAKER_03: And this includes acting as the gateway, handling risk management, processing transactions, acquiring payments and settling funds.
• 12:42
  SPEAKER_03: Agen earns fees for processing and settlement, and these are gateway and acquiring services, along with smaller fees for additional products and functionalities that simplify business's operations.
• 12:55
  SPEAKER_04: Yeah, so you talked about the speed and the efficiency of a payment.
• 13:01
  SPEAKER_04: So, for example, when you are in a McDonald's and you place your order and you are willing to pay at the terminal, which is maybe placed by Agen, software is from Agen.
• 13:13
  SPEAKER_04: Can you know by the speed of the terminal if it's an Agen or Stripe or maybe a legacy player that placed it?
• 13:21
  SPEAKER_03: Oh, that's a really hard question.
• 13:23
  SPEAKER_03: I think there is no clear answer to that.
• 13:26
  SPEAKER_03: Sometimes you say see on the on the terminal like the green letters of Agen above.
• 13:31
  SPEAKER_03: That means at least that's something I notice a lot when I walk to stores, I always look at that.
• 13:40
  SPEAKER_03: Um, but for example, by McDonald's, I don't see those green letters above, and I see that that they have those Ingenico terminals.
• 13:51
  SPEAKER_03: I'm not sure if you can see if AGM poses these payments.
• 13:56
  SPEAKER_03: Have you any idea, Matthijs?
• 13:58
  SPEAKER_04: No, I have no idea, but I was just thinking about there's such a big difference sometimes between different types of terminals.
• 14:05
  SPEAKER_03: Yeah.
• 14:06
  SPEAKER_04: So I thought maybe there's a difference that we as human beings can actually see in real life.
• 14:13
  SPEAKER_04: Maybe that's that's that's a complex thing.
• 14:17
  SPEAKER_04: Alright, so so what does Edgeon actually do?
• 14:19
  SPEAKER_04: What processes are integrated in their single platform?
• 14:23
  SPEAKER_03: They offer various services, such as handling in-store payments with their own design terminals like the EMS1 or the SFO1, and they also, of course, process digital payments.
• 14:36
  SPEAKER_03: And this unified approach lets merchants combine data from both channels, adding value and increasing switching costs.
• 14:43
  SPEAKER_03: As of June 2024, Agen had around 460,000 installed terminals used by clients like Nike, L'Oreal, and Douglas.
• 14:54
  SPEAKER_03: Another product that Agen offers is Agen for Platforms, and this is a key growth driver.
• 15:00
  SPEAKER_03: It supports platforms like eBay, Uber, and Uber by processing payments for both the platforms and their users.
• 15:08
  SPEAKER_03: With the world increasingly moving to platforms, this product positions Agen perfectly for the future.
• 15:14
  SPEAKER_03: And this is also where they think most growth will come from in the future.
• 15:19
  SPEAKER_03: I will talk more about this later.
• 15:21
  SPEAKER_03: Agen also offers capital, providing business loans to merchants, basically the business model of traditional banks.
• 15:27
  SPEAKER_03: But at Agen, repayments are made via fixed fees, but only if the merchant processes payments or uses Agen cards, tying the service to the ecosystem.
• 15:36
  SPEAKER_04: And what is the advantage for a merchant to get a loan through Agen instead of a bank?
• 15:43
  SPEAKER_03: Yeah, I don't think it's the yield that is lower at Agen, but I think it's the speed at which they can get the loan.
• 15:50
  SPEAKER_03: Like traditional banks, it can sometimes take weeks before you get the loan you asked for because they have to assess the risk, uh, all slow systems, all slow processes.
• 16:01
  SPEAKER_03: But at Agen you can just simply click a button, and within I think one or two days you get the loan, and that's that's great, that's an advantage for uh for those merchants.
• 16:13
  SPEAKER_03: This is actually a very small part of uh the total business of Agen, but it's it it's interesting to see where they are moving.
• 16:21
  SPEAKER_03: And is it growing a lot or yeah, they don't give the this information to shareholders, but I think it's uh yeah, I think it's growing.
• 16:30
  SPEAKER_04: And it might be hard to assess this industry and this company as an outsider, but how good are these products in comparison to, for example, Stripe, which I guess is their main competitor?
• 16:42
  SPEAKER_03: Is there anything you can share about that?
• 16:45
  SPEAKER_03: Yeah, you're right, it's quite hard to uh assess this as an outsider.
• 16:49
  SPEAKER_03: But I've looked at a report of the Forrester Wave, and they basically make assessments of Stripe, Agen, and all those other payment service providers.
• 16:59
  SPEAKER_03: And basically, Agen and Stripe are the most complete, most innovative, and best PSPs out there.
• 17:05
  SPEAKER_03: That is what they say in the Within analysis.
• 17:10
  SPEAKER_03: You also see a picture of uh where they stand compared to checkout.com and WorldPay, for example.
• 17:16
  SPEAKER_03: Um, but they also price premium, and this is something we will talk about soon because yeah, payments of Agen and Stripe are just more expensive than payments of uh like a Worldline or Chase Payment Deck.
• 17:31
  SPEAKER_04: Yeah, and can you make this a bit more concrete?
• 17:34
  SPEAKER_04: So, what impact does this have on customers?
• 17:38
  SPEAKER_04: What does it bring them?
• 17:39
  SPEAKER_03: On the Invested Day of 2023, Agen highlighted Burberry as a great example.
• 17:44
  SPEAKER_03: And Burberry went from using over 20 PSPs to just one, and that is of course Agen.
• 17:51
  SPEAKER_03: And this reduced their contracts from 94 to 12 contracts.
• 17:55
  SPEAKER_03: And this, of course, significantly is cutting down the workload for their payments team.
• 18:00
  SPEAKER_03: So you can expect all those large merchants, global uh enterprises, they have a payments team where they look at the authorization rates, the cost of payments, and basically handling all those payments.
• 18:13
  SPEAKER_03: And the less contracts you have, the more simple a payment is.
• 18:17
  SPEAKER_03: Of course, the workload for the payments team, and maybe even you can uh maybe even you can fire some some uh employees, uh the costs go down.
• 18:26
  SPEAKER_03: And this showcases one of Agen's key strengths.
• 18:29
  SPEAKER_03: They are lowering the total cost of ownership for the customers.
• 18:32
  SPEAKER_03: From an outsider's perspective, this is really hard to validate, but this is what they constantly say.
• 18:40
  SPEAKER_03: They are uh lowering the total cost of ownership for their customers.
• 18:44
  SPEAKER_04: Yes, and I think Burberry can be a perfect example of combining the physical world with the online world, right?
• 18:51
  SPEAKER_04: Because they have many stores as well.
• 18:54
  SPEAKER_04: Um, it would be a big mess with 20 PSPs, I think.
• 18:58
  SPEAKER_04: Yeah, yeah, they needed it.
• 19:00
  SPEAKER_04: Yeah, they needed it.
• 19:02
  SPEAKER_04: So let's talk about the cost.
• 19:05
  SPEAKER_04: Achen is known as a payment service provider that has a premium price.
• 19:10
  SPEAKER_04: Is this justified, do you think, or do you think they should lower it maybe?
• 19:14
  SPEAKER_03: Yeah, merchants take several things into consideration when choosing their payment service providers.
• 19:20
  SPEAKER_03: So you said they use multiple payment service providers?
• 19:23
  SPEAKER_03: Yes, nearly all big companies have a handful and or sometimes even more payment service providers.
• 19:29
  SPEAKER_03: Amazon, for example, has even 50 payment service providers worldwide, and booking has also like eight or something.
• 19:37
  SPEAKER_03: And this gives the merchant, of course, leverage for pricing discussions and as a backup when a payment service provider isn't working.
• 19:44
  SPEAKER_03: You are just not that reliable on a single payment service provider when you have multiple, and this way risks are eliminated.
• 19:52
  SPEAKER_04: Yeah, still, but I get it when you have like two or three or maybe four providers, but 50 isn't that unneeded?
• 20:00
  SPEAKER_03: Yeah, maybe, but I think Amazon, yeah, they operate in so many countries, so I think they also have some local or regional um payment service providers for yeah, just a single country or something like that.
• 20:14
  SPEAKER_04: Yeah.
• 20:15
  SPEAKER_04: Alright.
• 20:16
  SPEAKER_04: Thanks for explaining.
• 20:18
  SPEAKER_04: So you talked about the pricing of Agen.
• 20:20
  SPEAKER_04: Except pricing, what are merchants taking into account when choosing a PSP?
• 20:25
  SPEAKER_03: Yeah, I think they take into account uh a couple of things.
