Adyen
Annual Report 2020

2020
Annual Report

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AdyenAnnual Report 2020

Cover image

Aleksei, Head of API—“ I have three kids that often make random
appearances in video calls, so my colleagues haveseen more of my personal life than we could haveever achieved when catching up in the office. ”

Disclaimer: This document is only a "printed version" and is not the official annual financial report, including the audited financial statements thereto
pursuant to article 361 of Book 2 of the Dutch Civil Code. The official annual financial report, including the audited financial statements and theauditor's report thereto, are included in the single report package which can be found via www.adyen.com/investor-relations/documents.
In case of any discrepancies between the printed version and the annual financial reporting package, the aforementioned financial reporting
package prevails. Note that the auditor's opinion included in the printed version does not relate to the printed version but only to the official annual
financial reporting. No rights can be derived from using the printed version, including the unofficial copy of the auditor's report. Our auditors did not
determine (nor do they need to) that the printed version is identical to the official version.

01
Management
Report_ ________________________________________ 5
Message from the CEO______________________ 6
Summary _ _______________________________ 8
Description of business activities _____________ 10
Strategy _ _______________________________ 11
Discussion of financial results _ ______________ 15
Financial objectives _ ______________________ 19
People & culture_ _________________________ 21
Social responsibility _______________________ 31
Compliance _ ____________________________ 39

02

Governance________________________________________ 69

Risk management _ _______________________ 47

Corporate governance _____________________ 71

Statement by the Management Board _________ 66

Report of the Supervisory Board_ ____________ 80
Compliance with the Dutch Corporate
Governance Code _ _______________________ 86

03
Financial
Statements_______________________________________ 101
Financial statement table of contents included
on page 102

Remuneration report _ _____________________ 88

04
Other
Information_______________________________________ 163

AdyenAnnual Report 2020

Arielle, Business Controller—“ At Adyen, we’ve really been encouraged to makeblocks in our calendar and take time for ourselves
to breathe and recharge. This past year, my team
especially got creative in scheduling activities justfor the sake of collaborating on something fun that
also keeps us productive. ”

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AdyenAnnual Report 2020

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Management
ReportAdyenAnnual Report 2020

message from the ceo

Staying the course
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 themainstream 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 eachother to sharpen our ideas — and we saw early on that it’s much easier to walkto someone’s desk than it is to give each other a call. It took us a while to findour 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 isthat once everyone on the team was separated by screens, colleagues fromaround the world actually felt a lot closer. Replacing face-to-face interactions
with Zoom meetings felt like an equalizer. It no longer really matteredwhether you were in Amsterdam or in Singapore, which made discussions
much more inclusive. Discussing a matter face-to-face in Amsterdam islimiting in that sense — in the current environment everyone can just ‘click in’team members from around the world on Zoom.

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AdyenAnnual 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 tothe office, and to travel, as houseplants in European offices went weeks
without water during the first wave in Europe. There is no single sharedreality 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 delaysin the rollout of projects, mostly on the merchant end, but nothing thatsignificantly impacted the business. This is also why we chose to shift toquarterly reporting for the year, something that is not part of our longterm approach, to provide transparency around the resilience of thebusiness 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 madesure to keep our focus on helping our merchants in these segments, asbusinesses 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 thepandemic’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 thiscrisis, we focus on our merchants’ problems, on our team’s mental healthand 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 theworld 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, travelingto different Adyen offices around the world and meeting our merchants. It’san 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 andwhat it will bring for Adyen.
We’ll stay the course, as we did this past year, and continue to adapt to theworld around us.
Pieterpage 7

AdyenAnnual Report 2020

2018
159.0

2019
239.6

page 8

2020
303.6

+27%
yOy

2018
348.9

2019
496.7

2020
684.2

2018
181.9

2019
279.3

+28%
yOy

2020
402.5

+27%
yOy

Processed volume

Net revenue *EBITDA *€ 303.6 bn€ 684.2 mn€ 402.5 mn
Margin 59%

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

Positively contributing to planet and society»

Offsetting our CO2 emissions by supporting environmental sustainability projects»

Volunteering globally to provide essential supplies to those in need»

Our checkout product feature, Giving, processing donations globally

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

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.

AdyenAnnual Report 2020

page 9Jeroen, Designer—“ A big reason why I work for Adyen is becauseof the Formula which keeps us close, even withcolleagues 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. ”

AdyenAnnual Report 2020

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Description ofbusiness activities
Adyen operates a global payments platform, integrating the full payments
stack — gateway, risk management, processing, issuing, acquiring, andsettlement. Adyen Issuing was launched in 2019, and enables merchants
to provide virtual and physical cards to their customers. Issuing meetsvarious merchant needs, as it gives them the ability to issue cards fora 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 acrossdifferent verticals, connecting them directly to Visa, Mastercard, andmany other payment methods. Additionally, it provides a high level ofreliability, performance, and data insights.
For this service of payments processing, Adyen earns processing andsettlement fees — gateway and acquiring services, respectively — aswell as some smaller fees related to products or functionalities aimed at
reducing complexity and friction for merchants. For a full breakdown offees, refer to Note 2 ‘Revenue and segment reporting’ of the attached
Consolidated Financial Statements for more information.

Figure 1
The Adyen value chain

Merchant

Gateway

Risk management

Processing

Acquiring

Creditcard
schemes

Processing Risk Issuing KYC Printing

Adyen Issuing

Authentication

Card holder

AdyenAnnual Report 2020

Strategy
Building with our merchants’ needs in mind is central to our businessstrategy. Most of our yearly growth (consistently over 80% from each halfyear period since our IPO in 2018) comes from the growth of merchants
already on our platform when the period began. As such, we measuresuccess by how we grow together with our merchants.
We are always focused on solving problems for our merchants, especiallyas 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 comprisedof 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 theseworkstreams’ 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 comeslargely from existing enterprise merchants, paired with very low volume
churn, illustrates our success in this space. The more recent evolution in thissegment is the rise of platform-based business models, allowing us to reachthe long tail of the market through enterprise-sized platforms who powertens 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 withexpanding 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).

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AdyenAnnual Report 2020

page 12Sunil, VP of Product—“ In every tragedy, it helps to focus on opportunities.
This has been an opportunity to see and guide mychildren's learning — it’s an opportunity for them toobserve 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. ”

AdyenAnnual Report 2020

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 andverticals we are targeting, both of which are constantly expanding.
3. Capitalizing on evolution in the industry: Our strength is in our speed andability to react to market developments that can help our merchants dueto 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 asingle brand across all sales channels (i.e. offline and online). In industries
such as retail, hospitality, and quick-service restaurants, merchants canno longer afford to have only one option. Our unified commerce offering
is currently focused on providing merchants in verticals such as thesethe flexibility to shift seamlessly between sales channels and give theircustomers 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 platformto process all payments, irrespective of channel, is foundational to
how we have built our technology since the beginning. This approachallows the collection of data that can deliver unique shopper insights
and simultaneously help to combat fraud. Our back-end infrastructure

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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 acrossall sales channels. This allows merchants to significantly improve thequality 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 importancedue to the COVID-19 pandemic, we have been well-equipped to service
our merchants with safe operations as all of our POS devices facilitatecontactless payments.

Mid-market
Historically, we built the Adyen platform focused on the needs ofenterprise merchants. Now, we are broadening our reach and are readyto support the growth of businesses in the next adjacent segment toenterprise, mid-market.
Every merchant on our platform has access to the same performance andfunctionality as some of the world's largest businesses. This makes theplatform attractive to both large domestic merchants and local merchantswith 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 expertisein 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.

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AdyenAnnual Report 2020

Discussion offinancial 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, andairplanes 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 achallenging 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 processedvolume in 2019. Lockdown restrictions impacted in-store volume
throughout the year.

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AdyenAnnual Report 2020

page 16Europe

424.9

347.6

Asia-Pacific

65.0

50.2

2019

2020

North America

2019

2020

Latin America

133.0

80.3

60.1

54.2

2019

2020

2019

2020

Figure 2
Adyen’s net revenue in key regions (by billing address in EUR millions) in 2019 and 2020

Solid net revenue growthcontinuing to diversify regionallyNet 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 ourmerchant 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.

AdyenAnnual Report 2020

Investing in long-term growth
Total operating expenses were €310.3 million in 2020, up 29% year-onyear, 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 brandawareness and lead generation across regions. When global lockdown
restrictions went into effect, our focus shifted from physical events tohosting 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, thesame percentage as for full year 2019.

Net income impacted by otherfinancial 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 scalabilityof 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.

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Manavi, Software Developer—“ Setting some rules for myself helps to maintaina healthy balance — for example, I don’t move my
laptop off my desk, which makes its sole purposeto 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’ssoothing for your eyes and is relaxing in these times. ”

AdyenAnnual Report 2020

Financial objectives
We have set the following financial objectives1, wherein EBITDA margin
guidance has been updated since prior publications. Other objectives remainunchanged since IPO.
Net revenue growth: We aim to continue to grow net revenue and achievea CAGR between the mid-twenties and low-thirties in the medium term byexecuting our sales strategy.
EBITDA margin: We aim to improve EBITDA margin, and expect this margin tobenefit 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 levelof up to 5% of our net revenue.
On EBITDA margin — given the substantial growth and operating leverage wehave seen since IPO, combined with our continued focus on the scalability of theplatform, we expect this upward trend to continue to levels over 65% in the longterm. 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 mediumterm 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 mediumterm 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 factorsthat 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.

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Pieter, Co-founder and Chief Executive Officer—“ 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, butsomething to actively design for. ”

AdyenAnnual Report 2020

People & culture
Building the Adyen team for thelong term
To us, winning is more important than ego — we value people for theirskills and what they bring to the company. When building for long-term
success, we need a team that comprises different perspectives tochallenge 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 makeup 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 believethat maintaining our culture is critical to its continued success.

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The
Adyen Formula
We build to benefit all merchants (not just one)

We don’t hide behind email, instead we pick up
the phone Formula

We make good choices to build an ethical businessand drive sustainable growth for our merchants

We talk straight without being rude

We launch fast and iterate

We include different people to sharpen our ideas

Winning is more important than ego; we work as ateam — across cultures and time zones

We create our own path and won’t be slowed
down by “stewards”

How talent grows with us
We don’t do pre-set career paths at Adyen. You join, learn, and grow in the waythat 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 ourexisting team:zzz

The Adyen Way of Leading Teams training program provides teamleads with board-led training sessions that teach the mechanics andphilosophy of the Adyen leadership style.
We offer a wide range of trainings for all employees, including careerdevelopment 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 theregions wherein we are active.
We run a number of trainings that relate to running Adyen in a safe
and secure way — including mandatory data privacy, security, andcompliance trainings for all staff members.

AdyenAnnual 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 throughvirtual company introduction sessions and online onboarding programs.
In order to account for the lack of in-office interaction and inter-officetravel, 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, nomatter 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 matteredless 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, ourbusiness and the team as a marathon, not a sprint.

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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 ourideas. 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 froma DEI perspective. Ever since we founded Adyen, we focused on cultivating aculture of diversity and inclusion. In 2020, we added equity as a central culturalvalue to our approach of building the team. To us, equity means that there’s noone-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 responsibilityof the entire Adyen team, and for which we hold ourselves accountable. We needeveryone at Adyen to contribute for us to be able to build a team with Diversity,
Equity, and Inclusion at its core.

Roy, Office Manager—“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.”AdyenAnnual Report 2020

page 25

Total FTE
1,747

EuropeAsia PacificAmsterdam

Berlin1,011

Brussels

36

Manchester

22

LondonMunich
84

Milan
11

6

7

Paris
43

4

Toronto7

Figure 32020 FTE growth

MumbaiShanghaiSingapore

Sydney96

26

17

Stockholm

Tokyo

25

7

2

Warsaw
1

North America
BostonMelbourne
346

MadridHong Kong

Latin America

New York

San Francisco

53

179

São José17São Paulo
72

Mexico City
8

AdyenAnnual Report 2020

page 26

Wouter, Implementation Manager—“ It’s because we’re all in this together,including our merchants, that we’reable 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 adifferent way, and has improved thequality of our relationships. ”

AdyenAnnual Report 2020

Juanma, Motion Designer—“ I recently moved to Amsterdam tojoin Adyen, and there were somechallenges to overcome at first — forexample, I didn’t have Wi-Fi or a proper
home office set-up yet. Thankfully, thevirtual onboarding went super well andI've been fortunate to meet some of my
teammates in person. I'm excited tomeet many more in the future. ”

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Designing for inclusion
Based on the DEI working group’s observations, we broadly assessed andimproved 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, andimplemented company-wide unconscious bias trainings.
In the interviewing process, we focused on minimizing biases throughbalanced 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, withcurrent 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 fromall over the world, there is a lot to learn from each other. Over the courseof 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.

Fan, Account Manager—“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 thecommunity I need to do something for, that is Adyen Pride.”AdyenAnnual Report 2020

Sergen, Internal Auditor—“At Adyen, we are empowered and supported to makea difference within our company, and I feel lucky forbeing able to contribute to that difference in our pridecommunities. Adyen Pride is all of our pride. It is anddefinitely feels like one community without borders.”
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 aroundequity — Equal Pay, Equal Chance, and Normal course of life.
zzz

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 tojoin Adyen and to grow with us as we continue to change the payments
industry with the best talent out there.
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.
Normal course of life: There is no one-size-fits-all approach when
dealing with life events such as starting a family or coping withchallenging 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 isdifferent, 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 teammembers on the individual level during the COVID-19 pandemic.

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AdyenAnnual Report 2020

page 30

Tatiana, Software Engineer—“ My apartment used to be my refuge, but now thatit’s also my place of work, I go for daily walks andmake the streets and parks of Amsterdam my new
refuge. I’ve grown to really love this routine, andhave 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. ”

AdyenAnnual Report 2020

Socialresponsibility
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 theenvironment. In recent years, we took on our responsibility when it comes toour impact on planet and society, and continue working towards becoming amore 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 takeresponsibility for our own business operations and we leverage our existing
technology to enable merchants and shoppers to contribute positively tosociety and the environment.
It starts with us. Internally, we have our Footprint and Local Initiatives
programs, wherein we take responsibility for the negative impact thatcomes with being a globally operating business.
In the Footprint program, we acknowledge that growing a company andsupporting 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 ourbusiness as usual. In 2019, we have become a carbon neutral company byoffsetting all CO2 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) thattogether make up our social responsibility plan are strongly alignedwith 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.

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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 ourcommunities. 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, afeature of our Checkout product that allows shoppers to carbon compensate
for their purchases. By working together with our merchants and partneringwith 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 lookat how our Footprint, Local Initiatives, and Impact programs help make that areality 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 wemust consider our impact on the planet. This year, we grew from thesolid groundwork we laid in 2019 and started helping our merchants takeresponsibility for the impact of their operations as well by building ourOffsets 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 CO2eemissions for which we are accountable. Through our partnershipwith 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 ReportingStandard2. Scope 1 and 2 emissions are calculated using data from ouroffices 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 theextra 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.

