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Klarna generated $1.42 billion revenue in 2021, a 32 percent year-on-year increase. A majority of Klarna’s income comes from interchange, processing and merchan

Klarna generated $1.42 billion revenue in 2021, a 32 percent year-on-year increase. A majority of Klarna’s income comes from interchange, processing and merchant fees. As Klarna has expanded its BNPL offering, its losses have increased. It reported a net loss of $730 million in 2021, a 337 percent increase on its 2020 loss. I would say its surprising that this company is still in business at all with numbers like this.

logifail 4y ago
> As Klarna has expanded its BNPL offering, its losses have increased. It reported a net loss of $730 million in 2021, a 337 percent increase on its 2020 loss Yet the tone from the acticle is that employees appeared to think the company was successful?
- bombcar 4y ago
  Employees base company success on internal metrics and how they're being paid, few employees bother looking at publicly available numbers lest they "jinx" it. (Or the ones that do see the writing on the wall and bail, or decide to ride it out as long as they can).
- foepys 4y ago
  Since Uber seems to be a benchmark for VC start-ups (Uber for X) and Uber is still losing money in the tens or hundreds of millions per year, I am not surprised that employees think that Klarna is a success.
- PheonixPharts 4y ago
  At least in tech there are people who have had decade+ long careers where it was very feasible to never work for a company that actually made more money than it spent. I've been at multiple startups that had VCs pressure leadership not to make profit because that would hurt growth of some other KPI of interest (users, revenue etc). In the last few year many of these people have seen these companies go public, and their imaginary Options/RSUs suddenly turn to liquid assets. Company hasn't started making profits, P/E is negative, but TC has gone up by 50%-200%. That certainly feels like success. Looking back at my own career the companies that made the least profit (including negative) are the ones that have paid me the most. I'm old enough to remember the pre-dotcom bust chats of "new economy" and "things are different now", and how all of the stuffy old finance people who thought businesses should make more than they spend where ultimately proven correct. For many people, even in their late 30s, the ability for a company to actually make more than it spends has been an academic curiosity, hardly relevant to the success of a company.
  - orzig 4y ago
    Agreed, and the opposite is true: I started at a small public company which had stopped growing and become profitable. It was targeted for a hostile takeover by PE who thought it could grow more. To their credit it did, and (to the extent your willing to believe unaudited financials) again became profitable.
  - toomuchtodo 4y ago
    The stock and exuberance are the product.
    - logifail 4y ago
      > The stock and exuberance are the product. I've worked at places where the slide decks were always full of exuberance. At one of them they were exuberant right up until the moment the staff found themselves locked out of the offices after being told that a liquidator was in charge. It's not pretty.
      - toomuchtodo 4y ago
        Same!
    - deleted 4y ago
      [deleted]
- cosmodisk 4y ago
  The company I used to work for got acquired by a listed company. At the same time, I was doing finance module at the university. One assignment was to analyse a company's financial reports and come up with a conclusion. So I analysed the company I worked for and the outcome was that I need to get out. At the same time the company was sending communication as it's about to discover time travel and unicorn milk.
  - logifail 4y ago
    > At the same time, I was doing finance module at the university. One assignment was to analyse a company's financial reports and come up with a conclusion. So I analysed the company I worked for and the outcome was that I need to get out. That's interesting. My OH is almost half way through her MBA and for one recent module, she chose to analyse her current employer's financial reports and come up with a conclusion. Her conclusion is also that she needs to get out. I wonder how many tech employees can actually read a financial report, though?
    - dthul 4y ago
      Any good resources for a tech employee to learn about these things without having studied it?
      - cosmodisk 4y ago
        The Economist Guide To Analysing Companies is a good start. Others would be corporate finance books or intro books to accounting.
    - sys_64738 4y ago
      > Her conclusion is also that she needs to get out. It depends. I haven't been RIF'd before but would take a package if they were layoffs if I had the opportunity. I'd also use as much of unemployment as I could for as long as I could. Basically I'd be looking to maximize the amount of time I can go before I'd need another job. Just because a company appears to be running out of cash doesn't necessarily mean you need to leave immediately if they do downsizing.