• 20:29
  SPEAKER_03: Let's start off with the authorization rate, yeah.
• 20:32
  SPEAKER_03: Basically, the number of successful transactions is very important, of course.
• 20:37
  SPEAKER_03: Uh, the number of payment methods, and Agen has like 100 payment method methods, and I've compared it to Stripe, the information I have from the sites, and Stripe has like 50.
• 20:50
  SPEAKER_03: So Agen has some kind of advantage here.
• 20:54
  SPEAKER_03: The data insights a payment service provider can provide, and if it has a trusted name by complying with regulatory requirements and compliance, so that is also quite important.
• 21:05
  SPEAKER_03: And about the price of Agen, the cost of merchants using Agen varies widely, making it tricky to compare directly with competitors like Stripe.
• 21:14
  SPEAKER_03: However, with some help, I uncovered some details about this.
• 21:18
  SPEAKER_03: Agen typically charges just 11 to 13 cents per transaction with additional fees for payment methods like Discover Visa or MasterCard.
• 21:41
  SPEAKER_03: This reminds me a little bit of Hilton Food Group, another company I've analyzed.
• 21:46
  SPEAKER_03: But uh, compared to Stripe's online payment fees, Agen is often cheaper.
• 21:50
  SPEAKER_03: Stripe generally adds 30 cents per transaction.
• 21:54
  SPEAKER_03: Though it's possible, Stripe negotiates lower rates with large merchants.
• 21:58
  SPEAKER_03: And about Stripe in their 2023 annual letter, Stripe mentioned they have now over 100 customers processing more than 1 billion annually through the Stripe platform.
• 22:09
  SPEAKER_03: So yeah, this highlights the strength with the high volume customers.
• 22:13
  SPEAKER_03: Also, Stripe has.
• 22:15
  SPEAKER_04: Yeah, so they are known for acquiring mostly smaller businesses.
• 22:20
  SPEAKER_04: This is actually the proof that they also have also doing very good with large clients.
• 22:25
  SPEAKER_03: Yeah, exactly.
• 22:26
  SPEAKER_03: So this is something to really keep an eye on, and it's kind of surprised me when I read that.
• 22:31
  SPEAKER_03: If you are interested in Agen, it's very good to also read the annual letters of Stripe, I think, because they are yeah, really strong competitors.
• 22:40
  SPEAKER_04: Is it also the way around, by the way, that Agen also has a lot of smaller companies?
• 22:46
  SPEAKER_04: Because I remember when we started the Dutch investors that we tried to search for a PSP, and at the end we ended up with Stripe.
• 22:56
  SPEAKER_03: Yeah, this is this is a funny story, actually, because I'm a kind of fan of Agen, the the business, and so we mailed them like we're gonna start a company, um, we do it like this, and we want you as a payment service provider, and they didn't respond for I think like three months.
• 23:17
  SPEAKER_03: And after three months, we got a really polite mail uh from the sales team, and they said, Uh, I'm sorry guys, but you are but we are actually not the right payment service provider for you.
• 23:28
  SPEAKER_03: You are too small, maybe come back in five years or something like that when you are bigger and sell to more countries.
• 23:35
  SPEAKER_03: But um that's that's funny, yeah.
• 23:39
  SPEAKER_03: And to come back to your question, they are moving to more smaller and smaller businesses because but they do it in another way uh than Stripe.
• 23:49
  SPEAKER_03: Stripe goes directly to the smaller businesses, they yeah, kind of acquire them directly, and Agen does it through their platforms business.
• 24:01
  SPEAKER_03: So when you use a platform like that that uses Agen, um maybe your transactions are processed via Agen.
• 24:10
  SPEAKER_03: And um that is basically yeah, it's another way that Agen chooses to get those smaller, small to medium-sized businesses.
• 24:20
  SPEAKER_03: But um Agen, yeah, they have tried to acquire them directly like Stripe does, but they failed, and uh they acknowledge this, so that is uh that's good to know, I think.
• 24:32
  SPEAKER_04: Yeah, I think we have been talking quite a lot about the business model now.
• 24:38
  SPEAKER_04: So let's end with the segmentation of the revenues.
• 24:42
  SPEAKER_04: Can you take us through?
• 24:44
  SPEAKER_03: Yes.
• 24:44
  SPEAKER_03: Agen talks in three key commercial pillars, and this is digital.
• 24:50
  SPEAKER_03: Agen powers digital payments for clients like Netflix and Spotify, and the focus here is on offering preferred payment methods and keeping transaction costs low and maintaining those high authorization rates.
• 25:02
  SPEAKER_03: And this pillar accounts for around 60% of Agen's payment volume.
• 25:07
  SPEAKER_03: Then we have Unified Commerce, and listen carefully, Matthijs, because I want to test this uh in a few minutes with you.
• 25:15
  SPEAKER_03: Um, then you have unified commerce for businesses with both online and physical stores, and Agen provides advanced point of sales terminals and strong data collection.
• 25:26
  SPEAKER_03: And this supports companies like Nike, Leafice, Burberry, and Prada.
• 25:31
  SPEAKER_03: Around 25% of Agen's payments volume come from this pillar.
• 25:35
  SPEAKER_03: Then we have platforms, and platforms are like Uber, Olo, Fintech, and Etsy, and they use Agen specialized solution.
• 25:43
  SPEAKER_03: And this smallest but fastest growing pillar is currently making up around 15% of Agen's total payment volume.
• 25:51
  SPEAKER_03: And Matthijs, I want to test this with you.
• 25:54
  SPEAKER_03: Maybe you can name a random company and then I have to assess which in which commercial pillar they are uh segmentated.
• 26:03
  SPEAKER_04: Alright, then I'm gonna start with the company that I mentioned earlier to you.
• 26:07
  SPEAKER_04: So let's say take Meta.
• 26:10
  SPEAKER_03: Meta.
• 26:11
  SPEAKER_03: So Meta, I think it's a platform because they have also other businesses on the platform to who they pay.
• 26:20
  SPEAKER_03: So this is uh a platform business.
• 26:22
  SPEAKER_04: Alright.
• 26:24
  SPEAKER_03: Um let's say Amazon.
• 26:26
  SPEAKER_03: Also, Amazon has other businesses on its platform, so as we know as shareholders, I think uh Amazon is moving more and more to a platform business, so also platforms.
• 26:38
  SPEAKER_03: What about Amazon Prime?
• 26:40
  SPEAKER_04: Like the the payments consumers make to Amazon directly without third parties.
• 26:45
  SPEAKER_03: Yeah, that's uh that's a good one.
• 26:47
  SPEAKER_03: That's uh a digital transaction, right?
• 26:51
  SPEAKER_04: Let's name one easy one, um interesting one, maybe.
• 26:55
  SPEAKER_04: Let's say Domino's Pizza.
• 26:58
  SPEAKER_03: Domino's Pizzas is also a customer of Agen, and they are as well in-store as they are uh online, so this is a unified commerce business.
• 27:10
  SPEAKER_03: So maybe now you have a better understanding like how they uh segmentate this.
• 27:15
  SPEAKER_03: And Agen doesn't disclose revenue breakdowns for its commercial pillars, but just the the yeah percentage of volumes, uh, and around 80% of their revenues come from settlement fees and processing fees, and yeah, basically, as the volume grows, also the settlement fees and processing fees grow.
• 27:36
  SPEAKER_03: So, yeah, nothing uh special here.
• 27:39
  SPEAKER_04: Alright, then there's also the culture of Agen.
• 27:44
  SPEAKER_04: They're known for having a very strong entrepreneurial culture leaded by their current CEO and founder.
• 27:52
  SPEAKER_04: Can you tell us something more about that?
• 27:55
  SPEAKER_03: Yeah, Agen's culture is defined by the Agen formula, and this is a set of guiding principles shaping everything they do.
• 28:02
  SPEAKER_03: Uh, also unique is that every engineer has to spend time with a merchant annually to understand their product's impact.
• 28:10
  SPEAKER_03: So, this is quite unique and I think also quite great.
• 28:14
  SPEAKER_03: Um, Agen also has a high talent bar with final interviews conducted by top management, ensuring only the best one fits.
• 28:24
  SPEAKER_03: And beyond business, also Agen want to make an impact on the world.
• 28:28
  SPEAKER_03: They do that through Agen's giving, and this is an initiative that processed 7.7 million in donations in 2023 with zero fees.
• 28:38
  SPEAKER_03: So they basically ensure uh 100% of the funds reach the non-profit organizations.
• 28:44
  SPEAKER_03: So that is yeah, really great, I think.
