Q1 2026 Klarna Group PLC Earnings Call

May 14, 2026

Speaker #1: Hello, everyone, and welcome to Klarna's first quarter 2026 earnings call. During this call, we will discuss our business outlook and make forward-looking statements. These statements are based on our current expectations and assumptions as of today.

[Company Representative] (Klarna): Hello everyone, welcome to Klarna's Q1 2026 earnings call. During this call, we will discuss our business outlook and make forward-looking statements. These statements are based on our current expectations and assumptions as of today. Actual results may differ materially due to various risks and uncertainties, including those described in our most recent filings with the SEC. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website, as well as filed with the SEC. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period in 2025.

Operator: Hello everyone, welcome to Klarna's Q1 2026 earnings call. During this call, we will discuss our business outlook and make forward-looking statements. These statements are based on our current expectations and assumptions as of today. Actual results may differ materially due to various risks and uncertainties, including those described in our most recent filings with the SEC. During this call, we will present both IFRS and non-IFRS financial measures.

Speaker #1: Actual results may differ materially due to various risks and uncertainties, including those described in our most recent filings with the SEC. During this call, we will present both IFRS and non-IFRS financial measures, a reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website as well as filed with the SEC.

Operator: A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website, as well as filed with the SEC. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period in 2025. During the question and answer portion of today's call, please limit yourself to one question. To join the queue, participants should dial pound key five on their telephone keypad. Before we move to Q&A, we will begin with a brief presentation. Sebastian, please go ahead.

Speaker #1: Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period in 2025. During the question-and-answer portion of today's call, please limit yourself to one question.

[Company Representative] (Klarna): During the question and answer portion of today's call, please limit yourself to one question. To join the queue, participants should dial pound key five on their telephone keypad. Before we move to Q&A, we will begin with a brief presentation. Sebastian, please go ahead.

Speaker #1: To join the queue, participants should dial pound key five on their telephone keypad. Before we move to Q&A, we will begin with a brief presentation.

Speaker #1: Sebastian, please go ahead.

Speaker #2: Good morning, everyone, and thank you for joining. This quarter was a good quarter. We delivered above the high end of every line. Revenue: 44%.

Sebastian Siemiatkowski: Good morning, everyone, and thank you for joining. This quarter was a good quarter. We delivered above the high end of every line. Revenue, $1.012 billion, up 44%. Transaction margin dollars, $389 million, up 44%. Adjusted operating income, $68 million against $3 million a year ago, and net income turned positive. Same 3 products, bigger network, deeper engagement. Here are the 3 things we did this quarter. First, our global default PSP strategy. We cover 26 markets. We carry 3 payment products, debit for everyday spend, the charge card equivalent Buy Now, Pay Later for mid-ticket, and point-of-sale installments Fair Financing for big tickets. PSPs have been reiterating the same thing to us for years.

Speaker #2: Transaction margin: 389 million dollars, up 44%. Adjusted operating profit: 68 million dollars, against 3 million dollars a year ago. And net income turned positive.

Speaker #2: Same three products, bigger network, deeper engagement. Here are the three things we did this quarter. First, our global default PSP strategy. We covered 26 markets.

Sebastian Siemiatkowski: Same 3 products, bigger network, deeper engagement. Here are the 3 things we did this quarter. First, our global default PSP strategy. We cover 26 markets. We carry 3 payment products, debit for everyday spend, the charge card equivalent Buy Now, Pay Later for mid-ticket, and point-of-sale installments Fair Financing for big tickets. PSPs have been reiterating the same thing to us for years.

Speaker #2: We carry three payment products: debit for everyday spend, the charge card equivalent buy now pay later for mid-ticket, and point of sale installments fair financing for big tickets.

Speaker #2: PSPs have been years. For us to be able to be default with them and across all their merchants and reach parity with the big networks, we need relevant payment methods for every vertical of merchants they serve.

Sebastian Siemiatkowski: For us to be able to be default with them and across all their merchants and reach parity with the big networks, we need relevant payment methods for every vertical of merchants they serve, subscriptions, groceries, ride-sharing, airlines or fast fashion. Geography plus product range. We are borrowing from Amex 2000s parity and ubiquity playbook, and it's working. That strategy is showing up across the payment lines. Payment transactions, 27% up from 13% a year ago. Volume, 33% up from 6%. Transaction and service revenue, 29% up from 7%. Stripe and Nexi are scaling, and you can already see it on our merchant count, 1.07 million, up 49%. J.P. Morgan Payments and Worldpay are signed, launching later this year. Second, we are still spend centric, not lend centric. Our book turns more than 10 times a year.

Speaker #2: Subscriptions, groceries, ride-sharing, airlines, or fast fashion. Geography, plus product range. We are borrowing from Amex 2000s parity and ubiquity playbook and it's working. That strategy is showing up across the payment lines.

Speaker #2: Payment transactions: 27% up from 13% a year ago. Volume: 33% up from 6%. Transaction and service revenue: 29% up from 7%. Stripe and Nexi are scaling, and you can already see it on our merchant count.

Sebastian Siemiatkowski: Payment transactions, 27% up from 13% a year ago. Volume, 33% up from 6%. Transaction and service revenue, 29% up from 7%. Stripe and Nexi are scaling, and you can already see it on our merchant count, 1.07 million, up 49%. J.P. Morgan Payments and Worldpay are signed, launching later this year. Second, we are still spend centric, not lend centric. Our book turns more than 10 times a year.

Speaker #2: 1.07 million up, 49%. JP Morgan payments and Worldpay are signed, launching later this year. Second, we are still spend-centric, not lend-centric. Our book turns more than 10 times a year.

Speaker #2: From 2020 through '24, our priority was pay later, especially in the US. We are now live with the majority of the US top 100 online retailers.

Sebastian Siemiatkowski: From 2020 through 2024, our priority was Pay Later, especially in the US. We are now live with the majority of the US top 100 online retailers. Pay Later means we start small with every new customer. A SEK 100 transaction repaid in weeks. That's how we get to know each other. In 2025, we shifted to Fair Financing. The vast majority of those borrowers are existing customers with proven repayment history. Fair Financing took off faster than we forecast. We took meaningful market share in less than 12 months, especially in the US. We said as much in February. Let's zoom out. In our 14 profitable years before the build-out era, point-of-sale installments were 10% to 20% of volume. This quarter, Fair Financing is 12. Not a new business, it's the same business restored. Credit data confirms it.

Speaker #2: Pay later means we start small with every new customer. $100 transaction repaid in weeks. That's how we get to know each other. In '25, we shifted to fair financing.

Speaker #2: The vast majority of those borrowers are existing customers with proven repayment history. Fair financing took off faster than we forecast. We took meaningful market share in less than 12 months, especially in the US.

Sebastian Siemiatkowski: The vast majority of those borrowers are existing customers with proven repayment history. Fair Financing took off faster than we forecast. We took meaningful market share in less than 12 months, especially in the US. We said as much in February. Let's zoom out. In our 14 profitable years before the build-out era, point-of-sale installments were 10% to 20% of volume. This quarter, Fair Financing is 12. Not a new business, it's the same business restored. Credit data confirms it.

Speaker #2: We set as much in February. But let's zoom out. In our 14 profitable years before the build-out era, point-of-sale installments were 10% to 20% of volume.

Speaker #2: This quarter, fair financing is 12. Not a new business. It's the same business restored. Credit data confirms it. US financing 30 plus days past due improved 36 basis points from the Q2 2025 peak.

Sebastian Siemiatkowski: US financing 30-plus days past due improved 36 basis points from the Q2 2025 peak. This quarter, the revenue margin from earlier cohorts are starting to catch up. We have listened to the feedback from this audience. Starting today, we will report volume by product and US versus non-US separately. We will publish provisions by cohort for both Pay Later and Fair Financing. Third, the Klarna Card crossed 5 million active users globally this quarter. The everyday spend account is the center of the customer relationship, daily app usage, debit transactions, and the credit option when they want it, additional bank products for the deeply engaged. Point-of-sale financing on the card unlocks revenue. The debit side unlocks engagement. Both are important. All of this builds the funding base. Everyday spend feeds the deposits. Deposits fund the originations. Klarna is diversified. Deposits at the core.

Speaker #2: This quarter, the revenue and margin from earlier cohorts are starting to catch up. We have listened to the feedback from this audience, starting today we will report volume by product and US versus non-US separately.

Speaker #2: We will publish provisions by cohort for both pay later and fair financing. Third, the Klarna card crossed 5 million active users globally this quarter.

Speaker #2: The everyday spend account is the center of the customer relationship. Daily app usage, debit transactions, and the credit option when they wanted, additional bank products for the deeply engaged.

Sebastian Siemiatkowski: The everyday spend account is the center of the customer relationship, daily app usage, debit transactions, and the credit option when they want it, additional bank products for the deeply engaged. Point-of-sale financing on the card unlocks revenue. The debit side unlocks engagement. Both are important. All of this builds the funding base. Everyday spend feeds the deposits. Deposits fund the originations. Klarna is diversified. Deposits at the core.

