Sebastian Siemiatkowski, CEO of Klarna, speaking at a fintech event in London on Monday 4 April 2022.

Chris Ratcliffe | Bloomberg via Getty Images

Klarna, the Swedish buy-now-pay-later fintech company, halved its net loss in the first quarter and posted a significant improvement in earnings after a major cost-cutting drive.

The company reported a net loss of 1.3 billion Swedish kronor ($120.7 million), a 50% decrease from the loss of 2.6 billion kroner in the same period a year ago.

Klarna reported a total operating net of SEK 5 billion, an increase of 22% compared to the previous year.

“This quarter we have impressively managed to increase GMV and revenue, while reducing costs and credit losses, and also invested ambitiously in AI-powered products,” Klarna CEO Sebastian Siemiatkowski said in a statement.

“We are on track to achieve profitability this year while revolutionizing shopping and payments through our AI-powered approach.”

Siemiatkowski previously told CNBC the company planned to reach profitability in the second half of 2023.

Klarna attributed the recent decline in losses to a drop in customer defaults thanks to an improvement in insurance coverage, as well as diversification into other sources of revenue, such as marketing.

The results show how Klarna is making “significant progress” towards profitability on a monthly basis, the company said.

Klarna, which now has more than 150 million customers, was given a BBB/A-3 credit rating with a stable outlook by S&P Global in April. The rating agency said at the time that this reflected Klarna’s “ability to defend its robust e-commerce position in its key markets, rebuild profitability” and “maintain a strong capital buffer.”

Early indications signal that Klarna’s deep savings measures are beginning to bear fruit. The company went on a hiring spree in 2020 and 2021 to take advantage of growth sparked by the COVID-19 pandemic, and was forced to cut staff by roughly 10% in May 2022 in response to investor pressure to trim operations. Despite this action, the company later lost 85% of its market value in a funding round last summer.

Klarna is not alone in its problems. Buy-now-pay-later companies, which allow shoppers to defer payments to a later date or pay over installments, have been particularly affected by a deterioration in investor sentiment for technology amid a worsening macroeconomic environment.

AI print

Recently, Klarna has focused on AI. The company has redesigned its app with a more advanced AI recommendation algorithm to help its merchants target customers more effectively.

Klarna previously launched the ability to integrate OpenAI’s ChatGPT into its service with a plugin that allows users to ask the popular AI chatbot for shopping inspiration. The company said it embedded AI into its operations to “improve internal efficiency and provide customers with an even better service and experience,” such as through real-time translations in customer chat.

The company has now also made a withdrawal to facilitate short-term rental of holiday homes. Earlier this month, Klarna announced a partnership with Airbnb to allow the online vacation company’s customers to book vacations and pay the cost over installments.