• 28:47
  SPEAKER_04: And it's crazy that they still, even though they are becoming very big now, that still every final interview uh for an applicant is being conducted by the top management of the company.
• 28:58
  SPEAKER_03: Yeah, that is that is true.
• 29:00
  SPEAKER_03: That's great, right?
• 29:01
  SPEAKER_03: If you are an engineer or top talent, you it's unique that you can talk in your first interview, yeah, in your final interview with an uh with a top manager, like the co-CEO Pieter van der Does.
• 29:13
  SPEAKER_03: So that is that is awesome.
• 29:15
  SPEAKER_04: Alright, now we've had the business model.
• 29:18
  SPEAKER_04: Let's go to the sector and industry.
• 29:25
  SPEAKER_04: So now we can finally delve some deeper into the differences between ATEN and other service providers.
• 29:33
  SPEAKER_04: Can you share what you found about the payment processing mark in general and its industry?
• 29:40
  SPEAKER_03: Yes.
• 29:41
  SPEAKER_03: Um, the PSP market is around 50 to 70 billion big, and the market is expected to grow with roughly 10% per year.
• 29:50
  SPEAKER_03: Um, and this is driven by more cashless transactions and a higher smartphone penetration.
• 29:55
  SPEAKER_03: But my personal view is that Agen can grow faster than this, so they take market share, um, and they can even increase the total addressable market for the PSP market by offering extra and innovative services like what I already told you embedded finance.
• 30:11
  SPEAKER_03: Um has noted several times at their earnings calls that they still have single digit market share, so there's a lot of room to grow for them.
• 30:20
  SPEAKER_04: And were Agen's main competitors?
• 30:22
  SPEAKER_04: We mentioned Stripe before.
• 30:25
  SPEAKER_03: Uh, can you tell us something more about it?
• 30:28
  SPEAKER_03: I think Agen's main competitors are Stripe and Braintree, maybe Chase Payment Tech as well.
• 30:35
  SPEAKER_03: But there are many other in the payment processing market, like I already mentioned, maybe even 50, like Amazon uh has 50 PSPs.
• 30:43
  SPEAKER_03: Um, and most competitors are built on legacy systems which have drawbacks like higher cost or slower processing, limited functionality.
• 30:52
  SPEAKER_03: Um, for example, Chase Payment Tech, yeah, this is a really big legacy player, uh, focus on simpler payments and offering fewer payment methods compared to Agen.
• 31:03
  SPEAKER_03: Um, while Chase is fine for the US-only businesses, Agen is a better option for the global companies with local payment needs.
• 31:11
  SPEAKER_03: And Wardline is another big payment service provider who have acquired 33 companies and had to integrate all those systems into one.
• 31:19
  SPEAKER_03: And the result is a system that is that works but is connected with duct tape, and this results in slower processes, barely any updates and very little innovation.
• 31:31
  SPEAKER_03: Um, then we have checkout, another legacy competitor that doesn't offer point-of-sill terminals, and yeah, basically all legacy PSPs come with dwell downs but are cheaper than, for example, a general stripe.
• 31:45
  SPEAKER_04: So, what about what if you're a supermarket from the USA, let's say uh Target, which I think solely operates in the US, then Chase Payments tax might be a good solution, right?
• 32:02
  SPEAKER_04: Because maybe people only pay with credit cards there, they don't do not need to integrate international sales.
• 32:08
  SPEAKER_03: Yeah, you are completely right.
• 32:10
  SPEAKER_03: Uh for those kind of simpler payments, and legacy PSP like Chase Payment Tech is uh is is pretty good for them.
• 32:20
  SPEAKER_03: Alright.
• 32:21
  SPEAKER_04: Do you have an example where legacy competitors had issues with their systems?
• 32:27
  SPEAKER_03: Yeah, it's funny because when I was researching AGEN, I stumbled upon uh a news article, uh, and that news article said Worldline says permit services back to normal after major disruption in Italy.
• 32:41
  SPEAKER_03: So during the um yeah Black Friday season, they their services didn't work.
• 32:47
  SPEAKER_03: And can you can you imagine how frustrated that those businesses were that process payments to Worldline and they miss a lot of revenue?
• 32:55
  SPEAKER_03: That's really a ramp, I think.
• 32:58
  SPEAKER_03: That would have cost them a lot of money, yeah.
• 33:01
  SPEAKER_03: So that is why uh yeah, maybe sometimes you want to pay more for better PSP.
• 33:07
  SPEAKER_04: Yeah, and in the meantime, Achen had like 99.99999 percentage uh authorization rates, right?
• 33:16
  SPEAKER_04: Or uptime, uptime, exactly.
• 33:18
  SPEAKER_03: Uptime, yeah.
• 33:19
  SPEAKER_03: So uh they did a very good job, but uh Worldline uh filled the test, I think, for uh Black Friday, so that is uh painful for those merchants.
• 33:30
  SPEAKER_03: Yep, and um yeah, like you like you said with your example from uh Target, yeah, there is just no one, there's no one size fits all in the PSP market.
• 33:41
  SPEAKER_03: Uh, small businesses might prefer Stripe or Square, while larger companies might choose Braintree.
• 33:47
  SPEAKER_03: Um, and for global ent enterprises with an omni-channel project, maybe Agen is uh the better fit.
• 33:54
  SPEAKER_03: So, yeah, that is something I learned by reading all those interviews.
• 33:59
  SPEAKER_03: There is no one size fits all in the PSP market, it's quite fragmentated, and I think it will be for quite some time.
• 34:06
  SPEAKER_03: Yeah, with all the differences in this market, do you think it will ever consolidate?
• 34:12
  SPEAKER_03: Yes, I think, but only to a certain extent.
• 34:15
  SPEAKER_03: There, I think there will always be room for uh legacy payment service providers because of their lower cost, so they can be quite attractive for uh for simpler payments.
• 34:27
  SPEAKER_03: And that was something I didn't expect when I started this analysis.
• 34:31
  SPEAKER_03: I thought Agen and Stripe would push all the legacy providers out of the market, but now I don't think this is true anymore.
• 34:38
  SPEAKER_03: Although they certainly win wallets and market share over those competitors.
• 34:42
  SPEAKER_04: Yeah, maybe at the at the final end, let's say in 10 years, when they reach a very high skill and they might be able to offer lower uh lower rates to clients.
• 34:53
  SPEAKER_04: Is that a possibility?
• 34:55
  SPEAKER_03: Yeah, but it's not this strategy that Agen has right now, and I'm not sure if they will ever do that to win, yeah, to push those competitors out of the market.
• 35:06
  SPEAKER_03: They price premium, they they have a premium product, so that's basically how they work operate.
• 35:12
  SPEAKER_04: Right.
• 35:13
  SPEAKER_04: So then, as an Agen shareholder, you have to hope for a continuing globalization, right?
• 35:19
  SPEAKER_03: Yeah, that would be great because that means more complex payments, and yeah, more complex payments are where Agen is very good in, so uh that would be great for Agen.
• 35:30
  SPEAKER_04: Okay, so let's zoom in a final time on that competitor stripe.
• 35:36
  SPEAKER_04: What are the similarities or big differences?
• 35:40
  SPEAKER_03: Yeah, I will name a couple.
• 35:42
  SPEAKER_03: Um, in the written analysis, I've made a table of this, and uh one thing that stood out to me was a notable difference is that the number of countries where payments are accepted.
• 35:54
  SPEAKER_03: I found out that it was roughly 100 at Agen and only about 50 for Stripe.
• 35:59
  SPEAKER_03: So Agen is yeah, really a global player, and Stripe more yeah, in the uh in yeah, also a lot of markets, but just less.
• 36:09
  SPEAKER_03: Um, payment methods offered by Agen, uh, what I can find on the site were also around 100, and at Stripe they were 60, so also yeah, a difference here.
• 36:20
  SPEAKER_03: The take rate for Agen is yeah, very low, 0.2%.
• 36:26
  SPEAKER_03: So when you have a payment of$100, only 20 cents of that goes to basically Agen.
• 36:34
  SPEAKER_03: Um, and the take rate for Stripe is quite high, actually, and this is around 1%.
• 36:41
  SPEAKER_03: And Matthijs, do you have any idea how so?
• 36:44
  SPEAKER_04: Yeah, I think that's still because of the big difference between the size of customers.
• 36:50
  SPEAKER_04: So Agen is very large enterprises who can negotiate better prices, as Stripe is in with many more small companies, medium-sized companies.
• 37:01
  SPEAKER_03: Yeah, that's that's right.
