Klarna Group PLC on Tuesday reported record third-quarter revenue in its first earnings release as a publicly traded company, driven by surging demand in the US and rapid adoption of its new Klarna Card, even as higher credit loss provisions pushed the buy-now-pay-later provider deeper into the red.
The Swedish fintech said revenue rose 26% year-over-year to $903 million, beating analysts’ expectations, while US revenue jumped 51%.
Gross merchandise volume grew 23%, supported by a 244% surge in its longer-term “Fair Financing” loans.
Klarna said the Klarna Card, which allows consumers to spread payments across fixed monthly installments, has attracted four million sign-ups since launching four months ago and accounted for 15% of global transactions in October.
Despite the top-line strength, profitability deteriorated as provisions for credit losses more than doubled to $235 million, reflecting accounting rules that require upfront recognition of expected losses on its fast-growing Fair Financing portfolio. Klarna posted a net loss of about $95 million for the quarter and an operating loss of $83 million, compared with an adjusted operating loss of $4 million a year earlier.
Transaction margin dollars, a key measure of profitability, fell to $281 million from $299 million a year ago.
The company highlighted improving credit performance, noting realized losses edged down to 0.44% of GMV, and pointed to operational efficiencies, with revenue per employee tripling since 2022.
CEO Sebastian Siemiatkowski said the company’s “AI-driven model is working at scale” and reiterated guidance for revenue to exceed $1 billion in the fourth quarter.
In a separate development, Elliott Investment Management said it has agreed to purchase Klarna loans over a two-year term, in a pact that could involve up to $6.5 billion. The deal covers part of Klarna’s Fair Financing portfolio, which offers longer-term, fixed-payment plans compared with its traditional interest-free options.
Klarna remains one of the world’s largest providers of buy-now-pay-later services, offering installment plans with low or no interest for consumers shopping online and in stores.
Shares of Klarna were down 9% at around US$31.75 on Tuesday morning.