Speaker #2: Point of sale financing on the card unlocks revenue. The debit side unlocks engagement. Both are important. All of this builds the funding base. Every day spend feeds the deposits, deposits fund the originations.

Speaker #2: Klarna is diversified. Deposits are at the core. 91% consumer deposits, average duration 270 days. One of the most predictable funding profiles in banking. That base lets us price US originations competitively and earn peer-level returns.

Sebastian Siemiatkowski: 91% consumer deposits, average duration 270 days, one of the most predictable funding profiles in banking. That base lets us price US originations competitively and earn peer-level returns. Our forward flow capabilities expand this quarter as announced. They are additive, not a substitute, and allow us to manage capital more efficiently. Diversified deposits at the core is a structural advantage. We will manage the mix actively. Now, I was going to tell you three priorities for the rest of 2026. They are the same three things we just did. Default PSPs, focus on the spend-centric foundation, and everyday spend and deposit-funded growth. Our biggest additional upside opportunity for transaction margin dollars growth is payment fees, which is basically the remaining gap between Europe and US Pay Later economics. Niclas, over to you.

Speaker #2: Our forward flow capabilities expanded this quarter as announced. They are additive. Not a substitute. And allow us to manage capital more efficiently. Diversified deposits at the core is the structural advantage.

Speaker #2: We will manage the mix actively. Now, I was going to tell you three priorities for the rest of 2026. They are the same three things we just did: default PSPs, focus on the spend-centric foundation, and everyday spend and deposit-funded growth.

Sebastian Siemiatkowski: Now, I was going to tell you three priorities for the rest of 2026. They are the same three things we just did. Default PSPs, focus on the spend-centric foundation, and everyday spend and deposit-funded growth. Our biggest additional upside opportunity for transaction margin dollars growth is payment fees, which is basically the remaining gap between Europe and US Pay Later economics. Niclas, over to you.

Speaker #2: Our biggest additional upside opportunity for transaction margin dollar growth is payment fees, which is basically the remaining gap between Europe and US pay later economics.

Speaker #2: Niclas, over to you.

Speaker #3: Many thanks, Sebastian. Good morning, everyone. Before I cover our Q1 results and outline our Q2 and full year 2026 guidance, I want to highlight that alongside our results, we've also published an enhanced supplementary data pack.

Niclas Neglén: Many thanks, Sebastian. Good morning, everyone. Before I cover our Q1 results and outline our Q2 and full year 2026 guidance, I want to highlight that alongside our results, we've also published an enhanced supplementary data pack. This data pack is supported by a short video walkthrough, which should enhance visibility and understanding of our business. I encourage you to take a few minutes to review it. Starting with the P&L summary, before going into the details, I would like to highlight that our business has executed strongly in Q1, compounding nicely across all lines, and we're well on track for our full year guidance, which we have reiterated this morning. GMV came in at SEK 33.7 billion, revenue at just over SEK 1 billion, and transaction margin dollars at SEK 389 million, all accelerated quarter on quarter.

Speaker #3: This data pack is supported by a short video walkthrough, which should enhance visibility and understanding of our business. I encourage you to take a few minutes to review it.

Speaker #3: Starting with the P&L summary, before going into the details, I would like to highlight that our business has executed strongly in one Q. Compounding nicely across all lines and we're well on track for a full year guidance, which we have reiterated this morning.

Niclas Neglén: Starting with the P&L summary, before going into the details, I would like to highlight that our business has executed strongly in Q1, compounding nicely across all lines, and we're well on track for our full year guidance, which we have reiterated this morning. GMV came in at SEK 33.7 billion, revenue at just over SEK 1 billion, and transaction margin dollars at SEK 389 million, all accelerated quarter-on-quarter.

Speaker #3: GMV came in at 33.7 billion dollars, revenue at just over 1 billion dollars, and transaction margin dollars at 389 million dollars. All accelerated quarter on quarter.

Speaker #3: Adjusted operating income of $68 million was up $65 million year on year. These results underscore the operating momentum in the business. Revenue in the first quarter grew 44% year over year to just over $1 billion, with like-for-like growth of 36%.

Niclas Neglén: Adjusted operating income of SEK 68 million was up SEK 65 million year on year. These results underscore the operating momentum in the business. Revenue in Q1 grew 44% year over year to just over SEK 1 billion, with a like-for-like growth of 36%. Transaction costs were SEK 623 million, up 45% year on year, or 37% on a like-for-like basis. Within that, processing and servicing costs grew 62%, reflecting the scaling of Fair Financing, our point-of-sale installment product, and our card product. Provision for credit losses was SEK 186 million, or 55 basis points of GMV, a sequential decline from Q4, reflecting both favorable seasonal collections and the natural maturation of our Fair Financing book, where upfront provisioning on new originations shrink as a share of total revenue over time.

Niclas Neglén: Adjusted operating income of SEK 68 million was up SEK 65 million year-on-year. These results underscore the operating momentum in the business. Revenue in Q1 grew 44% year-over-year to just over SEK 1 billion, with a like-for-like growth of 36%. Transaction costs were SEK 623 million, up 45% year-on-year, or 37% on a like-for-like basis.

Speaker #3: Transaction costs were 623 million dollars, up 45% year on year, or 37% on a like-for-like basis. Within that processing and servicing costs grew 62%, reflecting the scaling of fair financing, our point of sale installment product, and our card product.

Niclas Neglén: Within that, processing and servicing costs grew 62%, reflecting the scaling of Fair Financing, our point-of-sale installment product, and our card product. Provision for credit losses was SEK 186 million, or 55 basis points of GMV, a sequential decline from Q4, reflecting both favorable seasonal collections and the natural maturation of our Fair Financing book, where upfront provisioning on new originations shrink as a share of total revenue over time.

Speaker #3: Provision for credit losses was 186 million dollars, or 55 basis points of GMV. As the current decline from Q4. Reflecting both favorable seasonal collections and the natural maturation of our fair financing book, we're upfront provisioning our new origination shrink as a share of total revenue over time.

Speaker #3: Funding costs grew 32% broadly in line with GMV. Transaction margin dollars, which is our North Star metric for the health of the business, reached 389 million dollars, up 44% year over year, and 34% on a like-for-like basis.

Niclas Neglén: Funding costs grew 32% broadly in line with GMV. transaction margin dollars, which is our North Star metric for the health of the business, reached SEK 389 million, up 44% year over year and 34% on a like-for-like basis. You can see that progression clearly on the right-hand side of this slide from SEK 270 million in Q1 last year to SEK 389 million this quarter. TMD is the cleanest signal of how our c- model compounds because it absorbs the upfront provisioning drag of growth and shows what we earn after all variable costs. Non-transaction related operating expenses were SEK 373 million, up just 3% year over year. transaction margin dollars are growing more than 14 times faster than our cost base. This operating leverage is structural and driven by our compounding network.

Speaker #3: You can see that progression clearly on the right-hand side of this slide. From 270 million dollars in Q1 last year to 389 million dollars this quarter.

Speaker #3: TMD is the cleanest signal of how our model compounds. Because it absorbs the upfront provisioning drag of growth and shows where we earn after all variable costs.

Niclas Neglén: TMD is the cleanest signal of how our c- model compounds because it absorbs the upfront provisioning drag of growth and shows what we earn after all variable costs. Non-transaction related operating expenses were SEK 373 million, up just 3% year-over-year. transaction margin dollars are growing more than 14 times faster than our cost base. This operating leverage is structural and driven by our compounding network.

Speaker #3: Non-transaction-related operating expenses were 373 million dollars, up just 3% year over year. Transaction margin dollars are growing more than 14 times faster than our cost base.

Speaker #3: This operating leverage is structural and driven by our compounding network. Adjusted operating income was 68 million dollars, a 65 million dollar improvement year over year.

Niclas Neglén: Adjusted operating income was $68 million, a $65 million improvement year-over-year. Operating income turned to +$70 million from a $90 million loss a year ago, a $106 million improvement. Net income was $1 million, a $100 million year-over-year improvement, and earnings per share improved by $0.25 from -$0.26 to -$0.01, effectively break even. EPS remains slightly negative as a portion of the net income is attributable to capital bond interest payments. Turning to GMV, gross merchandise volume grew 33% year-over-year to $33.7 billion or 22% on a like-for-like basis. Growth was broad-based across geographies and products. By geography, the US grew 39% to $7.1 billion, representing 21% of the total GMV.

Speaker #3: Operating income turned depositive 17 million dollars from a 90 million dollar loss a year ago. A 106 million dollar improvement. Net income was 1 million dollars, a 100 million dollar year over year improvement.

Speaker #3: And earnings per share improved by $0.25, from negative $0.26 to negative $0.01, effectively break even. EPS remained slightly negative as a portion of the net income is attributable to capital bond interest payments.

Speaker #3: Turning to GMV, gross merchandise volume grew 33% year over year to 33.7 billion dollars, or 22% on a like-for-like basis. Growth was broad-based across geographies and products.