• 37:03
  SPEAKER_03: That's right.
• 37:04
  SPEAKER_03: I knew it, but I wanted to test you and you uh succeeded.
• 37:07
  SPEAKER_03: Yeah, smaller companies though just don't have bargaining power and they have to accept a higher take rate, and uh that is what yeah, those global giants, yeah, they certainly have bargaining power with multiple PSPs.
• 37:20
  SPEAKER_03: Um, and also the onboarding process at Agen is quite hard.
• 37:25
  SPEAKER_03: Uh, as we know, we couldn't we couldn't be a customer of Agen.
• 37:30
  SPEAKER_03: Um, but we can easily be a customer of Stripe.
• 37:34
  SPEAKER_03: And um, yeah, also Agen has three, maybe even four banking licenses right now, and uh yeah, Stripe doesn't have any banking licenses.
• 37:44
  SPEAKER_04: Looking at this table, it seems like an easy choice as a big company.
• 37:49
  SPEAKER_04: If you look at the number of countries available, payment methods, stake rate, Agen scores better in every in every variable.
• 37:57
  SPEAKER_03: So, yeah, yeah, but for like I said, if you are only operating as a company in the US and in Canada in in the Netherlands, yeah, I think Stripe is also fine here.
• 38:09
  SPEAKER_03: And if I think you can negotiate uh if you are a bigger company, uh also better take rates at uh at Stripe.
• 38:17
  SPEAKER_04: So all right, I think that's it for the industry.
• 38:22
  SPEAKER_04: Let's move on to the competitive advantage.
• 38:30
  SPEAKER_03: Yes, the competitive advantage.
• 38:34
  SPEAKER_03: Uh let me be quite straight here.
• 38:36
  SPEAKER_03: Um, I don't think Agen has a durable competitive advantage.
• 38:42
  SPEAKER_03: Because they don't benefit from network effects, high switching costs, uh patents, and a strong brand, or uh significant skill advantages.
• 38:50
  SPEAKER_03: Yeah, I don't think they have a durable competitive advantage, and but what they do have is a superior process and a long-term focus.
• 38:58
  SPEAKER_03: Agen works very closely with their customers building relationships over time, but is that enough to create a sustainable mode?
• 39:07
  SPEAKER_03: Yeah, I'm not convinced.
• 39:09
  SPEAKER_03: As you certainly know, Matthew's in 2022-2023 uh BrainTree challenged the wall payment service market and certainly also Agen with extremely low pricing, especially in America.
• 39:22
  SPEAKER_03: Um, and despite this, Agen wasn't significant significantly impacted.
• 39:28
  SPEAKER_03: I'm sure Agen uh did lose some wallet share of uh of customers to BrainTree, but yeah, customers just didn't leave, and uh the prices of Braintree were so low that this was not sustainable, and now you see they are also asking higher prices, and you see uh Agen taking wallet share again.
• 39:49
  SPEAKER_03: So, this is yeah, this shows me some resilience, but it doesn't necessarily indicate a lasting edge, in my opinion.
• 39:57
  SPEAKER_03: What are what do you think about uh the mode of Agen Bathais?
• 40:00
  SPEAKER_04: I think it's not impossible to overtake Agen, but I think it's very difficult for companies to be better than Agen.
• 40:08
  SPEAKER_04: That's my view uh view of it.
• 40:12
  SPEAKER_04: I I think I think the the the facts speak for itself.
• 40:16
  SPEAKER_04: Agen is consistently growing faster than competitors, um, realizing very high margins as well, and I think that says something about their durability.
• 40:27
  SPEAKER_04: But as I said, it's not impossible to at a certain time overtake them.
• 40:32
  SPEAKER_04: But it will be very hard, and it will take a lot of investments for companies to do it.
• 40:38
  SPEAKER_03: Yeah, yeah.
• 40:39
  SPEAKER_03: Maybe now we are talking about this.
• 40:41
  SPEAKER_03: Maybe you can also see it coming as an investor.
• 40:44
  SPEAKER_03: Like you see that uh PSP is building into more countries, uh accepting more payment methods, and there will certain there will certainly be written about this.
• 40:55
  SPEAKER_03: So maybe you can see it coming.
• 40:57
  SPEAKER_03: Um, I agree with you that it's uh that it's quite hard, but I don't really see uh CMO it.
• 41:04
  SPEAKER_03: Also, after reading all those interviews, I think that yeah, customers are looking at prices very uh very high.
• 41:12
  SPEAKER_04: So it's it's difficult to gain wallet share from solely US operating companies, that's where I agree with.
• 41:20
  SPEAKER_04: I think they do not really have an edge compared to a GP JSTEC in uh in the US, solely the US.
• 41:28
  SPEAKER_04: But if I if I look at your attached article from Worldline, for example, we're trying to connect uh more than 30 companies into one, then I think Agen will take a lot of market share from them in the future, as well as was will Stripe, I guess.
• 41:49
  SPEAKER_03: Yeah, I really hope so because you are a shareholder and I'm still a shareholder, but um I think the yeah the growth will slow down because those legacy providers they they will exist, in my opinion.
• 42:04
  SPEAKER_03: After reading those articles, I think there will be a lot of room for those uh legacy PSPs because of their lower pricing.
• 42:12
  SPEAKER_03: So that's something I'm a little bit worried about, actually.
• 42:18
  SPEAKER_04: And also also don't forget the fact that more and more payments are coming through online, and that's where also more payment solutions are possible for merchants to to give to their clients.
• 42:34
  SPEAKER_04: So I think that's a big tailwind for AGEN.
• 42:39
  SPEAKER_04: So you have that that growth that that comes from just like globalization growth, online growth, and you have AGEN taking market share.
• 42:49
  SPEAKER_04: So it's like some sort of dual engine.
• 42:52
  SPEAKER_03: Do you see it the same way, or yeah, they certainly have tailwinds, but when we talk about the mode, I think it's actually not that strong.
• 43:03
  SPEAKER_03: Like a Molly here in the Netherlands, also uh a Dutch company, they have also a single platform, they have also never done uh an acquisition, so they I think they can catch up with Agen.
• 43:15
  SPEAKER_03: I think if Agen doesn't innovate, they they they are not worth their premium price.
• 43:20
  SPEAKER_03: And yeah, of course Molly is yeah focuses on a different market, more small to medium-sized businesses, but they yeah, it's software.
• 43:28
  SPEAKER_03: I think uh it is possible they built what Agen has built.
• 43:32
  SPEAKER_04: Do you think that culture could be a it's definitely an advantage, but could it be a competitive advantage?
• 43:44
  SPEAKER_03: Um I think it's not uh not strong.
• 43:49
  SPEAKER_03: Yeah, I think culture is never strong enough to be a sustainable, durable advantage.
• 43:57
  SPEAKER_03: No, I uh I think it's certainly an advantage.
• 44:00
  SPEAKER_03: Like they never do an acquisition, and because of that, their system they they can innovate faster.
• 44:06
  SPEAKER_03: But like I said, other companies can also do that.
• 44:09
  SPEAKER_03: Molly actually also does that, never does an acquisition, and with enough engineers, they can catch up, I think.
• 44:17
  SPEAKER_03: So um, so yeah, that's another mode.
• 44:20
  SPEAKER_04: Alright, let's see what happens in the coming years.
• 44:23
  SPEAKER_04: I'm very curious, and we will follow it with huge interest.
• 44:28
  SPEAKER_03: Yeah, yeah.
• 44:29
  SPEAKER_03: Yeah, a gen has high barriers to entry, like you said, it's very hard to match their offering.
• 44:36
  SPEAKER_03: Um but when you look at their digital segment, that is becoming more and more a commodity.
• 44:44
  SPEAKER_03: The digital segment where 60% of their revenues come from, like simple online payments.
• 44:50
  SPEAKER_03: And it's quite worries, it quite worries me that Agen has so much um revenues coming from the digital segment, and the unified commerce and platforms they have higher switching costs.
• 45:02
  SPEAKER_03: So uh if that would change, I think their mode would be stronger, but um with all those point-of-sale terminals, uh upfront investment, plus uh but right now it's not uh very very strong, I think.
• 45:18
  SPEAKER_04: But I still don't get then why it's possible for ICEN to realize 40 plus percent net margins.
• 45:27
  SPEAKER_03: That's uh that's a good note, Matthijs, but I think it's some kind of inherent to their business model, just like Visa or MasterCard, just when you have enough skill, your margins will increase significantly.
• 45:40
  SPEAKER_03: And yeah, when you compare that to competitors like Braintree and Stripe, they are barely profitable, so um Agen is certainly way more efficient.
