Klarna’s Global Growth Soars in 2018

Relentless focus on superior shopping experience continues to
drive strong preference for Klarna amongst merchants and consumers

STOCKHOLM–(BUSINESS WIRE)–Today, Klarna Bank AB (publ) (“Klarna”), one of the leading global
payment providers, has released its annual
financial report for 2018. With the tremendous amount of
opportunities ahead for the company, the strong financial performance
and momentum gained in 2018 with a 36% increase in sales volumes to USD
29bn¹ (SEK 252bn), and a 31% increase in total net operating
revenues to USD 627m (SEK 5,451m) will provide a solid foundation for
continued growth.

Klarna’s offering continues to resonate with consumers, merchants and
partners across all markets as demand grows steadily. Klarna is now
partnering with over 130,000 merchants across verticals, with over
25,000 newly added in 2018 and existing partnerships both deepening and
expanding across markets. There is now an average of 1 million
transactions a day running on the platform. Equally, the consumer base
continues to grow rapidly. Klarna welcomed almost 26 million new
consumers during the last year, but most importantly, they are highly
engaged as preference and loyalty builds, with many markets seeing an
average of over 70% of consumers make multiple repeat transactions.

“Klarna’s trajectory is the result of continuous innovation, putting
consumers, merchants and products first, and always staying true to our
core belief of the value we add are the solutions we bring. Our
relentless focus on the experience stretching beyond the actual
transaction has differentiated us in the market, we know consumers and
merchants will not settle for average and at Klarna neither do we.

“We naturally set out big ambitions for 2018 and we are pleased with
the financial performance of strong year on year growth in both volumes
and revenues, now partnering with over 130,000 merchants across
geographies and welcoming 26 million new consumers over the year. Klarna
does not dwell too much on past achievements, our focus is on it the new
opportunities and challenges ahead but it’s clear we have built strong
momentum and the strategic investments made in 2018 are already proving
a solid platform for driving desired future growth and scale,” says
Sebastian Siemiatkowski, CEO and Co-founder.

Highlights 2018:

• Year over year growth in total sales volumes was 36% to USD 29bn (SEK
  252bn)
• Total operating revenues increased 31% to USD 627m (SEK 5,451m)
• Operating income amounted to USD 18.5m (SEK 161m)
• Net income for the year amounted to USD 12m (SEK 105m)

• 25,398 new merchant partners², overall total now 130,000
• 26 million new consumers used Klarna over the year

Focus on growth

• At the beginning of 2018, Klarna made a strategic decision to
  significantly increase investments in line with the core focus on
  driving future growth. Investments in people, global scalable systems
  and products were made to further strengthen capabilities, optimizing
  the offering as well as to support future business objectives in new
  verticals and geographies. Over the course of 2018, an entire overhaul
  of the operating model across the entire company was implemented,
  where norms on structure were challenged to find a way to be smarter,
  faster and closer to consumers. This will support the pace and
  parallelity of product development and scaling. In line with the new
  operating model, we continue to focus on our efforts to make Klarna
  even more metrics driven right across the board and with an
  overarching focus on consumer and merchant satisfaction. Throughout
  all of this, the focus has been on establishing a platform to drive
  future growth tied to a relentless commitment to consumers and
  merchants in delivering best in class services. While revenues
  continue to increase steadily, this decision on investments has
  resulted in a lower net profitability for the year but an acceleration
  from these investments is already starting to be realized and this
  will continue at pace.

