Interim financial statement release January – June 2019.

Klarna is a leading global payments provider and fully licensed bank with a mission to help consumers and merchants to explore just how ‘smoooth’ the modern purchase experience can be. Klarna facilitates the relationship between consumers and merchants by providing merchants with a flexible range of preferred payment options that enable consumers to easily and securely pay when and how they want everywhere – online and in-store. Klarna generates revenues from both merchants and consumers that use Klarna’s payment solutions. Klarna continuously expands its product range to provide an offering that stretches beyond the actual transaction, including services for the consumers’ pre and post purchase experience, the Klarna app that enables consumers to take control over their personal finances, the direct to consumer in-app shopping browser as well as the B2B-focused Open Banking and Customer Authentication Platforms.

January – June 2019

– Year-on-year growth in total sales volume was 29%

– Total underlying sales processed through the Klarna platform amounted to SEK 148bn (USD 16bn), compared to SEK 115bn (USD 14bn) in H1 2018

– Total operating revenues, net, for the period increased by 32% to SEK 3,314m (USD 356m), compared to SEK 2,504m (USD 298m) in H1 2018

– Operating income for the period amounted to SEK -78m (USD -8m), compared to SEK 112m (USD 13m) in H1 2018

– Net income for the period amounted to SEK -84m (USD -9m), compared to SEK 71m (USD 8m) in H1 2018

– Klarna now works with 170,000 merchants, including global brands such as H&M, Adidas, Expedia Group, Michael Kors, Sonos, IKEA, Nike, Sephora and Ticketmaster have enabled Klarna’s innovative shopping experience.

– The consumer base continues to grow with 9 million new consumers using Klarna’s service during this period.

Highlights from the period

– Continued strong year-on-year growth in sales volumes, transactions, new and returning consumers and merchants onboarded. Traction from strategic investments made over the last year is increasingly evident, and the commitment to further invest to strengthen capabilities, product offerings and to support future business expansion for future growth and scaling will continue going forward. In particular, the UK and the US have seen strong growth during the period, partly due to the Pay in 3 and

– Pay in 4 product offering which has resonated well amongst merchants and consumers. In some markets the number of transactions have more than doubled compared to the same period last year. Klarna’s brand awareness continues to steadily rise on all markets.

– The merchant base continues to grow rapidly with approximately 30,000 new merchants during the period. Total number of live merchants now amounts to almost 170,000. Existing valued merchant partnerships, including H&M, Abercrombie & Fitch, Steve Madden and BeautyBay, continue to develop strongly, expanding to new markets and/or with new products.

– The consumer base continues to grow with 9 million new consumers using Klarna’s service during the period. There is strong consumer acquisition momentum on all markets, and currently 50,000 new consumers are being added weekly in the UK. Most important is that Klarna’s consumers are highly engaged – in some markets over 75% make repeat transactions over a 12 month period, and that they are satisfied – the CSAT score amounts to 89% across markets at the end of the period.

– In the US, a direct to consumer (DTC) in-app shopping browser was launched and has been extremely positively received. The shopping browser has contributed to a strong boost in consumer acquisition, and an acquisition rate of close to 6 million app users annually. Together with the Pay in 4 product, and the strong merchant acquisition, there has been a very strong growth in the number of transactions during this period.

– During the period a dedicated and ambitious journey of Klarna becoming more sustainable in how the company operates has intensified. As a starting point from an environmental perspective, Klarna has committed to being carbon neutral by the end of 2019. Mindful Money is another project to support and educate consumers and help them make smarter financial decisions. Klarna works alongside personal finance journalists, money bloggers and influencers to produce content on topics that are important to consumers.

Merchants

– Klarna’s commitment to its merchants is to support them in becoming more successful and relevant to their target consumers, and the already strong merchant base continues to develop with new global brand enterprise merchants across verticals being added. Recent additions include Expedia Group, AliExpress, Michael Kors, Toms, rue 21 and The Hut Group, joining current merchant base including IKEA, Ticketmaster, Sonos, H&M Brands, Adidas, Zara, ASOS, SAS, Boozt Fashion and Turkish Airlines.

– Small and medium-sized enterprise (SME) merchant acquisition has been strong in this period, especially in the US with 4x monthly onboarded merchants compared to the beginning of the year, but also in the UK and Germany. Merchant experience has improved with the automated and simplified SME onboarding process. New services have been added to help SMEs optimise their business, accelerate growth and unlock potential.

