Klarna(KLAR) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Active consumers reached 180 million, up 28% year-over-year [3] - Merchants grew to 966,000, up 42% year-over-year [3] - Gross Merchandise Volume (GMV) was $38.7 billion, exceeding guidance [3] - Revenue grew 38% to over $1 billion, also beating guidance [3] - Transaction margin dollars before provisions grew 31% to $622 million [4] - After provisions, transaction margin dollars were $372 million, up 17% year-over-year [4] Business Line Data and Key Metrics Changes - Klarna's banking products, including the Klarna Card and deposit accounts, saw accelerated adoption [3] - Active card users grew to 4.2 million, up 288% year-over-year [11] - Consumer deposits reached $13 billion, up 37% [11] - Klarna banking customers reached 15.8 million, growing at 101% year-over-year [11] Market Data and Key Metrics Changes - In 2025, Klarna processed over $127 billion in volume across 26 markets [4] - The adoption of fair financing products grew at 165% annually [8] - The company added 285,000 merchants, up 42% year-over-year [9] Company Strategy and Development Direction - Klarna aims to become a ubiquitous payment solution, expanding its network and partnerships [9] - The company is focusing on building deeper relationships with consumers to transition them from casual users to banking customers [10] - The strategy includes enhancing product offerings and ensuring relevant payment options are available at every checkout [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of credit quality and the potential for future profitability despite current provisioning impacts [16][20] - The company anticipates continued growth in banking products and expects transaction margins to improve as loan cohorts mature [42] - Management highlighted the importance of maintaining a lean cost structure while scaling operations [14] Other Important Information - Revenue per employee reached $1.24 million in 2025, a 3.6x increase since 2022 [14] - Adjusted operating expenses declined by 8% while revenue grew 104% since 2022 [14] Q&A Session Summary Question: When are you planning to become profitable? - Management indicated that while current growth may reduce transaction margin dollars, it will lead to increased future profits as loan books mature [16] Question: How will you prioritize capital allocation between reinvestment, debt reduction, and shareholder returns? - Management emphasized the focus on growth and product adoption while being disciplined on costs, which will inform future capital allocation decisions [19] Question: What are the latest delinquency trends and confidence in provisions stabilizing? - Management reported a decline in provisions for credit losses from 0.72% of GMV to 0.65%, indicating stable delinquency trends [20][21] Question: Can you elaborate on the impact of excess loan growth on transaction margins? - Management explained that strong growth in pay later volumes is affecting transaction margins but is expected to normalize as the business matures [23][24] Question: How is the Walmart rollout performing? - Management expressed satisfaction with the Walmart rollout and highlighted the importance of partnerships in driving growth [35][36] Question: What are the expectations for transaction margins in the coming year? - Management indicated that transaction margins are expected to remain consistent with Q4 2025 levels as the company continues to invest in growth [42]