• 45:52
  SPEAKER_03: But I think if those companies reach a certain skill, process more payments, and they they can also get uh those high margins.
• 45:59
  SPEAKER_03: But uh Agen is certainly way leaner, don't hire as quick as uh as those other companies.
• 46:05
  SPEAKER_04: But yeah, if you say that Stripe and Printry are not profitable, then the difference is even bigger.
• 46:11
  SPEAKER_04: To me, it's an indication that merchants cannot get around Agen because they can basically win 40% by moving, otherwise.
• 46:21
  SPEAKER_04: So that's an interesting point, I think.
• 46:26
  SPEAKER_03: Yeah, I I think Agen is certainly the best solutions for a lot of global merchants, but yeah, but I think it also has to do with just how Agen operates.
• 46:37
  SPEAKER_03: Like yeah, they don't overhire, they don't yeah, they take in everything such a long-term view, and uh also by not acquiring those companies, yeah, you your processes will be way more efficient.
• 46:51
  SPEAKER_03: So you also in that you don't need more employees.
• 46:54
  SPEAKER_03: Um, so there are a lot of small benefits that come from the the long-term vision, which is culture, I think.
• 47:01
  SPEAKER_03: But yes, I think we are done with the mode, right?
• 47:04
  SPEAKER_03: Or do you have something to add?
• 47:06
  SPEAKER_03: Uh no, I think we can move over to the management.
• 47:14
  SPEAKER_04: So, Piet van der Does is co-founder and co-CEO of Agen.
• 47:20
  SPEAKER_04: You have watched and read a lot of interviews from him.
• 47:24
  SPEAKER_04: What do you think about him?
• 47:27
  SPEAKER_03: Yeah, I think he's a really, really great guy.
• 47:30
  SPEAKER_03: He's very humble, and um yeah, he's just also he's not a technical guy, more a commercial guy.
• 47:36
  SPEAKER_03: And when you watch interviews with him, uh just listen to he's not in a lot of podcasts, but listen to podcasts of him.
• 47:44
  SPEAKER_03: You certainly can get a grasp of what kind of person he is, and he's great.
• 47:48
  SPEAKER_03: And most of the time, he focuses actually on uh tasks like selecting training programs uh for Agen employees and conducting final interviews, and that is something you don't see that often with a co-CEO position that is doing that.
• 48:03
  SPEAKER_03: He's just very focused on the culture of Agen.
• 48:06
  SPEAKER_03: No, you don't see that very often.
• 48:08
  SPEAKER_03: No, indeed, and yeah, all those operational tasks, he yeah just outsourced to um uh Ingo Uiterhage, who is uh also co-CEO, or Ethan Tandowski, who is uh CFO.
• 48:24
  SPEAKER_03: Yeah, Agen takes hiring very seriously, so they don't overhire.
• 48:29
  SPEAKER_03: And in 2022, 2023, when all those tech companies were laying off employees, they actually hire a lot of employees.
• 48:38
  SPEAKER_03: Yeah, and investors didn't like that, and investors didn't like that, no.
• 48:43
  SPEAKER_03: Of course, this have has an impact on your net margins, and uh but yeah, we have to see if that uh if those investments in employees are going to work out.
• 48:55
  SPEAKER_03: What do you think?
• 48:56
  SPEAKER_04: If it was a good decision, you mean yes, difficult.
• 49:00
  SPEAKER_04: I I think it's it underscores the long-term view because they are also always taking the the long-term view with everything they say.
• 49:08
  SPEAKER_04: That's also why they didn't publish I think they didn't publish quarterly results, right?
• 49:14
  SPEAKER_04: Before that's right, and now they are doing so because of shelter pressure, but they did not care about the next quarter or the the next year, they they care about the next 5, 10, 20 years.
• 49:25
  SPEAKER_04: That's what I like about them.
• 49:27
  SPEAKER_04: Everyone was firing people, and Agen was just hiring people if they could find very good and suitable employees.
• 49:36
  SPEAKER_03: Yeah, there has to be a strong fit uh to the Agen culture and to of course what they need uh as in you as an employee.
• 49:46
  SPEAKER_03: Uh and Peter van der Duis has a Glassdoor approval rate of 88%, which is quite high.
• 49:52
  SPEAKER_03: Uh, and I think yeah, he's just uh he's very respected also in the industry, also at employees of Agen, he's very respected just as uh Ingo Uitach, the other co-CEO.
• 50:05
  SPEAKER_03: And this I'm gonna tell you a funny story because in recent years Van de Dus has reduced his uh shareholding in Agen by selling shares regardless of the price.
• 50:15
  SPEAKER_03: And when I was at the annual meeting, I asked him personally like um why he sold all those shares.
• 50:23
  SPEAKER_03: You have a long-term view, right?
• 50:25
  SPEAKER_03: You are you you have trust in the company, right?
• 50:28
  SPEAKER_03: So also in the share price.
• 50:29
  SPEAKER_03: Why why do you share why do you sell those shares?
• 50:32
  SPEAKER_03: And he responded, um, it was something like, most of my wealth is in agent stock, and I think it's smart to diversify my personal assets.
• 50:41
  SPEAKER_03: Uh, of course, I can understand it, but um, I'm not sure if this has any to do, but um, when the share price dropped, he stopped uh selling shares, and um now he also doesn't buy shares, but he has around 1500 times his base salary in shares, so he yeah, he there's more than enough skin in the game.
• 51:05
  SPEAKER_03: Yeah, that's that's definitely more than enough.
• 51:08
  SPEAKER_03: And what about the other co-CEO?
• 51:10
  SPEAKER_03: Uh yeah, that's Ingo Uithage.
• 51:12
  SPEAKER_03: He joined Agen in 2011 as um chief financial officer, and before joining Agen, he worked at uh several financial and board jobs at companies like Keep N, uh, that's a Dutch telecommunication network.
• 51:28
  SPEAKER_03: Um, and in 2023 he got promoted to co-CEO.
• 51:31
  SPEAKER_03: And following the fintech magazine, the choice was uh has to do with the uh health of uh of Pieter van der Does uh that seems to be yeah decreasing or not going as well, the health of van der Does.
• 51:45
  SPEAKER_03: Um, and Uiterhager seems like a very competent leader for Agen.
• 51:49
  SPEAKER_03: Uh, how he comes across in interviews, it's think yeah, it's it's great, and he also has a long-term vision, like Van der Does.
• 51:57
  SPEAKER_03: Um, and he holds over 500 times his base salary in shares, so these are phenomenal uh figures.
• 52:04
  SPEAKER_04: Yeah, both enough skin in the game.
• 52:08
  SPEAKER_04: And do you also want to talk about the CFO, Ivan Tandowski?
• 52:13
  SPEAKER_03: Yeah, Tandowski, uh also a great guy.
• 52:16
  SPEAKER_03: I I talked to him at the last annual meeting, and he is a very cool and smart guy, and he also seems to breathe the Agen culture, just like very long-term thinking, uh, very in intriguer.
• 52:30
  SPEAKER_03: He comes uh intriguer, he comes across.
• 52:33
  SPEAKER_03: So uh he worked for Agen since 2017, and I've read in interviews that Agen might be very happy to keep him on board because uh yeah, he's a very talented guy.
• 52:46
  SPEAKER_03: So Agen did a great job holding him on board.
• 52:49
  SPEAKER_03: Um, he has very few shares, but but now he uh is appointed to chief financial officer.
• 52:56
  SPEAKER_03: I think this will increase uh the coming years significantly.
• 52:59
  SPEAKER_04: Yeah.
• 53:00
  SPEAKER_04: The two co-CEOs have a big share position, which might be an incentive in itself, but what are the other incentives for the management team?
• 53:09
  SPEAKER_03: Yeah, it's a comparison between peers in the payment and financial industry um and in the high-tech and listed uh IEX index.
• 53:18
  SPEAKER_03: The IEX index is the Dutch index.
• 53:22
  SPEAKER_03: Uh, they also have a fixed remuneration in the form of cash and equity.
• 53:26
  SPEAKER_03: They have a variable remuneration in the form of equity and since short, uh, a new hire policy.
• 53:32
  SPEAKER_03: And this is the possibility of granting a sign-on award in cash or equity uh instruments to to external hires.
• 53:41
  SPEAKER_03: So uh the new hire policy enables Agent to recruit the best talent available.
• 53:47
  SPEAKER_03: And when I read the remuneration report, that's what it was so funny because uh they said like we aim for total remuneration of management board members to not be positions above the median of the peer group.