- hef19898 4y ago
  It truely shocking how little employees can care about their employers finacials.
Traubenfuchs 4y ago
That's insane -what's the magic event people believe will turn those losses around?
- mrweasel 4y ago
  It's kinda fascinating really. We had a client that had only ever lost money. Their idea was pretty good, they had what I'd call a working prototype and paying customers. Our CEO happened to know one of the investors, and chatted with him about the investment and the numbers we did on a whiteboard. Even if they grew their business with 10 times the number of customers, and each customer ramped up their usage 10 times it would take 10 - 12 years to make back the money that had already been spend. That was assuming no new investments and zero cost in those 10 to 12 years. The idea that this may not have been the best investment in history was more or less brushed, as the stock price would surely rise. VC funding is weird.
  - runnerup 4y ago
    Even if the already-invested money can’t be recouped, marginal additional investment could theoretically be with favorable (LIFO) terms offered typically offered to later investment. So sure, acknowledge a bad $300 million bet, but then throw your next $50 million at the same bet if it looks like the best place to put a marginal $50 million. I don’t always think investors are doing this rationally - sunk cost fallacy / gamblers paradox / greater fool theory / FOMO all play a part, but also recognize that lots of these super large investments are led by a small team using lots of other peoples money so there are ways for the decision-makers to come out closer to breakeven if much of the pot is lost. Also with potential IPO’s and sky high rate of valuation growth over the past decade, the “greater fool theory” isn’t necessarily an irrational motivation to invest. Not all smart investments are value-based.
    - lumost 4y ago
      A company built to operate as a 100 billion dollar behemoth can rarely transition to a 1 billion dollar success without lots of pain. To make this transition, your going to need to crush a lot of dreams and projects. Why would the result not be a hollowed out hulk of a company?
qbasic_forever 4y ago
For the past decade money has been effectively free to borrow with interest rates at zero. All the companies that immediately went bankrupt, into layoffs, etc. when interest rates were raised this year were coasting on these financial fumes.
- killSp4m 4y ago
  Powell wants to keep wages tethered to his preferred reality of 2% inflation versus the actual reality people live on. The real issue with inflation is it devalues the public hallucination; fiat money: https://www.wsj.com/articles/transcript-fed-chief-powells-postmeeting-press-conference-11651696613 https://www.wsj.com/articles/transcript-fed-chief-powells-po... Fear mongering over employment security is a favorite tactic: https://www.nytimes.com/1997/02/27/business/job-insecurity-of-workers-is-a-big-factor-in-fed-policy.html https://www.nytimes.com/1997/02/27/business/job-insecurity-o... The reality is “people need to eat”, will trade as they must to do so. We don’t actually rely on government officials to do the work; we placate the die hards by speaking in the traditions. They’re yanking on the leash they have. Big tech looking to axe senior talent and big pay days for cheaper Gen Z grads; a quiet wealth redistribution plan. Some of the rich senior tech people would move on to cheaper locales and perhaps build businesses. We’re in the ML era and a lot of senior folks are from the “manually program a machine” era; that’s a way over valued skill set now; it’s everywhere. Cheaper talent with the latest collegiate training not the old ways baked in, could offset the expense of moonshots, hoping to boost an ML-backed cloud economy post generic server backed cloud. Google’s Eric Schmidt has been in DC lobbying for AI investment: https://www.vox.com/recode/2022/6/9/23160588/eric-schmidt-americas-frontier-fund-google-alphabet-tech-government-revolving-door https://www.vox.com/recode/2022/6/9/23160588/eric-schmidt-am... Picking the winners right away to avoid the last decades shotgun approach.
hotpotamus 4y ago
I recently left an 8,000 person company that's been on a 2 decade loop of private money to publicly traded and back a couple times now. It occurred to me that in 25ish years (about 10 of which I worked there) that it might never have made any money - I can't remember a profitable year ever; we were always seeking growth above all else. I now work at a small SaaS company of around 50 people and it's only ever made money. Every day I feel like I live the Homer Simpson quote, "I don't know how the economy works".