Merchants

• Klarna’s merchant base continues to grow and develop at a pace, with
  now over 130k merchant partners across verticals. The value which our
  products bring can be seen in the increased conversion rates, order
  value, number of new and repeat users and overall preference for our
  merchants. The merchant pipeline is strong for 2019 with a multiple
  large scale integration with global brands ongoing.
• Global enterprise retailers and service providers across existing and
  new verticals continue to choose Klarna, recent examples include IKEA,
  Expedia Group, Ticketmaster, Sonos, Sephora, H&M and their Brands
  (COS, & Other Stories, Arket, Monki, Weekday and Afound) marketplace
  Etsy, adding to existing global merchant base including Adidas, Zara,
  Nike, Lenovo, ASOS, Arcadia Group, Wish, Sephora, GymShark, Expedia,
  Lufthansa, SAS, Spotify and Turkish Airlines.
• Today’s consumers are empowered and their expectations are high. They
  now demand a personalized, flexible and intuitive shopping experience
  that not only meets their individual needs before and at the checkout
  but increasingly in a post-purchase service. This means merchants need
  to offer the ability to shop anytime, anywhere, on any device but also
  more importantly keep consumers engaged throughout the shopping
  journey in order to attract and build loyalty. If merchants don’t meet
  these demands, consumers will simply move on to one that does.
• Investments in value added services for our merchants have increased
  significantly, with a focus on enabling them to offer an even more
  personalized shopping experience throughout the journey in order to
  continue to compete effectively, build preference and drive loyalty.
  Furthermore, a new merchant portal was launched including tools that
  provide our merchants with additional insights on their current
  customer base.
• Recently launched SME focused services have already shown good
  traction. Since early autumn 2018, almost 21,000 merchants across
  markets have signed up through the new automated and simplified SME
  onboarding tool. Boost, our SME merchant lending product that
  democratizes and simplifies access to capital, has also been well
  received and strong demand from our merchant base, overall it is
  proving a great addition to our toolbox that helps SMEs accelerate
  growth and unlock potential.

Products

• Investments in innovating and further optimizing the current core
  product offering and ‘Klarna everywhere’ concept continues, and the
  returns are already evident. A new offering ‘Pay later in 3 or 4’ in
  the UK and the US respectively and soon to be live across other
  markets. With this product, Klarna is responding to a generational
  shift away from traditional credit cards and revolving credit to
  alternative financing and for some segments towards reliance on debit
  cards is accelerating, consumers can increase their purchasing power
  and flexibility on debit without the hassle of a long-term commitment
  but most importantly no interest or fees. The Klarna card has now
  launched in Sweden and most recently Germany to resounding consumer
  enthusiasm and now close to 100,000 cards issued in Sweden alone in
  the first months. In Sweden, both Apple and Google Pay functionality
  is enabled and advancing the ability to use Klarna across all relevant
  touchpoints.
• The Klarna app is now live across markets, where a host of services
  are now continuously being made available, including shipping
  tracking, instant refunds, images of items purchased and increasingly
  financial overview services amongst a host of services. The app aims
  to empower consumers to take control over their personal finances, as
  well as allowing them to shop using Klarna’s payment methods also at
  merchants not yet directly connected to Klarna through our ‘Shopping
  in-app’ browser.
• As the Klarna brand has grown in stature in inspiring ways, so too has
  the ‘Klarna everywhere’ proposition with ever growing relevant
  touchpoints with consumers. This includes Klarna instore and offline
  continue to build momentum and more than 6,500 physical stores are
  live with Klarna instore.
• The Klarna checkout offering has also evolved, new innovations such as
  shipping support now added alongside new geographies including the
  Netherlands and Denmark.

Markets
The performance of core Klarna markets continues to
develop, while the market leading position in the Nordics was maintained
across verticals, the momentum in UK, DACH, BNL and the US markets has
been robust, most of whom are at over 100% volume growth year on year
and ever improving margins. 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 and average usage and spend is
increasing.

