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01/11 12:01
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary presents a mix of positive elements: strong user growth, strategic partnerships (e.g., Walmart, OnePay), and ambitious expansion plans in the U.S. and Europe. Klarna's focus on improving transaction margins and operational efficiency, along with its agile underwriting model, indicates a promising outlook. However, the lack of dividend plans and some unclear management responses slightly temper the overall sentiment. Despite these uncertainties, the strong growth initiatives and partnerships suggest a positive stock price reaction in the short term.
GMV (Gross Merchandise Volume) Grew to $32.7 billion, with the U.S. growing 43% year-over-year. This growth is attributed to the expansion of fair financing and strategic partnerships.
Revenue Increased to $903 million, with the U.S. revenue growing 51% year-over-year. The growth is driven by the success of fair financing and increased merchant adoption.
Transaction Margins Came in at $281 million, reflecting a planned accounting lag from fair financing. This lag is temporary and expected to improve in Q4.
Fair Financing Growth Fair financing GMV grew 139% year-over-year, with delinquencies falling 5% and U.S. charge-offs remaining stable. The growth is due to a 3x increase in merchant adoption over the last two years.
Revenue Per Employee Increased to $1.1 million per employee, driven by operational efficiency and AI applications.
Employee Compensation Compensation per employee rose from $126,000 to $203,000, reflecting a commitment to share efficiency gains with employees.
Operational Efficiency Achieved 108% revenue growth while keeping operating expenses flat, attributed to AI-driven efficiency and strategic focus.
Fair Financing Product: Achieved record growth of over 139% year-on-year, driven by doubling the number of merchants offering this product to 150,000.
Klarna Card: Surpassed 3.2 million global active card users, with U.S. cardholders growing to 1.4 million. The card offers a unique feature of 'press 1 for debit, press 2 for credit' and is rolling out debit cards with credit card perks.
Neobank Features: Expanded offerings beyond payments, including shopping browser, cashback, and savings products, with 10% of users engaging in these features.
Global Expansion: Added 235,000 merchants this quarter, a 38% increase year-on-year, driven by partnerships with major PSPs like Stripe and Apple Pay.
U.S. Market Growth: Achieved 51% revenue growth year-on-year in the U.S., outpacing local competitors.
Operational Efficiency: Revenue per employee increased to $1.1 million, with a 47% reduction in workforce through natural attrition. AI tools now perform the equivalent of 853 full-time jobs, saving $60 million.
Credit Loss Management: Maintained credit losses below 70 basis points over $0.5 trillion issued in 20 years, showcasing strong underwriting capabilities.
AI and Customer Obsession: Focused on leveraging AI for operational efficiency and customer insights, generating $300 million in lifetime transaction margin from actionable insights.
Market Positioning: Positioned to capture a $1 trillion profit pool in financial services and technology by focusing on customer trust and operational efficiency.
Market Competitiveness: The CEO highlighted that the financial and tech sectors are becoming increasingly competitive due to AI advancements. This could lead to challenges in maintaining market share as competitors innovate and adapt.
Regulatory and Economic Risks: The CFO mentioned that actual results may differ materially due to various risks and uncertainties, including those described in the company's filings with the SEC. This implies potential regulatory and economic challenges that could impact operations.
Profitability Lag from Fair Financing: The CFO explained that the success of the fair financing product has created a short-term profitability lag due to upfront provisioning for potential credit losses. This could strain financial performance in the near term.
Operational Efficiency: While the company has improved operational efficiency, the reduction in staff by 47% through natural attrition could pose risks to maintaining productivity and service quality.
Credit Losses and Underwriting: Although the company has a strong track record of low credit losses, the CFO noted that fair financing requires upfront provisioning for potential credit losses, which could impact financial stability if not managed effectively.
Customer Trust and Retention: The CEO emphasized that trust is critical in the competitive landscape. Any failure to maintain high levels of customer trust could adversely affect the company's growth and reputation.
Revenue Growth: Klarna is expecting to see above 30% revenue growth for Q4 2025, driven by strong performance in the U.S. and fair financing products.
Fair Financing Product: Fair financing product grew over 139% year-on-year in Q3 2025, with expectations for continued growth as it is now available at 151,000 merchants, a 3x increase over the last two years.
Transaction Margin: Guidance for Q4 2025 includes an increase in transaction margin dollars to $390 million to $400 million, driven by compounding revenue from fair financing.
U.S. Market Growth: Revenue in the U.S. grew 51% year-over-year in Q3 2025, with expectations for continued acceleration in this market.
Global Expansion: Klarna aims to be available everywhere Visa is, targeting 150 million acceptance points globally through partnerships with major PSPs and acquirers.
AI and Operational Efficiency: Klarna continues to leverage AI to drive operational efficiency, achieving 108% revenue growth while keeping operating expenses flat. AI is expected to further enhance productivity and cost savings.
Klarna Card: The Klarna card has reached 3.2 million global active users, with significant growth in the U.S. market. The company plans to expand this offering further in Europe and other regions.
Neobank Transition: Klarna is transitioning from a payments provider to a full neobank, with plans to expand its suite of financial services and increase average revenue per customer.
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