- allenu 4y ago
  > I recently left an 8,000 person company that's been on a 2 decade loop of private money to publicly traded and back a couple times now. It occurred to me that in 25ish years (about 10 of which I worked there) that it might never have made any money That is crazy if true. My fear is that there are a ton of tech companies like that, just chasing future profits or an acquisition, but not actually creating anything of value (at least in terms of profit). I don't know. It just doesn't sit well with me knowing that a lot of products we build don't actually make any money. We're all just part of some weird system of money re-allocation and the software is just there as a signal that money should change hands.
  - blantonl 4y ago
    Rackspace?
    - hotpotamus 4y ago
      Well spotted ;)
      - blantonl 4y ago
        I live in SA, also one of my neighbors was brought into the c-suite when they first went PE, so this story looked pretty familiar :)
  - BeFlatXIII 4y ago
RandomLensman 4y ago
From the outside, I find it difficult to judge as management might have been focused on top line growth (given investors preferences in recent years). A (possibly) changed focus could now mean a very different profit profile will develop.
tibbydudeza 4y ago
Uber
treis 4y ago
In a lot of ways internet businesses are like buying bonds. You pay some cost to acquire a customer and will get revenue from them over time. You can calculate a present value for that customer based on that future revenue. As long as that value is more than what you paid to acquire the customer you're making money. And if your numbers are right then you, more or less, want to spend as much money as you can buying customers. So that's how companies with numbers like this continue to operate. To put it simply, Klarna is spending a billion dollars to buy customers that will generate more than a billion dollars in revenue. The catch is that you have to pay now for later revenue. So your numbers look like crap until your existing customers far outnumber your new ones.
- disgruntledphd2 4y ago
  This is a very, very dangerous business to be in unless your numbers are rock solid and you make sure your models reflect reality.
  - deltree7 4y ago
    all businesses are risky. that's why we have capitalism and there are bunch of people who are willing to take the risk and rewarded for taking that risk
    - geysersam 4y ago
      Rewarded for luring people into consumption loan debt? Great system.
      - deltree7 4y ago
        debt is a fantastic instrument that solves a production / consumption mismatch of both individuals and humanity. A 55 year old is the most productive member of a society, but that is also the age where you start to consume very little. Imagine if you had to 'save' to get your college education, your home, a laptop, or starting a business. There is a reason we don't ask babies to 'pay up' for milk or shelter. Imagine if Larry Page or Sergey Brin had to work and save to start Google. Imagine if government had to save trillions of dollars before investing in Carbon Capture and renewable energy generations. Yes, all good things can be abused. But you can't prevent good things for 95% society because a 5% of the society abuses it
lumost 4y ago
For transaction processing, wouldn't a 1-3% margin be about the maximum achievable? That would translate to about 15 million dollars in potential profit against a 730 million loss.
- treis 4y ago
  1-3% of the transaction volume. That percentage is the 1.4 billion Klarna takes as revenue. The margins of that can be very high.
  - lumost 4y ago
    Are we sure that that's true? As a private company klarna can choose any metric they so desire as revenue...
    - christophilus 4y ago
      What? Isn’t revenue kind of … revenue? What else can it be?
      - lumost 4y ago
        To my knowledge, there isn't any reason klarna can't describe their transaction volume as revenue. Then declare their margin 3%. As a private tech company I would assume that they are using the broadest possible definition of revenue.
        junofan 4y ago
        Dunno about Sweden but lots of compensation stuff triggers financial reporting requirements for obvious reasons.
        Montaque 4y ago
        No. GAAP and IFRS have very strict definitions of Revenue. Transaction volume falls under the agency principle. Its not the Co's revenue.
throwaway859383 4y ago
Up until a massive expansion push some years ago, Klarna used to be a profitable company. It expanded from 3200 employees in 2019 to the 7000 that are there now. They also started spending money on experiments that had not much to do with the core business.
- indymike 4y ago
  Employee count may be the worst business metric of all time.
  - ImPostingOnHN 4y ago
    depends, for what? it is a good metric for number of employees you employ :)
  - throwaway98797 4y ago
    money raised is better (worse)