Niclas Neglén: Growth was broad-based across geographies and products. By geography, the US grew 39% to $7.1 billion, representing 21% of the total GMV. Our global ex-US business grew 31% to SEK 26.6 billion. By product, Pay Later, our charge card equivalent, continues to deliver strong global growth, growing 29% and representing 77% of GMV.

Speaker #3: By geography, the US grew 39% to 7.1 billion dollars, representing 21% of the total GMV. Our global ex-US business grew 31% to 26.6 billion dollars.

Niclas Neglén: Our global ex-US business grew 31% to SEK 26.6 billion. By product, Pay Later, our charge card equivalent, continues to deliver strong global growth, growing 29% and representing 77% of GMV. Fair Financing, our point-of-sale installment product, is scaling rapidly at SEK 4.1 billion, up 138% year over year as more merchants adopt it. 225,000 merchants now offer Fair Financing, up from 103,000 a year ago. Pay in Full, our everyday spending product, contributed to SEK 3.5 billion. The volume mix is important because it directly drives the revenue and the TMD opportunity. Higher engagement products like Fair Financing and Card generate stronger TMD per dollar of GMV as they mature. Now to the revenue composition and the TMD in more detail.

Speaker #3: By product, pay later, our charge card equivalent continues to deliver strong global growth, growing 29% and representing 77% of GMV. Fair financing, our point of sale installment product, is scaling rapidly at 4.1 billion dollars, up 138% year over year, as more merchants adopt it.

Niclas Neglén: Fair Financing, our point-of-sale installment product, is scaling rapidly at SEK 4.1 billion, up 138% year-over-year as more merchants adopt it. 225,000 merchants now offer Fair Financing, up from 103,000 a year ago. Pay in Full, our everyday spending product, contributed to SEK 3.5 billion. The volume mix is important because it directly drives the revenue and the TMD opportunity. Higher engagement products like Fair Financing and Card generate stronger TMD per dollar of GMV as they mature. Now to the revenue composition and the TMD in more detail.

Speaker #3: 225,000 merchants now offer fair financing, up from 103,000 a year ago. Paying full, our everyday spending product contributed to 3.5 billion dollars. The volume mix is important because it directly drives the revenue and the TMD opportunity.

Speaker #3: Higher engagement products like Fair Financing encourage and generate stronger TMD per dollar of GMV as they mature. Now, to the revenue composition and the TMD in more detail.

Speaker #3: On the left-hand side, you see the revenue by type. Transaction and service revenue was 671 million dollars, up 29%, broadly tracking our volume growth.

Niclas Neglén: On the left-hand side, you see the revenue by type. Transaction and service revenue was SEK 671 million, up 29%, broadly tracking our volume growth. Interest income grew 56% to SEK 284 million, driven by both new originations and the continued revenue recognition from loan originated in prior periods. Gain on sale of receivables was SEK 57 million in Q1. We will continue our asset-light strategy and act opportunistically on receivable sales. By geography, US revenue grew 67% to $399 million, significantly outpacing US GMV growth of 39%. The higher take rate reflects the contribution of interest income and gain on sale. Our global ex-US revenue grew 33% to SEK 613 million, with Fair Financing and membership fees growing growth driving the acceleration.

Speaker #3: Interest income grew 56% to 284 million dollars, driven by both new originations and the continued revenue recognition from loan originated in prior periods. Gain on sale of receivables was 57 million dollars in Q1.

Speaker #3: We will continue our asset light strategy and act opportunistically on receivable sales. By geography, US revenue grew 67% to 399 million dollars, significantly outpacing US GMV growth of 39%.

Niclas Neglén: By geography, US revenue grew 67% to $399 million, significantly outpacing US GMV growth of 39%. The higher take rate reflects the contribution of interest income and gain on sale. Our global ex-US revenue grew 33% to SEK 613 million, with Fair Financing and membership fees growing growth driving the acceleration.

Speaker #3: The higher take rate reflects the contribution of interest income and gain on sale. Our global ex-US revenue grew 33% to $613 million, with fair financing and membership fees driving the acceleration.

Speaker #3: On a like-for-like basis, total revenue grew 36%. Now, on the right, the metric that matters the most: transaction margin dollars, or TMD. TMD by geography tells the story of where our model is heading.

Niclas Neglén: On a like-for-like basis, total revenue grew 36%. On the right, the metric that matters most, transaction margin dollars or TMD. TMD by geography tells the story of where our model is heading. Total TMD was $389 million at a 38.4% margin on revenue, growing 44% year-over-year, 34% like-for-like. In the US, TMD was $106 million, with a 26.6% margin on revenue, up 58% year-over-year. Our ex-US business delivered $283 million of TMD at a 46.2% margin, and within that, our most established markets are generating approximately 60% transaction margins. We expect the US margins to continue converging towards the mature markets over time. Turning to credit quality, consumer delinquency rates remain healthy across both product lines.

Speaker #3: Total TMD was 389 million dollars, at a 38.4% margin on revenue, growing 44% year over year, 34% like-for-like. In the US, TMD was 106 million dollars, with a 26.6% margin on revenue, up 58% year over year.

Speaker #3: Our ex-US business delivered 283 million dollars of TMD at a 46.2% margin, and within that, our most established markets are generating approximately 60% transaction margins.

Niclas Neglén: Our ex-US business delivered $283 million of TMD at a 46.2% margin, and within that, our most established markets are generating approximately 60% transaction margins. We expect the US margins to continue converging towards the mature markets over time. Turning to credit quality, consumer delinquency rates remain healthy across both product lines.

Speaker #3: We expect the US margins to continue converging towards the mature markets over time. Turning to credit quality, consumer delinquency rates remain healthy across both product lines.

Speaker #3: The charts show 2024 and 2025 vintage performance side by side. In pay later, our charge card equivalent product and our largest by volume, 30-day plus delinquency rates are stable and well managed.

Niclas Neglén: The charts show 2024 and 2025 vintage performance side by side. In Pay Later, our charge card equivalent product and our largest by volume, 30-day-plus delinquency rates are stable and well managed. This is a short duration, high frequency book. It turns over approximately 10 times per year with an average consumer balance of SEK 124. We underwrite every transaction individually, starting with small balances and scaling exposure as we build confidence. In Fair Financing, our point-of-sale installment product, delinquency rates are tracking favorably, with both 30-plus and 60-plus day past dues rates declining quarter over quarter. Our ability to continuously improve underwriting, driven by transaction level decisioning, short duration exposure, and the dataset built on over half a trillion dollars of cumulative transactions since inception, remains a key competitive advantage and a direct contributor to TMD expansion. Finally, our outlook.

Speaker #3: This is a short duration, high-frequency book. It turns over approximately 10 times per year with an average consumer balance of 124 dollars. We underwrite every transaction individually, starting with small balances and scaling exposure as we build confidence.

Speaker #3: In fair financing, our point of sale installment product, delinquency rates are tracking favorably, with both 30 plus and 60 plus day past dues rates declining quarter over quarter.

Niclas Neglén: In Fair Financing, our point-of-sale installment product, delinquency rates are tracking favorably, with both 30-plus and 60-plus day past dues rates declining quarter-over-quarter. Our ability to continuously improve underwriting, driven by transaction level decisioning, short duration exposure, and the dataset built on over half a trillion dollars of cumulative transactions since inception, remains a key competitive advantage and a direct contributor to TMD expansion. Finally, our outlook.

Speaker #3: Our ability to continuously improve underwriting, driven by transaction level decisioning, short duration exposure, and the data set built on over half a trillion dollars of cumulative transactions since inception, remains a key competitive advantage and a direct contributor to TMD expansion.

Speaker #3: Finally, our outlook. Full-year 2026 guidance is unchanged. We continue to target GMV of greater than $155 billion, and revenue of greater than 2.8% of GMV.

Niclas Neglén: Our full year 2026 guidance is unchanged. We continue to target GMV of greater than $155 billion, revenue of greater than 2.8% of GMV, TMD of greater than 1.04% of GMV, and adjusted operating income of greater than 6.9% of revenue. For Q2, our guidance reflects normal seasonality for a retail-driven business, as well as FX normalization following the sharp US dollar depreciation in Q1 of last year. Specifically, we're guiding to GMV of $35.5 to 36.5 billion, revenue of $960 million to 1 billion, TMD of $375 to 395 million, and adjusted operating income of $30 to 50 million. Since we provided our full year and Q1 guidance, FX has not had a material movement.

Speaker #3: TMD of greater than 1.04% of GMV. And adjusted operating income of greater than 6.9% of revenue. For Q2, our guidance reflects normal seasonality for our retail-driven business.

Speaker #3: As well as FX normalization following the sharp US dollar depreciation in Q1 of last year. Specifically, we're guiding to GMV of $35.5 to $36.5 billion.

Speaker #3: Revenue of $960 million to $1 billion. TMD of $375 million to $395 million. And adjusted operating income of $30 million to $50 million.

Speaker #3: Since we provided a full year and Q1 guidance, FX has not had a material movement. To summarize, we started 2026 well. TMD grew 44% to $389 million.