• 54:02
  SPEAKER_03: So they basically say like we want to give less to the uh yeah management board.
• 54:09
  SPEAKER_03: Where do you read that?
• 54:11
  SPEAKER_03: I've never read that to be honest.
• 54:13
  SPEAKER_03: So no, me neither.
• 54:14
  SPEAKER_04: I think this is the first time that I heard something like this.
• 54:17
  SPEAKER_03: Yeah, and also this sentence also from the when also from the remuneration uh report.
• 54:23
  SPEAKER_03: We deeply believe in treating our management board members the same as other employees, therefore, we offer them pension and benefits arrangements in line with typical market practice and in accordance with what we offer our wider workforce.
• 54:38
  SPEAKER_03: So they there's not a yeah big difference between uh the management board and uh and the employees, which I think it's yeah great for the culture at AGN.
• 54:47
  SPEAKER_03: And we can also see that the CEO and other management board members earned only seven times as much as an average employee.
• 54:54
  SPEAKER_03: And for your comparison, at the most other companies, this ratio stands at at least 20 times.
• 55:00
  SPEAKER_03: So I think yeah, the culture of AGEN also in this part is great.
• 55:06
  SPEAKER_04: Yeah, so the gap between the management and the overall employees is relatively low at Agen.
• 55:11
  SPEAKER_03: Yeah.
• 55:12
  SPEAKER_04: Which also fits in the culture, I think.
• 55:14
  SPEAKER_04: I think the the lines are very short with an organization, it's a very flat one.
• 55:20
  SPEAKER_03: Yes.
• 55:21
  SPEAKER_04: So I think it's more in line with with everything.
• 55:24
  SPEAKER_04: Okay, since Agen has a lot to do with numbers when they are processing money, let's talk about finances.
• 55:35
  SPEAKER_03: Yes, and let's start off with the capital allocation of Agen.
• 55:39
  SPEAKER_03: Uh, for now, Agen chooses to reinvest all available funds back into the business or to strengthen their balance sheet.
• 55:47
  SPEAKER_03: And as of H1 2024, Agen's balance sheets consist mainly of cash and equivalents, around 8.7 billion.
• 55:56
  SPEAKER_03: And approximately 6 billion needs to be repaid to merchants or schemes, and that means that not all of Agent's cash and equivalents are truly their own.
• 56:07
  SPEAKER_03: And the management said they choose to strengthen the balance sheet because this makes regulatory issues and gaining banking licenses easier.
• 56:16
  SPEAKER_03: The cash bile is growing and growing, and at some point it has to be distributed to shareholders, and this is exactly what I expect them to do.
• 56:25
  SPEAKER_03: They have a debt-free balance, um, but they basically has some kind of float, like they have they earn money earlier than they have to pay it, so they also earn a lot of interest.
• 56:37
  SPEAKER_03: Um, and the main investment Agen can make is in new employees, and last year they invested heavily in new uh employees, and now, like I told you, this is pressure on the margins, this is putting pressure on the margins, uh, and now they lowered their hiring pace, and we expect operational leverage will kick in in uh 2025, for example.
• 56:58
  SPEAKER_03: And something we love very much is that Agen has very few stock-based compensation, only about only about 1.5% of net revenue.
• 57:08
  SPEAKER_03: So that is that is really great.
• 57:10
  SPEAKER_03: Um but I think this will increase in the future because they are moving more to America, and um, yeah, there they employees demand yeah higher stock-based compensation.
• 57:22
  SPEAKER_04: Yeah, and that that might be a natural advantage comp compared to Braintree and Stripe, because I think those US-based companies you have to you have to pay the employees like twice or maybe three times as much of a salary than in than here in the Netherlands.
• 57:39
  SPEAKER_03: Yeah.
• 57:40
  SPEAKER_03: And if you're only gonna work for at Agen for the money, I've yeah, you are just not a good fit.
• 57:46
  SPEAKER_03: So that's something uh that's really great.
• 57:48
  SPEAKER_03: Yeah, indeed, some kind of net natural advantage.
• 57:51
  SPEAKER_04: Yeah.
• 57:52
  SPEAKER_04: What are the key financial numbers you are looking for with Agen?
• 57:57
  SPEAKER_03: Of course, net revenues.
• 57:58
  SPEAKER_03: Um, and over the past few years this grew from 500 million in 2019 to 1630 million in 2023, so really exploded.
• 58:10
  SPEAKER_03: Uh, this implies a keggot of around 34%.
• 58:13
  SPEAKER_03: Um, and there is one thing to remember: I don't think this kind of growth uh is likely to happen again in the future because yeah, the low-hanging fruit, like the the the big global mergins, yeah, most of them are already onboarded at AGEN.
• 58:29
  SPEAKER_03: So I think yeah, 22-25% growth rate seems more reasonable to me.
• 58:36
  SPEAKER_03: And I would also focus on volumes because this implies the market share they're they are taking, and also uh yeah, Stripe in their annual letter is also talking about volumes, uh, so you can compare both.
• 58:50
  SPEAKER_04: What about the net margins for Argen?
• 58:52
  SPEAKER_04: I think we spoke briefly about it during the the moat.
• 58:56
  SPEAKER_04: How is it developing?
• 58:57
  SPEAKER_03: Yeah, net margins.
• 58:59
  SPEAKER_03: Yeah, they hired a lot of employees, uh putting pressure on the margins, and they still have a net margin of 43% in 2023.
• 59:09
  SPEAKER_03: So that's really extraordinary.
• 59:12
  SPEAKER_03: Yeah.
• 59:13
  SPEAKER_03: Um don't see that often.
• 59:17
  SPEAKER_03: Exactly.
• 59:18
  SPEAKER_03: This so that's actually very great.
• 59:20
  SPEAKER_03: Um, and they stated that the investment in personal will convert to more profits in the coming years, and I think in 2025 and later it's very likely Agenda has profit margins of maybe even 50%.
• 59:34
  SPEAKER_03: So that is just another leak compared to most other companies.
• 59:38
  SPEAKER_04: But that um I think you said that the market is likely to commoditize more in the future, right?
• 59:45
  SPEAKER_04: But but they still can realize higher net margins.
• 59:49
  SPEAKER_03: Yeah, and I will tell you why, because each dollar or euro coming in is just very high margin.
• 59:56
  SPEAKER_03: So you have to look at net revenues.
• 59:58
  SPEAKER_03: If net revenues is growing, so basically the money they earn from their merchants, then the uh net margin is also gonna grow.
• 1:00:06
  SPEAKER_03: So it's not like uh a physical product where you have a lot of costs involved.
• 1:00:12
  SPEAKER_03: Basically, if the net revenues are growing, there are there really aren't a lot of fixed costs, uh, the net net margin will grow, and I think uh that's exactly how this is gonna play out.
• 1:00:23
  SPEAKER_04: Yeah, so at a certain point in time, every extra dollar is an extra dollar of profit.
• 1:00:29
  SPEAKER_03: Yeah, if they reach uh a scale of uh maybe 100 trillion uh of volumes, that's like uh 100x, then um then that's gonna happen.
• 1:00:41
  SPEAKER_03: Yeah, yeah.
• 1:00:42
  SPEAKER_03: You also see that at Visa right now, right?
• 1:00:44
  SPEAKER_03: Those margins and that MasterCard, those margins are incredible high.
• 1:00:48
  SPEAKER_03: They also don't have a lot of costs.
• 1:00:50
  SPEAKER_04: Alright.
• 1:00:51
  SPEAKER_04: Yeah, so the costs are very fixed, and if you reach a certain stage, then every dollar of extra revenue is basically extra profit.
• 1:01:02
  SPEAKER_03: Yes, and they have a tiered pricing model, so when uh the volumes are increasing at a at a merchant, uh the yeah, take rate will be lower.
• 1:01:12
  SPEAKER_03: But that this doesn't affect margin, this does affect revenues.
• 1:01:16
  SPEAKER_03: So here also you see um yeah the revenue will grow slower, but the net margin will be even higher.
• 1:01:25
  SPEAKER_03: You you understand?
• 1:01:27
  SPEAKER_04: Yep, I do.
• 1:01:28
  SPEAKER_03: Okay, great.
• 1:01:30
  SPEAKER_03: And often that income, yeah, around 40% of uh of the net income is interest income, that is huge.
• 1:01:38
  SPEAKER_03: Um they also have a lot of uh cash on their balance sheet, so that as uh yeah, they they they stall it at the central bank of Europe, uh, as in other banks as well to get interest income.