AdyenAnnual Report 2020

page 33

Figure 43

Adyen’s 2020 operational GHG emissions, measured in tCO2e 3

The measure for our greenhouse gas

emissions is tonnes of Carbon Dioxide
Equivalents (tCO2e) — covering the

Scope 1223.62 tCO2e
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 tCO2e

Kyoto Protocol by the United Nations
Framework Convention on Climate
Change. These six gases are carbon
dioxide (CO2), methane (CH4), nitrous
oxide (N2O), hydrofluorocarbons (HFCs),

Scope 2 emissions cover indirect emissions, such as purchased electricity for

perufluorocarbons (PFCs) and sulphur

our buildings. To make it tangible: when charging a smartphone at one of ourhexafluoride (SF6).

offices, these emissions tie into scope 2.
Scope 3six greenhouse gases defined in the

6,064.85 tCO2e
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.

COVID-19 impacting our environmental footprint
Normally, the majority of our company’s emissions are due to travel fromvisiting each other in our 24 offices and keeping them running. However,
due to the pandemic, we reduced our overall tCO2e as reflected in theaudit results above. In gathering these results, we decided to include anestimation of increased CO2 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.

AdyenAnnual Report 2020

Environmental sustainability projects
This year, the environmental sustainability projects we supported werefocused on the SDGs of climate action, quality education, decent work andeconomic 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 Groupand 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 withno other option. The Kariba project protects around 785,000 hectareson the shores of Lake Kariba from deforestation and land degradation.
This large biodiversity corridor is home to many vulnerable andendangered species, and prevents 3.5 million tonnes of CO2 from being
released into the atmosphere annually. The project also supports regionalsustainable 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 andborehole maintenance.

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AdyenAnnual Report 2020

page 35

Ingo, Chief Financial Officer—“ We frequently remind the team to take time forthemselves and make this situation work for them.
That might mean something different for everyone,
there’s no one-size-fits-all approach to dealing withthis situation. For me, that means going outside, andtaking regular bike rides — even when it's raining. ”

AdyenAnnual Report 2020

Local Initiatives
Our teams live, work and thrive in their local communities, so we want toaddress locally relevant issues through employee-led initiatives. We enable
our employees who want to set up grassroots initiatives, ranging frompreparing 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 thanchains, 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, ourAmsterdam team would have hosted free coding bootcamps for refugees
in partnership with local NGO Hack Your Future. The curriculum wasquickly 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 andmore shoppers are expecting businesses to be socially and environmentally
responsible, and we’re ready to help our merchants meet that expectationand 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 goodat, 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.

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page 37

GivingLeveraging our existing technology, we built Giving, a checkout productfeature that enables shoppers to donate to the merchants’ charity ofchoice 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 ourmerchants’ sustainability goals, facilitate shoppers’ desires to do good,and create additional revenue streams for charities supporting at least oneof the United Nations’ SDGs4.

4

Adyen’s social responsibility programs

are aligned with the United Nations’

While checkout donations are not new, they typically include additionalcosts and complexity for merchants, making this seemingly easy choice
to do good less enticing. We believe doing good shouldn’t come withbarriers, 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, andprovides 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, webuilt 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 deliveryof goods they are purchasing at that moment, sending that back tocheckout via an easy to implement integration.
We are able to help support our merchants’ sustainability aspirations andallow 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.

Sustainable Development Goals (SDGs). We
acknowledge the importance of the SDGs
as key metrics in the long-term prosperity ofpeople and planet.

AdyenAnnual Report 2020

Ayomide, Java Software Engineer—“ As a new father, I’ve been grateful for theopportunity to see more of my family throughout
all hours of the day. The line between work andlife has blurred over the past year — I can be fully
involved in their lives without compromisingon my work projects. ”

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AdyenAnnual 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 partof 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 andevery 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 initiallythrough 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 andenhances Adyen’s competitive position by building trust.

We make good choices to build an ethicalbusiness and drive sustainable growthfor our merchants
Adyen Formula

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AdyenAnnual Report 2020

page 40

Compliance and integrity
Central to Adyen’s compliance framework is the identification, mitigationand monitoring of integrity risks, being the risk of inappropriate behaviorof 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 orin 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 withrespect 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.

5

Adyen’s definition of Integrity Risk also

includes the related concept of conduct risk.

Integrity Risk identification
Adyen identifies a number of integrity-related topics as being core to
maintaining control from a compliance perspective 6:

6

Other Integrity Risk topics such as cyber-security and fraud are referenced in the Risk
z
z
z
z
z
z
z

Money laundering
Terrorist financing
Circumvention of sanctions legislation
Corruption (bribery) and conflicts of interest
Non-compliance with relevant laws and regulations
Socially unacceptable behavior and market manipulation
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 andstandards. 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 accordancewith business objectives and the Adyen Formula. In 2020, Adyen has

section of this report.

AdyenAnnual Report 2020

continued to develop and refine principle-based policies, supported
by globally applicable scalable procedures, to combat misuse of thefinancial system and build scalable compliance solutions to meet
Adyen’s regulatory obligations as a financial institution. Particularfocus 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 tomerchant business models. The Prohibited and Restricted List
acts as an articulation of Adyen’s risk appetite — specifying whichmerchants 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 andemerging trends/industries.
To ensure new products, features or markets are appropriately
accounted for in Adyen’s compliance program, a Product Approval andReview Process (PARP) is undertaken as part of launch preparations.
The purpose of the PARP is to ensure relevant stakeholders canidentify 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 ormarkets 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 thesecond line of defense are mandated with an independent position fromwhich 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.

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AdyenAnnual Report 2020

Sergen, Internal Auditor—“ Earlier this year, Pieter sent out a message saying
we should think of our offices like a café thatprovides us with a comfortable space to workand 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. ”

page 42AdyenAnnual 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 theunderlying principles and objectives of financial regulation around the globe andleverages 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 andexplore and develop new product opportunities.
Throughout 2020, key focus areas for Adyen to maintain control and leverageregulation as an opportunity included:
z

z

z

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 andprocedures can be applied irrespective of merchant type, merchant location,or the financial products and services provided to such merchants.
Supporting Adyen’s expanding global footprint from a regulatory
perspective, including to identify new or changing obligations andimplement 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 regulatorychange and/or expansion in the activities of such subsidiaries;| Latin America — increasing regulatory requirements relating to
expansion in the activities of locally operating subsidiaries.
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.
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 withincreasing regulatory complexity. Adyen continues to take a proactive approachto 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.

page 43AdyenAnnual Report 2020

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 longrun entails building a platform that has privacy engrained in its design.
Adyen continues to strive for a global privacy approach, thereby aiming toensure a solid privacy governance throughout the world. This governanceis 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 anddevelop 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 oursustainability strategy. The taxes that we pay are an important part ofour contribution to local economies and support the development of thecountries 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 thisapproach 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 totax 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 thecorporate income taxes paid and the taxes collected, such as: value added
tax, withholding tax, and payroll tax. More details on the taxes paid andtaxes collected can be found in the financial statements.

page 44AdyenAnnual Report 2020

page 45

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 fortax ensures Adyen’s tax strategy and approach to tax are properly
embedded within the organization.
The tax control framework7 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 whichevidence 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 anannual tax in-control statement. We continuously seek for ways toembed 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 aremonitored by the CFO and ultimately the responsibility of the Management
Board. Tax is also regularly discussed in the Audit Committee. We refer toour Whistleblowing Policy for the mechanism for anyone within Adyen toreport its concerns about unethical or unlawful behavior in relation to tax.

Stakeholder engagement and management ofconcerns 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 theorganization 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.

AdyenAnnual Report 2020

page 46

Fernando, Head of Investor Relations—“ 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 isgreat, and in future situations I will think back of thepast year and remind myself how lucky we are. ”

AdyenAnnual 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 willingto 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 alignedwith its strategy. Changes in strategy and willingness to assume risks or
external developments may result in an updated risk appetite, which isultimately 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, theManagement Board performed its annual review and updated Adyen’s
risk appetite statements and risk limits, which were approved by theSupervisory Board.

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AdyenAnnual Report 2020

page 48

Risk governance
Adyen has established a risk governance that is consistent with the sizeand complexity of the organization and the risk profile of the Company.
Adyen's governance identifies, establishes and reinforces the importanceof 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 andcontrol 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 Boardin the Risk Committee. The Corporate Risk and Internal Control teamregularly 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 thefinancial condition of Adyen promptly to the Management Board.

The
Adyen Way of Being In Control
We always ask why and are critical,
we don’t just tick the box

We all make mistakes, we seek help
Formulaand share as soon as we find outYour work impacts others, involve them

Always look for improvement, automate
processes continually & challenge the status quo

We evidence our work at the source, we don’t
replicate it

The formula guides our behavior, policies
support it

If you see a problem, act on itAdyenAnnual Report 2020Three-lines-of-defense
Adyen has adopted the three-lines-of-defense model, which reflects
the segregation between operations (first line management), therisk management and compliance functions (second line), and the
independent internal audit function (third line). The first line owns andmanages 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 toguide people in making good decisions. Therefore, Adyen promotes andsafeguards the key elements of culture through the Adyen Formula andthe Adyen Way of Being In Control.

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AdyenAnnual Report 2020

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 orderto 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 iscomplemented 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 theevaluation 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.

page 50AdyenAnnual Report 2020

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 oversightby 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 fromoccurring, include an anti-fraud policy, employee background screening,and process-specific fraud risk controls. Controls aimed at the detectionof fraud include system monitoring, auditing, process-specific fraud
risk controls, and a whistleblower policy. Whenever fraud is suspectedor reported, an internal investigation and/or external investigation isconducted and corrective actions are taken.

Resilience
In 2020, Adyen has merged its business continuity management andrecovery frameworks into one resilience framework, in which Adyen plansfor 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 havebeen 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 tobe resilient due to the diversification of its merchant base across verticals
and geographies. Illustrative to this resilience is how online retail anddigital 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 movevolumes online quickly, and in reopening scenarios Adyen has facilitatedseveral 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 overpage 51

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the upcoming years. Governmental support and monetary programs havecushioned some of the impact for a portion of Adyen’s merchants up tonow, but for some of them the end of the survival horizon may come inview. Adyen will continue to execute its strategy to diversify the productand customer portfolio across verticals and geographies to mitigate theimpact from the pandemic.

Stress testing
Adyen uses stress testing to understand the potential impact of stressevents on its business model, capital, and liquidity ratios. The stressscenarios are based on exceptional but plausible events with an adequate
degree of severity. Adyen also performs stress testing to evaluate thereliability 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 beconsidered 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. Moreinformation 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 withfinancial 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 andcontrol 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 figureswith 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 tomerchants. 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 internalrisk 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 in2020. This section describes the principal risks that could potentially affectAdyen. While Adyen believes that the risks described below are the material
risks concerning Adyen's business, they are not the only risks relating toAdyen. Other risks, facts, or circumstances not presently known to Adyen orthat 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 thattrigger 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 andshoppers with its products or services, could adversely affect its reputationand 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 protectionof sensitive information, compliance failures and claims, litigation and otherclaims, 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 arelarger than Adyen, have a dominant position, or offer other products andservices to shoppers and merchants that Adyen does not offer. Some
competitors have greater merchant bases, volume, scale, resources, andmarket 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 thatcompetition could increase as it seeks to increase market share, thereby
potentially reducing profit margins, but not at all cost — if pricing is notsustainable, then it will not pursue a deal. In general, Adyen is able toreact quickly to market developments due to how its technology andworkstreams 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 isunable 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 andadversely 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, andcommercial staff, Adyen can work closely with its customers and respondquickly to their evolving needs. In 2020, Adyen has found its products to beparticularly suited to rapid adaptations during the pandemic.
Access to card networks
The majority of transactions processed on the Adyen platform go throughinternational credit and debit card networks. In order to access thesecard 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 relationshipwith 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 orthe deterioration in its relationships with the card networks for any otherreason, which could result in the restriction, suspension, or termination ofAdyen's own licenses, or use of sponsoring banks’ licenses.

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Concentration of sales
Some of Adyen's largest merchants provide significant contributions to its
net revenue. Large merchants typically have arrangements with multiple
payment service providers (primarily in order to mitigate against singlepoint-of-failure risk). Large merchants could terminate their contracts or shiftbusiness 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 fromdifferent 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 somemacroeconomic 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 oflockdown 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 businessmodel 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

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well as a variety of administrative procedures. Adyen's intellectual property
rights may be contested, circumvented, or found unenforceable or invalid,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 ofthe outcome, any such claim, with or without merit, may be time-consuming,
result in costly litigation, divert management's time and attention, andrequire Adyen to, among others, stop providing transaction processing andother payment-related services or redesign, stop selling its products orservices, pay substantial amounts to satisfy judgments or settle claims orlawsuits, pay substantial royalty or licensing fees, or satisfy indemnification
obligations that Adyen has with certain parties with whom Adyen hascommercial 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 fromexternal 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 orservices as agreed, issuing banks can file chargebacks. Adyen seeks tooffset 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 onassumptions and estimates that Adyen believes are reasonable to coversuch eventualities, the measures, including the withheld funds, may not be
sufficient.
The uncertainties associated with the COVID-19 pandemic have led tofinancial and economic volatility, especially in certain industries. Adyen’s
MPL team has closely followed the development of the pandemic andincreased its monitoring efforts in early 2020. The team frequently
discussed its observations and recommendations with the Merchant
Risk Committee, Management and Supervisory Board throughout theyear. 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.

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Availability, connectivity, and performance of products and services
Adyen has a low appetite for issues in the availability, connectivity, andperformance 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 andservices, potentially harming Adyen's reputation and brand permanently.
Moreover, to the extent that any platform failure or similar event results indamages to Adyen's merchants or their business partners, the merchantsor partners could seek significant compensation or contractual penalties
from Adyen for their losses, which, even if unsuccessful, could likely betime-consuming and costly for Adyen to address and divert management
attention. Furthermore, frequent or persistent interruptions could lead toregulatory scrutiny, significant fines and penalties, and/or mandatory andcostly 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 unavailabilityof corporate resources, from information technology, physical locations oreven 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 theavailability, connectivity or performance of our platform that can specificallybe 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 unauthorizedtransactions. Adyen has a low appetite for information security risk. Any realor perceived privacy breaches or improper use of, disclosure of, or access topage 57

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such data could harm Adyen's reputation as a trusted brand in the handlingand 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, andto ensure that specific information security compliance programs aremaintained 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 andsecurity 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-homeenvironment 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 andtraining 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 theplatform 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 withand monitor compliance with the policy. Adyen has not observed major data
breaches, operational interruptions, or financial stress at its third parties dueto the COVID-19 pandemic.