Niclas Neglén: Since we provided our full year and Q1 guidance, FX has not had a material movement. To summarize, we've started 2026 well. TMD grew 44% to $389 million. That is our focus, and it is compounding. Our network is scaling profitably, our credit quality is healthy, and our operating leverage is clear. Accelerating TMD growth and the value it creates for shareholders remain my primary focus.

Niclas Neglén: To summarize, we've started 2026 well. TMD grew 44% to $389 million. That is our focus, and it is compounding. Our network is scaling profitably, our credit quality is healthy, and our operating leverage is clear. Accelerating TMD growth and the value it creates for shareholders remain my primary focus.

Speaker #3: That is our focus, and it is compounding. Our network is scaling profitably. Our credit quality is healthy, and our operating leverage is clear. Accelerating TMD growth and the value it creates for shareholders remain my primary focus.

Speaker #1: Thank you, Sebastian and Niclas. We will now move to the questions from the analysts. A friendly reminder that to join the queue, participants should dial pound key 5 on their telephone keypad and please limit yourself to one question.

[Company Representative] (Klarna): Thank you, Sebastian and Niklas. We will now move to the questions from the analysts. A friendly reminder that to join the queue, participants should dial pound key 5 on their telephone keypad, and please limit yourself to one question. Your first question comes from the line of Harshita Rawat from Bernstein. Please go ahead.

Operator: Thank you, Sebastian and Niklas. We will now move to the questions from the analysts. A friendly reminder that to join the queue, participants should dial pound key 5 on their telephone keypad, and please limit yourself to one question. Your first question comes from the line of Harshita Rawat from Bernstein. Please go ahead.

Speaker #1: Your first question comes from the line of Harshita Rawat from Bernstein. Please go ahead.

Harshita Rawat: Hi. Good morning, Niklas. I want to ask about the US and its Fair Financing expansion. Maybe take a step back and reflect on the key learnings from the past year. It's driven GMV growth, but also quite a bit of volatility in financials. If you talk about what, in your view, may be less appreciated by the investment community as it relates to Klarna's US growth beyond the mechanics of revenue recognition. Maybe also talk about the surprise in the Q1, kind of like what drove that on the positive side. Thank you.

Speaker #3: Hi. Good morning, Niclas. I want to ask about the US and fair financing expansion. Maybe take a step back and reflect on the key learnings from the past year. We've driven GMV growth, but also seen quite a bit of volatility in financials.

Speaker #3: And if you talk about what, in your view, maybe less appreciated by the investment community as it relates to Klarna's US growth beyond the mechanics of revenue recognition.

Speaker #3: And maybe also talk about the surprise in the first quarter, kind of like what drove that on the positive side. Thank you.

Speaker #2: Great. Hi, Harshita. Thank you so much for the question. So I think we're seeing what we had expected over time, right? Overarching fair financing grew about 220% in the first quarter, and we've seen that that has driven and supported the growth of our interest income up about 56% year over year.

Niclas Neglén: Good. Hi, Harshita. Thank you so much for the question. You know, I think we're seeing what we had expected over time, right? Overarchingly, Fair Financing grew about 220% in Q1. We've seen that that has driven and supported the growth of our interest income, up about 56% year over year. That's also coupled with the fact that we are continuing to compound from the volumes that we saw in H2 of the year. Overarchingly, I think Q1 really represents a good momentum in the business, and we're continuing to execute. We obviously beat volume slightly higher than what we had come in and expected, that supports it. Then there's two other things.

Niclas Neglén: Good. Hi, Harshita. Thank you so much for the question. You know, I think we're seeing what we had expected over time, right? Overarchingly, Fair Financing grew about 220% in Q1. We've seen that that has driven and supported the growth of our interest income, up about 56% year-over-year. That's also coupled with the fact that we are continuing to compound from the volumes that we saw in H2 of the year. Overarchingly, I think Q1 really represents a good momentum in the business, and we're continuing to execute.

Speaker #2: And that's also coupled with the fact that we are continuing to compound from the volumes that we saw in the second half of the year.

Speaker #2: Overarchingly, I think the first quarter really represents a good momentum in the business, and we're continuing to execute. We obviously beat volume slightly higher than what we had come in and expected.

Niclas Neglén: We obviously beat volume slightly higher than what we had come in and expected, that supports it. Then there's two other things. There was a later asset sale towards the back end of the quarter, which meant that it generated more interest income off that prior to the sale of those assets. Finally, we had really strong collection performance in Q1. Generally, we have seasonally stronger collection performance, but this performance was even above what we had expected, particularly in the US, as we saw consumers repaying us off the peak season.

Speaker #2: That supports it. And then there are two other things. There was a later asset sale towards the back end of the quarter, which meant that we generated more interest income off that prior to the sale of those assets.

Niclas Neglén: There was a later asset sale towards the back end of the quarter, which meant that it generated more interest income off that prior to the sale of those assets. Finally, we had really strong collection performance in Q1. Generally, we have seasonally stronger collection performance, but this performance was even above what we had expected, particularly in the US, as we saw consumers repaying us off the peak season.

Speaker #2: And then finally, we have really strong collection performance in the first quarter, generally we have seasonally stronger collection performance, but this performance is even above what we had expected, particularly in the US, as we saw consumers repaying us off the peak season.

Speaker #1: Next. Research. Please go ahead.

[Company Representative] (Klarna): Next, Research. Please go ahead.

Operator: Next, Research. Please go ahead.

Speaker #4: Hey, thanks, guys. Nice quarter, nice results. Just thinking about your GMV trends and comparing what we saw in first quarter to the guidance for second quarter, maybe just provide any puts and takes on how to think about the driving factors.

[Analyst]: Hey, thanks, guys. Nice quarter and nice results. Just thinking about your GMV trends and comparing what we saw in Q1 to the guidance for Q2, maybe just provide any puts and takes on how to think about the driving factors. It was very strong in Q1. I know there's a tougher comp, but anything else we should think about? Underneath that, what are the key drivers, if you kinda rank ordered what you'd expect to see the strength coming from going forward for the remainder of the year? Obviously, fair financing is still gonna be strong, but I know it'll moderate, so maybe a little more.

Speaker #4: It was very, very strong in Q1. I know there's a tougher comp. But anything else we should think about? And then underneath that, what are the key drivers?

Speaker #4: If you kind of rank ordered, what you'd expect to see, the strength coming from going forward for the remainder of the year, obviously fair financing is still going to be strong, but I know it'll moderate.

Speaker #4: So maybe a little more.

Speaker #2: Sure. So I think we've had good momentum in the business so far. One should appreciate that we are a retail-focused business. That is driven by seasonality.

Niclas Neglén: Sure. I think we've had good momentum in the business so far. One should appreciate that we are a retail-focused business that is driven by seasonality. We, in Q1, clocked around about 20% of our total full-year volume, and in Q2, we're clocking about 23% of our full-year GMV. Overarchingly, this is very much in line with normalized trends. If you look to 2025, we obviously had a few central wins at the beginning of the year. I think we expect a slightly larger ramp towards the back end of the year. Obviously, as I mentioned earlier, the significantly lower FX tailwind in Q2 versus Q1 because of the US depreciation.

Speaker #2: We in the first quarter clocked around about 20% of our total full year volume, and in the second quarter, we're clocking about 23% of our full year GMV.

Speaker #2: So overarchingly, this is very much in line with normalized trends. And if you look to 2025, we obviously had a few central winds at the beginning of the year.

Speaker #2: I think we expect to surger slightly larger ramp towards the back end of the year. And then obviously, as I mentioned, earlier, the significantly lower FX tailwind in Q2 versus Q1.

Niclas Neglén: I think we expect a slightly larger ramp towards the back end of the year. Obviously, as I mentioned earlier, the significantly lower FX tailwind in Q2 versus Q1 because of the US depreciation. Overarchingly, you know, we had set up a framework for the guide of greater than, and I think we are comfortably moving towards that, and focusing on beating or meeting our full-year guide.

Speaker #2: Because of the US depreciation but overarchingly, we had set up a framework for the guide of greater than. And I think we are comfortably moving towards that and focusing on beating or meeting our full year guide.

Niclas Neglén: Overarchingly, you know, we had set up a framework for the guide of greater than, and I think we are comfortably moving towards that, and focusing on beating or meeting our full-year guide.

Speaker #1: Next, we'll go to Will Nance from Goldman Sachs. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to line of Will Nance from Goldman Sachs. Please go ahead.

Operator: Next, we'll go to line of Will Nance from Goldman Sachs. Please go ahead.

Speaker #5: Hi. Thank you for taking the questions. Also, thanks to Niclas and the IR team for all the work on the incremental disclosures. I'm sure those will be appreciated.

Will Nance: Hi. Thank you for taking the questions. Also, you know, thanks to Niclas Neglén and the IR team for all the work on the incremental disclosures. I'm sure they will be appreciated. If I can maybe just ask a question on some of the credit results that you guys have seen, 'cause I'm sure we'll get questions on it. I think in the deck you're showing some of the initial cumulative loss curves from H2 2025 and on US Fair Financing cohorts. I think probably as one would expect, given some of the composition of merchant launches, in H2, you know, the losses look like they're trending a little bit higher than prior cohorts.

