By
Godfrey Benjamin
November 6th, 2023
Swedish fintech giant Klarna recently reported an increase in its operating loss as it looks to remain profitable for investors.
Klarna Bank AB revealed on Wednesday that its half-year operating loss has more than tripled. According to the Swedish fintech platform, the increase was primarily due to fiscal reasons. These include higher employee costs, rising debt losses, and ongoing investment efforts in expanding the market.
Klarna’s latest bi-annual operating loss came in at 6.17 billion Swedish crowns, or $578.52 million. By comparison, the buy-now-pay-later solution provider registered a much smaller loss of 1.76 billion crowns in the year-ago period. Meanwhile, Klarna’s total credit deficit increased to 2.85 billion crowns from 1.85 billion a year ago. Amid these developments, revenue increased 24%.
Commenting on Klarna’s recent financial state of affairs, chief executive officer Sebastian Siemiatkowski explained in a statement:
“We’ve had a few years now where growth has been really heavily prioritized by investors. Now, understandably, they want to see profitability.”
More on Klarna Operating Loss
As an online payment solution provider, Klarna expanded rapidly as it took advantage of the opportunities presented by the pandemic. However, since the turn of the year, runaway inflation and the Eastern European military strife have adversely impacted its business interests. In May this year, the Swedish digital payments platform laid off around 10% of its staff. In addition, Klarna also raised $800 million of funds at a $6.7 billion valuation in July. Last month’s fundraising valuation represents a staggering 85% drawdown from the company’s hefty $46 billion valuation in 2021. Weighing in on the depleted price tag, Simyatkowski explained:
“We’ve had a few years now where growth has been a really heavy priority by investors. Now, obviously, they want to see profitability.”
Simyatkowski also further suggested that the company could not be as “forward-leaning” amid growing investor skepticism about the fintech industry. In an attempt to remain competitive and profitable, Klarna also suggested revising its 2022 agenda. Such an undertaking will include implementing several cost-effective and pre-emptive measures to adapt to the ongoing changes.
There was a decline in Klarna’s borrowing costs following the earnings, with yields on bonds due February 2024 recently falling 14 basis points to 4.57%. This development possibly suggests that the Swedish fintech giant has somehow brought its cash outflow under control. However, yields remain positioned in excess of the 1.38% seen at the turn of this year.
Klarna’s revenue rose 24% to 9.1 billion crowns, with gross merchandise value (GMV) increasing 21% to 396 billion crowns. However, the company’s total operating expenses before credit losses also surged from 6.26 billion crowns to 10.81 billion crowns.
Klarna
Headquartered in Stockholm Sweden, Klarna boasts a global consumer base of 150 million consumers. The company operates in 45 markets, including the United States, Germany, and its home country Sweden.
Klarna’s bread-and-butter service is to facilitate digital payment processing across all tiers of the e-commerce industry. In addition, the company also manages store claims and customer payments. In recent times, Klarna has also established itself as a post-purchase payments facilitator, offering customers credit on their purchases.