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Data privacy
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 theirtransactions in the countries wherein Adyen operates. Throughout the worldthese 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 havebecome more complex and this resulted in additional requirements for thesedata 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 highethical 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 beable to compete effectively against its competitors, leading to declining growthand 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 aworking-from-home environment. The onboarding process and the company
introduction sessions moved online in March. Senior management spentsignificant time on the online company introductions by hosting Adyen
Formula chats and continued to meet every new hire before they joined theteam. Although the current situation could be likely to persist for a longer time,
Adyen is comfortable growing the company in this environment going forwardwith the online efforts to safeguard the unique culture.
TalentAdyen's future performance substantially depends on the continued services
of key talent and its ability to attract, retain, and motivate such talent. The lossof 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 andsocial 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 aninternal webpage “COVID-19 — Staying connected from home” andestablished “Guiding Principles for Working from Home.” The regularly
updated principles followed guidance from the World Health Organizationand local authorities. The Management Board introduced “The Adyen
Work-From-Home Formula” and organized weekly calls with team leads tomonitor employee wellbeing. Our HR department raised awareness withmanagers 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 workfrom-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, whilechallenging 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 ensurethat we follow up on the DEI initiatives and that we work towards substantial
improvements. This working group is composed of Adyen employees fromacross 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 ethicalbusiness conduct, supervisory authorities may initiate legal and regulatory
proceedings against Adyen. Adyen has a low risk appetite for non-ethicalbehavior of its management, employees, and third parties that could
negatively affect Adyen’s reputation or brand, lead to compliance breachesof 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 beheld responsible. Such events may have severe consequences, including
litigation, sanctions, administrative measures, fines, criminal penalties, andreputational 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 awayfrom 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 determinationof Adyen's worldwide provision for income taxes, value-added taxes, andother tax liabilities requires estimation and significant judgment. Like manyother multinational corporations, Adyen is subject to tax in multiple tax
jurisdictions. Adyen's determination of its tax liability is always subject toaudit and review by applicable domestic and foreign tax authorities. Any
adverse outcome of any such audit or review could have a negative effecton Adyen's business and the ultimate tax outcome may differ from theamounts recorded in its financial statements. Adyen has not observed
adverse impact from the COVID-19 pandemic on its ability to report taxes ina timely and accurate manner. For more information, please refer to ‘Tax’ aspart 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 thefinancial statements. Adyen has implemented internal control over financial
reporting designed to provide reasonable assurance regarding the reliabilityof 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 ofinternal control over financial reporting to future periods are subject to the riskthat the controls may become inadequate because of changes in conditions, orthat 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 fullvalue of an obligation — neither when it becomes due, nor thereafter (defaultrisk), or the risk of losses stemming from on- and off-balance sheet positions
arising from concentrations in exposures to a counterparty or a group ofconnected counterparties (concentration risk). Adyen has a low to moderatecredit risk appetite. We make good choices in our financial counterparties andactively 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 atleast two different banks.
Fluctuations in foreign currency exchange rates
The strengthening or weakening of the euro impacts the translation ofAdyen'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 noneuro 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 theassets 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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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 dependon the transformation of assets. Therefore, the low interest rates do not
impact Adyen’s revenues. However, Adyen is exposed to interest rate riskin 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 mediumterm payment and collateral obligations without affecting daily operations.
Adyen has no appetite for not being able to meet its payment and collateralobligations 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 inthe 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 fundits 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 orenter 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 atimely 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 togrow 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.

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Emerging risks
Climate change
Climate and environment-related risks are commonly understood tocomprise two main risk drivers: physical and transition risks. Physicalrisk 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 candirectly 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 moreenvironmentally 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 beunderestimated. Physical risk could have an adverse impact on Adyen’s
ability to provide services to its customers. Prolonged power outages due tonatural disasters could have a devastating impact on critical infrastructureused 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 relianceon 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 oursustainability efforts. Adyen is planning to further improve risk management,
by including relevant climate-related risks in its risk assessments and stresstesting, 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 thejurisdictions in which it operates, but also with laws and regulations withworldwide 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 overtime as new guidance is provided by supervisory authorities and thepage 64AdyenAnnual Report 2020

interpretation of requirements by supervisory authorities and courts may befurther clarified over time. If Adyen's efforts to comply with laws, regulations,and standards differ from the activities intended by regulatory bodies orsupervisory 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 compliancespecialists 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 ofa 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 aresult, Adyen is well placed to handle regulatory complexity in a scalable
and sustainable manner. Adyen continues to take a proactive approach tobuilding 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 acompetitive 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 tous. 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.

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Statement by theManagement Board
The Management Board of Adyen is responsible for establishing andmaintaining 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 nonfinancial 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 thereliability of our financial reporting for external purposes in accordancewith IFRS and IFRIC interpretations as endorsed by the European Unionand in accordance with sub article 8 of article 362, Book 2 of the Dutch
Civil Code. Internal control over financial reporting includes:zz

Maintaining records that, in reasonable detail, accurately, and fairly
reflect our transactions;
Providing reasonable assurance that transactions are recorded asnecessary 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, projectionsof 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 degreeof 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 andoperation of the risk management and control systems as of December
31, 2020. The results were shared with the Audit Committee and theSupervisory Board and discussed with the external auditor.

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page 67

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

z

z

z

This Annual Report provides sufficient insights into any failings in theeffectiveness of the internal risk management and control systems(see section ‘Risk management’);
The aforementioned systems provide reasonable assurance that thefinancial reporting does not contain any material inaccuracies (seesection ‘Risk management’);
Based on the current state of affairs, it is justified that the financial
reporting is prepared on a going concern basis (see ‘Financial
statements’); andThis Annual Report states those material risks and uncertainties
that are relevant to the expectation of the company’s continuity forthe period of twelve months after the preparation of this report (seesection ‘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, theManagement Board confirms that to the best of its knowledge and belief:zz

The financial statements of 2020 give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company; andThe 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					CEO						R. Prins
CCO

I.J. Uytdehaage					CFO						K. Zaki		
COO

M.B. Swart					CLCO						A. Matthey
CTOAdyenAnnual Report 2020

page 68Mariëtte, Chief Legal & Compliance Officer—“ As we continue to grow the team, we prioritize
global events and communication. Virtual tools havemade it so much easier to involve and engage withthe team across all corners of the world. We’ve beenamazed by how the team kept the same focus andcommitment throughout the year, and how global
the team felt in a time without any travel. ”

AdyenAnnual Report 2020

page 69

02
GovernanceAdyenAnnual Report 2020

page 70

Pedro, Team Lead, Data Infrastructure—“ 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’velost 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. ”

AdyenAnnual 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 governancestructure we are guided by Dutch statutory requirements, the Dutch
Corporate Governance Code (the Code), European Banking Association(EBA) Guidelines on Internal Governance and international bestpractices. As Adyen is operating globally, international developments areclosely monitored.
Adyen’s governance is reflected in its Articles of Association, theManagement Board By-Laws, the Supervisory Board By-Laws, theTerms 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 specificresponsibilities. The Management Board is collectively responsible forthe overall management, which includes, among others, developing andexecuting Adyen’s strategy and risk management policy, and setting
and achieving Adyen’s objectives. The Supervisory Board oversees andadvises the Management Board, and can give guidance to its generaldevelopment. Each board is accountable to the General Meeting for the
performance of its duties.

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page 72

Management Board
Composition, powers and function
Per December 31, 2020, Adyen’s Management Board is composed of thefollowing 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 theinterests of the Company’s stakeholders. The Management Board
By-Laws set out rules regarding the composition, responsibilities andobjectives of the Management Board.
Name

Year of birth

Nationality

GenderPosition

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 2024Mariëtte Bianca Swart

1980

NL

Female

CLCO

January 1, 2020

January 2024

Two new Managing Directors have been appointed per January 1,
2020. Mariëtte Swart took on the position of CLCO (Chief Legal andCompliance 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 behanded over to Mariëtte Swart via Adyen Management Board approval aswell 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.

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.

AdyenAnnual Report 2020

More information on the Management Board can be found atwww.adyen.com/about.
Subject to certain statutory exceptions, the Management Board as awhole 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 shallconsist of two or more members and that the Supervisory Board determines
the exact number of Managing Directors after consultation with theManagement 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 Boardin accordance with the Articles of Association. The Supervisory Board shallmake 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, theresolution 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 thenomination of the Supervisory Board, provided that a proposal to appointsuch 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 amajority of two thirds of the votes cast representing more than half of theCompany's issued share capital.
Adyen is a licensed credit institution, which means that any appointment of aManaging Director must be approved by the Dutch Central Bank (the DNB).
In connection with its approval procedure, DNB will test the proposed newManaging 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 tosuspend or remove a Managing Director other than in accordance with aproposal of the Supervisory Board, such suspension or dismissal needs tobe adopted by a majority of two thirds of the votes cast representing morethan half of the Company's issued capital. The Supervisory Board may at
any time suspend but not dismiss a Managing Director. A General Meetingmust be held within three months after a suspension of a Managing

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Director has taken effect, in which meeting a resolution must be adopted
to either terminate or extend the suspension, provided that in the case thatsuch suspension is not terminated, the suspension does not last longer
than three months in aggregate. The suspended Managing Director mustbe given the opportunity to account for his or her actions at that meeting. Ifneither such resolution is adopted nor the General Meeting has resolved todismiss the Managing Director, the suspension will cease after the periodof suspension has expired.

Supervisory Board
Composition, powers and function
Adyen’s Supervisory Board is composed of the following members (theSupervisory Directors) as of December 31, 2020:

Name

Year of birth

Nationality

GenderPosition

Member since

TermPiero Overmars

1964

NL

Male

ChairmanJanuary 20, 2017

January 2025

Delfin Rueda Arroyo

1964

ES

Male

MemberJanuary 20, 2017

January 2022

Joep van Beurden

1960

NL

Male

MemberJanuary 20, 2017

January 2024

Pamela Joseph

1959

US

FemaleMemberMay 21, 2019

May 2023

The Supervisory Board supervises the conduct and policies of theManagement Board and the general course of affairs of the Company
and its business. The Supervisory Board also provides advice tothe 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 andits implementation in Adyen’s strategy and culture. The Supervisory
Board also has due regard for corporate social responsibility issues thatare relevant to the Company. The Supervisory Board By-Laws set out
rules regarding the composition, responsibilities and objectives of theSupervisory 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 theNomination and Remuneration Committee. More information on her
background can be found in the ‘Supervisory Board Report’ below.

AdyenAnnual 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 bereappointed for a term of two years, which can be extended for anothertwo years. Supervisory Directors are appointed by the General Meetingupon a nomination of the Supervisory Board in accordance with the
Articles of Association. The Supervisory Board shall make one or morenominations in case a Supervisory Director is to be appointed.
In the event that the Supervisory Board has made a nomination, theresolution 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 thanupon 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 castrepresenting more than half of the Company's issued share capital. The
Supervisory Board shall appoint one of its members as chairman andshall 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 inaccordance 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.

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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 theseCommittees 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. Termsof 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 themeetings 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 andRemuneration 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 developmentsof 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 andappointment 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 arescheduled 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 amember of the Nomination and Remuneration Committee as of her
appointment on February 12, 2021. The composition and number ofmembers of the Committee provide for sufficient capacity to carry out
the supervisory functions. The members of the Committee have thespecific skills and experience required to properly carry out their duties.
Adyen’s CEO, CFO and CLCO have a standing invitation for eachCommittee meeting. The Company’s HR Director also attends themeetings of the Committee.

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Audit Committee
The Supervisory Board has assigned certain tasks to the Audit
Committee. This Committee supervises the provision of theCompany’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 supervisingcompliance with relevant legislation and regulations.
The Audit Committee meets as often as required for a proper functioningof 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 theCommittee 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 eachCommittee 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 wasreappointed for a period of 4 years, ending January 2024.
General Meetings
Adyen holds a General Meeting of shareholders within six months ofthe 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 andthe Supervisory Board for their performance during the financial year, (v)the policy of the Company on additions to reserves and on distributions ofprofits, (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 theSupervisory Board deem necessary. A General Meeting is also convened
in case of a decision entailing a significant change in the identity or

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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 fromthe 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, resolutionsof 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 toamend 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 theManagement Board. During the Annual General Meeting held on May 26,
2020, the General Meeting granted the Management Board – subject to theSupervisory 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 timeof the General Meeting for any purpose. Hence, within the aforementioned
limit shares can be issued by a decision of the Management Board, whichallows the Management Board to react promptly when for example abusiness opportunity arises which requires such issuance. This decisionmust 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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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 sharesto the Management Board. During the General Meeting held on May 26,
2020, the shareholders granted the Management Board – subject to theSupervisory Board’s approval – the authority to acquire shares in thecapital of the Company, either through purchase on a stock exchange orotherwise. 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 thenominal value of the shares and not higher than 110% of the opening priceat 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 ofsubstantial holdings and gross short positions' at www.afm.nl.

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Report of theSupervisory Board
The Supervisory Board is pleased to present its report for 2020 — achallenging 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 growand 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 theManagement Board and the Supervisory Board, as explained in the section‘Governance’ of this Annual Report. The Supervisory Board functions as aseparate 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 andany particular interest and allows for properly carrying out all Supervisory
Board tasks, including staffing of committees. The Supervisory Board iscapable of assessing the broad outline of the overall policy of the Company
and of the most important risks incurred. The background, knowledge andexpertise 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 ofAmsterdam UMC and Dura Vermeer Groep NV. Previously, he served asa member of the Management Board of Randstad Beheer B.V. and waspage 80AdyenAnnual 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 andManagement 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 theManagement Board of ING Insurance, following an extensive career atAndersen 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 MBAfrom 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 ofTechnology (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 ofClearent, holds a position as Chair of the Board of Directors of TransUnionand 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 tothe 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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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 thepublication of the half-yearly results, and discusses these results with theManagement Board, as well as the draft press release and auditor’s reporton 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, compliancewith 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 andOperational 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 andCommittee meetings, and acted as the secretary of the Supervisory Boardand its committees. The Chairman of the Supervisory Board met regularly
during the year with the CEO and other Managing Directors to discuss theperformance of the company and projects as part of executing the strategy.
The Supervisory Directors also interacted individually and collectively withManaging 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 andconclusions of each Committee were shared with the full Supervisory Board.

page 82AdyenAnnual Report 2020

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 theCode and applicable laws and regulations in relation to remuneration
policies, reviewed Adyen’s Remuneration Policy and its execution forcompliance 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 andRemuneration Committee has drawn up a plan for the succession of theManaging Directors and the Supervisory Directors.
In 2020, the remuneration policy for the Management Board andSupervisory Board was reviewed to ensure compliance with the EU’s
revised Shareholders Rights Directive (SRD2) following its implementationin Dutch law on December 1, 2019. No substantive changes were includedin 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 andemployment conditions of the employees of the Company. The revised
remuneration policy considers the relevant statutory provisions andcompetitive 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 thesection ‘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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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 Adyenin general. Differences in amongst others educational background,nationality, age, race, gender, experiences and beliefs are vital to thebusiness, enabling the Boards and the Company to look at issues andopportunities differently and to respond to challenges in new ways.
Diversity is a key driver for innovation and allows Adyen to attract andretain the most talented and smart people. This standpoint has also been
embedded in the Adyen Inclusion Policy — please refer to the ‘People andculture’ 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 andculture of the business of Adyen in all countries where it is active. In linewith the Company’s Inclusion Policy and the adoption of the legislative
proposal introducing stricter gender diversity measures for Dutch listed (inline 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 fromthe 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 andcomposition and that of its committees. This assessment was facilitatedby Focus Orange, an external advisory firm, and focused on organizational
learning. In preparation, Focus Orange conducted interviews with eachmember of the Supervisory Board, the CEO, the CFO and the CLCO, aswell 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 theSupervisory Board and the Management Board. The evaluation concludes,
among others, that the relationship between the Supervisory Board andthe 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 theSupervisory Board fully complies with the relevant principles and bestpractices 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:zz

The Supervisory Board aims to maintain the balance between the
Supervisory Board’s formal and informal processes.
The Supervisory Board would like to convene in additional bilateral
discussions and meetings with fellow Supervisory Directors and theSupervisory Board as a body, aside from the regular Supervisory
Board meetings.