Speaker #5: If I can maybe just ask a question on some of the credit results that you guys have seen. Because I'm sure we'll get questions on it.

Speaker #5: I think in the deck, you're showing some of the initial cumulative loss curves. From the second half of 2025 and on US fair financing cohorts.

Speaker #5: I think probably as one would expect, given some of the composition of merchant launches in the back half, the losses look like they're trending a little bit higher than prior cohorts.

Will Nance: I think probably as one would expect, given some of the composition of merchant launches, in H2, you know, the losses look like they're trending a little bit higher than prior cohorts. Maybe you can just talk about, you know, how those are trending versus your own expectations internally and, you know, higher level, can you talk about, you know, any changes in the underwriting or in the pace of Fair Financing originations as you guys have progressed over the last 6 months? Thanks for taking the questions.

Speaker #5: Maybe you can just talk about how those are trending versus your own expectations internally and higher level. Can you talk about any changes in the underwriting or in the pace of fair financing originations as you guys have progressed over the last six months?

Will Nance: Maybe you can just talk about, you know, how those are trending versus your own expectations internally and, you know, higher level, can you talk about, you know, any changes in the underwriting or in the pace of Fair Financing originations as you guys have progressed over the last 6 months? Thanks for taking the questions.

Speaker #5: Thanks for taking the question.

Speaker #2: Sure. Thank you. We're performing continues to perform well in accordance with our expectations. If you look to the forward-looking metrics, 30 days past due and 60 days past due, all of them are trending in the right way in the US.

Niclas Neglén: Sure, thank you. We're continuing to perform well and in accordance with our expectations. If you look to the forward-looking metrics, 30 days past due and 60 days past due, all of them are trending in the right way in the US. They're coming sequentially down in Q1, which just shows that we're continuing to do the underwriting in the way that we want with strong risk management. In regards to your actual question around the cumulative net charge-offs, they're also in line with expectations. As we ramped in H2 our card business as well as our 3-month loan tenors, we saw and needed to adjust the models a little bit around that.

Speaker #2: They're coming sequentially down in the first quarter, which just shows that we're continuing to do the underwriting in the way that we want with strong risk management.

Speaker #2: In regards to your actual question around the cumulative net charge offs, there are also in line with expectations. As we ramped in the second half, our card business as well as our three-month loan tenors, we saw a need to adjust the models a little bit around that.

Niclas Neglén: In regards to your actual question around the cumulative net charge-offs, they're also in line with expectations. As we ramped in H2 our card business as well as our 3-month loan tenors, we saw and needed to adjust the models a little bit around that. We're seeing good performance in both the Q3 cohort as well as the Q4 cohort as those normalize and our models adjust appropriately.

Speaker #2: And we're seeing good performance in both the third quarter cohort as well as the fourth quarter cohort as those normalize and our models adjust appropriately.

Niclas Neglén: We're seeing good performance in both the Q3 cohort as well as the Q4 cohort as those normalize and our models adjust appropriately.

Speaker #5: That's great, Klarna. Thank you, guys.

Will Nance: That's great color. Thank you, guys.

Speaker #1: Next, we'll go to the line of James Fawcett from Morgan Stanley. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of James Faucette from Morgan Stanley. Please go ahead.

Operator: Next, we'll go to the line of James Faucette from Morgan Stanley. Please go ahead.

Speaker #4: Thank you so much. Wanted to ask, related to acceptance, et cetera, it seems like you're adding a lot of new merchants. Again, this quarter.

James Faucette: Thank you so much. Wanted to ask related to acceptance, et cetera, it seems like you're adding a lot of new merchants again this quarter. Just wondering how many of those merchants are net new to BNPL overall compared to merchants that already had another BNPL provider like Affirm or Billtrust. What does your volume capture look like in those situations? Just trying to get a sense of how well you're being able to differentiate and attract new merchants to the product. Thanks, guys.

Speaker #4: Just wondering, how many of those merchants are net new to BNPL overall compared to merchants that already had another BNPL provider like a firm or whomever?

Speaker #4: And what is your volume capture look like in those situations? Just trying to get a sense of how well you're being able to differentiate and attract new merchants to the product.

Speaker #4: Thanks, guys.

Sebastian Siemiatkowski: Yeah, this is Sebastian. We don't have that exact number to give you, but I can give you a directional answer. Generally speaking, with our partnerships, as I highlighted in the beginning of the call today, the reason they're working with us is because we cover so many markets and that we have a payment method for every type of payment. If you are one of those PSPs and you want to allow us to be default side by side with Visa and Mastercard so that every merchant they work with has and offers Klarna, then it's important that our payment methods are relevant for each one of those. Some of these partnerships then sometimes are exclusive. Some of these partnerships, sometimes there's other providers.

Speaker #3: Yeah, this is Sebastian. So we don't have that exact number to give you, but we can give you I can give you a directional answer.

Speaker #3: Generally speaking, with our partnerships as we highlighted as I highlighted in the beginning of the call today, the reason they're working with us is because we cover so many markets and that we have a payment method for every type of payment.

Speaker #3: If you are one of those PSPs and you want to allow us to be default side by side with Visa and Mastercard so that every merchant they work with has an offers Klarna, then it's important that our payment methods are relevant for each one of those.

Sebastian Siemiatkowski: If you are one of those PSPs and you want to allow us to be default side by side with Visa and Mastercard so that every merchant they work with has and offers Klarna, then it's important that our payment methods are relevant for each one of those. Some of these partnerships then sometimes are exclusive. Some of these partnerships, sometimes there's other providers. But the big difference is that they are usually not default, which means that they would require that particular merchant to add on an additional, for example, Buy Now, Pay Later provider, as opposed to coming out of the box when you sign up with that PSP.

Speaker #3: So some of these partnerships then sometimes are exclusive. Some of these partnerships sometimes there's other providers. But the big difference is that they are usually not default, which means that they would require that particular merchants to add on an additional, for example, buy now, pay later provider.

Sebastian Siemiatkowski: But the big difference is that they are usually not default, which means that they would require that particular merchant to add on an additional, for example, Buy Now, Pay Later provider, as opposed to coming out of the box when you sign up with that PSP. Then in that case, what we track closely is if we are side by side with others, who would consumers actually prefer and who do they choose? When we track that, we have seen over and over again, both in the US and in Europe, that we get the higher share of checkout when side by side with other Buy Now, Pay Later providers, which to us speaks to the strong brand and consumer preference of Klarna.

Speaker #3: As opposed to coming out of the box when you sign up with that PSP. And then in that case, what we track closely is if we are side by side with others who would consumers actually prefer and who do they choose.

Sebastian Siemiatkowski: Then in that case, what we track closely is if we are side by side with others, who would consumers actually prefer and who do they choose? When we track that, we have seen over and over again, both in the US and in Europe, that we get the higher share of checkout when side by side with other Buy Now, Pay Later providers, which to us speaks to the strong brand and consumer preference of Klarna.

Speaker #3: And when we track that, we have seen over and over again, both in the US and in Europe, that we get the higher share of checkout when side by side with other buy now, pay later providers which to us speaks to the strong brand and consumer preference of Klarna.

Speaker #1: Next, we'll go to line of Brian Keane from Citi. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of Bryan Keane from Citi. Please go ahead.

Operator: Next, we'll go to the line of Bryan Keane from Citi. Please go ahead.

Speaker #6: Hey, guys. Congrats on the solid results. Niclas, maybe you could just talk about transaction margin that came in better which was great to see.

Niclas Neglén: Hey, guys. Congrats on the solid results. Niclas, maybe you could just talk about transaction margin. That came in better, which was great to see. Could you just talk about the cadence as we go into Q2 and then Q3 and Q4, what transaction margin will look like this year? Thanks so much.

Bryan Keane: Hey, guys. Congrats on the solid results. Niclas, maybe you could just talk about transaction margin. That came in better, which was great to see. Could you just talk about the cadence as we go into Q2 and then Q3 and Q4, what transaction margin will look like this year? Thanks so much.

Speaker #6: Can you just talk about the cadence as we go into second quarter and then third and fourth? What will transaction margin look like this year?

Speaker #6: Thanks so much.

Speaker #2: Sure. Thank you. Yes. Transaction margin ended up at 389 million up to 44% in the first quarter. We expected to continue to grow over time.

Niclas Neglén: Sure. Thank you. Yes. Transaction margin ended up at SEK 389 million, up 44% in Q1. We expect it to continue to grow over time. It's our focus, obviously. As you can see on transaction margin dollars, you'll see that revenue today is growing around about the same pace as transaction margin dollars. We actually expect that through the year, as you will see from our full year guide, transaction margin dollars will compound faster as the Fair Financing point-of-sale installment portfolio matures. As such, we're guiding towards roughly about 30% growth in the transaction margin dollars, versus a 22% to 23% growth in the revenues through the year.

Speaker #2: It's our focus, obviously. And as you can see on transaction margin dollars, you'll see that revenue today is growing run by at the same pace as transaction margin dollars.

