Klarna, the Swedish fintech mainstay, cut its first-quarter net loss to $120.7 million while boosting operating income by 22% year over year.
Klarna Bank AB significantly improved its net profit for the first quarter after halving the net loss incurred during the period compared to last year. In the first quarter of the year, the Swedish fintech giant posted a net deficit of SEK 1.3 billion ($120.7 million). That reversal is down 50% from Klarna’s outing a year ago as the company looks to profitability. In the first quarter of 2022, the company incurred a loss of 2.6 billion crowns.
The strides made by Klarna during the first quarter were reflected in overall net operating income, up 22% year-on-year at SEK 5 billion. In a statement, Sebastian Siemiatkowski, CEO of the Stockholm-based firm, hinted at a positive outlook for the second half of 2023. However, Klarna’s CEO also reflected on the fintech’s commendable Q1 round, saying:
“This quarter, we were impressively able to grow GMV and revenue, while simultaneously reducing costs and credit losses as well as ambitiously investing in AI-driven products. We are on track to achieve profitability this year, all while making Revolutionize shopping and payments with our AI-powered approach.”
Last November, Simyatkovsky said Klarna would become profitable again in 2023.
Klarna improved net loss in the first quarter of the year attributable to several business decisions, including broad partnerships and the AI push.
Clarna He attributed the significantly reduced net loss in the first quarter to lower customer defaults and an income diversification strategy. The buy-now-pay-later (BNPL) facility, which cut its staff by 10% last May, has tapped into other revenue streams, including marketing. Klarna’s growth in Q1 2023 also outpaced e-commerce trends due to its rapid adoption of Artificial Intelligence (AI) in all of its operations. Moreover, the company has recently secured several high-profile partnerships with globally recognized companies such as Airbnb Inc (NASDAQ: ABNB).
The Airbnb deal offers seamless, flexible and sustainable payment solutions for the San Francisco-based lodging company’s global guests. The business collaboration between the two companies promises to prove profitable, as Airbnb expects more than 300 million guests to arrive this year.
In the first quarter of 2023, Klarna also forges new retail partnerships with Samsung, Uniqlo, and Boden. Furthermore, the online financial services provider has strengthened existing relationships with Nike (NYSE: NKE), Etsy (NASDAQ: ETSY), and Tod’s.
Klarna’s push for AI has seen Firm partner with ChatGPT creator OpenAI to deploy generative technology to improve efficiency and consumer outcomes. The OpenAI partnership is a first for a European technology platform and underscores Klarna’s goal to help merchants target customers more effectively.
In April, Klarna received a credit rating of BBB/A-3 with a stable outlook from S&P Global. At the time, the ratings agency said its assessment reflected the Swedish fintech’s ability to regain profitability and remain competitive in key markets.
2022 downsizing and growing pains
Klarna, which currently has more than 150 million customers, is liberally set between 2020 and 2021 to capitalize on the growth caused by the pandemic. However, the company downsized in May 2022 under pressure from investors to scale back operations. In the first half of 2022, Klarna lost more than $580 million, burning money to support expansions in the US and UK.
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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify cryptocurrency stories down to the bare essentials so that anyone anywhere can understand without much background knowledge. When he’s not deep into cryptocurrency stories, Tolo enjoys music, loves to sing, and is a movie lover.