Financial statements
The Financial Statements for the year ended December 31, 2020, wereprepared 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 Reportin 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 ofmerchants, shareholders and other stakeholders of Adyen.

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AdyenAnnual Report 2020

page 86

Compliance with theDutch Corporate
Governance CodeAdyen acknowledges the importance of good corporate governance.
The Company agrees with the general approach and with the majorityof the provisions of the Code9. As such, it fully complies with the Codewith the exception of:Best practice provision 2.1.5 of the Code, which provides that theSupervisory Board should draw up a diversity policy for the compositionof the Management Board and Supervisory Board, addressing concretetargets 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 tobuild 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, theDiversity, 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 andInclusion, with current metrics at 34% female team members and 29% ofteam lead positions filled up by women, and 16% in the Management Board,
respectively. In line with the Company’s Inclusion Policy and the adoptionof the legislative proposal introducing stricter gender diversity measuresfor 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.

9

For the full version of the Dutch Corporate

Governance Code 2016 please refer towww.mccg.nl

AdyenAnnual 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 anomination for the appointment of a member of the Management Board orof the Supervisory Board and/or a resolution to dismiss a member of theManagement Board or of the Supervisory Board by an absolute majority ofthe 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 aprevious arrangement with Adyen’s shareholders before its IPO in 2018.

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AdyenAnnual Report 2020

Remuneration
ReportThis remuneration report explains how the remuneration policy for theManagement 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 besttalent worldwide by offering competitive payment structures that takeaccount of our strategy to focus on our merchants’ growth, changing thepayment landscape and having fun while doing so.
Our remuneration policies are consistent with, and promote, sound andeffective risk management and are always aligned with our strategy andthe Adyen Formula to create long-term value for our company and ourmerchants. As such, our remuneration policy does not contain incentives
that exclusively benefit staff members themselves or encourage improperrisk-taking.
The remuneration policy of Adyen is published on the Company’s website.
There have been no deviations from the remuneration policy or theprocedure for its implementation in the financial year 2020.

Equal pay
We value all perspectives, so we see no reason to reward one more thanthe other — same role, same pay. We are committed to ensuring equal pay,therefore this is included in our annual equal pay audit, to safeguard anduphold 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
market circumstances, which varies depending on country.

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AdyenAnnual Report 2020

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 theindividual 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 andcontribute to the long-term performance of the company. This is specificallyachieved 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 interestin 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 therisk profile of Adyen). Adyen does not award variable remuneration to theSupervisory 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 theManagement Board or the Supervisory Board in the financial year 2020, novariable remuneration has been adjusted or clawed back in accordance withthese instruments.

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AdyenAnnual Report 2020

The total global company-wide amount of variable remuneration awarded over2020 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 paymentsmade) 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 dutiesof the Nomination and Remuneration Committee are described in the‘Governance’ section of this Annual Report.
The current remuneration policy for the Management Board and theSupervisory 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 withthe 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 theGeneral Meeting.

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AdyenAnnual Report 2020

page 91

The Managing Directors provide the Nomination and Remuneration
Committee with their individual views with regard to the amount and structureof 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 theother 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.

2020

2019

2018

3,252,768

2,773,786

2,962,042

Share-based payments

104,166

209,069

214,101

Post-employment benefits

96,27882,33532,661

3,546,977

3,065,190

3,208,804

Salaries and short-term employee benefits

Total

As Adyen N.V. became a listed company in June 2018, management
remuneration related to years 2018, 2019 and 2020 are disclosed in thisreport instead of five years required by Dutch Civil Code.

AdyenAnnual 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:
Pension and social

Share-based

Base salary 12

security contributions

compensation

Variable income

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

65,234821--

66,055

Joop Wijn

248,777

6,653

87,112 13-

342,542

Kamran Zaki

656,000

15,617--

671,617Mariëtte Swart 11

347,746

15,968104,166 14-

467,880

3,252,768

102,931

191,278-

3,546,977

2020 (in EUR)

Total

Total Remuneration

Sam Halse left Adyen per February 29, 2020. Joop Wijn left Adyen per May 31,
2020.
Pension and social

Share-based

Base salary 12

security contributions

compensation 13

Variable income

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

2,773,786

82,335

209,069-

3,065,190

2019 (in EUR)

Total

Due to an administrative mistake, both the 2020 pension contribution and
8% increase of the Management Board remuneration over 2019 were notincluded and thus reported incorrectly in the 2019 Annual Report. The correct
amounts are shown in the table above.

Total Remuneration

AdyenAnnual Report 2020

page 93

Pension and social

Share-based

Variable income

Total Remuneration

Base salary 12

security contributions

compensation 13

in cash 15

2018

Pieter van der Does

512,305

7,426-

85,000604,731

Arnout Schuijff 10

250,6023,229-

41,400295,231

Roelant Prins

416,305

6,815-

69,000492,120

Ingo Uytdehaage

482,510

6,974-

80,000569,484

Sam Halse

403,252-

5,032

52,491

460,775

Joop Wijn

512,5108,216

209,069

56,667786,4622,577,484

32,661

214,101

384,558

3,208,804

2018 (in EUR)

Total

10

Part-time percentage 60%

11Part-time percentage 90%

12This amount includes allowances.

13

This amount equals the total expenses
recognized by Adyen during thefinancial year in relation to share-based
compensation, based on the vestingschedule for options granted and the fairvalue of the option at grant date, as further
detailed in the Financial Statements.

14

Share-based fixed remuneration awarded indepository receipts

15

Variable income in cash relates toperformance in the preceding calendar year.

AdyenAnnual 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:
Number of Options

Number of Options

Number of Options

Grant date

VestedNon-Vested

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

-

-

2020

Number of Options

Number of Options

Number of Options

Grant date

VestedNon-Vested

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

2019

Number of Options

Number of Options

Number of Options

Grant date

VestedNon-Vested

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--2017

26,87537,62537,625

2018

Joop Wijn

AdyenAnnual Report 2020

page 95

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 observationof a 15% daily trading-cap. The stock options held by Kamran Zaki are due toexpire January 1, 2022. Kamran has instructed ABN Amro to sell to cover inorder 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 eachsale, 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 theManaging 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

287,309

338,011

338,011

Ingo Uytdehaage

195,182229,570229,570

Sam Halse

N/A

-

-

Joop Wijn 16

8,061

2,156

2,156

Kamran Zaki

21,440

-

-

52

-

-

Mariëtte Swart16

2020 vesting until May 31, 2020
(termination date)AdyenAnnual Report 2020

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 eachManaging 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 aswell 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 Adyenprovides 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, forwhich 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 andconditions of these service agreements have been aligned with the Dutch
Corporate Governance Code. The service agreements will be entered into for aterm 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 terminatedby 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.

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AdyenAnnual Report 2020

page 97Loans
No loans, advance payments and guarantees have been granted to or on behalfof the Managing Directors.
The below table shows the comparative remuneration and company
performance over the last two reported financial years:
Annual change

2020 vs 20192019 vs 2018

RemarkPieter 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

671,617-17Mariëtte Swart

467,880-

17

Net revenues

149,900

160,855

EBITDA82,245

110,464

Director's remuneration17

Became Managing Directors as per 2020

Company Performance (in EUR ‘000)

Average remuneration comparative on FTE basis (in EUR)
Wages and Salaries / FTE

1,702.66

1,688.69

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 and2020. In addition to the remuneration, expenses incurred by the Supervisory
Directors in the performance of their duties are reimbursed in full:

Salaries and short-term employee

2020

2019

2018

292,705

240,000

176,000

-

-

5,000

292,705

240,000

181,000

benefits
Share-based payments
TotalAdyenAnnual Report 2020

page 98

The table below provides an overview of the remuneration of eachSupervisory Director for the financial year 2019 and 2020. In addition to the
remuneration, expenses incurred by the members of the Supervisory Boardin the performance of their duties are reimbursed in full.

2020

2019

Remuneration

Share-based

Total

Remuneration

Share-based

Total(in EUR)in cashcompensation

Remunerationin cashcompensation

Remuneration

Piero Overmars

90,200-90,20080,000-80,000Delfin Rueda Arroyo

69,000-69,00060,000-60,000

Joep van Beurden

66,000-66,00060,000-60,000

Pamela Joseph

67,505-67,50540,000-40,000292,705-

292,705

240,000-

240,000

Total

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.

Shareholdings (aggregate number of Shares and/or Depositary Receipts)
2020

2019

2018

1,094

1,094

1,094

Delfin Rueda Arroyo

-

-

-

Joep van Beurden*

1,719

1,719

1,719

-

-

-

Piero Overmars

Pamela Joseph

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.

AdyenAnnual 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 whenacting in their capacities as supervisory directors.

Loans
No loans, advance payments and guarantees have been granted to or on
behalf of the Supervisory Directors

page 99

AdyenAnnual Report 2020

page 100

Tess, VP Account Management—“ I work in my daughter’s old bedroom where I’vehung frames with positive affirmations that remind
us good things never come from comfort zones.
Even though this year had its difficulties, it is great towork at a company where people share that mind set
and make the best out of it, as a team. ”

AdyenAnnual Report 2020

page 101

03

Financial
Statements

AdyenAnnual Report 2020

Consolidated Financial Statements____________________________________________________________________________________ 103

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 equivalents _____________________________________________________ 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

Company Financial Statements____________________________________________________________________________________ 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 102AdyenAnnual Report 2020

Consolidated Financial Statements

page 103

AdyenAnnual Report 2020

page 104

Consolidated Statement of Comprehensive Income
For the years ended December 31, 2020 and 2019 Restated*(all amounts are in EUR thousands unless otherwise stated)

Revenue2

3,641,389

20 19
Re s ta te d *2,656,774

Costs incurred from financial institutions

2(2,935,182)(2,105,929)

Costs of goods sold3

(22,007)(16,545)684,200

534,300

N o teNet revenue

20 20

Wages and salaries

4(151,440)(100,450)

Social securities and pension costs

4(28,574)(21,997)

13,14,17(28,567)(22,326)

5(101,889)(95,113)

Amortization and depreciation
Other operating expenses
Other income
Income before net finance income/(expense) and income taxes
Finance income
Finance expense
Other financial results

10,17
6

183

202

373,913294,616

1,334

334

(9,406)(4,633)(42,661)

4,560(50,733)

261

323,180

294,877(62,161)(60,593)

Net income for the year

261,019234,284

Net income attributable to owners of Adyen N.V.

261,019234,284

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

Net finance income/(expense)
Income before income taxes
Income taxes

7

Other comprehensive income
Items that may be reclassified to profit or loss

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).

AdyenAnnual Report 2020

page 105

Consolidated Balance Sheet
As at December 31, 2020, 2019 Restated*, and January 1, 2019 Restated*(all amounts are in EUR thousands unless otherwise stated)

Intangible assets

13

9,970

December 31,
2019
Restated*
7,640

Plant and equipment

14

35,74630,219Right-of-use assets

17

124,328

59,695-

Other financial assets at FVPL

11

20,88344,08830,378Contract assets

2.2

124,113140,000

140,791

Deferred tax assets

7

106,337

71,633

8,297

421,377

353,275

208,446

Note

Total non-current assets

December 31,
2020

January 1,
2019
Restated*
5,059
23,921Inventories

3

19,548

7,020

7,864

Receivables from merchants and financial institutions

15883,939443,333

355,596

Trade and other receivables

15

75,07946,92742,334Current income tax receivables

7

8,794

-

-

-

-

4,418

Financial asset at amortized cost
Other financial assets at amortized cost

11

12,23813,031

9,842

Cash and cash equivalents

10

2,737,486

1,745,388

1,231,916

Total current assets

3,737,084

2,255,699

1,651,970

Total assets

4,158,461

2,608,974

1,860,416

Share capital

8

304

301

296

Share premium

8

194,608

179,296

160,209(4,804)

Treasury shares--

Other reserves

149,931

129,230

69,472Retained earnings

873,291

609,507376,999

1,218,134

918,334

602,172

Total equity attributable to owners of Adyen N.V.
Derivative liabilities

11

68,40035,80023,800

Deferred tax liabilities

7

23,924

26,214

23,777

Lease liability

17

118,051

50,903-

210,375

112,91747,577

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

88,10532,495

Lease liability

17

13,434

10,791-

Current income tax payables

7

16,10819,601

15,479Deferred revenue

-

-

364

Total current liabilities

2,729,952

1,577,723

1,210,667

Total liabilities and equity

4,158,461

2,608,974

1,860,416

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).

-(4,804)

6,582

6,582

Legal
reserves

Balance - December 31, 2019

Share-based payments

Movement resulting from treasury shares

Proceeds on issuing shares

Options exercised

Repurchase of depositary receipts

Deferred tax on share-based compensation

Statutory tax rate change

Transactions with owners in their capacity as owners:

Other adjustments

Intangible assets

Adjustments:

4.3

8

301

5

5

-

179,296

19,087(846)

15,332

4,346

255

-

-

4,804

23,127(18,323)

-

9,095

-

2,594

13

2,581

(81)

-

160,209(4,804)

TreasurysharesTotal comprehensive income for the year
(restated)-296

160,209

Share
premium

(81)

7

1.3.1

296

Share
capitalCurrency translation adjustments

Net income for the year (restated)

Balance - January 1, 2019 (restated)

Adjustment for correction of error

Balance - January 1, 2019 (as previously
reported)

Note

For the years ended December 31, 2020 and 2019 Restated*(all amounts are in EUR thousands unless otherwise stated)

Consolidated Statement of Changes in Equity

66,73458,0632,020(4,346)

60,389

-

-

8,671

8,671

Sharebased
payment
reserve

Other reserves

53,401

(818)

(818)

-

-

54,21954,219Warrant
reserve

609,507

818

818(2,594)(13)(2,581)

234,284

234,284

376,999

19,768357,231

Retainedearnings

918,334

81,9592,020

22,281

15,337-(18,323)

60,644----

234,203(81)

234,284

602,172

19,768582,404

Total equity

5

Adyen
Annual Report 2020
page 106

7

-

-

8
4.3

304

3

3

(321)

194,608

15,312

12,8382,795

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).

