Good morning, everyone, and welcome to Klarna's Third Quarter 2025 Earnings Call. My name is Andrea Ferraz, Head of Investor Relations and M&A, and I'm joined today by Sebastian Siemiatkowski and Niclas Neglen. Our Q3 results were released at around 7:30 a.m. Eastern Time, and they are available on the same link as this webcast. 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 of 2024. Before we move to Q&A, we'll begin with a short presentation. Sebastian, please go ahead.

Hello, everyone, and welcome to Klarna's first quarterly earnings report as a public company. Very excited. I'm Sebastian Siemiatkowski, the CEO and Founder of Klarna. And with me, I have Niclas Neglen, our CFO. Let's get right to it. Most of you are probably familiar with Klarna: 114 million active consumers, 850,000 merchants and above $100 billion in GMV. We have grown this network quite extensively in the last few years. We have users across all types of life: females, males, all educational backgrounds, living in all areas. As you may know, Klarna is today much more than just buy now, pay later. We offer pay in full, pay later, fair financing, and as you will see, more and more neobank features. Our reach is global: North America, Canada, U.S., most of Europe, and Australia and New Zealand. But let's look at today's headlines. I'm very proud to focus together with you on three topics: growth acceleration. We're expecting to see above 30% revenue growth for Q4. We have a record quarter for the fair financing product, which grew over 139% year-on-year. Klarna has issued over $0.5 trillion over our 20 years with continuously lower losses than industry standards. Those $0.5 trillion has been issued with less than 70 basis points, which is impressive over 20 years and 26 markets. In 2015, the leadership team sat down, asking ourselves, what is the future of tech and finance? We realized this world is about to change. Eventually, we will all have digital financial assistance that helps save time and money, controlling our lives. Historical financial industries have been malfunctioning, making it hard to search and find the right products. AI will change all that. This means that trust is the new oil, not data, but trust, as only those who genuinely care for their customers will win. Customer service is going to be significant as trust develops. We will see a dramatic increase in competitiveness in financial services and tech. Klarna is targeting two massive profit pools in fintech and advertising tech worth $1 trillion combined. We aim to go after significant market share by focusing on customer obsession, growth, operational efficiency, and leading AI innovation. Our form of credit is sustainable, emphasizing that Klarna provides healthier options than traditional credit cards. Our Klarna payment network distinguishes itself by collecting SKU level data on transactions, providing insights and control to our customers regarding their spending habits. We conduct over 200 consumer interviews weekly to create actionable insights from our service interactions, driving tangible improvements. This approach reflects in our impressive NPS and global brand trust metrics. For growth, our objective is for Klarna to be available everywhere Visa is. We're pushing for our default global distribution partnership play, increasing our partnerships with PSPs and significant brands, evidenced by a record 235,000 merchants added this quarter. Customer obsession is at the core of our identity, enabling us to drive substantial growth in our fair financing product, doubling the number of merchants offering it. We're transitioning from payments to a full neobank, leveraging our unique customer acquisition channel already yielding strong results.

Thanks, Sebastian. As mentioned, Q3 was a landmark quarter for Klarna. I'll take a few minutes to walk through the financial update. GMV grew to $32.7 billion, and in the U.S., it grew 43% year-over-year. Consequently, revenue grew to $903 million, with the U.S. seeing a revenue growth of 51%. The transaction margins came in at $281 million, reflecting a planned accounting lag from fair financing. However, we are guiding a $109 million increase in Q4 on transaction margin dollars as revenue compounding. The foundations of our growth remain unchanged. Fair financing is a key contributor to Q3 '25 performance. In the U.S., it is up 244%, now available at 151,000 merchants, a 3x increase over the last 2 years. Overall, revenue growth outpaces the market while we see an increasing take rate distinctly and profitably.

Thanks, Niclas. We'll go to the investor questions first. The first question is from Salem: how can Klarna stay competitive against traditional credit card companies that offer buy now, pay later options?

