Fintech company announces 50% reduction in net loss

Klarna, the Swedish fintech Buy Now, Pay Later, halved its net loss in the first quarter, posting a significant improvement in results after a major cost-cutting campaign.

The company recorded a net loss of 1.3 billion Swedish crowns ($120.7 million), down 50% from the loss of 2.6 billion crowns in the same period a year ago .

Klarna reported total net operating profit of SEK 5 billion, up 22% year-on-year.

“This quarter, we had impressive success in increasing GMV and revenue, while reducing costs and credit losses, and ambitiously investing in AI-enabled products,” said the CEO of Klarna, Sebastian Siemiatkowski, in a statement.

“We are on track to achieve profitability this year while revolutionizing shopping and payments with our AI-powered approach.”

Siemiatkowski previously told CNBC that the company expects to reach profitability in the second half of 2023.

Klarna attributed the latest reduction in losses to a drop in customer insolvencies thanks to improved underwriting, as well as diversification into other revenue streams, such as marketing.

The results show how Klarna is making “significant progress” toward profitability on a monthly basis, the company said.

Klarna, which now has more than 150 million customers, was assigned a credit rating of BBB/A-3 with a stable outlook by S&P Global in April. The then-rating agency said this reflected Klarna’s “ability to defend its strong e-commerce position in its key markets, restore profitability” and “maintain a strong capital reserve”.

Early indications are that Klarna’s significant cost-cutting measures are starting to pay off. The company carried out a wave of hiring in 2020 and 2021 to capitalize on the growth triggered by the Covid-19 pandemic, and was forced to cut its workforce by around 10% in May 2022 in response to pressure investors to reduce its operations. Despite this measure, it still later lost 85% of its market value in a funding round last summer.

Klarna is not alone in its problems. Companies that buy now, pay later, which allow buyers to defer payments to a later date or pay installments, have been particularly hard hit by deteriorating investor sentiment towards technology, in a deteriorating macroeconomic environment.

More recently, Klarna has turned to AI. The company revamped its app with a more advanced AI recommendation algorithm to help its merchants target their customers more effectively.