Klarna announced its financial results for the first half of the year. „Klarna continues to show exceptional growth in the US and UK, with all markets showing Gross Merchandise Volume (GMV) growth,” according to the press release.
The US continues to be the engine of growth as demand for Klarna’s interest-free payments, cards and marketing services accelerates among consumers and retailers. The US remains Klarna’s fastest growing market with GMV doubling, up 109% YoY, comfortably outperforming both US peers and e-commerce growth rates.
Purchase frequency increased 37% to 6.3x as US consumers use Klarna for more of their purchases, recognising the benefits of a superior shopping experience both in-store and online.
„Klarna has gone from an unknown Swedish payments company to becoming a market leader in the US, with 30m users, 60% brand awareness, and 49 of the top 100 US retailers partnering with us. Credit losses from newer consumers are down 29% vs Q221 with US GMV now growing twice as fast as credit losses as the US matures in line with Klarna’s established market trajectories,” the company says.
Sebastian Siemiatkowski, CEO and Co-Founder of Klarna commented:
“Klarna’s stellar growth in the US continues at pace with sales volumes doubling, outperforming both US peers and e-commerce growth as consumers recognise the value Klarna provides compared to interest-laden credit cards. Our European business continues to perform strongly, driving $1bn gross profit each year. Improvements in underwriting mean credit loss rates are well ahead of our peers with 99% of Klarna consumers paying us back, and 70% of global Pay Later orders actually paid off early. Together with the significant investments we have made in entering 11 new markets since 2020, and investing in growing our platform and services for the benefit of consumers and retailers, the foundation for a global leader has been set.
“We have taken prudent and pre-emptive measures in order to prioritize profitability and growth in consideration of the changing macroeconomic environment. We will continue to leverage the platform and global scale we have built in the last few years to support Klarna’s 150m consumers and 450,000+ retailers during more challenging economic conditions, freeing consumers from the unnecessary debt trap of credit cards, and helping our retailer partners succeed in an increasingly competitive global marketplace.”
Our established European markets are making USD 1bn in gross profit on an annual basis, while our growth markets continue to progress with GMV increasing 105% YoY. The UK is performing particularly strongly, with GMV increasing 8x since 2018, growing 70% YoY in the first half of 2022. The UK is an excellent example of Klarna’s expected market trajectory, with UK gross margin now >50% and credit loss rates at an historic low of 0.4% of GMV.
Revenue is growing faster than GMV growth, increasing 24% YoY1 to USD 950m2 GMV increased 21% in H122 to USD 41bn3, significantly outstripping e-commerce growth which declined -4%4. In Q222 GMV grew 22% to USD 21.3bn5 vs an e-commerce contraction of -6%. Net operating income increased 18% to USD 782m5. Credit losses are in line with expectations at 0.7% of GMV.
However, Klarna saw its net losses nearly quadruple in the first half of 2022 on higher credit defaults, increased employee costs and investment in market expansion.
In a letter to shareholders, CEO Sebastian Siemiatkowski says the firm has been „operating in a very different environment” in the first half of 2022 as it faced up to the fallout from Russia’s invasion of Ukraine, the economic downturn and a „huge shift in investor sentiment„.
First half revenue was $950 million, up 24% on H1 2021, driven largely by growth in the US. However, net losses for the period were $581 million, compared to $141 million the previous year.
The firm says the losses were caused by rising defaults on borrowing and the cost of integrating recently acquired price comparison site PriceRunner.
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1 All percentages are calculated on SEK basis as that is the currency Klarna reports in. Exchange rates used are the average for the reporting period: 1 USD = SEK 9.6.
2 SEK 9.1bn
3 SEK 396bn
4 Salesforce Shopping Index
5 SEK 209bn
6 SEK 7,495m
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
