Klarna Sees 615 Pct Increase In Net Losses

Klarna, the Swedish-based global payments and by now, pay later (BNPL) provider, reported mixed results for 2020’s first half — a 37 percent jump in operating income, but a 903 percent expansion in overall operating losses.

“In the context of COVID-19 and the uncertainties it has unfortunately created for so many, a somewhat precautionary approach was necessary at times, including adjusting our credit policies globally,” Klarna Co-Founder and CEO Sebastian Siemiatkowski wrote in a letter to shareholders. “Despite this, we have seen accelerated growth and rapidly increasing demand for our services.”

On the plus side, the company said net operating income for January through June increased 37 percent year over year to 4.6 billion krona ($526.7 million). Total sales also grew to 215 billion krona ($24.6 billion), a 44 percent hike compared to the same period last year.

“The uniqueness of Klarna’s consumer offering, providing a healthier, simpler and smarter alternative to credit cards, continues to drive consumer adoption and loyalty to us and our retailers globally,” the company said in releasing the results. “This is further boosted by our strong brand, as well as our multiple services to smoothen the shopping experience — online and in-store.”

Klarna also said it ended the period with some 3.1 billion krona ($355 million) in cash and cash equivalents, up from about 1.6 billion krona ($183 million) a year earlier.

The company said it enjoyed “positive cash flow from operating activities, as increased negative operating profit was offset by increased non-cash items (such as provision for credit losses) and positive change in the assets and liabilities of operating activities (such as increase in deposits from the public).”

But on the downside, total operating expenses before credit losses rose by 45 percent to 4 billion krona ($458.4 million), up from 2.7 billion krona ($309.4 million) a year earlier. In addition, credit losses increased by 93 percent to nearly 1.2 billion krona ($137.5 million).

Factoring that in, operating losses shot up 903 percent year over year to 652 million krona ($74.7 million) from just 65 million krona ($7.4 million) one year ago. And overall, net losses swelled to 522 million krona ($59.8 million) from 73 million krona ($8.3 million), or 615 percent worse than a year ago.

Despite its mixed showing, Klarna topped PYMNTS’ Provider Ranking of Alternative Credit Apps.

And in June, the company upgraded its mobile app to gives users access to “exclusive deals and drops, the ability to create and share wish lists with friends and family, and the ability to shop anywhere online and pay in four, interest-free installments,” Klarna said at the time.

Klarna also said at the time that it reached a milestone with 7.85 million U.S. customers. The company credited that achievement to its partnerships with a variety of brands, including H&M, Sephora, Timberland and The North Face. All used Klarna to provide BNPL services to consumers, offering an easier way of paying for goods.

David Sykes, the company’s U.S. head, said users have flocked to eCommerce solutions because of the pandemic, which has necessitated less of a focus on in-store commerce as people seek to avoid the virus.

“More shoppers than ever before are turning to eCommerce for a wide range of product categories,” he said in a statement. “And they are looking to pay for things in a smarter way that lets them manage their finances without having to use credit options that come with interest, fees and revolving debt.”