Speaker #2: We actually expect that through the year and as you will see from our full year guide, transaction margin dollars will compound faster as the fair financing point of sale installment portfolio matures.

Speaker #2: And as such, we're guiding towards a roughly about 30% growth in the transaction margin dollars versus a 22, 23% growth in the revenue through the year.

Speaker #5: Okay. Thanks for taking the question.

Bryan Keane: Okay. Thanks for taking the question.

Speaker #1: Next, we'll go to the line of Connor Allen from JPMorgan. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of Connor Allen from JP Morgan. Please go ahead.

Operator: Next, we'll go to the line of Connor Allen from JP Morgan. Please go ahead.

Speaker #7: Hi. Thanks for taking my question. Sebastian, could you talk about the Klarna card? You now have 5 million actives there. Any surprises in the rollout and the usage of the customers?

Connor Allen: Hi. Thanks for taking my question. Sebastian, could you talk about the Klarna Card? You now have 5 million actives there. Any surprises in the rollout and the usage of the customers? If you don't mind, Niclas, maybe just as a follow-up on that, could you talk about how the ramp-up of the card this year is impacting the P&L? Thanks, guys.

Speaker #7: And if you don't mind, Niclas, maybe just as a follow-up on that, could you talk about how the ramp-up of the card this year is impacting the P&L?

Speaker #7: Thanks, guys.

Sebastian Siemiatkowski: Yep. Happy to start. What I'm particularly pleased about with the card, and the success of it is obviously its high growth, the fact that we now are over 5 million users globally. The additional thing that I find interesting and happy about as well is that the debit side of the card is stronger than we initially expected. There's a lot of debit volume on it in addition to the financing, point-of-sale installments that we also offer on it. That's great to see because that speaks to the objective that we have to make this into people's truly everyday spend card that they use when shopping. Over to you, Niclas.

Speaker #3: Yep. Happy to start. What I'm particularly pleased about with the card and the success of it is obviously its high growth, the fact that we now are over 5 million users globally.

Speaker #3: The additional thing that I found interesting and happy about as well is that the debit side of the card is stronger than we initially expected.

Speaker #3: So there's a lot of debit volume on it in addition to the financing point of sale installments that we also offer on it. So that's great to see because that speaks to the objective that we have to make this into people's truly everyday spend card that they use when shopping.

Speaker #3: Over to you, Niclas.

Speaker #2: Thank you, Sebastian. So yeah, with regards to the P&L, what we're seeing is strong increase in our membership fees. So they're up over 600% or so in the first quarter versus prior year.

Niclas Neglén: Thank you, Sebastian. Yeah, with regards to the P&L, what we're seeing is strong increase in our membership fees. They're up over 600% in Q1 versus prior year. That's obviously a key element of how we continue to monetize by allowing and engaging with the consumers in the right way with the card. What we're also seeing in the card is that a card user has about 3 times the frequency of a non-card user. When you see the maturity of the performance of those, you also see an average revenue that per user of about 4 times higher after about 6 months maturity into the card. This is something that we will continue to expand on.

Speaker #2: And that's obviously a key element of how we continue to monetize by allowing and engaging with the consumers in the right way with the card.

Speaker #2: What we're also seeing in the card is that a card user has about three times the frequency of a non-card user. And when you see the maturity of the performance of those, you also see an average revenue per user of about four times higher after about six months of maturity into the card.

Speaker #2: So this is something that we will continue to expand on.

Speaker #5: Thank you.

Connor Allen: Thank you.

Speaker #1: Next, we'll go to the line of Sanjay Sakrani from KBW. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of Sanjay Sakhrani from KBW. Please go ahead.

Operator: Next, we'll go to the line of Sanjay Sakhrani from KBW. Please go ahead.

Speaker #5: Thank you. Good morning. Obviously, consumers are under quite a bit of pressure around the world as a result of the geopolitical situations, and your credit remains really strong.

Sanjay Sakhrani: Thank you. Good morning. Obviously, consumers are under quite a bit of pressure around the world as a result of the geopolitical situations, and your credit remains really strong. I'm just curious, sort of, if you could peel the onion a little bit for us and tell us what you're seeing, how you're managing the business. Is it sort of impacting how you're growing? Specifically, maybe you could just talk about how confident or comfortable you are with the growth trends you're seeing from your key relationships here in the United States that you formed. Thanks.

Speaker #5: I'm just curious sort of if you could peel the onion a little bit for us and tell us what you're seeing, how you're managing the business.

Speaker #5: Is it sort of impacting how you're growing? And then specifically, maybe you could just talk about how confident or comfortable you are with the growth trends you're seeing from your key relationships here in the United States that you formed.

Speaker #5: Thanks.

Speaker #2: I'll take that then. So with regards to the first thing, I think we see a healthy Klarna user. What we're seeing is that delinquencies and the pay later side are stable.

Niclas Neglén: I'll take that then. With regards to the first thing, I think we see a healthy Klarna user. What we're seeing is that delinquencies on the Pay Later side are stable, and the delinquencies in the Fair Financing point-of-sale installments are trending, you know, stable in global ex-US and downwards in the US as we continue to expand that portfolio, right? Overarchingly, I think the key elements of this come back to the fact that we have a short-tendered user. We have a strong brand. We have over 1 million merchants that we work with, so we're ubiquitous. People use us for everyday spending needs as well as for large ticket and medium-sized ticket. That really is the driver here.

Speaker #2: And the delinquencies in the Fair Financing point-of-sale installments are trending stable in global ex-US, and downwards in the US as we continue to expand that portfolio, right?

Speaker #2: Overarchingly, I think the key elements of this come back to the fact that we have a short-tenored user. We have a strong brand. We have over a million merchants that we work with.

Niclas Neglén: Overarchingly, I think the key elements of this come back to the fact that we have a short-tendered user. We have a strong brand. We have over 1 million merchants that we work with, so we're ubiquitous. People use us for everyday spending needs as well as for large ticket and medium-sized ticket. That really is the driver here.

Speaker #2: So we're ubiquitous. And people use us for everyday spending needs as well as for large ticket and medium-sized tickets. And that really is the driver here.

Speaker #2: We have done about half a trillion worth of volume in the last 20 years. And we continue to improve our models, but also build on that spending with consumers.

Niclas Neglén: We have done about half a trillion worth of volume in the last 20 years. We continue to improve our models, but also build on that spending with consumers. Most of our volume is actually from returning users, right? Your second question with regards to the US, we see good performance across our large merchants and partnerships in the US. We continue to expand relationships, both online and offline, through various partnerships.

Speaker #2: So most of our volume is actually from returning users, right? And then your second question with regards to the US, we see good performance across our large merchants and partnerships in the US.

Speaker #2: We continue to expand relationships both online and offline. Through various partnerships.

Speaker #1: Next, we'll go to the line of Robert Wildhack from Autonomous Research. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of Robert Wildhack from Autonomous Research. Please go ahead.

Operator: Next, we'll go to the line of Robert Wildhack from Autonomous Research. Please go ahead.

Speaker #8: Hi, guys. One more on the transaction margin outlook. I hear you on the dollar growth there. But as a percentage of volume, the guidance would imply that the transaction margin is down sequentially in the second quarter and then moves even lower in the second half.

Robert Wildhack: Hi, guys. One more on the transaction margin outlook. I hear you on the dollar growth there, but as a % of volume, the guidance would imply the transaction margin is down sequentially in Q2 and then moves even lower in H2. I think that's the opposite of what we might expect to see given the growth and seasoning of Fair Financing. Is there something specific that would drive that or any other color you could add would be helpful there? Thank you.

Speaker #8: And I think that's the opposite of what we might expect to see given the growth and seasoning of fair financing. So is there something specific that would drive that or any other color you could add would be helpful there?

Speaker #8: Thank you.

Speaker #2: Yeah. I think again, revenues continue to expand sequentially with regards to the fair financing and interest income and gain on sales. Obviously, there are some elements of timing with regards to when you do your gain on sale items.

Niclas Neglén: Yeah, I think, again, revenues continue to expand sequentially with regards to the Fair Financing and interest income and gain on sales. Obviously, there are some elements of timing with regards to when you do your gain on sale items. With regards to the transaction costs, you will notice that we have strong performance with regards to our provisions for credit losses, and we expect those to be maintained. We're also looking to continue to see our processing and servicing unit economics improve over time through the year. Those are really the elements that are gonna be driving the transaction margin dollars.

Speaker #2: With regards to the transaction costs, you will notice that we have strong performance with regards to our provisions for credit losses. And we expect those to be maintained.

Speaker #2: We're also looking to continue to see our processing and servicing unit economics improve over time through the year. So those are really the elements that are going to be driving the transaction margin dollars.

Speaker #1: Next, we'll go to Matthew O'Neill from Bank of America. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to Matthew O'Neill from Bank of America. Please go ahead.

Operator: Next, we'll go to Matthew O'Neill from Bank of America. Please go ahead.

Speaker #9: Hey. So just this is Caroline Latta on from Matt. So just on the receivable sale this quarter, generating that $57 million of gain on sale.

