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Losses at Klarna tripled in the first half of 2022

Despite sizeable improvements on many important metrics, the buy now, pay later leader managed to rack up significant losses in the first half of 2022.

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Sebastian Siemiatkowski/Klarna.

Losses at Klarna over tripled year-on-year in the first half of 2022, which the buy now, pay later (BNPL) provider attributed to the costs of integrating Swedish price comparison site PriceRunner, increased staff costs, as well as higher credit losses in new markets.

The losses come as the firm’s valuation has dropped 85% to $6.7bn from its 2021 peak of $45.6bn, amid a wider drop in valuations in the fintech space.

The company losses totalled $580m in the six months to July, more than tripling from $168m in the same period in 2021.

Despite widespread layoffs at the firm, which saw it trim 10% of its workforce, employee costs were a key driver of the expanded losses. 

Administrative expenses, such as salaries, rose to $960m in the first half of the year, up from under $560m in 2021.

The news comes despite many elements of the results being positive. 

Klarna’s revenues increased 24 per cent year-on-year to around $850m, driven by growth in relatively new markets such as the US.

Despite the recent losses and blows to its valuation, Klarna may be performing comparatively well compared to other providers in its space.

US BNPL company Affirm is currently worth only $6.76 billion, a huge drop since its January 2022 valuation of $24 billion.

Afterpay was acquired by Block, previously known as Square, in a $29 billion deal in August 2021, only for its valuation to fall to $13.9 billion when the deal became final in January 2022. 

In fact, some of Klarna’s figures have outperformed the e-commerce sector as a whole.

Klarna’s Gross Merchandise Value (GMV) growth in the first half of 2022 was up 21% to $41bn compared to an overall decline of -4% in the wider global e-commerce industry according to the Salesforce Annual Shopping Index, with the US and UK being the main drivers of growth. 

The Klarna app remains the company’s fastest-growing channel by volume, with monthly active app users up 24% year-on-year to 23 million, with app downloads increasing 47%.

The app is showing particularly strong adoption in the US with monthly active app users up 70% year-on-year and app downloads up 31%.

Despite significantly trimmed-down recent valuations Klarna has continued to raise capital on mass. 

In July, Klarna confirmed it had secured an $800m funding round at a post-money valuation of $6.7bn, with Canada’s largest pension fund, Canada Pension Plan Investment Board (CPPIB) and the Abu Dhabi state investment fund Mubadala participating. 

The company has not reported a full-year operating profit since 2019, though the report did clarify that its well-established markets like Sweden and Germany remain profitable. 

Klarna CEO Sebastian Siemiatkowski said that the world was “was a very different world than the one we are in today” when it first laid out its 2022 results, citing how factors such as the war in Ukraine and “a huge shift in investor sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession” have all changed the market landscape.

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