Swedish buy-now-pay-later fintech company Klarna has posted a significant improvement in earnings, with its net loss halving in the first quarter following extensive cost-cutting efforts.
The company posted a net loss of SEK 1.3 billion ($120.7 million), down 50% from a loss of SEK 2.6 billion in the same period last year.
Klarna reported total net operating profit of SEK 5 billion, up 22% year-on-year.
“This quarter, we will reduce costs and credit losses, invest aggressively in AI-driven products, while achieving impressive growth in GMV and revenue,” Klarna CEO Sebastian Siemiatkowski said in a statement. I was able to do it,” he said.
“We are on track to achieve profitability this year while revolutionizing shopping and payments through our AI-powered approach.”
Shimiyatkowski previously told CNBC that the company plans to reach profitability in the second half of 2023.
Klarna attributes the recent decline in losses to lower customer defaults from improved underwriting and diversification into other revenue streams such as marketing.
The results show how Klarna is making “substantial progress” toward profitability on a monthly basis, the company said.
Klarna, which currently has more than 150 million customers, was given a BBB/A-3 credit rating with a stable outlook by S&P Global in April. The rating agency at the time said this reflected Klarna’s “ability to defend its strong e-commerce position in key markets and rebuild profitability” and “maintain a strong capital buffer”. .
Early signs suggest that Klarna’s drastic cost-cutting measures are starting to pay off. The company hired heavily in 2020-2021 to capitalize on growth spurred by the Covid-19 pandemic, but responded to pressure from investors to streamline its operations. In May 2022, the company was forced to reduce its workforce by about 10%. Despite this move, the company lost 85% of its market value in a funding round last summer.
Khurana isn’t the only one with problems. “Buy now, pay later” businesses, which allow shoppers to defer or pay in installments, have been particularly affected by deteriorating investor sentiment toward technology amid a deteriorating macroeconomic environment.
More recently, Klarna has focused on AI.company has revamped its app with more advanced AI recommendation algorithms to help merchants target customers more effectively.
Klarna previously released 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 incorporating AI into its business to “improve internal efficiency and provide customers with an even better service and experience” through things like real-time translation of customer chats.
The company is now also expanding into promoting short-term vacation rentals. Earlier this month, Klarna announced a partnership with Airbnb to allow customers of the online vacation rental company to book their vacation and pay for it in installments.