Interim financial statement release January – June 2018

Our purpose at Klarna is to make the modern purchase experience smooother. This is done by facilitating the relationship between consumers and merchants, creating a flexible buying experience for consumers and making selling simpler and safer for merchants. Klarna’s business is primarily comprised of payment solutions and consumer credit products designed specifically for e-commerce. Today, Klarna’s services have expanded beyond traditional e-commerce, for example, by managing payments for public transport, media and increasingly in physical stores. Klarna receives revenues from both the merchants and the consumers that use Klarna’s payment solutions.

January – June 2018 Business update

Highlights from the period:

• Continued strong year on year growth in volumes, transactions, new and returning users, merchants onboarded, increasing share of merchant check-out and adoption of in-store proposition by multi-channel partners
• Year on year sales volume grew by 43%. Total underlying sales processed through the Klarna platform SEK 115bn
• Total operating revenues increased 35% to SEK 2,760m (2,052)
• Operating income for the period was SEK 112m (321)
• Net income for the period amounted to SEK 69m (228)
• Over the last six months, we have significantly accelerated investments in people, systems and products to further strengthen our capabilities, product offering and support future business expansion and objectives.
• Over 90,000 merchants are live with Klarna. Global enterprise retailers and service providers across verticals continue to choose Klarna, a 138% new sales growth year on year in this area, both in more traditional retail categories but also particular growth in beauty, travel, entertainment, lifestyle and marketplaces, with strong future pipeline.
• Rapid growth in UK market continues at pace. ‘Pay later’ from Klarna now established as a favoured payment option for UK fashion merchants and consumers, resonating strongly meaning a high repeat spend and consumer engagement. Diversification into other verticals with launch of BeautyBay and Swoon Editions for beauty and home furnishings respectively. Successful expansion into automotive and instore with our EMaC partnership already live in 230 stores across the market.
• Klarna’s position as one of the e-commerce market leaders is again confirmed by continued strong volume growth across verticals both from existing merchants, new merchants such as Babymarkt and dm, and with partnerships like Gambio focusing on SME segment. Continuing focus on Klarna ‘customer first’ strategy. Finalisation of integration of BillPay into Klarna Group now complete.
• Maintaining leading position in Nordic market continues across verticals, with significant new Entreprise merchants such as IKEA. There has been particular new growth from merchants in leisure, tourism, beauty, sports with retailers such as XXL and Intersport and also the growth of women’s e-commerce brand NA-KD in Nordics but also into other European markets together with Klarna.
• Klarna commitment to its merchants is to help them become more successful and relevant to their target consumer. Over the last months, we have accelerated investment in the development of a range of value added services, with specific focus on enabling our merchant partners to offer an even more personalised customer journey and shopping experience.
• Launch of simplified SME onboarding tool now live and part of suite of SME focused services including Klarna ‘boost’ financing tool.
• Klarna’s customer base continues to grow (added 9.7 million in the first six months of this year) but most importantly they are engaged, in some markets, 80% customers making repeat transactions over 6 month period.
• Launch of new app simultaneously across multiple markets, rollout of features to continue on an ongoing basis. Aim is to enable consumers to take control over their personal finances and smooothen all moments around shopping experience. During the last 6 months, the app has been downloaded almost 2 million times.
• Klarna instore and offline is building momentum. Klarna card successfully launched and continuing development and implementation of innovative instore solutions across markets.
• Continued emphasis on partnership strategy as a means efficient and wide distribution of products.
• New partnership with Wirecard covering Germany, Austria, the Nordics and the Netherlands as a first step. The partnership will expand to additional countries, such as the US and the UK later this year
• Extended partnership with ACI Worldwide, across 10 markets, including the U.S. and U.K.
• Integration with Magento Commerce as a Core Bundled Extension in the latest release of its flagship commerce platform, which simplifies the onboarding process for merchants
• Partnership with MyOnlineStore, the most popular e-commerce platform in the Netherlands with over 40,000 online merchants, to offer all-in-one online commerce solution

 

To our shareholders

Fellow shareholders,

We have had a busy 2018 to date.

We are pleased to see continued strong year on year growth in volumes, transactions, active users and merchants onboarded across all markets and the increasing strength of our position particularly with the global retail partners, in the DACH region and the success of Pay Later in the UK.

The recently launched Klarna app has been received very positively, but this is just the beginning, it will evolve far beyond its current form into something we believe is truly pioneering for customers. Equally our off-line presence is steadily developing, with an expanding suite of in-store solutions now live and the launch of the Klarna card, which is also the beginning of utilising the capabilities from our banking license.

We have been reflecting on what we at Klarna are working to solve. We know consumers will no longer be forgiving of friction or when shopping or banking experience interactions are not intuitive. Consumers want simple, fast and secure engagement. We also know that there is a disproportionate anxiety and time spent managing personal finances and shopping. We have come to the conclusion that giving consumers control, saving them time and creating a joyful experience that stretches far beyond the actual transaction, should be our goal.

The focus on consumer experience needs to be relentless across everything we do. A superior experience will drive the growth of a loyal and engaged consumer base which creates sales for our 90,000 merchants and partners. Therefore in the past months, we have significantly accelerated investments in people, systems and products to further strengthen our capabilities and support our business expansion and objectives. This is part of our commitment to our merchants and consumers, in bringing outstanding value adding services to the market. These are investments in our future.

Investing in people is one of the components crucial to our success. We are recruiting across all areas of the business and markets but there is a particular emphasis on engineering and product in order to accelerate output. We have also put in place a new way of working, this includes 250+ self governing teams all owning specific products or problem spaces. This will guarantee flexibility, freedom and clarity of ownership for those teams and overall ensure increase the pace we bring new products and services to the market.

I want to take this opportunity to thank my fellow employees, our shareholders, merchants and users for a solid start to 2018 and I am very excited with what the second half of this year will bring, soon to be revealed.

Together we will continue to create wonders.

Thank you,
 
Sebastian Siemiatkowski, CEO and Co-founder
 

The full report is available at www.klarna.com

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Klarna is one of Europe’s leading payments providers and fully licensed bank, which wants to revolutionise the payment experience for shoppers and merchants alike. Founded in Stockholm, Sweden, in 2005, we give online consumers the option to pay now, pay later or over time – offering a simple, safe and smoooth checkout experience. Klarna now works with 90,000 merchants. Klarna has 2,000 employees and is active in 14 countries. Klarna is backed by investors such as Sequoia Capital, Bestseller Group, Atomico, VISA and Permira.

For further information, please contact:

Aoife Houlihan, VP of Communications

+46 (0) 72855 8047

aoife.houlihan@klarna.com

Or visit:

www.klarna.com

This information is information that Klarna Bank AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CET on August 28, 2018.