By
Godfrey Benjamin
April 19th, 2024
Swedish fintech mainstay Klarna cut its Q1 net loss to $120.7 million while boosting operating income by 22% YoY.
Klarna Bank AB significantly improved its Q1 bottom line after halving the net loss sustained for the period compared with last year. For the first quarter of the year, the Swedish fintech giant posted a net deficit of 1.3 billion Swedish krona ($120.7 million). This reverse is down 50% from Klarna’s year-ago outing as the company looks ahead toward profitability. In Q1 2022, the company sustained a loss of 2.6 billion krona.
Klarna’s significant strides during the first quarter were also reflected in its total net operating income, up 22% year-over-year at 5 billion Swedish krona. In a statement, the Stockholm-based company’s CEO Sebastian Siemiatkowski hinted at a positive outlook for H2 2023. However, the Klarna CEO also reflected on the fintech firm’s commendable Q1 outing, saying:
“This quarter, we’ve impressively managed to grow GMV and revenue, at the same time as we cut costs and credit losses and also investing ambitiously in AI-driven products. We are on track to achieve profitability this year, all while revolutionizing shopping and payments through our AI-powered approach.”
Last November, Siemiatkowski said Klarna would become profitable again in 2023.
Klarna Improved Q1 Net Loss Attributable to Several Business Decisions, Including Extensive Partnerships & AI Push
Klarna attributed its substantially reduced Q1 net loss to declining customer defaults and its income diversification strategy. The Buy Now Pay Later (BNPL) facilitator, which reduced its headcount by 10% last May, has tapped other revenue sources, including marketing. Klarna’s Q1 2023 growth also surpassed e-commerce trends due to its swift adoption of artificial intelligence (AI) throughout its operations. Furthermore, the company recently secured several notable partnerships with globally recognized companies such as Airbnb Inc (NASDAQ: ABNB).
The Airbnb deal offers seamless, flexible, and sustainable payment solutions to global guests of the San Francisco-based lodging company. The business collaboration between both companies promises to prove lucrative, with Airbnb anticipating over 300 million guest arrivals this year.
In the first quarter of 2023, Klarna also forged new retail partnerships with Samsung, Uniqlo, and Boden. Furthermore, the online financial services provider strengthened existing ties with Nike (NYSE: NKE), Etsy (NASDAQ: ETSY), and Tod’s.
Klarna’s AI push has seen the firm partner with ChatGPT creator OpenAI to deploy the generative technology for improved efficiency and consumer outcomes. The OpenAI partnership is the first for a European tech platform and underscores Klarna’s goal to help merchants target customers more effectively.
In April, Klarna earned a credit rating of BBB/A-3 with a stable outlook from S&P Global. At the time, the rating agency said its assessment reflected the Swedish fintech’s ability to reclaim profitability and remain competitive in key markets.
2022 Downsizing & Growing Pains
Klarna, which currently boasts over 150 million customers, hired liberally between 2020 and 2021 to leverage pandemic-induced growth. However, the company downsized in May 2022 under investor pressure to trim operations. In H1 2022, Klarna lost over $580 million, burning through cash to support expansions into the US and the UK.