Balance - December 31, 2020

Share-based payments

Proceeds on issuing shares

Options exercised

Deferred tax on share-based compensation(1,504)-

1,165

Other adjustments

Transactions with owners in their capacity as owners:

2,330(1,165)Intangible assets

Adjustments:(11,764)

9,095

Legal
reserves

Total comprehensive income for the year-

179,296

Share
premium(11,764)
-

301

Share
capitalCurrency translation adjustments

Net income for the year

Balance - January 1, 2020

Note

98,03430,135771(2,795)32,159

1,165

1,165

-

66,734

Sharebased
payment
reserve

Other reserves

53,401---53,401

Warrant
reserve873,291

-

2,765

5,095

(2,330)261,019

261,019609,507

Retainedearnings

1,218,134

45,450771

12,841-

31,838

5,095

5,095

-

249,255(11,764)

261,019

918,334

Total
equity6

Adyen
Annual Report 2020
page 107

AdyenAnnual Report 2020

page 108

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 o teIncome before income taxes

20 20

323,180

20 19
Re s ta te d *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

11,2309,022- 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

- 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

14,27955,610Changes in working capital:- Deferred revenue

-

(364)

- Redemption financial assets at amortized cost

-

4,418

- Amortization of contract assets

2.2

Cash generated from operations

10,6412,133

1,096,684

587,275

Interest received

1,334

334

Interest paid

(9,406)(4,633)

Income taxes paid
Net cash flows from operating activities(71,965)(53,521)1,016,647

529,455(10,073)

Purchases of financial assets at amortized cost

11

(13,355)

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

Net cash used in investing activities
Proceeds from issues of shares

8(4,795)(4,773)(22,159)(22,757)

12,832

15,332

Sale of depositary receipts (treasury shares)-

22,281

Repurchase of depositary receipts (treasury shares)-(18,323)(9,439)(9,932)

Lease payments

17

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
Cash, cash equivalents and bank overdrafts at end of the year10

(5,783)(2,584)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).

7AdyenAnnual Report 2020

page 109

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 ReportingStandards 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 apresence in, have been taking measures designated to limit the continued spread of COVID-19, including theclosure 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 theCompany 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 growthcontinued 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 forcontinued 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 otherassets remains unchanged. During 2020, Management reassessed the expected credit loss model for trade andother 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 recognizedmaterial losses related to its merchant portfolio. All topics mentioned above continue to be monitored timely due tothe fast-changing environment linked to the pandemic.

AdyenAnnual Report 2020

1.1

page 110

Consolidation

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 theactivities 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 groupcompanies are eliminated.

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 thesefinancial 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 addressof Adyen’s N.V. registered office is Simon Carmiggeltstraat 6-50, 1011 DJ Amsterdam, the Netherlands.

9AdyenAnnual Report 2020

page 1111.2. 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 areincluded in these financial statements. It further provides an overview of how accounting policies together withsignificant 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 wasconsidered: the amount in question is significant in size and/or nature, importance for understanding the results ofAdyen or explaining the impact of significant changes in Adyen’s business and whether judgement is involved.

Accounting Policies

What it is

Accounting policies considered relevant for understanding thefinancial statements, or required to be disclosed by law or IFRS

Where

Provided per note to the financial statements. The notes areorganized into the following sections:

Significant Accounting Estimatesor Judgments
These accounting policies involve ahigher degree of judgement orcomplexity. The estimates applied are
more likely to be materially adjusted
due to inaccurate estimates and/or
assumptions applied

Key disclosures: provide abreakdown of individual line
items in the financial
statements that users of thefinancial 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 forrevenue out of settlement fees
7. Income tax – Recognition ofdeferred taxes related to share-based
compensation

Capital, investment andfinancial risk management: key
information relating to Adyen’s
capital management,
explanations regarding
financial instruments andfinancial 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 becompliant with EU-IFRS andother legal requirements.

Notes 13 – 41

AdyenAnnual Report 2020

page 112

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 cancelledtransactions 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(Previously
Reported)
Payables to merchants and financial
institutions
Current income tax payables

Adjustment

31/12/19

01/01/19(Restated)(Previously
Reported)

Adjustment

01/01/19(Restated)

1,521,377(62,151)

1,459,226

1,186,861(24,532)

7,463

12,13819,601

10,715

4,764

15,4791,627,736(50,013)

1,577,723

1,230,435(19,768)

1,210,667

Net Assets

868,32150,013

918,334

582,404

19,768602,172

Retained earnings

559,494

50,013

609,507357,231

19,768376,999

Total equity attributable to theowners of Adyen N.V.

868,32150,013

918,334

582,404

19,768602,172

Total current liabilities

1,162,329

1.3.2. Adjustment to the consolidated statement of comprehensive income (extract)
31/12/19(Previously
Reported)
Costs incurred from financial institutions

31/12/19
Adjustment(Restated)(2,143,548)

37,619(2,105,929)

Net revenue

496,681

37,619534,300

Income before income taxes

257,258

37,619294,877

Income taxes(53,219)(7,374)(60,593)

Net income for the year

204,039

30,245234,284- Net profit per share - Basic

6.86

1.02

7.88

- Net profit per share - Diluted

6.68

0.99

7.67

Earnings per share (in EUR)

11

AdyenAnnual Report 2020

page 113

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.

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 andrecognized 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. Adyenconsiders 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 otherservices, are recognized at point in time. Services transferred over time relate to the amortization ofdeferred revenue for services provided as part of the merchant contract (note 2.1) and terminal services
fees as part of the unified commerce offering.

The breakdown of revenue from contracts with customers per type of goods or service is as follows:
Types of goods or service

20 20

20 19 R e s t a t e 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 fromfinancial 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AdyenAnnual Report 2020

page 114

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).

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 whichinterchange and payment network fees are charged to Adyen. Adyen adopts a transparent pricing modeland 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 theservice 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 themerchant. 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 incurredfrom 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 theservices are rendered or the ownership of the goods is transferred (‘goods and services transferred at apoint 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.

The breakdown of revenue from contracts with customers based on timing is as follows:
Timing of revenue recognition
Goods and services transferred at a point in time
Services transferred over time
Total revenue from contracts with customers

20 20

20 19

3,634,151

2,650,160

7,238

6,614

3,641,389

2,656,774

13

AdyenAnnual Report 2020

page 115

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 theinitial 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

Contract assets

Accounting treatment

Note reference

Contract assets are initially recognized at cost on the balance sheet, andsubsequently 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 amonetary and non-monetary component and are assessed for impairment
annually with reference to the remaining (net) benefits from the long-term
merchant contract.

2.2. Contract assets

The USD "monetary item" is translated at each balance sheet date at the
EUR/USD spot rate and is assessed for impairment under the expectedcredit loss model. Exchange movements on the "monetary item" isrecognized in profit or loss (other financial results).
Settled by:
1. Cash advanceCash consideration is treated as part of incremental costs of obtaining themerchant contract ('contract assets').

2.2. Contract assets

2. Warrants

Derivative liabilities relating to the warrants are recognized initially at fairvalue and are subsequently stated on the balance sheet at fair value, withmovements 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 thatthe 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 sharevolume 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.

8. Derivative liabilities andWarrant reserve;
11. Accounting policy Derivative liabilities.

After the IPO (on June 13, 2018), the derivative liabilities relating totranches 1 and 2 were reclassified as a warrant reserve in equity in theamount 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'sbalance sheet.

AdyenAnnual Report 2020

page 116

2.2. Contract assets

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 thecontract 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 amortizedand 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 tomeasuring 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.

The contract assets were assessed for impairment at year-end with reference to the remaining (net) benefits fromthe 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 theremaining 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 yearend.
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:
Monetary
component

Non-monetarycomponent

Total contract
assetsBalance - January 1, 2019
Movements:
Amortization for the period

61,306

79,485

140,791(1,561)(572)(2,133)

Exchange differences

1,342

-

1,342

Balance - December 31, 2019

61,087

78,913140,000

Contract assets

Movements
Amortization for the period(8,184)(2,457)(10,641)

Exchange differences (note 6)(5,246)-(5,246)

Balance - December 31, 2020

47,65776,456

124,11315

AdyenAnnual Report 2020

page 1172.3. Segment reporting

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 thesegment 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 theallocation of resources and performance of the operating segments identified. Based on Adyen’s businessand 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 ofinterchange, scheme fees and costs of goods sold) as a performance indicator. As a result, Adyenconsiders net revenue to provide insight to its users to evaluate the nature and financial effects of thebusiness 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.
The following table summarizes Adyen’s geographical breakdown of its revenue based on the billing location asrequested by the merchant for the periods indicated:
2020

2019

Europe1,629,384

1,445,069

North America

1,511,470

799,442

Asia-Pacific

263,678

205,457

Latin America

231,330

201,240

5,527

5,566

3,641,389

2,656,774

Revenue - Geographical breakdown

Rest of the World
Total revenue from contracts with customers

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
Netherlands

2020

2019

300,939

254,330

Rest of the World

120,438

98,945

Non-current assets

421,377

353,275

AdyenAnnual Report 2020

page 118

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 costsof 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-

2019
Restated

2020

Europe424,87822%

132,95966%

347,632
80,25042%

North America
Asia-Pacific

64,95029%

50,17936%

Latin America

60,082

11%

54,22546%

Rest of the World

1,331

-34%

2,014

41%

Total net revenue

684,200

28%

534,300

43%

51%

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 "capitalizationof 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.
2020

2019
Restated

Income before net finance income/(expense) and income taxes

373,913294,616

Amortization and depreciation

28,56722,326

EBITDA

402,480

316,942

Net revenue

684,200

534,300

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

316,942CapEx(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

92%

91%

Selected non-IFRS financial measures

EBITDA margin (%)

Free cash flow conversion ratio (%)*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.

17

AdyenAnnual Report 2020

page 119

3. Inventories
Inventories relate to the point of sale (POS) terminals in connection with the roll out of the Unified Commerce
strategy.

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 andother costs incurred in bringing them to their existing location and condition. Net realizable value isdefined 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 writtenoff, unless they form part of the cost of another asset.

Inventories

20 20

20 19

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
Balance - December 31

(551)

(520)

19,5487,020

During 2020, Adyen performed an impairment test on inventories and determined that the net realizable value ofpart 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

20 20

20 19

Amsterdam

1,011

660

San Francisco

179

126

Singapore

96

78

London84

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.

AdyenAnnual Report 2020

page 120

4.1. Employee benefits

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).

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

19,520Pension 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

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 administeredpension 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.

The expected contributions to the pension benefit plans for 2021 are EUR 4,950 (2019: EUR 3,688).

19

AdyenAnnual Report 2020

page 1214.3. Share-based payments
The share-based compensation consists of both equity- and cash-settled compensation expenses. A specificationof 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.
II.

Equity-settled option plan (granted until 2018);
Cash-settled share-based payment plan (granted from 2018 onwards).

These plans are described in more detail below:
I.

Equity-settled option plan

Accounting policy – Equity-settled options
Adyen has an option plan for directors and employees. Exercisable options provided participants theopportunity 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 thefirst 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 timefrom 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.

The maximum aggregate number of Depository Receipts in respect to which options shall be granted is 1,312,5001.
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 theBlack-Scholes valuation model as at each grant date. At December 31, 2020, the weighted average grant date fairvalue 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.

AdyenAnnual Report 2020

page 122

Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
2020
Number of options(thousands)

Weighted average
exercise price (inEUR) per shareoptionNumber 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

Share options outstanding

II.

2019

Weighted average
exercise price (inEUR) per shareoptionCash-settled share-based payment plan

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 sharesat grant date. Subject to the employee’s continued employment with Adyen N.V., the phantom shares willvest over a period of four years from the grant date. 25% of the phantom shares will vest on the firstanniversary 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 ofAdyen’s shares. The liability is measured at fair value through profit or loss using the market price ofAdyen’s shares at balance sheet date with remeasurements on each reporting date. Changes in the fairvalue are recognized as “share-based compensation”.
The expense reflecting the recognition of the grant date fair value and changes in fair value of thephantom share plan is presented as wages and salaries in the statement of comprehensive income.

In 2020 a total of 7,7072 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.

21AdyenAnnual Report 2020

page 123

5. Other operating expenses

Accounting policy – Operating expenses
Operating expenses are recognized in the period when they occur.

The other operating expenses can be specified as follows:
Other operating expenses

2020

2019

Sales and marketing costs

39,61232,276Advisory costs

15,891

12,738IT 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
Exchange gains/(losses) (note 6.1)

2020

2019

(11,066)

2,850(32,600)(12,000)

1,005

13,710(42,661)

4,560

Fair value re-measurement of financial instruments:
Derivative liabilities (note 6.2)
Other financial assets at fair value through profit or loss (note 6.3)
Total other financial results

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’).

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page 124

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 inwhich Adyen operates. The financial statements of entities that have a functional currency different fromthat 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 reasonableapproximation of the actual rates prevailing at the transaction dates).
Foreign currency differences are recognized in other comprehensive income and are presented withinequity in the legal reserves.
Monetary items
Monetary items are units of currency held and assets and liabilities to be received or paid in a fixed ordeterminable 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 arerecognized 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 atfair value through profit or loss and are retranslated at the date that the fair value is determined.

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 moredetail 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 thederivative liabilities is mainly linked to the Adyen share price increase over the year as well as a change in theestimate of the probability of vesting.

6.3. Other financial assets at fair value through profit or loss (‘FVPL’) (Visa Inc. preferredshares)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 lossof 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.

23

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7. Income tax
7.1. Income tax expense

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.

The tax on Adyen’s income before income taxes differs from the amount that would arise using the statutory tax ratein the Netherlands. The effective tax rate (“ETR”) of Adyen for the year ended December 31, 2020 is 19.23% (2019Restated: 20.55%) which differs from the statutory tax rate in the Netherlands of 25% (2019: 25%) due to theapplication of the innovation box, tax rate differences on foreign operations and other adjustments (such as nondeductible 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
Income before income taxes
Statutory tax rate in the Netherlands (%)
Income taxes based on statutory tax rate in the Netherlands

20 20

20 19 R e s t a t e d

323,180

294,877

25%

25%

80,79573,719Tax effects of:(18,381)(13,029)

Change in tax rate

2,150

(602)

Tax rate differences on foreign operations

(497)

(374)

Innovation box

Other adjustments (such as prior year and non-deductible amounts)(1,906)879

Effective tax amount62,16160,593The breakdown between current and deferred income taxes for the year ended December 31, 2020 and 2019 isdisclosed below:
Income taxes

20 20

20 19 R e s t a t e dCurrent income tax expense

69,91561,305

Deferred income tax income(7,754)(712)

Total income taxes

62,16160,593The breakdown between current income tax receivables and payables as at December 31, 2020 and 2019 isdisclosed below:
Current income tax receivables/(payables)

20 20

Current income tax receivables

8,794

-

Current income tax payables(16,108)(19,601)20 19 R e s t a t e dAdyenAnnual Report 2020

page 126

7.2. Deferred income taxes

Accounting policy – Deferred income taxes
Deferred income taxes arise, in general, as a result of temporary differences between tax andcommercial 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 thebalance sheet date.
In some tax jurisdictions, Adyen is granted a tax deduction (i.e. an amount that is deductible indetermining 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 mayarise 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 available against 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.