Yes, I think Klarna has been competitive since the beginning. The key is to stay customer obsessed by listening to our customers and building the features they want. Operational efficiency is critical — we must remain prudent with our resources. Klarna is now at scale with 114 million users globally and is positioned well to compete against traditional banks. Most of them lean towards complacency, which we'll use to our advantage.

The second question is from Benjamin, who asks, does Klarna have any plans to pay dividends to shareholders?

No, we have no current plans or ambitions to pay dividends. We hope Klarna will continue to improve its profitability in the future.

The third question is about how you intend to improve profits on your current business model.

There are multiple strategies underway. The profitability lag is indeed created through the high growth of our fair financing product. We anticipate further growth as we expand the number of merchants offering this service. Across most markets, Klarna has had a transaction margin of around 50% to 60%. In the U.S., we're focused on reducing payment costs to enhance profit margins.

I've asked analysts to email me the questions. The first comes from Tim Chiodo at UBS regarding Apple Pay in-store. Tim wonders about the potential opportunity associated with Apple Pay even more broadly.

Our strategy is to achieve the same acceptance points as major networks. We realized that we need to build strong relationships with distribution partners like Stripe and Apple Pay. With every new partnership, we're seeing significant growth in our merchant adoption. We're also focusing on user education and enhancing customer experience, which will propel future growth.

Today, we do not include Apple Pay in our card volumes, but it's growing strongly and we expect continued strong adoption.

The next question comes from Sanjay at KBW. He asks about the 4 million Klarna card sign-ups—what's the uplift in GMV from consumers signing up for the card?

The ARPAC for card customers is approximately $130, significantly higher than the average active user at $28. We expect this trend to continue as more customers adopt the card.

The next question comes from Jason from Wells Fargo. He asks if you are seeing signals in your data that suggest you may need to tighten the credit box in any major geography.

Currently, we haven't observed anything in our data that suggests we need to make changes to our underwriting criteria. Our audience, using Klarna, are conscious spenders who appear to be in control of their credits and finances.

Operator, please open the lines for analysts.

Your first question comes from the line of James Faucette of Morgan Stanley. He asks if you are seeing signals in your data that suggest you may need to tighten the credit box in any major geography. Sebastian Siemiatkowski, CEO and Founder, responds that currently, they haven't observed anything in their data indicating a need to change their underwriting criteria. Their audience, using Klarna, consists of conscious spenders who seem to be in control of their credits and finances. Andrea Ferraz Estrada, Head of Investor Relations and M&A, requests to open the lines for analysts.

I wanted to ask about your partnership with Walmart and OnePay. Could you provide more insight on how that's developing in terms of adoption?

The OnePay-Walmart relationship is going well. We're seeing high-volume movement with this partnership, and the consumer response is promising.

The next question comes from the line of Jason Kupferberg of Wells Fargo.

Can you provide an update on the fair financing adoption rate among merchants?

Currently, 18% of our merchants are offering fair financing. We anticipate further growth as we continue to work with our partnerships.

Your next question comes from the line of Darrin Peller of Wolfe Research.

Could you elaborate on the key drivers of the acceleration in U.S. GMV growth?

Our partnerships have been a vital driver of growth, and fair financing has significantly contributed. We foresee sustainable momentum across all verticals.

There is $7 trillion worth of volume flow through these PSPs we plan to grow on, looking forward to scaling these partnerships over the coming quarters.

Your next question comes from the line of Mihir Bhatia of Bank of America.

Can you discuss the increase in provisions for credit losses in Q3?

The provisions reflect the rapid scaling of the credit book, primarily driven by our new growth cohort. We anticipate normalization over the next few quarters.

This makes sense as we aim for sustainable, thoughtful growth while keeping profitability in mind. We are approaching this with diligence.

With that, we conclude the call. We thank everyone for joining and for your patience during our technical issues.

Thank you so much.

Thanks, everybody.