Caroline Latta: This is Caroline Latta on for Matthew O'Neill. On the receivable sale this quarter, generating that $57 million gain on sale, I know you said you'll act opportunistically. How should we think about a potential run rate cadence of forward flow transactions and the impact on reported interest income volatility?

Speaker #9: I know you said you’ll have opportunistically, but how should we think about a potential run-rate cadence of workflow transactions, and the impact on reported interest income volatility?

Speaker #2: Sure. Thank you. So basically, today we booked about $57 million worth of gain on sale. Around about 50% of that comes from routine forward flow, versus the remainder through what you call a backbook sale.

Niclas Neglén: Sure. Thank you. Basically today we booked about $57 million worth of gain on sale. Around 50% of that comes from routine forward flow versus the remainder through the back book sale. We'll continue to see the growth of the gain on sale sequentially every quarter is my expectation and slightly a slight trend increasing through the periods.

Speaker #2: We'll continue to see the growth of the gain on sale sequentially every quarter is my expectation. Slightly a slight trend increasing through the periods.

Speaker #9: Okay. Thanks.

Caroline Latta: Okay, thanks.

Speaker #1: Next, we'll go to the line of Thomas Nilsen from Nordea. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of Thomas Nelson from Nordea. Please go ahead.

Operator: Next, we'll go to the line of Thomas Nelson from Nordea. Please go ahead.

Speaker #8: also take my question. Could you speak a bit to the long-term earnings potential of the model with just the operating margin now at 6.7% in Q1 and non-transaction operating costs growing just 3%?

Thomas Nelson: Thanks for taking my question. Could you speak a bit to the long-term earnings potential of the model with just the operating margin now at 6.7% in Q1 and non-transaction operating costs growing just 3%, what do you see as a sustainable medium-term margin target range for Klarna?

Thomas Knudsen: Thanks for taking my question. Could you speak a bit to the long-term earnings potential of the model with just the operating margin now at 6.7% in Q1 and non-transaction operating costs growing just 3%, what do you see as a sustainable medium-term margin target range for Klarna?

Speaker #8: What do you see as a sustainable medium margin target range for Klarna?

Speaker #2: Yeah, so I mean, we're slightly early to give guidance further than 2026. But generally speaking, the way we're thinking about this is the transaction margin dollars of roughly 50% as the various parts of our portfolio mature towards the more steady state.

Niclas Neglén: Yeah. I mean, we're slightly early to give guidance further than 2026, but generally speaking, the way we're thinking about this is the transaction margin dollars of roughly 50% as the various parts of our portfolio matures towards the more steady state. On the adjusted operating income, we look towards roughly 25% in the medium to long term.

Speaker #2: And then on the adjusted operating income, we look towards roughly 25%. In the medium to long term.

Speaker #8: Thank you very much.

Thomas Nelson: Thank you very much.

Thomas Knudsen: Thank you very much.

Speaker #1: Next, we'll go to Nate Spencon from Deutsche Bank. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to Nate Spencer from Deutsche Bank. Please go ahead.

Operator: Next, we'll go to Nate Spencer from Deutsche Bank. Please go ahead.

Speaker #10: Hi, guys. Nice results. And thanks for the question. I did want to ask about expectations for the back half of the year. I guess in light of the reiterated full-year guidance.

Nate Spencer: Hi, guys. Nice results. Thanks for the question. I did want to ask about expectations for H2, I guess, in light of the reiterated full year guidance. Very solid Q1 results. Q2 looks pretty good as well. Just the implied H2 growth does look a little bit lower. I know we're going to be lapping some of the larger merchant wins last year. I was wondering if you could just walk through the puts and takes on what we should consider for growth in H2. Looks like it's decelerating a little bit. Is there any one-timers or two for you to keep in mind? It'd be very helpful. Thank you.

Nate Svensson: Hi, guys. Nice results. Thanks for the question. I did want to ask about expectations for H2, I guess, in light of the reiterated full year guidance. Very solid Q1 results. Q2 looks pretty good as well. Just the implied H2 growth does look a little bit lower. I know we're going to be lapping some of the larger merchant wins last year. I was wondering if you could just walk through the puts and takes on what we should consider for growth in H2. Looks like it's decelerating a little bit. Is there any one-timers or two for you to keep in mind? It'd be very helpful. Thank you.

Speaker #10: So very solid one-Q results. Q2 looks pretty good as well. But just the implied back half growth does look a little bit lower. I know we're going to be lapping some of the larger merchant wins last year.

Speaker #10: But I was wondering if you could just walk through the puts and takes on what we should consider for growth in the back half of the year, just looks like it's a decent rate a little bit.

Speaker #10: Is there any one-timers in two years to keep in mind, if they're available? Thank you.

Speaker #2: Yeah. Thank you for the question. The full-year guidance framework is really currently based on that greater than line items. And as we're spend-driven, it's just natural the seasonally in the first quarter, we've only done a bit more than about 20% of our full year overall volume expectations.

Niclas Neglén: Yeah. Thank you for the question. The full year guidance framework is really currently based on that greater than line items. You know, as we're spend driven, it's just natural that seasonally in Q1, we've only done a bit more than about 20% of our full year overall volume expectations. We've got a lot of the year ahead of us, right? Given the retail driven seasonality as well, I think and our greater than framework, to me, there's not a reason right now to change our outlook today. We have good underlying momentum in the business, and we've generated strong performance in our transaction margin dollars, which is our focus point, right, up 44%. We're gonna continue to execute and deliver on that guide.

Speaker #2: And so we've got a lot of the year ahead of us, right? Given the retail-driven seasonality as well, I think and our greater-than framework, to me, there's no reason right now to change our outlook today.

Niclas Neglén: Given the retail driven seasonality as well, I think and our greater than framework, to me, there's not a reason right now to change our outlook today. We have good underlying momentum in the business, and we've generated strong performance in our transaction margin dollars, which is our focus point, right, up 44%. We're gonna continue to execute and deliver on that guide.

Speaker #2: We have good underlying momentum in the business. We've generated strong performance in our transaction margin dollars, which is our focus point, right? Up 44%.

Speaker #2: And we're going to continue to execute to deliver on that guide.

Speaker #8: Thanks, Nicholas.

Nate Spencer: Thanks, Niclas.

Nate Svensson: Thanks, Niclas.

Speaker #1: Next. Next, we'll go to the line of Andrew Bao from BMO Capital Markets. Please go ahead.

[Company Representative] (Klarna): Next we'll go to the line of Andrew Bao from BMO Capital Markets. Please go ahead.

Operator: Next we'll go to the line of Andrew Bao from BMO Capital Markets. Please go ahead.

Speaker #11: Hi. Good morning. Thanks for taking the question. This is Conan On for Andrew. I appreciate the additional color on the breakout of GMV. Not sure if you gave it, but what was the car to GMV growth?

[Analyst] (BMO Capital Markets): Hi, good morning. Thanks for taking the question. This is Conan on for Andrew Bao. Appreciate the additional color on the breakout of GMV. Not sure if you gave it, but what was the card to GMV growth? I think last quarter it was up 209% year-over-year. My second question is on agentic. Could you maybe touch on your agentic commerce strategy? Given the press release this week on Klarna embedding with Gemini and Google Pay, how are you thinking about presentment from a competitive standpoint versus your key peers and other payment methods? Is there a way you're thinking about better positioning Klarna to be the top choice of payment method in an agentic transaction? Thanks.

Speaker #11: I think last quarter, it was up 209% year over year. And then my second question is on Agentic. Could you maybe touch on your Agentic commerce strategy?

Speaker #11: Given the press release this week on Klarna embedding with Gemini and Google Pay, how are you thinking about presentment from a competitive standpoint versus your key peers?

[Analyst] (BMO Capital Markets): Given the press release this week on Klarna embedding with Gemini and Google Pay, how are you thinking about presentment from a competitive standpoint versus your key peers and other payment methods? Is there a way you're thinking about better positioning Klarna to be the top choice of payment method in an agentic transaction? Thanks.

Speaker #11: And other payment methods? Is there a way you're thinking about better positioning Klarna to be the top choice of payment method in an Agentic transaction?

Speaker #11: Thanks.

Speaker #2: Great. So I'll take the first point. We haven't disclosed card growth. But ultimately, you will see the different payment forms that we have. And they're all growing very strongly.

Niclas Neglén: Great. I'll take the first point. We haven't disclosed card growth, ultimately you will see the different payment forms that we have, and they're all growing very strongly with Fair Financing up 138%. We've got a good growth on our Pay Later, up about 29%. We're continuing to expand our Pay in full product as well. I think that's kind of the focus for us right now to look at those rather than the card channel.

Speaker #2: With fair financing, up 138%. We've got a good growth on our pay later, up about 29%. And then we're continuing to expand our paying full product as well.

Speaker #2: So I think that's kind of the focus for us right now. To look at those rather than the card channel.

Speaker #12: Right. And on the Agentic commerce, I think Agentic commerce needs three things. And we own all three of those. That's trust, data, and transaction layer.

