Klarna CEO Sebastian Siemiatkowski speaking at a fintech event in London on Monday, April 4, 2022.
Chris Ratcliffe | Bloomberg via Getty Images
Klarna, the Swedish “buy now, pay later” fintech, halved its first-quarter net loss and saw its bottom line improve significantly after a sweeping cost-cutting effort.
The company posted a net loss of 1.3 billion Swedish kronor ($120.7 million), down 50% from the loss of 2.6 billion kroner in the same period last year.
Klarna reported total net operating profit of SEK 5 billion, up 22% year-on-year.
“During this quarter, we did an impressive job of growing GMV and revenue while reducing costs and credit losses and investing ambitiously in AI-driven products,” Klarna CEO Sebastian Siemiatkowski said in a statement.
“We are on track to reach profitability this year while revolutionizing shopping and payments through our AI-powered approach.”
Siemiatkowski previously told CNBC that the company plans to reach profitability in the second half of 2023.
Klarna attributed the recent drop in losses to a drop in customer defaults thanks to an improvement in its underwriting, as well as diversification into other revenue streams such as marketing.
The results show that Klarna is making “significant progress” toward profitability on a monthly basis, the company said.
Klarna, which now has more than 150 million customers, received a BBB/A-3 credit rating with a stable outlook from S&P Global in April. The rating agency at the time said this reflected Klarna’s “ability to defend its robust e-commerce position in its key markets, restore profitability” and “maintain a strong capital buffer”.
Early indications are that Klarna’s deep cost-cutting measures are beginning to pay off. The company undertook a hiring boom in 2020 and 2021 to capitalize on growth fueled by the Covid-19 pandemic and had to reduce headcount by about 10% in May 2022 in response to investor pressure to shut down operations shrink. Despite this measure, it still lost 85% of its market value in a funding round last summer.
Klarna is not alone with its problems. ‘Buy now, pay later’ companies, which allow buyers to defer payments or pay in installments, have been particularly affected by the deteriorating investor sentiment towards technology amid a deteriorating macro environment.
AI push
More recently, Klarna has turned its focus to AI. The company overhauled its app with a more advanced AI recommendation algorithm to help its merchants target customers more effectively.
Klarna previously introduced the ability to integrate OpenAI’s ChatGPT into its service with a plugin that allows users to ask the popular AI chatbot for shopping inspiration. The company said it is integrating AI into its business to “improve internal efficiencies and provide customers with an even better service and experience,” such as real-time translations in customer chat.
Meanwhile, the company has also made a foray into facilitating short-term vacation rentals. Earlier this month, Klarna announced a partnership with Airbnb to give the online vacation rental company’s customers the ability to book vacations and pay for their vacations in installments.
https://www.cnbc.com/2023/05/26/klarna-q1-results-fintech-firm-reports-50percent-reduction-in-net-loss-.html
