Klarna, the largest Buy Now Pay Later (BNPL) provider, filed its F-1 registration statement to go public on the NYSE under the ticker KLAR. Its $105 billion Gross Merchandise Volume (GMV) puts it over three times the size of Affirm (AFRM). AFRM is growing faster, with GMV growing 30%+ versus 14% for KLAR in 2024 with higher margins. KLAR’s more stable funding with its banking license could prove formidable, though, let’s dig into the F-1.
Main Advantage- Banking License
The main advantage, especially over other BNPL companies, is that it is a registered bank, allowing access to low and stable funding versus more expensive alternatives such as asset-backed debt. In 2024, they funded 94% of their financing products utilizing these deposits.
As the graph above shows, their average consumer loan is short-term, 40 days. Their fixed-term deposits are steady at 280 days, with 74% being fixed-term. As of year-end, they had $9.5 billion in consumer deposits, all in Europe, with the vast majority (76%) being held in Germany. They are subject to higher rates, with the average rate being paid on deposits of 3.0% in 2024. For comparison, Affirm had $5.6 billion in debt on its balance sheet with 60% being securitized.
Core Business Lines
KLAR comprises three business lines: Pay In Full, Pay Later, and Fair Financing. Using the Daloopa Stitcher feature, we can see how these have evolved over the last three years. The majority are Pay Later, up to 79% of revenue from 70% two years ago.
Improving Take Rate But…
Their take rate improved consistently over the last three years, to 2.7% in 2024 from 2.3% in 2022. Note that AFRM’s average RLTC (revenue less transaction costs) is over 4%, with interest-bearing installment loans being even higher. Klarna is adding higher-margin business lines such as advertising (low single-digit % of revenue), analytics for merchants, and promoting certain payment methods for fees.
US is the fastest growth market for Klarna, growing 39% year over year in 2024 and now represents its largest geography at 30% of total revenue. However, the United States is a very competitive market as they compete not only with Affirm but PayPal and Apple.
Interestingly, through its wholly owned subsidiary OnePay, Wal-Mart moved from Affirm to Klarna this week as its exclusive provider. Affirm confirmed the loss but noted that Wal-Mart represented 5% of GMV but only 2% of operating income, indicating a highly competitive pricing structure with a likely even more onerous one given to Klarna to win the business.
Material Weakness Red Flag
As part of the F-1 filing, Klarna “identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls.” The weakness involved- user access and system changes, revenue recognition and credit loss estimates” which suggests their financials could be overstated.
Use the Daloopa data sheet to build your model, with all the data and hyperlinks to the F-1 pre-populated from 2022 through 2024 for the income statement, IFRS to non-IFRS reconciliation, Balance Sheet, and Cash Flow Statement so you can drill into the important metrics and figure out if Klarna can help restart the IPO process.