Sebastian Siemiatkowski: Right. On the agentic commerce, I think agentic commerce needs 3 things, and we own all 3 of those. That's trust, data, and transaction layer. As you mentioned, this week's Google Pay launch inside search in the Gemini app. I would also highlight, for example, the fact that we are the solely only buy now, pay later inside Stripe Link, which if I remember correctly, is now over 200 million user wallet. Each one of these puts Klarna at the settlement layer of every major agent stack. In addition to that, it comes back to preference, as we talked about in the side by side when Klarna is available side by side with other providers.

Speaker #12: As you mentioned this week's Google Pay launch inside Search and the Gemini app. But I would also highlight, for example, the fact that we're the solely only buy now, pay later inside Stripe links, which if I remember correctly, is now over 200 million user wallets.

Speaker #12: So each one of these puts Klarna at the settlement lever of every major agent stack. In addition to that, it comes back to preference as we talked about in the side-by-side when Klarna is available side-by-side with other providers.

Sebastian Siemiatkowski: In addition to that, it comes back to preference, as we talked about in the side by side when Klarna is available side by side with other providers. At the core of it is the strength of Klarna, the preference, and then basically whether that is executed as we today are available on Apple Pay, on Google Pay, in other agentic layers, there will always be the question, what do you wanna pay with? Preference is the answer to that question.

Speaker #12: So at the core of it, it is the strength of Klarna, of the preference. And then basically, whether that is executed as we today are available on Apple Pay, on Google Pay, in other Agentic layers, there will always be the question: what do you want to pay with?

Sebastian Siemiatkowski: At the core of it is the strength of Klarna, the preference, and then basically whether that is executed as we today are available on Apple Pay, on Google Pay, in other agentic layers, there will always be the question, what do you wanna pay with? Preference is the answer to that question.

Speaker #12: And preference is the answer to that question.

[Analyst] (BMO Capital Markets): Appreciate it. Thank you.

Speaker #8: Appreciate it. Thank you.

Speaker #1: Next, we'll go to the line of Craig Moore from FT Partners. Please go ahead.

[Company Representative] (Klarna): Next, we'll go to the line of Craig Moore from FT Partners. Please go ahead.

Operator: Next, we'll go to the line of Craig Moore from FT Partners. Please go ahead.

Speaker #13: Yes. Hi. Thanks for taking the question. I wanted to ask about the progress being made with Walmart and how we should expect that volume to feed into the total considering it will likely drag on margins and take rate.

Craig Moore: Yes. Hi. Thanks for taking the question. I wanted to ask about the progress being made with Walmart and how we should expect that volume to feed into the total, considering it will likely drag on margins and take rate. Thanks.

Speaker #13: Thanks.

Speaker #2: So Walmart is going very well from a volume expectation and in line with what we thought. We continue to expand our partnership with OnePay and look to different ways to support them and Walmart.

Niclas Neglén: Walmart is going very well from a volume expectation and in line with what we thought. We continue to expand our partnership with OnePay and look to different ways to support them and Walmart. From our perspective, we're in a good performance, and we don't generally point or speak to particular partnership volume flows. Ultimately, we see this as a very good relationship and one that continues to expand in accordance with our expectations.

Speaker #2: From our perspective, we're in a good performance. And we don't generally point or speak to particular partnership volume flows. But ultimately, we see this as a very good relationship and one that continues to expand in accordance with our expectations.

Speaker #1: Next. For our final question, we'll go to the line of Jason Kupferberg from Wells Fargo. Please go ahead.

[Company Representative] (Klarna): Next, for our final question, we'll go to the line of Jason Kupferberg from Wells Fargo. Please go ahead.

Operator: Next, for our final question, we'll go to the line of Jason Kupferberg from Wells Fargo. Please go ahead.

Nancy Siyu Chen: Hi, this is Nancy Chen on for Jason. Thanks for taking my question. I guess, you know, just broadly, there's been concern in the investment community about the health of the lower to middle income consumer amid, you know, rising gas prices and whether that could be a headwind for the BNPL industry overall. Is there a counterargument to be made that perhaps in times of tighter finances, a consumer, you know, may lean into more of BNPL as more of like a cash flow management tool? I'm just curious what your data might be showing on that front. Thank you.

[Analyst] (Wells Fargo): Hi, this is Nancy Chen on for Jason. Thanks for taking my question. I guess, you know, just broadly, there's been concern in the investment community about the health of the lower to middle income consumer amid, you know, rising gas prices and whether that could be a headwind for the BNPL industry overall. Is there a counterargument to be made that perhaps in times of tighter finances, a consumer, you know, may lean into more of BNPL as more of like a cash flow management tool? I'm just curious what your data might be showing on that front. Thank you.

Speaker #14: Hi, this is Cassie Shannon for Jason. Thanks for taking my question. I guess just broadly, there's been concern in the investment community about the health of the lower- to middle-income consumer.

Speaker #14: Amid rising gas prices and whether that could be a headwind for the BNPL industry overall. But is there a counterargument to be made that perhaps, in times of tighter finances, a consumer may lean into more of BNPL as more of a cash flow management tool?

Speaker #14: I'm just curious what your data might be showing on that front. Thank you.

Speaker #12: Yeah. Hey, I can start with answering that. I mean, the Klarna consumer is showing very stable, as we have seen in the numbers and that Niclas has already quoted.

Sebastian Siemiatkowski: Yeah. Hey, I can start with answering that. I mean, the Klarna consumer is showing very stable, as we have seen in the numbers and that Niclas has already quoted. I think add to that, it's important to recognize that sometimes Buy Now, Pay Later may be referenced as a new phenomena. I think about it as a charge card equivalent product. It has short duration. People pay back, and they borrow very little, compared to, for example, an outstanding credit card balance might be $6,000. In general, our outstanding balance on Buy Now, Pay Later is about $120. As we have seen historically, charge card equivalents fare very well in different macroeconomic environments.

Speaker #12: But I think add to that is important to recognize that sometimes buy now, pay later may be referenced as a new phenomenon. I think about it as a charge card equivalent product.

Speaker #12: It has a short duration, people pay back, and they borrow very little compared to, for example, an outstanding credit card balance might be $6,000 in general, or an outstanding balance on buy now, pay later is about $100.

Sebastian Siemiatkowski: It has short duration. People pay back, and they borrow very little, compared to, for example, an outstanding credit card balance might be $6,000. In general, our outstanding balance on Buy Now, Pay Later is about $120. As we have seen historically, charge card equivalents fare very well in different macroeconomic environments.

Speaker #12: So and as we have seen historically, a charge card equivalent fare very well. In different macroeconomical environments, it is also the case that since we do take underwriting decisions in real time, it means that in the event of changing macroeconomic environments on the last 20 years, we have always had the strength of being able to adopt such underwriting and see that it's actually generally takes only about 60 days for sheet is underwritten by new standards.

Sebastian Siemiatkowski: It is also the case that since we do take underwriting decisions in real time, it means that, in the event of changing macroeconomic environments on the last 20 years, we have always had the strength of being able to adopt such underwriting and see that it actually generally takes only about 60 days for us. So that more than half of our balance sheet is underwritten by new standards. This is another reason why we have chosen and preferred to focus the business on the Buy Now, Pay Later charge card equivalent side of the business, and then only extend Fair Financing to the existing user base that has a track record of payments history with Klarna, in as they've been already using the other products.

Speaker #12: And this is another reason why we have chosen and preferred to focus the business on the buy now, pay later charge card equivalent side of the business and then only extend fair financing to the existing user base that has a track record of payments history with Klarna in as they've been already using the other products.

Sebastian Siemiatkowski: This is another reason why we have chosen and preferred to focus the business on the Buy Now, Pay Later charge card equivalent side of the business, and then only extend Fair Financing to the existing user base that has a track record of payments history with Klarna, in as they've been already using the other products.

Speaker #14: Helpful. Thank you.

Nancy Siyu Chen: Helpful. Thank you.

[Analyst] (Wells Fargo): Helpful. Thank you.

Speaker #1: And that was our final question for today. Thank you all for joining Klarna's first quarter 2026 earnings call. This concludes today's presentation. You may now log off.

Operator: That was our final question for today. Thank you all for joining Klarna's Q1 2026 earnings call. This concludes today's presentation. You may now log off, and we hope you have a wonderful rest of your day.

Speaker #1: And we hope you have a wonderful rest of your day.

[Company Representative] (Klarna): Line muted. You are now in a subconf-

Speaker #15: Line muted. You are now in a subconference.

Speaker #16: Did they hear my

Sebastian Siemiatkowski: Did they hear my, "Uh?

Niclas Neglén: I hope not.

Speaker #17: You're also really good.

Sebastian Siemiatkowski: Your office is really good.

Niclas Neglén: Yeah. There's potential. I think that's why they picked this.

Speaker #16: I think that's good.

Speaker #17: I've always booked in the side service doing their investor calls. We have that.

Niclas Neglén: So-

Niclas Neglén: Always booked when the fine folks are doing their investor calls that we have.

Sebastian Siemiatkowski: Come and look at this. This is really cool.

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