– Existing merchants continue to strengthen their relationship with Klarna, by entering new markets and/or adding products.

– H&M and Klarna have extended the multimarket partnership to also include the US. The partnership encompasses the leading Pay later offering, as well as a streamlined post-purchase experience for deliveries and returns across H&M channels, both online and in-store. This will be managed through the next generation of the H&M app and loyalty program, with the overall objective to create an outstanding end-to-end shopping experience.

– Abercrombie & Fitch expanded the current successful partnership in Germany to also include the US and the UK.

– Steve Madden has expanded to the UK and added Pay in 3 following a successful collaboration in Germany, Austria and the Netherlands.

– Missguided has expanded their partnership by making Klarna’s payment options available both online and in app.

– Schuh and BeautyBay have both expanded their payments range to also include Pay in 3 in the UK.

– Audio retailer HiFi Klubben has grown the partnership across markets, to now include all of HiFi Klubben’s European markets online and in-store.

– During the period investments in the development of value added services, with specific focus on the consumers’ pre and post purchase experience, have continued to accelerate. The recently launched new merchant portal has also been updated with new tools and support capabilities.

Products

– The Klarna app is continuously updated with new and improved features to create an outstanding shopping experience for consumers. The focus on the pre and post purchase experience has increased with added features such as wishlist, financial overview and insights with possibility to connect other bank accounts and cards, delivery tracking, overview of all purchases and a 24/7 chat function.

– Pay in 3 and Pay in 4 continue to gain traction in the UK and the US respectively, and are resonating well with its target consumers, millennials, who increasingly prefer not to hold credit cards or use revolving credit forms.

– In the US, the in-app shopping browser was successfully launched. It lets consumers shop now and pay later in four equal installments with zero interest and fees – everywhere. Klarna is the only alternative payment method in the US market to offer this. Since the launch in Q2 the total number of shopping browser users in the US is closing in on one million.

– The growing number of issued Klarna Cards in Sweden is a testimony of a strong offering with requested features. During spring the card was launched in Germany, and additional markets will follow. Almost 140,000 cards have now been issued. During the period, Google Pay was made available for both German and Swedish card holders, making mobile payments even easier and contributing to making Klarna available everywhere.

– During the period Klarna has widened its offering by making its proprietary infrastructure externally available. The first product launched was the Open Banking Platform with an unrivalled connectivity to 4,300 European banks through one API, followed by the global Customer Authentication Platform that allows multinational businesses to provide a simple, secure and personalised customer authentication experience through one integration.

– The strategic investments continue to result in a continuous flow of added products and services, as well as enhancements and optimisations of current core products. These have all received immediate popularity across markets, boosting the consumer and merchant acquisition further.

Markets

– The launch of the in-app direct to consumer shopping browser in the US and the ‘Shop like a queen’ campaign have significantly boosted both consumer acquisition and transactions, and together with the Pay in 4 product built strong momentum in the market, with the number of daily consumer additions ramping significantly to a current annual rate of 6 million new US consumers. The rapid merchant onboarding continues, with over 3,000 merchants live and with a strong pipeline of over 1,000 merchants. The rate of acquisition has also accelerated and 400 new merchants were added just in the month of June. New and live merchants include Lulus, Toms, Abercrombie & Fitch, rue21, SuperDry, Agent Provocateur, Daniel Wellington, Storets, Lenovo, Acne Studios, Planet Blue and the extended global partnership with H&M. To further strengthen expansion efforts, Klarna has opened a new office in Los Angeles.

– To build on the positive momentum and market position in the UK, Klarna will open a second office and hire additional talent in Manchester, close to some of Klarna’s largest merchant partners and consumers. ‘Klarna it’ has become an expression due to the continued rapid growth and traction of the Pay later offering, with over 5 million consumers who have used Klarna’s services, and the inflow of new consumers continues at a rapid pace. The historically strong foothold in fashion remains, while rapidly expanding into other verticals such as beauty, sports, leisure, electronics, homeware and healthcare. New and existing merchants include Mothercare, Agent Provocateur, Quiz Clothing, SuperDry, Gymshark, JD sports, Topshop, Peloton, Samsung Electronics, iSmash and Kaboodle.