In 2019, the Dutch Government substantively enacted a change in the statutory tax rate, decreasing it from 25% in2019 to 21.7% in 2021. During 2020, this statutory change was reversed meaning that the statutory tax rate willremain 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:
BalanceJanuary 1,
2019

Recognized in
profit or loss

Derivative liabilities

4,879

2,890

Windfall tax benefit

1,153

Recognizedin equity

Effects of foreignexchange

Balance
December 31,
2019

32,029(72)

33,110(5)

29,163

Deferred tax assets:

Tax losses carried forward

553

7,769
28,615

Temporary differences

1,712

357

Total deferred tax assets

8,297

3,247

Other financial assets at FVPL

(7,594)(1,973)(9,567)

Contract assets(16,020)(299)(16,319)

(163)

(263)

Total deferred tax liabilities(23,777)(2,535)Net deferred tax assets /(liabilities)(15,480)712

60,644

(478)

(555)

1,591
71,633

Deferred tax liabilities:

Temporary differences

98

(328)

-

98

(26,214)60,644(457)

45,41925

AdyenAnnual Report 2020

page 127

BalanceJanuary 1,
2020

Recognizedin profit or loss

Derivative liabilities

7,769

9,331

Windfall tax benefit

33,110Tax losses carried forward

29,163

Balance
December 31,
2020

Recognizedin equity

Effects of foreignexchange

10,521

303

43,934

21,638(8,263)43,085(7,960)106,337

Deferred tax assets:

547

17,100Temporary differences

1,591

627

Total deferred tax assets

71,633

10,50532,159

2,218

5,041

Deferred tax liabilities:
Other financial assets at FVPL

(9,567)(1)

Contract assets(16,319)(2,795)

Temporary differences(4,527)(19,114)

(328)

45

Total deferred tax liabilities(26,214)(2,751)

5,041-(23,924)

Net deferred tax assets

45,4197,754

37,200(7,960)82,413

I.

(283)

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.

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 tothe 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 agoing concern basis. The balance of deferred tax position relating to options exercised in 2020 andprevious 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 theselosses can be utilized. An amount of EUR 12,659 (EUR 8,056) related to deferred State taxes was notrecognised as of December 31, 2020, due to its finite carrying period and uncertainly around therecoverability of the asset.

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

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the positive outlook of future profitability of the Company, the deferred tax assets shown on the balance sheet wereconsidered 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.

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.

In 2020, 295,2893 (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 pershare). 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), sharebased payment reserve, warrant reserve, and total comprehensive income for the current period (in accordance withregulatory 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 andreclassified 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 ‘otherfinancial results’ in profit or loss. Reference is made to note 11 ‘Financial Instruments’ for further details on theaccounting treatment of the derivative liabilities.

3

Amounts in this paragraph are not rounded to the nearest EUR thousand.

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9.CRR/CRD IV Regulatory Capital
The following table displays the composition of regulatory capital as at December 31, 2020. The regulatory capital isbased 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)

Warrant reserve(53,401)(53,401)

Intangible assets(9,970)(7,640)

Deferred tax asset that rely on future profitability(93,788)(61,725)

Regulatory adjustments:

Prudent valuation

(89)

(80)

Total own funds

799,867

561,204

10. Cash and cash equivalents

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 threemonths 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.

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 isinvested in interest bearing short-term deposits with financial institutions and is exposed to credit risk with thesecounterparties. 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.

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11. Financial instruments

Accounting policy – Financial instruments
C las s if ic at io nAdyen classifies its financial assets in the following measurement categories, those to be measured:••

subsequently at fair value through profit or loss (‘FVPL’), andat amortized cost.
The classification depends on Adyen’s business model for managing the financial assets and thecontractual 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 ofthe contractual arrangement, and subsequently reassesses the accounting treatment on changes incircumstances. 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 bederecognized and classified as equity instruments contingent on uncertain future events linked tomilestones of processed payments volume with eBay.
Measurem ent
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 withembedded derivatives are considered in their entirety when determining whether their cash flows aresolely payment of principal and interest.

Debt instruments
Subsequent measurement of debt instruments depends on Adyen’s business model for managing theasset 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 inorder to collect contractual cash flows, where those cash flows represent solely payments ofprincipal and interest. Interest income from these financial assets is included in financeincome 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 othercomprehensive 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.
Im pairm ent
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 groupapplies the simplified approach, which requires expected lifetime losses to be recognized from initialrecognition of the assets.

Instruments in scope on the balance sheet of Adyen include: cash and cash equivalents, receivablesfrom 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
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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 isapplied.
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 fortrade 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, noforward-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.
Fair value m easurem ent
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 theentire 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 isdetermined using valuation techniques which maximise the use of observable market data andrely as little as possible on entity-specific estimates. If all significant inputs required to fairvalue 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, theinstrument is included in level 3.

The financial instruments as at each balance sheet date are summarized in the table below. For those measured atfair value, to provide an indication about the reliability of the inputs used in determining fair value, Adyen hasclassified 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 bemeasured at amortized cost. Furthermore, the classification is based on the business model test. As a result, theclassification is consistent with how the business is managed and is in line with risk management strategies andhow this is reported to key management. Adyen’s exposure to various risks associated with the financial instruments
is discussed in note 12.

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Financial instruments

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Note

Measurement policy

20202019 Restated

Financial assets:
Other financial assets at FVPLFVPL – level 2

20,88344,088Contract assets – monetary component

2.2

Amortized cost

47,65761,087

Receivables from merchants and financial
institutions

15

Amortized cost

883,939443,333

Trade and other receivables

15

Amortized cost

75,07946,927

Amortized cost

12,23813,031Other financial assets at amortized cost
Cash and cash equivalents

10

Amortized costTotal

2,737,486

1,745,388

3,777,282

2,353,854

Financial liabilities:
Derivative liabilities
Lease liability
Payables to merchants and financial
institutions
Trade and other payables
Total

Amortized cost

68,400131,485

35,80017

FVPL – level 2
16

Amortized cost

2,588,863

1,459,226

16

Amortized cost

61,694

111,547

88,1052,900,295

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 “otherincome” 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-collectbusiness 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 aBlack-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 onachievement 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 aswell as a change in estimate of the probability of vesting. Reference is made to note 6 ‘Other financial results’ for therecognition of the movement of the derivative liabilities.

31

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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

Liquidity risk
Liquidity risk is the risk that Adyen
could not meet its short-term
payment obligations.

Remaining risk
MinimalAdyen actively monitors its liquidity risk. However, the majority of thebalance sheet, excluding merchant funds, for both assets andliabilities has a maturity date of less than three months on an
undiscounted contractual basis. The remaining balances with adifferent maturity date (as mentioned specifically in the notes ofthese 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 andrelated 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 byliquidity from merchants with default pay-out schedules and liquidity
via settlement by payment methods.

Due to the shortterm characterof Adyen’sbalance sheet,the remaining
liquidity risk
remains within
Adyen’s risk
appetite.

Adyen holds a liquidity buffer based on the Liquidity Coverage Ratio(LCR), accompanied by a survival period metric, to mitigate theresidual risk. The survival period is determined by dividing the sum of
cash and cash equivalents, receivables from and payables tomerchants and financial institutions, by total operating expenses forthe period. The survival period is set at a minimum of six months andAdyen's survival period as at December 31, 2020 is 40 months(2019: 37 months). Given the maturity of the assets and liabilities onbalance sheet, as well as Adyen's liquidity buffer and survival period
metric, the Company has sufficiently mitigated liquidity risk.

M a rk e t ris k s

M inima l

Foreign exchange risk
Adyen operates internationally andis exposed to foreign exchange
risk arising from various currency
exposures. Foreign exchange riskarises on recognized assets andliabilities, principally trade andmerchant flow related receivables
and payables, and investments inforeign operations.

Management actively manages the foreign exchange risk resulting inlimited exposure to foreign exchange risks. USD and GBP are themost 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 orloss resulting from a 10% shock (positive or negative) of therespective significant currency against the Euro. All short-term
financial instruments have been excluded in this exposure given thequick settlement times, and hence, limited foreign exchange risk onthese instruments.

The resulting
overall impact ofan immediate
10% shock on all
currencies
excluding USD
and GBPremains within
Adyen’s risk
appetite.

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Currency

Net exposure

10% shock

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

December 31, 2019

The balance sheet positions related to merchant fund flows are notconsidered 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 fromadverse 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 bematerial to Adyen, as some assets are interest bearing whereas all
liabilities are non-interest-bearing.
Adyen is not financed with external debt, which could presentinterest rate risk. Although significant liabilities towards merchants
are present, these liabilities are non-interest bearing and are settled
at short notice.

As a result of thenature of the
products on the
Adyen balance
sheet theremaininginterest rate risk
remains within
Adyen’s risk
appetite.

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 heldto-maturity are minimal compared to the total financial instrumentson the Adyen balance sheet, are short-term in nature and are heldto-collect contractual cash flows leading to minimal interest rate risk.
Equity price risk
The risk that the fair value ofequities decreases as a result ofchanges in the levels of equity
indices and the value of individual
stocks.

The Group’s exposure to equity securities price risk arises frominvestment 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 inthe share price of Visa Inc.
Two tranches of the long-term merchant contract with eBay areclassified in the balance sheet as derivative liabilities. The exposure
is affected by share price movements of Adyen shares.

The remaining
equity price risk
is consideredlimited as Adyen
has no other
equityinstruments on
its balance
sheet.

Adyen carried out a sensitivity analysis on the Visa Inc. preferredshares 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 consideredequal:

33

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Balance sheet item

Carrying
amount

5% underlying
share
price
movement

December 31, 2019
Visa
Inc.
preferredsharesDerivative liabilities

EUR 44 million

EUR 2 million

EUR 36 million

EUR 2 million

EUR 21 million

EUR 1 million

EUR 68 million

EUR 3 million

December 31, 2020
Visa
Inc.
preferredsharesDerivative liabilities

In addition, Adyen’s Treasury policy does not allow purchasing
additional equity positions (excluding treasury shares).

C re d it ris k s

M inima l

Counterparty default risk
The counterparty default (credit)risk relates to receivables fromfinancial institutions regarding
settled payment transactions.

Adyen cash which is surplus to regulatory requirements andoperational needs is invested in interest bearing short-term deposits
with financial institutions and is exposed to credit risk with thesecounterparties.

A default of financial institution
counterparties could have anegative impact on Adyen’s
financial results.

The credit risk exposure per financial institution is maximized to EUR
150 million or 25% of Adyen’s eligible capital, whichever is thehighest, provided that the financial institution has a credit rating in
the A categories of Moody’s/S&P or, if not available, its equivalentfrom 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.

The remaining
credit risk
remains within
Adyen’s risk
appetite.

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, andreceivables from merchants and financial institutions.
Adyen has exposure to various financial institutions globally. In orderto 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 notexpect any losses from non-performance by these counterparties.
Concentration risk
Risk of losses stemming from onand off-balance sheet positions
arising from concentrations in
exposures to an issuer or a groupof 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 compliancewith the large exposure limit.

The remaining
credit risk
remains within
Adyen’s risk
appetite.

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Other disclosures
13. Intangible assets
Adyen’s intangible assets relate to expenses capitalized on the internal development of the Adyen’s payment
platform.

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 straightline 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 circumstancesindicate that the carrying amount may not be recoverable. The useful life is assessed on an annual
basis.

Intangible assets
Internally generated software
Cost
Accumulated amortization
Balance - January 1

20 20

20 19

15,022(7,382)
7,640

10,249(5,190)5,059

Additions
Amortization for the year

4,795
(2,465)

4,773(2,192)

Total as at December 31

9,970

7,640

Cost
Accumulated amortization

19,817(9,847)15,022(7,382)

Total as at December 31

9,970

7,640

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14. Plant and equipment

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 auseful 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 berecoverable. The useful life is assessed on an annual basis.

Plant and equipment

2020

2019

Plant and equipment
Cost

55,58740,414

Accumulated depreciation(25,368)(16,493)

Balance - January 1

30,21923,921

Additions

17,097

15,186

Disposals

(38)

(377)

(11,230)(9,022)

Depreciation for the year
Other changes (e.g. exchange differences)
Balance - December 31

(302)

511

35,74630,219Cost

70,04055,587

Accumulated depreciation(34,294)(25,368)

Balance - December 31

35,74630,219The additions during the year mainly relate to hardware equipment such as laptops for employees and servers fordata centers. Adyen did not recognize an impairment loss or reversal of impairment loss of plant and equipment
during the year (2019: nil).

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15. Trade, other receivables, and receivables from merchants andfinancial institutions

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 areclassified at amortized cost, initially recognized at fair value and subsequently measured at amortized costless impairments for expected credit losses. Due to the short duration of the receivables (average lessthan 3 months) the fair value approximates the carrying value.

15.1. Trade, other receivables, and receivables from merchants and financial institutions
Trade, other receivables, and receivables from merchants and financial institutions

20 20

20 19

Trade and other receivables

79,91850,155

Less: Allowance for expected credit losses(4,839)(3,228)Trade receivables - Net

75,07946,927

Receivables from merchants and financial institutions

883,939443,333

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
Receivables from financial institutions

20 20

20 19

833,657

406,714

Receivables from merchants

50,282

36,619Balance – December 31

883,939443,333

Receivables from financial institutions
Receivables from financial institutions include balances due from schemes and other financial institutions regardingtransactions 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 fromfinancial 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 besettled 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.

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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 reflectreasonable 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 yearover-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

Accounting policy – Trade and other payables
Payables are obligations initially recognized at fair value and subsequently measured at amortized costto 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.

Trade, other payables, and payables to merchants and financial institutions

20 20

Trade payables

8,308

9,458

Taxes and social security

42,482

43,709Accrued employee benefits

31,39018,959Accrued liabilities and other debts

21,14014,783

Cash-settled share-based payment plan

8,227

1,196

T ra d e a n d o th e r p a y a b le s

11 1, 5 47

88, 1 0 5

Payables to merchants and financial institutions

2,588,863

1,459,226

T o ta l2, 7 00, 41 0

1, 5 47, 33 1

20 19 R e s t a t e d

The payables to merchants and financial institutions relate to interchange and scheme fees payable and do notconstitute borrowings. The payables to merchants include the Merchant Potential Liability (‘MPL’) reserve as part ofAdyen’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 theamount of transaction volume for which issuers could potentially submit a chargeback and Adyen has to takefinancial 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’).

AdyenAnnual Report 2020

page 140

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.

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 orchanges in circumstances indicates that the carrying amount may not be recoverable. Interest on leaseliability 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 ofcomprehensive 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.
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 ona monthly basis, starting February 2022; therefore, the total lease liability outstanding is disclosed as non-current.
2020

2019

Cost

70,84962,625

Accumulated depreciation(11,154)-

Balance - January 1

59,69562,625Right-of-use assets
Offices and data centers

Additions

81,3088,712

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
Balance - January 1

2020

2019

61,69462,625Additions

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

61,694Current portion

13,434

10,791

Non-current portion

118,051

50,90339

AdyenAnnual Report 2020

page 141

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:
2020

2019

Within 1 year

11,126

11,815

Between 1 and 2 years

16,294

10,520Between 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

65,799Minimum future lease payments

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 otherthings, 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 totalcollateral 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 renderedthroughout the year (refer to note 22.2 ‘Remuneration Supervisory Board’). The outstanding balances as per
December 31, 2020 and 2019 are:
Related party transactions

20 20

20 19

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).