• The UK is making significant gains, where it is now
  acknowledged that Klarna has established the ‘Pay Later’ category and
  de-facto market leader but also driving strong preference amongst
  consumers, which high frequency of repeat users who are now actively
  requesting merchants to onboard Klarna as it is the top payment
  method. Now thousands of new consumers are choosing Klarna Pay later
  each week users at merchants including Topshop, Samsung, Schuh, JD
  sports, Missguided, BeautyBay, Fragrance Shop, Asos and Swoon Editions
  and GAME. Strong consumer engagement and high levels of repeat users
  creating much desired loyalty for merchants. The fashion and beauty
  verticals are particularly strong with new additions In The Style,
  Moss Bros and Cult Beauty, but also in verticals such as sport,
  leisure with Gymshark. The acquisition of Close Brothers Retail
  Finance (CBRF) will significantly strengthen Klarna’s position in the
  UK market for retail financing and will enable accelerated growth and
  expansion of the consumer offering.
• The DACH region is now our largest market and performing very
  well with strong volume across all payment methods and a 47% revenue
  growth in 2018. We are very well positioned to further capitalize on
  the enormous potential and online and offline addressable market in
  the region. We have broadened out into new verticals such as leisure
  and entertainment for example on Cinemaxx but also, in supporting
  consumers in their daily lives like on the toll highway road with
  tickets on ASFiNAG, the Austrian state highway company. We have
  further increased our presence in the fashion and beauty market with
  the go lives of Sephora, Stylebop and Escada.
• In the Nordic markets, we maintain our leading position across
  verticals, growing with our existing merchant base. Merchants such as
  SkiStar, the leading operator of European alpine destinations, online
  grocery store chain MatHem.se, consumer electronics retailer
  Elgiganten and women’s fashion brand NA-KD, have all chosen to
  strengthen the relationship with us by offering a wider range of our
  products in new channels or by entering new markets together with us.
  We have also added new merchants such as Svenssons i Lammhult, the
  leading Swedish furniture chain.
• In the US, we have had a continued healthy trajectory of
  merchant acquisition and expansion of current relationships, as well
  as steadily increasing the consumer base now at over 3.4 million
  consumers. The pipeline for the year ahead is strong and much
  foundational work during 2018. The ‘Pay later in 4’ product was
  launched in autumn proving immediately popular with consumers and
  merchants such as Daniel Wellington and Storets. We have also expanded
  our relationships with Lenovo and Rancourt to their payments offering
  and entered new verticals with the addition of DISH Network, allowing
  their technicians to offer upgraded solutions to their customers
  during in-home appointments.
• In the Netherlands, the number of active Pay later users have
  grown with 61% and we have increased our market presence and now live
  with new merchants such as sports apparel company O’Neill, Intergamma
  group, V&D and vanHaren.

Partners

• Klarna has significantly increased focus on partners as high growth
  distribution channel to efficiently extend our reach and the merchant
  base. During 2018 period we have initiated several new and extended
  existing partnerships with key players across markets.
  • Further deepening global partnership with Shopify through Shopify
    Payments in Germany, allowing SME merchants to automatically
    enable Klarna payment methods, and Shopify Plus Partner Program in
    Germany, the UK and the US, focusing on high-growth and
    high-volume merchants.
  • Partnering with Mollie in the Netherlands, Germany, Austria and
    Finland reaching more than 55,000 SME and Enterprise merchants.
  • 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.
  • Extended partnership with ACI Worldwide, across 10 markets,
    including the US and UK.
  • Integration with Magento Commerce as a Core Bundled Extension in
    the latest release of its flagship commerce platform, which
    simplifies the on-boarding process for merchants.
  • Partnership with MyOnlineStore, the most popular e-commerce
    platform in the Netherlands with over 40,000 online merchants.

**********

The annual reports of Klarna Bank AB (publ) and Klarna Holding AB are
available in English and Swedish at www.klarna.com.
The annual results were made public with the Klarna year-end report on
February 28. The annual reports

For further information, please contact:
Aoife Houlihan, VP
of Communications
Phone: +46 (0) 72855 8047
Email: aoife.houlihan@klarna.com
Please
visit www.klarna.com
or, for the latest, www.klarna.com/international/latest-from-klarna/.

About Klarna
Klarna is leading global payments providers and
fully licensed bank, which wants to revolutionize 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 smooth checkout experience. Klarna now works
with 130,000 merchants. Klarna has 2,500 employees and is active in 14
countries. Klarna is backed by investors such as Sequoia Capital,
Bestseller Group, Atomico, VISA and Permira.

This information is information that Klarna Bank AB (publ) is obliged
to make public pursuant to the EU Market Abuse Regulation and the
Swedish Securities Markets Act (2007:528). The information was submitted
for publication, through the agency of the contact person set out above,
at 08.00 CET on April 29, 2019.

¹ Klarna’s results are reported in SEK. To arrive at USD
values, the average exchange rate for the full-year 2018 as published by
Sweden’s central bank has been used, i.e. 1 USD equals approximately 8.7
SEK
² This figure has been corrected compared to the
Annual financial statement release 2018, published on February 28, 2019.

Contacts

Aoife Houlihan, VP of Communications
Phone: +46 (0) 72855 8047
Email:
aoife.houlihan@klarna.com