– Klarna’s first pop-up shop opened in Covent Garden to set a new benchmark for experiential retailing and bring the digital shopping experience to life, and to host exclusive events in collaboration with some of the UK’s biggest brands. The pop-up showcased over 20 Klarna partners with a mix of fashion, beauty, sports, interiors and technology and featured merchants such as ASOS, BeautyBay, Bulk Powders, Swoon, Samsung, Cambridge Satchel Company, Finery and Schuh. The pop-up was a huge success with over 3,000 visitors in just one week.

– Klarna continues to hold a market leading position in the DACH region and sees strong momentum in merchant and consumer acquisition. Consumer usage and loyalty has grown strongly compared to last year, the number of app downloads has increased rapidly and unaided brand awareness has doubled over the past year. The merchant signing and onboarding has been the strongest to date and include brands across verticals such as Karstadt, Reuter, internetstores, Tigha, Escada, Wolford, Getyourguide, Intersport and ÖAMTC. The launch of the Klarna card together with traction seen with the in-store product has increased the possibility for consumers to use Klarna at for them relevant touchpoints, and builds on the ‘Klarna everywhere’ concept.

– In the Nordic region, Klarna’s offering is leading across verticals, and long lasting relationships continue to grow to new markets and through added products. Gina Tricot has gone live with in-store during the spring and Chiquelle, Footway and Swap.com have added new markets to existing partnerships. Merchant onboarding continues at a rapid pace, with new additions like AniCura, Bokus, Idre Fjäll, SkinCity, Autokeskus, Holzweiler and Helly Hansen. Klarna continues to expand the product range to become even more relevant across consumer touchpoints, e.g. through the app, the in-app shopping browser and the card. It is also becoming evident that consumers increasingly demand Klarna’s solutions from merchants.

– In the Netherlands, Klarna continues to grow and increase market presence. More than 10,000 merchants are now live including Dyson, MS Mode, Omoda and Megekko. During the period both Pay later in 30 days and Klarna in-store was launched and has already gotten traction among merchants and consumers.

Partners

– Partnerships are a core focus to further grow the merchant and consumer base. During the period, new and existing partnerships with key players across markets have been initiated and extended.

– Partnership with Stripe to support UK merchants, such as Missguided, to transform the app-based shopping experience, and with the Kaboodle platform to bring flexible payments when buying e.g. festival tickets, opening up a brand new market where Klarna provides an ideal solution for splitting costs.

– Partnership with Adyen to allow merchants across markets, such as AliExpress, to enable Klarna’s payment suite.

– Extended partnership with BigCommerce. Following a successful partnership in the US, Klarna was integrated on core European markets.

– Partnering with Apple Pay and Google Pay in Germany and Sweden to allow card holders to make mobile payments even easier and more secure, ensuring a fast and smooth way to pay.

– The development of add-on services to partner connected merchants continue. A global on-site messaging app was launched in Shopify’s app store. The app offers cost-free targeted and tailored promotions through a simple integration, and will help increase conversion, personalise the shopping experience, and increase the number of consumers as Pay later options will be shown at an earlier stage in the shopping journey. The on-site messaging will be rolled out with other partners on a continuous basis.

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The full report is available at www.klarna.com

About Klarna

Klarna, the leading global disruptor of payments and banking, and provider of smoooth retail services, was founded in Sweden in 2005. Klarna currently holds a post money valuation of $5.5 billion, which ranks Klarna as the largest private fintech in Europe and one of the largest private fintechs globally. Klarna provides merchants with a flexible range of preferred payment alternatives that enable consumers to easily and securely pay when and how they want everywhere – online and in-store. Over 170,000 merchants, including H&M, Adidas, IKEA, Expedia Group, ASOS, Peloton, Abercrombie & Fitch, Michael Kors, Nike, AliExpress, Sephora, Spotify, Gymshark, Samsung, Zara, Topshop, Boozt, Lufthansa, ETSY, Daniel Wellington and many more have enabled Klarna’s innovative shopping experience, that stretches beyond the actual transaction and also allows consumers to take control over their personal finances. Klarna has 2,500 employees and is active in 16 countries. Klarna has been backed by Sequoia Capital since 2010 and more recently, Bestseller Group, Permira, Visa, Atomico, Dragoneer Investment Group, Commonwealth Bank of Australia, HMI Capital LLC, Merian Chrysalis Investment Company Limited, Första AP-Fonden (AP1), IPGL, IVP and funds and accounts managed by BlackRock.

For further information, please contact:

Aoife Houlihan, VP of Communications
+46 (0) 72855 8047
press@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 29, 2019.