Klarna’s annual loss rises to $1 billion, but the boss’s salary jumps by 35%
Klarna has plunged to the biggest annual loss in its history, but the Swedish buy-now-pay-later company maintained it was on its way back to profitability and increased its chief executive’s pay by more than a third.
The privately held Swedish fintech, whose valuation shrank from $46 billion to $6.7 billion last year, reported that its annual net loss had widened to NOK 10.4 billion ($1 billion), a 47 per increase from 2021.
The net loss was reduced in the fourth quarter to NOK 1.9 billion from NOK 4.6 billion the previous year. The credit losses were NOK 1.4 billion in the three months, an improvement of 18 per cent from the same period in 2021.
“We are making concrete progress towards profitability while driving growth well ahead of e-commerce and reducing credit losses and costs,” said CEO Sebastian Siemiatkowski.
Despite the losses, Siemiatkowski’s total remuneration increased by 35 per cent to NOK 13.2 million. Klarna said its remuneration policy was in line with other technology companies “to hire and retain the best talent”.
Klarna’s status as Europe’s highest-valued private company came as online shopping boomed during the pandemic, making it a symbol of the exuberance of the fintech boom. However, the staff cuts and the 85 percent cut in valuation have humbled it.
Siemiatkowski told the Financial Times in November that he expected the company to return to profitability by the third quarter of this year, although he warned that it could still post an annual loss in 2023.
Founded in 2005 by a trio of business school friends in Stockholm, Klarna was regularly profitable until 2019 when it began an aggressive expansion in the US. It last had an annual profit in 2018, a quarterly profit in the second quarter of 2019 and a monthly profit in August 2020.
The company hailed two consecutive quarters of falling credit losses. Revenues in the fourth quarter increased by 19 per cent to NOK 5.6 billion.
Growth was particularly strong in the US, where gross merchandise volume – how much it processes for retail customers – rose 71 percent last year, making the country its biggest market by revenue in December despite competition from rivals such as Affirm and PayPal.
The wider buy-now-pay-later sector is facing regulatory scrutiny in key markets including the US, UK and Australia over concerns that lenders are failing to ensure users can afford to take out loans or are encouraging users to use too much.
In February, the UK Treasury unveiled draft proposals that would allow the Financial Conduct Authority to punish companies that failed to carry out adequate credit checks by banning them from further lending. The UK government intends to bring the legislation to Parliament later this year following a consultation.
Inflationary pressures and central banks’ efforts to tackle them are another headwind for the fintech sector. Affirm announced it was cutting nearly a fifth of its workforce earlier this month. Chief executive Max Levchin said higher US interest rates had “already dampened consumer spending and dramatically increased Affirm’s borrowing costs”. The shares have fallen almost 70 percent in the past year.