AdyenAnnual Report 2020

page 142

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 inaccounting 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 havenot 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 (“Wettoezicht accountantsorganisaties-Wta”) as well as by the Dutch and foreign-based accounting firms, including theirtax services and advisory groups. These fees relate to the audit of the 2020 financial statements, regardless ofwhether 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*

Audit of financial statements

706

293

Other audit services

93799

Tax services
Total

PwC
Accountants

Other PwC
firms*

999

825

221

1,046

-

93

139

-

139

-

-

-

7

7

293

1,092

964

228

1,192

Total

Total

*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.

41

AdyenAnnual Report 2020

page 143

2020

2019

999

1,009

-

37

93

139

-

7

1,092

1,192

Other audit services required by law or regulatory requirement
Statutory audits of controlled entities
Audit of the regulatory returns to be submitted to the Dutch Central Bank
Other audit services
Assurance engagement ISAE 3402 report
Tax services
Tax compliance services
Total for the year

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).
20 20

20 19

3,253

2,774

Share-based payments

191

209

Post-employment benefits

103

82

3,547

3,065

Salaries and short-term employee benefits

Total

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 indicationthat a competent supervisory authority will take such position).
Pension4
As from January 2017, all Dutch members of the Management Board participate in the Collective DefinedContribution (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 theaccrual of old age pension benefits as well as the administration costs. If and as far as fiscally allowed, eachManaging 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 fromtheir 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.

AdyenAnnual Report 2020

page 144

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 andconditions 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 reappointed 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 tablebelow 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:
20 20

20 19

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.

43AdyenAnnual Report 2020

page 145

23. Share information

Accounting policy – Earnings per share
Adyen presents basic and diluted earnings per share (EPS) data for its ordinary shares. The calculationof 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 toshare 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 ‘Capitalmanagement’.

Share information

2020

2019
Restated

Net income attributable to owners of Adyen N.V. (in EUR '000)

261,019234,284

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)

420,676794,693

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

Weighted average number of ordinary shares for diluted net profit for the period

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 firstglobal 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 basedon 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 ofgovernment 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 participatinginterests as referred to in Article 414, Book 2 of the Dutch Civil Code can be found in note 32 ‘Investments inconsolidated subsidiaries on equity method’ of the company financial statements.

AdyenAnnual Report 2020

Country andSubsidiary

page 146

Ending
FTE

Total
OperatingExpenseIncomeBefore Tax

Direct Tax
Expense

1,011

161,784

296,43991
43

14,147
7,923

Sales office

42

Sales office

VAT

Payroll
Taxes

Total Tax
Contribution

60,931

81,020106,332

248,2835,283
980(372)*
422

(322)
2,038

6,023
3,780

5,329
6,240

5,848

1,981

508

-

3,951

4,459

25

5,527

2,233

509

-

2,823

3,332

Sales office

22

2,999

1,341

511

1,600

1,006

3,117

Sales office

6

781

417

74

-

381

455

Sales office

11

1,743

464

323

-

445

768

Sales office

1

-

-

-

-

-

-

Sales office

-

21

(21)

-

-

-

-

Sales andsupport office

236

67,106

7,923(2,415)*-73,63871,223

Sales office

89

14,042

1,515

357

4,497

3,463

8,317

Sales office

8

631

422

227

1,343

181

1,751

Sales office

7

1,241

295

75

3,723

128

3,926

96

13,759

1,565

417

4,340

846

5,603

29

6,718

1,034

331

4,402

1,264

5,997

Main activity

NetherlandsAdyen N.V. and
Adyen
International B.V.
Adyen UK Ltd
Adyen France
Adyen N.V. German Branch
Adyen Nordic
FilialAdyen N.V.,
Spain Rep Office
Adyen N.V.,
Belgium Rep
OfficeAdyen N.V., Italy
Rep Office
Adyen N.V.,
Polish Rep Office
Adyen Middle
East Limited
United StatesAdyen Inc.,
Adyen Services
Inc. And Adyen
Nevada Inc.
Adyen Brasil
Ltda.
Adyen Mexico
SAdeCV
Adyen Canada
Ltd
Adyen Singapore
PTE Ltd
Adyen Australia
Pty Limited
Adyen (China)
SoftwareTechnology Co.
Ltd.

Head office Payment
serviceproviderSales office
Sales office

Sales office

17

3,244

376

95

198

629

922

Adyen Japan K.K

Sales andsupport office

7

1,620

187

60

-

286

346

Sales office

4

441

525

32

-

-

32

Sales office

2

510

61

18

36

93

147

Sales office

-

164

5

16

1,619

39

1,674

Sales office

-

30

163

42

75

-

117

-

8

(8)

-

-

-

-

310,287

323,180

62,161

104,569

205,308

372,038

Adyen Hong
Kong Ltd
Adyen India
Technology
Services Private
LimitedAdyen New
Zealand Ltd.
Adyen Malaysia
Sdn. Bhd
Adyen Korea
Chusik Hoesa
Total

Sales andsupport office
Sales andsupport office

Inactive

1,747* 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).

45

AdyenAnnual Report 2020

page 147

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 aretaxed 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 inthe 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 oftaxable 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.

AdyenAnnual Report 2020

Company Financial Statements

page 148

AdyenAnnual Report 2020

page 149

Company Statement of Comprehensive Income
For the years ended December 31, 2020 and 2019 Restated*(all amounts in EUR thousands unless otherwise stated)
N o te20 20

Revenue26

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)

540,385

420,024

Net revenue

20 19 R e s t a t e d *Wages and salaries

27(85,505)(54,628)

Social securities and pension costs

27(14,542)(12,541)

13,30,31(20,545)(14,727)

28(66,356)(58,968)

Amortization and depreciation
Other operating expenses
Other income
Income before net finance income/(expense) and income taxes

286

196

353,723

279,356

Finance income

1,248

326

Finance expense(8,987)(4,316)

Other financial results

29

Net finance income/(expense)
Share of the profit of investments in subsidiaries

32(42,203)

6,853(49,942)

2,863

20,516

12,284

Income before income taxes

324,297294,503

Income taxes(63,278)(60,219)

Net income for the year

261,019234,284

Net income attributable to owners of Adyen N.V.

261,019234,284

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

Other comprehensive income
Items that may be reclassified to profit or loss

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).

AdyenAnnual Report 2020

page 150

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

D e c e m b e r 31,
20 20
9,970

D e c e m b e r 31,
20 19 R e s t a t e d *7,640

J a n u a r y 1, 2 01 9
Re s ta te d *5,059

18,139Intangible assets

13

Plant and equipment

30

27,68623,482Right-of-use assets

31

104,251

35,619-Other financial assets at FVPL

11

20,88344,08830,378Contract assets

2.2

124,113140,000

140,791

17,100

7,769

4,879

139,150

98,147

23,903443,153

356,745

223,149

Deferred tax assets
Investments in consolidated subsidiaries on equity method

32

Total non-current assets
Inventories

16,055

5,614

6,656

Receivables from merchants and financial institutions

33

790,271299,618

277,066

Trade and other receivables

33

200,535

103,269

58,362

-

-

4,418

12,23813,031

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

Current income tax receivables
Other financial assets at amortized cost

11

Share capital

8

304

301

296

Share premium

8

194,608

179,296

160,209

Treasury shares--(4,804)

Legal reserves

14,853

43,61629,366

Other reserves

151,435

120,135

62,890Retained earnings

595,915

340,702203,301

Net income for the year
Total equity attributable to owners of Adyen N.V.
Derivative liabilities

11

Deferred tax liabilities
Lease liability

31

Total non-current liabilities

261,019234,284

150,914

1,218,134

918,334

602,172

68,40035,80023,80023,64025,886

23,615

102,647

31,120-

194,687

92,80647,415

Payables to merchants and financial institutions

36

2,406,651

1,266,808

1,034,976

Trade and other payables

36

77,98878,47427,516

Lease liability

31

7,349

5,243

-

15,481

20,192

13,966

Current income tax payables
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).

49

729,36629,366Legalre s e rv e s

Balance - December 31, 2019

Share-based payments

Movement resulting from treasury shares

Proceeds on issuing shares

Options exercised

Repurchase of depositary receipts

Deferred tax on share-based compensation

Statutory tax rate change

Transactions with owners in their capacity as owners:

Other adjustments

Intangible assets

Other financial assets at FVPL movement to legal
reserve

Adjustments:

4.3

8

301

5

5

-

179,296

19,087(846)

15,332

4,346

255

-

-

4,804

23,127(18,323)-

43,616-

14,33113

2,581

11,737(81)-(4,804)(4,804)

T re a s u rys h a re s

Total comprehensive income for the year
(restated)-

160,209160,209

S ha rep re miu m

(81)
-

296

296

S ha rec a p ita lCurrency translation adjustments

Net income for the year (restated)

Balance - January 1, 2019 (restated)

Adjustment for correction of error

Balance - January 1, 2019 (as previously
reported)

N o teFor the years ended December 31, 2020 and 2019 Restated*(all amounts are in EUR thousands unless otherwise stated)

Company Statement of Changes in Equity

50

66,73458,0632,020(4,346)

60,389

-

-

8,671

8,671

S ha re bas ed
p a y me nt
re s e rv e

53,401

(818)

(818)

-

-

54,21954,219W a rra nt
re s e rv e

O the r re s e rv e s

574,986818

818(14,331)(13)(2,581)(11,737)

234,284

234,284354,215

19,768334,447

R e ta ine de a rning s

918,334

81,9592,020

22,281

15,337-(18,323)

60,644

-

-

-

-

-

234,203(81)

234,284

602,172

19,768582,404

T o ta l e q u ity

Adyen
Annual Report 2020
page 151

7

8
4.3

304

3

3

(321)

194,608

15,312

12,8382,795

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).

Balance - December 31, 2020

Share-based payments

Proceeds on issuing shares

Options exercised

Deferred tax on share-based compensation

Statutory tax rate change

Transactions with owners in their capacity as owners:

51

14,853

(760)

(760)

(16,239)(1,165)-

Other adjustments
-

2,330

(17,404)

Intangible assets

Other financial assets at FVPL movement to legal reserve

Adjustments:(11,764)

43,616Legalre s e rv e s(11,764)-

179,296

S ha rep re miu m

Total comprehensive income for the year-

301

S ha rec a p ita lCurrency translation adjustments

Net income for the year

Balance - January 1, 2020

N o te98,03430,135771(2,795)32,159

1,165

1,165

-

66,734S ha re bas ed
p a y me nt
re s e rv e

53,401---53,401

W a rra nt
re s e rv e

O the r re s e rv e s

856,934760

760

20,1695,095(2,330)17,404

261,019

261,019574,986

R e ta ine de a rning s

1,218,134

45,450771

12,841-

31,838

-

5,095

5,095

-

249,255(11,764)

261,019

918,334

T o ta l e q u ity

Adyen
Annual Report 2020
page 152

AdyenAnnual Report 2020

page 153

Company Statement of Cash Flows
For the years ended December 31, 2020 and 2019 Restated*(all amounts in EUR thousands unless otherwise stated)
N o teIncome before income taxes

20 20

20 19 R e s t a t e d *324,297294,503

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)

3,026

1,735

- Share-based payments
Changes in working capital:- Inventories(10,441)

1,042(83,473)(44,907)33(490,653)(22,552)

36

1,139,843

231,832(3,274)50,958- Trade and other receivables

33- Receivables from merchants and financial institutions- Payables to merchants and financial institutions- Trade and other payables- Deferred revenue

-

(364)

- Redemption financial assets at amortized cost

-

4,418

- Amortization of contract assets

2.2

Cash generated from operations

10,641

2,133

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(10,073)

Purchases of financial assets at amortized cost

11

(13,355)

Redemption of financial assets at amortized cost

11

13,088

7,275

Purchases of plant and equipment30(13,563)(12,461)

Capitalization of intangible assets

13

Net cash used in investing activities
Proceeds from issues of shares

8(4,795)(4,773)(18,625)(20,032)

12,832

15,332

Sale of depositary receipts (treasury shares)-

22,281

Repurchase of depositary receipts (treasury shares)-(18,323)

Lease payments
Net cash flows from financing activities

31(4,257)(5,481)

8,575

13,809Net increase in cash, cash equivalents and bank overdrafts

851,502455,750

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
Cash, cash equivalents and bank overdrafts at end of the year

2,956

914

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).

AdyenAnnual Report 2020

page 154

Notes to the Company financial statements
Basis of preparation
The company financial statements have been prepared in accordance with International Financial ReportingStandards 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 ispassed on by Adyen to the merchant, which, in the normal course of business, would translate into the recognition ofa 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)31/ 12/ 1 9

Payables to merchants and financial
institutions
Current income tax payables(Previously
reported)

Adjustment

31/ 12/ 1 9(Restated)

1,328,959(62,151)

1,266,808(Previously
reported)

01/ 01/ 1 9

Adjustment

01/ 01/ 1 9(Restated)

1,059,508(24,532)

1,034,976

8,054

12,13820,192

9,202

4,764

13,9661,420,730(50,013)1,370,717

1,096,590(19,768)

1,076,822

Net Assets

868,32150,013

918,334

582,404

19,768602,172

Retained earnings

320,934

19,768

340,702203,301-

203,301

Net income for the year
Total equity attributable to theowners of Adyen N.V.

