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Klarna, the Swedish buy now, pay later group, has returned to monthly profitability for the first time in three years.
Sebastian Siemiatkowski, chief executive, said on Thursday that Klarna had one month of net profit in the second quarter of 2023 in May.
“Today’s results clearly rebut the misconceptions around Klarna’s business model,” he said. The company became a symbol of the excesses of the tech boom and last year was forced to slash its valuation by 85 per cent to $6.7bn and cut a tenth of its workforce.
It still made an operating loss of SKr775mn ($71mn) in the second quarter, although that was down four-fifths from a year earlier. It last made a quarterly profit in the second quarter of 2019, and a monthly profit in August 2020.
On its preferred adjusted operating profit metric — which strips out restructuring costs, share-based payments, and depreciation and amortisation — Klarna said it eked out a small positive gain of SKr10mn in the second quarter.
Revenues in the second quarter increased 17 per cent to SKr5.5bn while credit losses fell 41 per cent to SKr1bn.
“Some claimed Klarna would face difficulties in the tough macroeconomic climate with high interest rates, but having led the company through the 2008 financial crisis I knew we had a strong and resilient business model to see us through,” said Siemiatkowski.
He said last November that Klarna would return to quarterly profit by this summer.
Klarna was consistently profitable from its founding in 2005 until 2018, when it started making losses after it invested heavily in a US expansion ahead of a hoped-for initial public offering.
But those hopes faded when the group, at one time the most highly valued unlisted start-up in Europe at $46bn, faced higher interest rates and lower consumer spending.
Buy now, pay later providers, which offer customers the option to spread out payments for purchases, have also faced criticism over worries about people taking on extra debt.
Policymakers across Europe and the US are increasingly focusing on the sector. Earlier this month, the UK’s opposition Labour party accused the government of dragging its feet on the matter, despite a review commissioned by the Financial Conduct Authority in 2021 that called for “very urgent” action.
Klarna’s US-listed competitor Affirm announced better than expected results at its fourth-quarter earnings on Friday. Shares have risen more than 30 per cent since then, although they are still down 80 per cent from its listing in January 2021.