logifail 4y ago

> As Klarna has expanded its BNPL offering, its losses have increased. It reported a net loss of $730 million in 2021, a 337 percent increase on its 2020 loss Yet the tone from the acticle is that employees appeared to think the company was successful?

bombcar 4y ago
Employees base company success on internal metrics and how they're being paid, few employees bother looking at publicly available numbers lest they "jinx" it. (Or the ones that do see the writing on the wall and bail, or decide to ride it out as long as they can).
foepys 4y ago
Since Uber seems to be a benchmark for VC start-ups (Uber for X) and Uber is still losing money in the tens or hundreds of millions per year, I am not surprised that employees think that Klarna is a success.
PheonixPharts 4y ago
At least in tech there are people who have had decade+ long careers where it was very feasible to never work for a company that actually made more money than it spent. I've been at multiple startups that had VCs pressure leadership not to make profit because that would hurt growth of some other KPI of interest (users, revenue etc). In the last few year many of these people have seen these companies go public, and their imaginary Options/RSUs suddenly turn to liquid assets. Company hasn't started making profits, P/E is negative, but TC has gone up by 50%-200%. That certainly feels like success. Looking back at my own career the companies that made the least profit (including negative) are the ones that have paid me the most. I'm old enough to remember the pre-dotcom bust chats of "new economy" and "things are different now", and how all of the stuffy old finance people who thought businesses should make more than they spend where ultimately proven correct. For many people, even in their late 30s, the ability for a company to actually make more than it spends has been an academic curiosity, hardly relevant to the success of a company.
- orzig 4y ago
  Agreed, and the opposite is true: I started at a small public company which had stopped growing and become profitable. It was targeted for a hostile takeover by PE who thought it could grow more. To their credit it did, and (to the extent your willing to believe unaudited financials) again became profitable.
- toomuchtodo 4y ago
  The stock and exuberance are the product.
  - logifail 4y ago
    > The stock and exuberance are the product. I've worked at places where the slide decks were always full of exuberance. At one of them they were exuberant right up until the moment the staff found themselves locked out of the offices after being told that a liquidator was in charge. It's not pretty.
    - toomuchtodo 4y ago
      Same!
  - deleted 4y ago
    [deleted]
cosmodisk 4y ago
The company I used to work for got acquired by a listed company. At the same time, I was doing finance module at the university. One assignment was to analyse a company's financial reports and come up with a conclusion. So I analysed the company I worked for and the outcome was that I need to get out. At the same time the company was sending communication as it's about to discover time travel and unicorn milk.
- logifail 4y ago
  > At the same time, I was doing finance module at the university. One assignment was to analyse a company's financial reports and come up with a conclusion. So I analysed the company I worked for and the outcome was that I need to get out. That's interesting. My OH is almost half way through her MBA and for one recent module, she chose to analyse her current employer's financial reports and come up with a conclusion. Her conclusion is also that she needs to get out. I wonder how many tech employees can actually read a financial report, though?
  - dthul 4y ago
    Any good resources for a tech employee to learn about these things without having studied it?
    - cosmodisk 4y ago
      The Economist Guide To Analysing Companies is a good start. Others would be corporate finance books or intro books to accounting.
  - sys_64738 4y ago
    > Her conclusion is also that she needs to get out. It depends. I haven't been RIF'd before but would take a package if they were layoffs if I had the opportunity. I'd also use as much of unemployment as I could for as long as I could. Basically I'd be looking to maximize the amount of time I can go before I'd need another job. Just because a company appears to be running out of cash doesn't necessarily mean you need to leave immediately if they do downsizing.
hef19898 4y ago
It truely shocking how little employees can care about their employers finacials.

Traubenfuchs 4y ago

That's insane -what's the magic event people believe will turn those losses around?

mrweasel 4y ago
It's kinda fascinating really. We had a client that had only ever lost money. Their idea was pretty good, they had what I'd call a working prototype and paying customers. Our CEO happened to know one of the investors, and chatted with him about the investment and the numbers we did on a whiteboard. Even if they grew their business with 10 times the number of customers, and each customer ramped up their usage 10 times it would take 10 - 12 years to make back the money that had already been spend. That was assuming no new investments and zero cost in those 10 to 12 years. The idea that this may not have been the best investment in history was more or less brushed, as the stock price would surely rise. VC funding is weird.
- runnerup 4y ago
  Even if the already-invested money can’t be recouped, marginal additional investment could theoretically be with favorable (LIFO) terms offered typically offered to later investment. So sure, acknowledge a bad $300 million bet, but then throw your next $50 million at the same bet if it looks like the best place to put a marginal $50 million. I don’t always think investors are doing this rationally - sunk cost fallacy / gamblers paradox / greater fool theory / FOMO all play a part, but also recognize that lots of these super large investments are led by a small team using lots of other peoples money so there are ways for the decision-makers to come out closer to breakeven if much of the pot is lost. Also with potential IPO’s and sky high rate of valuation growth over the past decade, the “greater fool theory” isn’t necessarily an irrational motivation to invest. Not all smart investments are value-based.
  - lumost 4y ago
    A company built to operate as a 100 billion dollar behemoth can rarely transition to a 1 billion dollar success without lots of pain. To make this transition, your going to need to crush a lot of dreams and projects. Why would the result not be a hollowed out hulk of a company?

qbasic_forever 4y ago

For the past decade money has been effectively free to borrow with interest rates at zero. All the companies that immediately went bankrupt, into layoffs, etc. when interest rates were raised this year were coasting on these financial fumes.

