Klarna year-end report January - December 2018.
Our purpose at Klarna is to make the modern purchase experience smooother and 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.
July – December 2018
- Compared to last year, total sales volume grew by 31%
- Total operating revenues, net, increased 30% to SEK 2,947m (2,265)
- Operating income for the period was SEK 49m (203)
- Net income for the period amounted to SEK 36m (117)
January – December 2018
- Year-on-year growth in total sales volumes was 36%
- Total operating revenues, net, increased 31% to SEK 5,451m (4,158)
- Operating income amounted to SEK 161m (524)
- Net income for the year amounted to SEK 105m (346)
- 14,498 new merchants
- 26 million new consumers used Klarna this year
Highlights of the year
- Continued strong year-on-year growth trajectory in sales volumes, revenues, transactions, new and returning users, and merchants onboarded. Also existing merchant partnerships in new markets and increased popularity of core products, and newly launched Slice it in 3 and 4 in the UK and US are resonating well already.
- Klarna’s merchant base continues to grow and develop very strongly and now over 100k merchants live.
- Klarna’s consumer base continues to expand, with the addition of over 26 million consumers during the year, but most importantly they are highly engaged, in some markets, over 70% of consumers make repeat transactions over a 12 month period.
- There was a significant increase in investments in people, global systems and products to further strengthen our capabilities, offering and support future business objectives, this includes a new global ERP system and further optimising our current core products, new solutions and expanding offline presence. These investments were a strategic decision taken at the beginning of the year in line with our core focus on driving future growth, and while lower net profit for the year an acceleration from initial investments is already being realised and this will continue at pace.
To our shareholders
A question we are often asked is ‘what is Klarna’? Are we a fintech, or a bank, maybe a technology company, an e-commerce facilitator or a payment provider? We are in fact in part all of the above and more but we are not so concerned on fitting into single neat labels, we are focused on what we are actually solving for. When Klarna was founded, the challenge was making technology work in an online retail environment and our mission was to enable merchants to sell and consumers to buy online in an easy, safe and smooth way. We then moved into an era where we had to focus more on reducing unnecessary friction in the shopping journey, so the consumer didn’t abandon their purchase in frustration. We believe we are now in the ‘experience era’. The technology functions, the unnecessary friction is continually being eliminated but the consumer now expects a highly personalised and intuitive experience that not only meets their individual needs before and at the checkout but also in post-purchase. That means offering a range of services that helps people seamlessly shop, pay, finance, manage and keep track of their purchases in a simple, convenient and secure way. We want to give consumers control, save them time and where possible create a joyful experience stretching far beyond the actual transaction.
This focus on the user experience is relentless and this principle should guide absolutely everything we do at Klarna. By doing so we also importantly drive loyalty, and ultimately sales for our 100,000 merchants and partners operating in a highly competitive environment. The value which our products bring can be seen in the increased conversion rates, order value, number of users and overall preference for our merchants. This value is also reflected in the continued year-on-year growth in volumes, transactions, active users and merchants base across all markets and the increasing strength of our position, particularly in the DACH region, which is now our largest market and the success of Pay later in the UK, to the point it has become a verb to ‘klarna it’.
We set out big ambitions for 2018 and the results of enormous efforts to make them a reality are evident. The new Klarna app with a host of features is now live across multiple markets and engagement has been really positive but this is just the beginning, the app will continue to evolve into something we believe will truly be empowering for consumers in managing their daily financial lives. We launched a new product called Slice it in 3/Slice it in 4 in the UK and the US, which allows consumers to spread their cost over 3 or 4 installments interest free, giving desired flexibility and purchasing power including on a debit card. This offer has already resonated strongly and will be available in other markets soon. Equally, our off-line presence has steadily developed with in-store solutions now live in thousands of stores and the successful launch of the Klarna card, which is utilising the capabilities from our banking license. We have also dedicated more resources to meeting the particular needs of SMEs, this includes new automated onboarding and a financing program that enables simplified access to funds. Finally, being able to share the news on our partnership with H&M across multiple markets has been a particular highlight, we are now working together to soon offer a seamless and engaging shopping experience that will delight consumers across touchpoints.
While Klarna is constantly evolving, we cannot be complacent. Every day brings new challenges and new opportunities. The context we are operating in is developing so rapidly, we need to constantly look ahead. Therefore, we made a strategic decision at the beginning of the year to significantly increase important investments in people, systems and products to further strengthen our capabilities and drive efficiencies. These are investments in our future and our core focus is on growth. While revenues continue to increase steadily, this decision has resulted in a lower net profitability for this year, but we know this was the right decision as we are building Klarna for the long term and an acceleration from the investments is already starting to be realised and this will continue.
Consumers and merchants will not settle for average. And neither do we. Every day, we will work to build world class products which offer the very best service and consumer experience. I want to take this opportunity to thank my fellow employees, our shareholders, merchants and users for their support in 2018 and I am very excited with what 2019 will bring, soon to be revealed.
Together we will create wonders.
Sebastian Siemiatkowski, CEO and Co-founder
The full report is available at www.klarna.com
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 offer a simple, safe and smoooth checkout experience – online and instore. Klarna now works with 100,000 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
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 February 28, 2019.