Swedish buy now, pay later firm Klarna reduced its losses by roughly 67% in the first half of 2023, as the company dramatically cut costs in a bid toward profitability.
The company reported overall net operating income of 9.2 billion Swedish krona ($843.5 million), up 21% year over year. The Si Despite the volatile environment, we have done exactly what we set out to do,” Siemiatkowski said.
Credit losses, a measure of how much the company sets aside for customer defaults, sank by 39% to 1.8 billion krona from 2.9 billion krona.
Buy now, pay later, or BNPL, firms allow shoppers to defer payments to a later date or purchase things over installments on interest-free credit.
These firms are able to offer zero-interest loans by charging merchants, rather than customers, a fee on each transaction — but as interest rates have risen, the BNPL funding model has been challenged.
Siemiatkowski previously told CNBC the company was planning to achieve profitability on a monthly basis in the second half of 2023, suggesting that an aggressive cost-cutting strategy in 2022 — which included hundreds of redundancies — had paid off.
Klarna cut 10% of its workforce in May last year.
“To some degree, all of us were lucky that we took that decision in May
because, as we’ve been tracking the people who left Klarna behind, basically almost everyone got a job,” Siemiatkowski said at an interview in Helsinki, Finland, at the Slush technology conference last November.
“If we would have done that today, that probably unfortunately would not have been the case. “
Klarna said that cost optimization was a key factor behind its ability to churn out a monthly profit in the first half of the year.The company said that operating expenses before credit losses improved by 26% year-on-year, thanks in part to its push into artificial intelligence.
Klarna said a recently launched customer services feature “made solving merchant disputes for customers more efficient, saving over 60,000 hours annually. The It is trying to make the software similar to TikTok, which has a discovery feed for users to find content suited to their preferences.
David Sandstrom, Klarna’s chief marketing officer, told CNBC at the time that the aim was to “offer people products and brands before they knew they wanted them. “
Klarna last year saw 85% erased from its market value in a so-called “down round,” taking the company’s valuation down from $46 billion to $6.7 billion.
Some of the company’s peers, like
Block, also saw their shares plummet sharply amid a wider sell-off in technology valuations.Klarna at the time blamed deteriorating macroeconomic conditions, including higher inflation, rising interest rates, and a shift in consumer sentiment.