First results as a listed company highlight Klarna’s US-led growth and rising costs from longer-term lending and credit provisions.
Klarna has reported its first results since listing on the New York Stock Exchange, with record sales but a return to loss as it pours money into longer-term loans.
The buy now, pay later group said revenue in the three months to the end of September rose 26% from a year earlier to $903m, its highest quarter ever, in its third quarter financials released on November 18. The value of shopping done through Klarna, known as gross merchandise volume (GMV), reached $32.7bn, up 23%.
However, Klarna reported an adjusted operating loss of $14m for the quarter and a net loss of $95m, compared with an adjusted operating profit of $63m a year earlier.
Klarna’s fastest growth is coming from the United States. US GMV rose 43% year on year, while US revenue grew 51%. The company says it is now three times larger than its nearest rival in “Pay in 4” instalment plans in that market.
A big part of the story is Fair Financing, Klarna’s longer-term loan product that lets shoppers spread payments over several months. Fair Financing GMV grew 244% in the US and 139% globally.
These loans are more profitable over time, but accounting rules mean Klarna must book expected losses up front.
Higher provisions, but credit losses remain low
This accounting effect shows up clearly in Klarna’s numbers:
- Klarna’s provision for credit losses rose to 0.72% of GMV, from 0.46% a year earlier.
- Actual losses on loans that have gone bad, known as realised losses, were 0.44% of GMV, slightly lower than last year.
Klarna says this means the quality of its lending remains strong and that more customers are paying on time or even early. The jump in provisions mainly reflects the rapid growth of Fair Financing, rather than a deterioration in how customers are behaving.
Klarna is also pushing deeper into everyday spending.
The Klarna Card, a debit-first card that can also offer instalment options, has signed up 4 million customers since its launch in July. By October, card spending made up 15% of all Klarna transactions.
Alongside this, more than 1 million people have joined Klarna’s new membership programme, which offers extra benefits for frequent users.
Klarna now counts 114 million active consumers worldwide, up 32% from a year ago, and 850,000 merchants, up 38%. Over the past year it has added a net 235,000 merchants, helped by partnerships with major payment providers such as Stripe, Worldpay, Nexi and JPMorgan Payments.
IPO cash and loan sales to fund expansion
Klarna listed in New York in September, raising about $169m in net proceeds from selling new shares at $40 each. That helped lift its cash and cash equivalents to $6.8bn at the end of September, up from $3.2bn at the end of last year.
To support the expansion of Fair Financing without tying up too much of its own balance sheet, Klarna has also signed a new forward-flow and whole-loan sale deal. This gives it $6.5bn of capacity to sell on Fair Financing loans to investors, including $1.2bn of receivables expected to be sold in the fourth quarter. The company says this should free up capital and speed up the recognition of revenue from these loans.
AI efficiency and the “path to profit”
Klarna continues to lean heavily on its AI story. Since the third quarter of 2022, revenue has grown 108%, while operating expenses are up just 2%. Revenue per employee has tripled over that period, according to the company.
Even so, the group is still loss-making at the bottom line. Management argues that the current hit to profits is temporary and mainly due to the timing of Fair Financing provisions.
Klarna is guiding for an even bigger quarter at the end of the year. For the fourth quarter it expects:
- GMV of $37.5bn–$38.5bn
- Revenue of $1.065bn–$1.08bn, which would be its first billion-dollar quarter
- Transaction margin dollars of $390m–$400m
The company says it remains on a “clear and steady path to profitability”. For new public investors, the key question will be how quickly that path turns into actual profits, and whether the rapid growth in Klarna’s loan book can be managed without a spike in bad debts if economic conditions worsen.