• 1:01:50
  SPEAKER_04: Yeah, it's so great that they can use the money that's being paid to collect the to collect uh interest from from banks, especially with their banking license, it allows them to even get higher interest rates, and that's uh that's a very positive point.
• 1:02:08
  SPEAKER_03: Yes, that's right, that's right.
• 1:02:10
  SPEAKER_04: And what are the financial targets from ICN?
• 1:02:14
  SPEAKER_03: Yeah, they stated this at the um at the investor day.
• 1:02:18
  SPEAKER_03: Um, net revenue growth between 20 and 29 percent, uh, EBITDA margins to levels above 50%, and EBITDA and net margins are basically the same because they don't have a lot of depreciation and amortization uh and do earn a lot of interest.
• 1:02:36
  SPEAKER_03: Um, and the capex expenditure of 5% of net revenues.
• 1:02:40
  SPEAKER_03: So I think they will um succeed in all of this.
• 1:02:45
  SPEAKER_04: But you miss something in these targets, or do you think it's complete?
• 1:02:49
  SPEAKER_03: No, I think it's uh it's great.
• 1:02:51
  SPEAKER_03: Do you do you miss something, Mathijs?
• 1:02:53
  SPEAKER_04: No, no, no, I was just asking.
• 1:02:55
  SPEAKER_04: Alright.
• 1:02:56
  SPEAKER_04: So let's start with the risks and opportunities.
• 1:03:01
  SPEAKER_04: What do you think are the main risks for Ajen?
• 1:03:04
  SPEAKER_03: Yeah, this would really be a horror scenario when a non-legacy competitor like Stripe are decreasing prices.
• 1:03:11
  SPEAKER_03: Uh, I've read in an interview that BrainTree that lowered their pricing is actually a legacy player, um, and Stripe is not a legacy player.
• 1:03:22
  SPEAKER_03: If they are going to decrease prices at those large mergins, yeah, I think Agen has to come down as well.
• 1:03:29
  SPEAKER_03: So, yeah, if they don't do that, they lose wallet share and eventually customers.
• 1:03:34
  SPEAKER_03: So uh, this is especially true for the digital pillar where roughly 60% of volume come from.
• 1:03:40
  SPEAKER_03: So this is uh something to really keep an eye on.
• 1:03:44
  SPEAKER_03: Um I'm not sure how big the chance how big the chance is that this happens, because I think this is not what Stripe wants, and certainly not what Agen wants.
• 1:03:55
  SPEAKER_03: But uh, if they're gonna fight for market share, this is this can happen.
• 1:03:59
  SPEAKER_04: Yeah, but this is also a risk that can break Agen as a as an investment.
• 1:04:04
  SPEAKER_03: Yeah, I think I think Agen would win this pricing price wire because they have yeah, way lower uh costs, they are way more profitable right now, but um yeah, this could break an investment because the valuation wouldn't fit anymore if uh if this happens.
• 1:04:23
  SPEAKER_04: Yeah.
• 1:04:24
  SPEAKER_03: Yeah, and a data breach or a hack or something like that could be disastrous because yeah, if that happens, a competitor like Stripe could say, Yeah, we are more trustworthy and more safe, uh, you know the data breach of 2024-2025.
• 1:04:40
  SPEAKER_03: No, uh, yeah, you can lose customer deals on that.
• 1:04:43
  SPEAKER_04: So yeah.
• 1:04:45
  SPEAKER_04: It's also uh I'm just thinking of it now.
• 1:04:48
  SPEAKER_04: Is the blockchain a risk for Agen?
• 1:04:51
  SPEAKER_03: No, I don't think so.
• 1:04:52
  SPEAKER_03: I think when I don't think it's gonna happen, to be honest, but if uh Bitcoin is gonna be uh it's gonna be a payment method, they can integrate it in their platform.
• 1:05:03
  SPEAKER_03: So it's more an yeah, it's more a risk for Visa or MasterCard for the payment networks than for uh than for Agen.
• 1:05:12
  SPEAKER_04: Okay, okay.
• 1:05:14
  SPEAKER_04: Good to know.
• 1:05:15
  SPEAKER_04: Uh on the other hand, what can make Agen perform better than we would expect now?
• 1:05:21
  SPEAKER_03: Yeah, I think there are a few very big opportunities, so a lot of tailwinds for Agen.
• 1:05:27
  SPEAKER_03: Uh, for example, when the platform business is gonna take off, and right now, yeah, this is just a small percentage of overall revenues, but I think this is gonna increase.
• 1:05:38
  SPEAKER_03: Yeah, they attract a lot of customers, um, like eBay, Dr.
• 1:05:43
  SPEAKER_03: Lib, GoFundMe, Wix, all platforms, and the the integration process for platforms are higher, uh, more switching costs.
• 1:05:50
  SPEAKER_03: So, yeah, this is very uh very interesting.
• 1:05:54
  SPEAKER_03: Also, when they are going to disrupt legacy players, this is something I don't expect.
• 1:06:00
  SPEAKER_03: Could be a big chance when these traditional banks and more legacy providers are gaining less volume.
• 1:06:08
  SPEAKER_03: That means basically less profit and perhaps they can eventually go bankrupt.
• 1:06:13
  SPEAKER_03: And this is something we see at Worldline, for example, that is barely growing and is barely profitable, innovate slowly.
• 1:06:20
  SPEAKER_03: Yeah, I think Agen can push a player like that out of the market because they aren't profitable, like Chase Payment Tech in the United States.
• 1:06:28
  SPEAKER_03: They are profitable.
• 1:06:30
  SPEAKER_03: And on the other side, there's a gen, very profitable, fast growing and innovating.
• 1:06:34
  SPEAKER_03: So that makes it an easy choice for merchants.
• 1:06:38
  SPEAKER_03: I will name one more and then I uh stop this uh very positive story.
• 1:06:43
  SPEAKER_03: Um I think embedded finance is following Agen a 185 billion opportunity, largely untapped by platforms.
• 1:06:52
  SPEAKER_03: And if this service can succeed, the merchant gets more profit, and also Agen creates yeah, is very focused on this, and they will also profit from this uh financially.
• 1:07:03
  SPEAKER_03: So uh yeah, great.
• 1:07:06
  SPEAKER_04: And maybe also to add one last one, maybe you can add something about it.
• 1:07:12
  SPEAKER_04: But um, is Agen also some sort of like spawner stock?
• 1:07:16
  SPEAKER_04: I I mean Google has many initiatives, people have are they like their own entrepreneurs within Google?
• 1:07:23
  SPEAKER_04: I think Agen has a similar culture where there are also teams working on future projects.
• 1:07:30
  SPEAKER_04: So it would this be an opportunity for Agen.
• 1:07:35
  SPEAKER_03: Yeah, I don't wanna be a harsh here, Matthijs, but I think a big no for uh for this.
• 1:07:41
  SPEAKER_03: Agen states quite clearly that they uh are not an Apple or very uh innovative company, like yeah, creating new products their own and see if it works.
• 1:07:53
  SPEAKER_03: No, Agen listens just to what customers need and they build that and they constantly do that, and uh it's not gonna be like they they launching new products, yeah.
• 1:08:05
  SPEAKER_03: Uh, and the and the customers think like, uh what is this?
• 1:08:10
  SPEAKER_03: I did it ask for this.
• 1:08:13
  SPEAKER_03: So um it's not like uh Apple or Google or something, or like uh NVIDIA.
• 1:08:18
  SPEAKER_03: No.
• 1:08:19
  SPEAKER_04: So Archen is purely focused on their clients and current offerings to improve that, yes.
• 1:08:25
  SPEAKER_04: Alright.
• 1:08:27
  SPEAKER_04: So now I'm very curious.
• 1:08:30
  SPEAKER_04: Let's go to the valuation.
• 1:08:37
  SPEAKER_03: The valuation, of course, very important because I think Agen is a strong enough company to to own, but there has to be a yeah, good, yeah, expected return.
• 1:08:49
  SPEAKER_03: Uh, I expect for the coming five years a growth of 20% per year of net revenues.
• 1:08:54
  SPEAKER_03: Uh, after that, uh, five years of 15% growth could be yeah are quite reasonable, I think.
• 1:09:01
  SPEAKER_03: I think they have a profit margin in year 10 of 50% and an exit multiple of 25.
• 1:09:09
  SPEAKER_03: And with this input at a price of 1500, the current stock price, uh, you get a gaggro of 9.4% per year, including that I expect a decrease in shares outstanding or a dividend.
• 1:09:24
  SPEAKER_04: So uh it sounds like um a doable scenario.
• 1:09:29
  SPEAKER_04: I think it's still hard for a company to grow this fast for 10 years straight.
