What is behind Klarna's recent losses?
It mostly has to do with the BNPL provider's rapid international expansion...
From 2005 to 2018, the Swedish “Buy Now Pay Later” (BNPL) provider Klarna, one of the hottest fintech companies in the world had been profitable. Quite a feat in that particular field.
However from January to June 2019, Klarna posted net losses of SEK 83.53 million (roughly $9.52 million). Fast-forward to 2021, the company suffered a pre-tax loss of SEK 3.1 billion ($344 million) from January to September.
So what gives?
In the past two years, the company has gone on a massive international expansion, seducing many UK and US consumers along the way. Klarna now boasts “90 million active consumers” through 250,000+ merchants in 17 countries
This rapid growth hasn’t been without major costs… The majority of losses came from general administrative expenses (think salaries, rent,…) They amounted to a staggering SEK 9.5 billion vs 5.9 billion in 2020.
A secondary reason are credit losses, now totaling SEK 2.9 billion between January 1st and November 26th (vs 1.6 billion last year for the same period).
Sebastian Siemiatkowski, Klarna’s co-founder and CEO believes those issues could soon dissipate, pointing that the major investments have tremendously increased operative income.
The company has been transparent about a possible IPO in 2022; there is no indication that those recent financial challenges would significantly delay the listing.