204,039

30,245234,284

131,146

19,768150,914868,32150,013

918,334

582,404

19,768602,172

Total current liabilities

53AdyenAnnual Report 2020

page 155

25.2. Adjustment to the company statement of comprehensive income (extract)
31/12/2019

Costs incurred from financial institutions(Previously
reported)

Adjustment

31/12/19(Restated)(1,896,242)

37,619(1,858,623)

Net revenues

382,405

37,619420,024

Income before income taxes

256,884

37,619294,503

Income taxes(52,845)(7,374)(60,219)

N e t i n c o m e fo r t h e y e a r

20 4, 0 39

30, 24 5

23 4, 2 84

26. Company - Revenue

Settlement fees

2,875,955

2019
Restated
2,050,267

Processing fees

178,851

143,190

Sales of goods

17,92913,753

Other services

98,46286,446

T o ta l re v e n u e f ro m c o n tra c ts wi th c u s to me rs

3, 1 7 1, 1 97

2, 29 3, 6 5 6

Costs incurred from financial institutions(2,610,741)(1,858,623)

Types of goods or service

2020

Costs of goods sold

(20,071)(15,009)

N e t re v e nu e

54 0, 3 85

42 0, 0 24

27. Company - Employee benefits
Employee benefits

2020

2019

Salaries and wages

81,47852,892

Share-based compensation

4,027

1,736

T o ta l wa g e s a n d s a la rie s

85, 5 0 5

54, 6 2 8

Social securities

11,852

10,915Pension costs - defined contribution plans

2,690

1,626

T o ta l s o c ia l s e c u ritie s a n d p e n s io n c o s ts

14, 5 4 2

12, 5 4 1

28. Company - Other operating expenses
Other operating expenses

2020

2019

Sales and marketing costs

17,583

12,963Advisory costs

12,77910,259IT 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

66,35658,968AdyenAnnual Report 2020

page 156

29. Company - Other financial results
Other financial results
Exchange gains/(losses) (note 29.1)

2020

2019

(10,608)

5,143(32,600)(12,000)

1,005

13,710(42,203)

6,853

Fair value re-measurement of financial instruments
Derivative liabilities (refer to note 6.2)
Financial instruments at fair value through profit or loss (note 6.3)
Total other financial results

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

23, 4 8 2

18, 1 3 9

Additions

13,563

12,461

Disposals

(535)

(144)

Depreciation for the year

(8,824)(6,974)

Balance - December 31

27, 6 8 6

23, 4 8 2

Cost

54,54943,241

Accumulated depreciation(26,863)(19,759)

Balance - December 31

27, 6 8 6

23, 4 8 255

AdyenAnnual Report 2020

page 157

31. Company – Leases
Adyen’s leases relate to offices and data centers across locations where it operates.

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 aretested 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 ofcomprehensive 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.

2020

2019

Cost

41,18035,697

Accumulated depreciation(5,561)-

Balance - January 1

35, 6 1 935, 69 7

Additions

77,8905,483

Depreciation for the period(9,258)(5,561)

B a l a n c e - D e c e m b e r 31

10 4, 2 51

35, 61 9

Recognized right-of-use asset

119,070

41,180

Accumulated depreciation(14,819)(5,561)

B a l a n c e - D e c e m b e r 31

10 4, 2 51

35, 61 9

Right-of-use assets
Offices and data centers

2020

2019

Balance - January 1

36,36335,697

Additions

77,8905,483

Lease instalments(5,918)(5,481)

Lease liability

Interest expense
Balance - December 31
Current portion
Non-current portion

1,661

664

109,996

36,363

7,349

5,243

102,647

31,120AdyenAnnual Report 2020

page 158

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

11,3585,214

Between 2 and 3 years

11,0144,478

Between 3 and 4 years

11,0144,134

Between 4 and 5 years

10,8494,134

Later than 5 years

73,927

15,385

Total

123,556

39,201

32. Company - Investments in consolidated subsidiaries on equity
methodAccounting 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 othercomprehensive income.
Investments are reviewed for impairment at least annually or whenever events or circumstancesindicate that the carrying amount may not be recoverable.

Investments in consolidated subsidiaries on equity method

20 20

20 19

Ba la n c e - J a n u a ry 1

98, 1 4 7

23, 9 0 3

Share of the profit of investments in subsidiaries

20,516

12,284Currency translation adjustments subsidiaries(11,764)(81)

Share of changes in equity of investments in subsidiaries

32,251

62,041

13 9, 1 50

98, 14 7

B a l a n c e - D e c e m b e r 31

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.

57

AdyenAnnual Report 2020

page 159

Adyen N.V. – Subsidiaries
Name
Adyen International B.V.
Adyen Inc.

Legal Seat
Amsterdam, The Netherlands
San Francisco, CA, USA

Ownership percentage
100%
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
Direct and indirectownership percentage

Name

Legal Seat

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, Japan100%

Adyen Middle East Limited

Dubai, United Arab Emirates

100%AdyenAnnual Report 2020

page 160

33. Company – Trade, other receivables, and receivables frommerchants 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
Trade and other receivables

2020

2019

205,073

106,376

Less: Allowance for expected credit losses(4,538)(3,107)

T ra d e re c e iv a b le s - N e t

20 0, 5 35

10 3, 2 69

Receivables from merchants and financial Institutions

790,271299,618

T o ta l

99 0, 8 06

40 2, 8 87

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 onintercompany 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 otherreserves 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

13,950Accrued liabilities and other debts

18,23912,716

Cash-settled share-based payment plan

3,478

690

T ra d e a n d o th e r p a y a b le s77, 9 8 878, 4 7 4

Payables to merchants and financial institutions

2,406,651

1,266,808

T o ta l2, 4 84, 63 9

1, 3 45, 28 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.

59

AdyenAnnual Report 2020

page 161

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.

AdyenAnnual Report 2020

page 162

Amsterdam, March 9, 2021

P.S. Overmars
Chairman Supervisory Board

D. Rueda Arroyo
Supervisory Director

J.A.J. van Beurden
Supervisory Director

P.A. Joseph
Supervisory Director

P.W. van der DoesCEO

R. Prins
CCO

I.J. Uytdehaage
CFO

M.B. Swart
CLCO

K. ZakiCOO

A. Matthey
CTO61

AdyenAnnual Report 2020

page 163

04

Other
Information

AdyenAnnual Report 2020

page 164

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 onthese shares or to add the dividend to the class reserve.
Independent auditor’s report
Please refer to the next page.

H2 2019 Shareholder letter

page 165

Independent auditor’s report
Financi al Statem ents
31 Dec em ber 2020
1 J anuary 2020
Ady en N.V.
Control e
Goedkeurend
31001542A053
KVK
Kvk N ummer uit DB ( nog te doen)
Create SBR Extensi on
1.0
Amsterdam
9 M arch 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 thefinancial position of the Company as at 31 December 2020 and of its result for the year thenended 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 andother 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.
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 Compliance 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 Conditionsof 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.

H2 2019 Shareholder letter

page 166

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 forour opinion.

Independence
We are independent of Adyen N.V. in accordance with the European Union Regulation on specificrequirements regarding statutory audit of public-interest entities, the ‘Wet toezicht
accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake deonafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional
Accountants, a regulation with respect to independence) and other relevant independence regulationsin 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 theunderlying control activities as well as the respective financial administration). We considered thesefactors in determining our group audit scope and approach as set out in the section ‘The scope of ourgroup audit’.
The financial year was characterised by the impact of the COVID-19 outbreak (see note ‘Basis ofpreparation’ 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 importantjudgements, 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 workfrom 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 2 of 14

page 167

H2 2019 Shareholder letter

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 aphysical inspection of point-of-sale equipment inventory.
As part of our evaluation of the audit, we identified three key audit matters. We identified the designand effectiveness of IT general controls as a key audit matter since all revenue generating activities areprocessed 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 valuationof 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 thepresentation 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 ofmaterial misstatement due to fraud. We ensured that the audit team has the appropriate skills andcompetences 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 aroundthe 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.

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Materiality

The scope of our audit is influenced by the application of materiality, which is further explained in thesection ‘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 toevaluate the effect of identified misstatements, both individually and in aggregate, on the financial
statements as a whole and on our opinion.
Overall groupmateriality
Basis for determining
materiality

Rationale forbenchmark applied€12,406,700 (2019: €10,000,000).
We used our professional judgement to determine overall materiality. As a basis forour judgement, we used 5% of income before income taxes (adjusted for thederivative 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 overallmateriality of 3.8% of income before income taxes (2019: 3.9%).
We used income before income taxes as the primary benchmark, a generally
accepted auditing practice, based on our analysis of the common information needsof 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 andis widely used within the industry.
We changed our basis for determining materially this year through excluding thederivative liabilities revaluation since the revaluation does not reflect the actual
performance of the Group and has a strong linkage with the share price ofAdyen N.V. When the share price increases, this leads to an increase of thevaluation of the derivative liability and vice versa (also see sensitivity analysis innote 12 to the consolidated financial statements). Excluding the revaluation fromthe materiality benchmark aligns the annual materiality development with theactual 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 forour 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.

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Componentmateriality

The Group manages and administrates transactions and operations (including
control activities) centrally, in Amsterdam. This means we are able to audit alltransactions and operations ourselves, in Amsterdam.
We therefore consider all activities (regardless of the legal subsidiaries in whichtransactions are recorded) to be part of one component, which is the financial
information presented in the consolidated financial statements (for the group as awhole). We therefore did not allocate separate component materiality.

We also take misstatements and/or possible misstatements into account that, in our judgement, arematerial 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 ourview, 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 isincluded 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 thefinancial 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, theaccounting 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 whichtransactions 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
Total assets
Profit before tax

100%
100%
100%

The group engagement team thus performed the audit work for the Group. By adopting this approachand 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 inthe audit of the financial statements. We have communicated the key audit matters to the supervisoryboard. 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.

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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 ofour 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 generalcontrols is of significance to the Group. The financial
accounting and reporting of the Group is largely
dependent on the payment platform, since the mostsignificant line items in the balance sheet (cash andcash equivalents, receivables from financial institutions
and payables to merchants) and the statement ofcomprehensive income (revenues and costs incurredfrom financial institutions) are recorded on thepayment platform.

Our audit work included, amongst others,
understanding, evaluating and testing, on a quarterly
basis, the relevant IT general controls, with theassistance 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 ofIT systems: We tested the design and operating
effectiveness of controls which were implemented
to ensure that back-up and recovery processes havebeen established by the Company and that local
back-ups (per individual datacentre) were madeand stored cross-datacentre. Our test results
demonstrated that production data were replicatedacross 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 overIT systems: We tested the design and operating
effectiveness of controls, which were implemented
to ensure that logical access to programmes anddata was limited to authorised personnel.
We verified that the Group implemented controls
to ensure, amongst others, the complete andaccurate processing of user rights of joiners,
movers and leavers, the periodic review of user
accounts, the review of database actions andlimitation of administrator accounts throughout
the application, database and network.
•
Change management procedures for software andinfrastructural changes: We tested the design andoperating effectiveness of relevant controls, whichwere implemented to ensure that the development
and maintenance of software was properly
authorised, peer reviewed, approved (bothmanually and automated) and documented prior to

In particular, the adequate design and operating
effectiveness of the payment platform and relevant
IT general controls are significant for the accurate andcomplete processing of occurred transactions.
Based on the above considerations, we considered
IT general controls as a key audit matter in our audit.

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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 ofrelated 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 performedthat 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 theGroup 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 arebeing served and transactions are being processed.
As such, this key audit matter should be read andconsidered in conjunction with the key audit matter on
IT general controls.
The revenues that the Group generated related toprocessing fees, settlement fees and fees for otherservices 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 toprocessing and settlement fees are reported on a grossbasis (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 (mediumterm) revenue growth. We deem revenue to be a key
financial indicator on which the performance ofmanagement is measured by stakeholders in the
Company.

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Our audit work included, amongst others, an evaluationof management’s design and operating effectiveness ofcontrols that mitigate the risk of overstatement ofrevenue:•standing data maintenance covering the accuracyof customer contracts;•
transaction handling relating to automatedcapturing and authorisation of payments;•
automated settlement for matching of bankstatements and collecting and matching refunds
and chargebacks;•
payment pay-out process covering the automatedgenerating, processing and authorisation of payout 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 forthe purpose of our audit.
In addition to testing the operating effectiveness ofthese controls on revenue recognition and IT generalcontrols 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 ofcontractual rates captured in the payment system
by comparing these with signed customer
agreements.
•
We performed media scans for ‘bad news’ toidentify potential fictitious revenue.

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Key audit matter

Our audit work and observations

Based on these facts and circumstances, we considered
the significant risk of overstatement of revenue(relating to the risk of overstatement and occurrence ofrevenues) as a key audit matter in our audit.

•
•
•

•

•

•

We independently obtained and requested bankconfirmations.
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 aprincipal.
We performed analytical procedures on the top ten
merchants on a monthly basis to assess thecorrelation between transaction volumes andrecognised total revenue.
We reconciled the recognised revenue in thefinancial 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 foundmanagement’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 theconsolidated financial statements
During 2018, the Company entered into a warrant
contract with a merchant with the prospect thatsignificant online sales volumes will be sent to theCompany in the future for payment processing throughthe payment platform.
The merchant is entitled to acquire a fixed number ofshares in a series of four tranches for cash, at a
specified price per share upon the terms and conditionsin the agreement. The ability to exercise a warrant islinked to meeting significant milestones with respect toprocessed volume on a calendar year basis.
Adyen N.V. reassessed the classification of thederivative financial liabilities and reclassified two
warrant tranches (‘tranches’) that were recorded as
derivative financial liabilities as equity instruments inaccordance with IAS 32 in 2018. As at 31 December
2020 no tranches have vested.

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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 thefollowing substantive audit procedures:•
We evaluated the valuation methodology appliedby the Company’s management expert.
•
We evaluated the competence, capabilities,
objectivity and work of management’s independentvaluator.
•
We tested the completeness and adequacy of thevaluation inputs applied by the Company’s
management expert that included, amongst others,
the discount for the lack of marketability of thefinancial instruments, the expected volatility of theCompany’s share price and the probability ofachieving the performance targets specific to thepage 173

H2 2019 Shareholder letter

Key audit matter
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 ofmarketability of the financial instruments and theprobabilities of specific performance targets being
achieved. The volatility of the Company’s share priceaccounts for most of the recorded fair value change ofthe tranches in 2020. The sensitivity of this assumption
is disclosed in note 12 to the financial statements.

Our audit work and observations•

various tranches, during the contractual durationof 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 ofthe derivative liabilities and found the outcome tobe reasonable.

We found that the assumptions used in the valuation of
the tranches by the Company are reasonable whencompared to relevant market data. Furthermore, we
agree with the method used and the calculations madeas part of the assessment of the valuation.
Based on our assessment, we concur with managementthat no facts and circumstances are available which
would require changes in the classification of thetranches.

During 2020, the share price of Adyen N.V. went up by
161%, which further increased the estimation
uncertainty of the underlying assumptions (as thevaluation of the tranches has a direct link with shareprice developments).
Given the related estimation uncertainty andcomplexity involved in determining the fair value,
we determined this to be a key audit matter.

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 auditof the financial statements or otherwise, we have considered whether the other information contains
material misstatements.

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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 themanagement 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, theCompany 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 ofuninterrupted 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 withregard 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, inaccordance with the RTS on ESEF, whereby management combines the various components into asingle 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 preparationof 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 inaccordance with the RTS on ESEF.

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No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services asreferred 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 thepreparation of the financial statements that are free from material misstatement, whether due tofraud or error.
As part of the preparation of the financial statements, the management board is responsible forassessing 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 thegoing-concern basis of accounting unless the management board either intends to liquidate theCompany 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 tocontinue 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 obtainsufficient and appropriate audit evidence to provide a basis for our opinion. Our objectives are toobtain 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 toinfluence 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 theeffect of identified misstatements on our opinion.

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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

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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 thanfor 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 ofaccounting estimates and related disclosures made by the management board.
•
Concluding on the appropriateness of the management board’s use of the going-concern basis ofaccounting, 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 thefinancial 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 reportand 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 awhole. 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 andtiming 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 isconsistent with our audit opinion in this auditor’s report.
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We provide the supervisory board with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and othermatters 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 ofmost 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 thematter is in the public interest.

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