• 1:09:36
  SPEAKER_04: But I think it definitely would be possible for Arjun.
• 1:09:40
  SPEAKER_03: Yeah, like growing faster than 15% a year for 10 years straight is is very hard, but I think there will be some years where they grow like 25%, maybe even that they accelerate the the current growth, but also some years when they uh yeah grow slower because a recession or something is quite yeah harsh for uh for Agen.
• 1:10:03
  SPEAKER_04: So they're almost a 100 billion company um in in 20 what is it 2034?
• 1:10:13
  SPEAKER_03: Yeah, 20, yes, exactly.
• 1:10:15
  SPEAKER_03: At the end of 2034, it will be a 100 billion company, and I think yeah, yeah, what when they focus on decreasing the um the cost of payments for merchants, they can ask uh maybe even higher price.
• 1:10:30
  SPEAKER_03: So it will be a big opportunity, something expect investors also don't expect right now if they if if that take rate can increase if they yeah lower the cost of payments for uh for uh merchants.
• 1:10:42
  SPEAKER_03: But this is just uh speculation.
• 1:10:45
  SPEAKER_03: I'm not sure if they're gonna do this, but yeah, yeah.
• 1:10:49
  SPEAKER_04: Alright, let's um wrap it up with the conclusion.
• 1:10:53
  SPEAKER_04: I'm very curious what are you going to do with your position?
• 1:11:01
  SPEAKER_03: Yeah, yeah, okay.
• 1:11:04
  SPEAKER_03: I will wrap it up.
• 1:11:06
  SPEAKER_03: So a 9% kegger isn't bad for a superb business, but here's the take.
• 1:11:11
  SPEAKER_03: I think Agen is a fantastic company and an exceptional employer, but I have doubts whether it's a great investment, and this all has to do with their durable competitive advantage, which I think is lacking.
• 1:11:25
  SPEAKER_03: I think competitors can catch up uh if Agen doesn't continue to innovate and there's a risk for a price war.
• 1:11:32
  SPEAKER_03: If Agen has to lower prices significantly, my entire valuation and investment fees could be thrown out of the window.
• 1:11:40
  SPEAKER_03: And yeah, with this level of uncertainty, I think I demand a higher expected return.
• 1:11:46
  SPEAKER_03: Yeah, 9% is for me just not enough.
• 1:11:50
  SPEAKER_03: And that said, I admire the company, I love the product they're building.
• 1:11:54
  SPEAKER_03: The management focus is very great.
• 1:11:57
  SPEAKER_03: Um, they have substantial skin in the game, and I even feel personally attached to Agen because I've been doing several annual meetings.
• 1:12:05
  SPEAKER_03: While it lacks a clear competitive advantage, Agen is operationally superior, expanding brick by brick into new regions like India and exploring markets like embedded finance.
• 1:12:16
  SPEAKER_03: And I think the circular growth trend is also undeniable.
• 1:12:20
  SPEAKER_03: And despite this high valuation, a PE more of more than 50, the combination of strong growth and operational leverage could make it an attractive opportunity right now.
• 1:12:31
  SPEAKER_03: For now though, I've decided to trim my position by 33% due to the absence of a durable competitive advantage.
• 1:12:39
  SPEAKER_03: And after the trim, I gen will make up uh about 5% of my portfolio.
• 1:12:45
  SPEAKER_03: Yeah, and if the market overreacts like they did like it did in 2023 with the big drop of around 50%, yeah, I wouldn't rule out that I will add to my position again.
• 1:12:56
  SPEAKER_03: But for now, I prefer more cautious allocation.
• 1:13:00
  SPEAKER_03: That is basically my take.
• 1:13:01
  SPEAKER_03: I think uh the mode is lacking and the valuation isn't priced for that.
• 1:13:07
  SPEAKER_03: Um but I'm also curious what are you thinking, Matthijs?
• 1:13:10
  SPEAKER_03: Uh, after my somewhat negative story about Agen as a shareholder.
• 1:13:15
  SPEAKER_04: Yeah, I definitely didn't expect this analysis to turn up like this at the end.
• 1:13:21
  SPEAKER_04: Uh, but it gave me some new insights.
• 1:13:23
  SPEAKER_04: For example, I thought that Acien would kick out all of their legacy competitors at the end.
• 1:13:30
  SPEAKER_04: But after reading your analysis, I realized that this will probably never be possible because some companies do not need the product that ACEN offers them.
• 1:13:41
  SPEAKER_04: Um I have a position of ACEN of around 5.5% of my portfolio.
• 1:13:48
  SPEAKER_04: Um I actually bought them in 2023 when the market, in my opinion, overreacted very much about them hiring personnel or IR employees for the long term and about short-term margin pressures.
• 1:14:03
  SPEAKER_04: I also think the mode issue is still very difficult for me because it's hard to grasp their very high margins, and then if you could say it's skill, then maybe skill can be a competitive advantage.
• 1:14:20
  SPEAKER_04: But I think it's it's not impossible to overtake Archien, that's for sure.
• 1:14:24
  SPEAKER_04: Um, but it is very hard to do so.
• 1:14:27
  SPEAKER_04: And so I think they have a lot of small advantages over competitors, but you might be right that there's not a real durable competitive advantage.
• 1:14:37
  SPEAKER_03: Yeah, and just to talk about skill, they have enormous skill, but they that is not an advantage, they don't give that skill back to the customers.
• 1:14:46
  SPEAKER_03: Like that is why they have such high margins.
• 1:14:48
  SPEAKER_03: So that is that attracts, of course, yeah, other companies as well.
• 1:14:53
  SPEAKER_03: They like Stripe, they can jump into this opportunity, into this margin.
• 1:14:58
  SPEAKER_04: Yeah, but then I think they are doing so, but it's still their margins are are staying high like this.
• 1:15:06
  SPEAKER_03: Yeah, yeah.
• 1:15:07
  SPEAKER_03: I'm I think if for example Stripe or um a regional PSP or a local PSP, just for example, when here in the Netherlands or in Europe we have Molly, right?
• 1:15:20
  SPEAKER_03: Basically the same kind of product that Agen offers, and I'm sure you have that in India as well, and I'm sure you have that in um yeah, maybe this will come in America as well.
• 1:15:30
  SPEAKER_03: And if they all offer a different strategy, like lower pricing than Agen does, maybe uh shared skill advantages, yeah.
• 1:15:39
  SPEAKER_03: I think Agen has a very hard time to uh to keep up with them.
• 1:15:46
  SPEAKER_04: Yeah, okay.
• 1:15:46
  SPEAKER_04: They talk about local countries, so business that sell solely in the Netherlands or solely in India, but when it comes to global businesses, then I think it's almost impossible to compete with them.
• 1:16:02
  SPEAKER_03: Yeah, but but like Amazon can have a local PSP in the Netherlands, a local PSP in India, a local PSP in uh America.
• 1:16:09
  SPEAKER_03: So that that is yeah, something that yeah, that I'm not yeah, convinced about.
• 1:16:14
  SPEAKER_03: Uh it would be a the payments team of Amazon has to uh hire more employees, but uh yeah, this uh this could happen, and I'm a little bit worried for agenda if it happens.
• 1:16:27
  SPEAKER_04: Alright.
• 1:16:28
  SPEAKER_04: Uh for now, by the way, I I do not do anything with my position.
• 1:16:31
  SPEAKER_04: I have um I'm comfortable with a little bit and a little bit more than 5%, so I'm keeping it intact, and who knows when the market overreacts again.
• 1:16:42
  SPEAKER_04: Let's see.
• 1:16:43
  SPEAKER_04: Uh, at least I enjoyed your analysis and I learned some new things about it.
• 1:16:47
  SPEAKER_04: Um, which I thank you for.
• 1:16:50
  SPEAKER_04: Uh, and I hope the members also enjoyed this analysis as well as your written one.
• 1:16:56
  SPEAKER_03: I hope so.
• 1:16:57
  SPEAKER_03: It was a lot of work, so uh I hope so, really.
• 1:17:00
  SPEAKER_03: Alright, but thank you.
• 1:17:02
  SPEAKER_03: Uh thank you, Matthijs, for being the host and uh providing us with some extra information.
• 1:17:07
  SPEAKER_03: So great.
• 1:17:08
  SPEAKER_04: Yeah, happy to do so.
• 1:17:09
  SPEAKER_04: So, uh thanks again, Balke, and thanks again to you if you have listened all the way to the end.
• 1:17:18
  SPEAKER_04: See you next week.
• 1:17:20
  SPEAKER_03: Bye bye.