killSp4m 4y ago
Powell wants to keep wages tethered to his preferred reality of 2% inflation versus the actual reality people live on. The real issue with inflation is it devalues the public hallucination; fiat money: https://www.wsj.com/articles/transcript-fed-chief-powells-postmeeting-press-conference-11651696613 https://www.wsj.com/articles/transcript-fed-chief-powells-po... Fear mongering over employment security is a favorite tactic: https://www.nytimes.com/1997/02/27/business/job-insecurity-of-workers-is-a-big-factor-in-fed-policy.html https://www.nytimes.com/1997/02/27/business/job-insecurity-o... The reality is “people need to eat”, will trade as they must to do so. We don’t actually rely on government officials to do the work; we placate the die hards by speaking in the traditions. They’re yanking on the leash they have. Big tech looking to axe senior talent and big pay days for cheaper Gen Z grads; a quiet wealth redistribution plan. Some of the rich senior tech people would move on to cheaper locales and perhaps build businesses. We’re in the ML era and a lot of senior folks are from the “manually program a machine” era; that’s a way over valued skill set now; it’s everywhere. Cheaper talent with the latest collegiate training not the old ways baked in, could offset the expense of moonshots, hoping to boost an ML-backed cloud economy post generic server backed cloud. Google’s Eric Schmidt has been in DC lobbying for AI investment: https://www.vox.com/recode/2022/6/9/23160588/eric-schmidt-americas-frontier-fund-google-alphabet-tech-government-revolving-door https://www.vox.com/recode/2022/6/9/23160588/eric-schmidt-am... Picking the winners right away to avoid the last decades shotgun approach.

hotpotamus 4y ago

I recently left an 8,000 person company that's been on a 2 decade loop of private money to publicly traded and back a couple times now. It occurred to me that in 25ish years (about 10 of which I worked there) that it might never have made any money - I can't remember a profitable year ever; we were always seeking growth above all else. I now work at a small SaaS company of around 50 people and it's only ever made money. Every day I feel like I live the Homer Simpson quote, "I don't know how the economy works".

allenu 4y ago
> I recently left an 8,000 person company that's been on a 2 decade loop of private money to publicly traded and back a couple times now. It occurred to me that in 25ish years (about 10 of which I worked there) that it might never have made any money That is crazy if true. My fear is that there are a ton of tech companies like that, just chasing future profits or an acquisition, but not actually creating anything of value (at least in terms of profit). I don't know. It just doesn't sit well with me knowing that a lot of products we build don't actually make any money. We're all just part of some weird system of money re-allocation and the software is just there as a signal that money should change hands.
- blantonl 4y ago
  Rackspace?
  - hotpotamus 4y ago
    Well spotted ;)
    - blantonl 4y ago
      I live in SA, also one of my neighbors was brought into the c-suite when they first went PE, so this story looked pretty familiar :)
- BeFlatXIII 4y ago

RandomLensman 4y ago

From the outside, I find it difficult to judge as management might have been focused on top line growth (given investors preferences in recent years). A (possibly) changed focus could now mean a very different profit profile will develop.

tibbydudeza 4y ago

Uber

treis 4y ago

In a lot of ways internet businesses are like buying bonds. You pay some cost to acquire a customer and will get revenue from them over time. You can calculate a present value for that customer based on that future revenue. As long as that value is more than what you paid to acquire the customer you're making money. And if your numbers are right then you, more or less, want to spend as much money as you can buying customers. So that's how companies with numbers like this continue to operate. To put it simply, Klarna is spending a billion dollars to buy customers that will generate more than a billion dollars in revenue. The catch is that you have to pay now for later revenue. So your numbers look like crap until your existing customers far outnumber your new ones.

disgruntledphd2 4y ago
This is a very, very dangerous business to be in unless your numbers are rock solid and you make sure your models reflect reality.
- deltree7 4y ago
  all businesses are risky. that's why we have capitalism and there are bunch of people who are willing to take the risk and rewarded for taking that risk
  - geysersam 4y ago
    Rewarded for luring people into consumption loan debt? Great system.
    - deltree7 4y ago
      debt is a fantastic instrument that solves a production / consumption mismatch of both individuals and humanity. A 55 year old is the most productive member of a society, but that is also the age where you start to consume very little. Imagine if you had to 'save' to get your college education, your home, a laptop, or starting a business. There is a reason we don't ask babies to 'pay up' for milk or shelter. Imagine if Larry Page or Sergey Brin had to work and save to start Google. Imagine if government had to save trillions of dollars before investing in Carbon Capture and renewable energy generations. Yes, all good things can be abused. But you can't prevent good things for 95% society because a 5% of the society abuses it

lumost 4y ago

For transaction processing, wouldn't a 1-3% margin be about the maximum achievable? That would translate to about 15 million dollars in potential profit against a 730 million loss.

treis 4y ago
1-3% of the transaction volume. That percentage is the 1.4 billion Klarna takes as revenue. The margins of that can be very high.
- lumost 4y ago
  Are we sure that that's true? As a private company klarna can choose any metric they so desire as revenue...
  - christophilus 4y ago
    What? Isn’t revenue kind of … revenue? What else can it be?
    - lumost 4y ago
      To my knowledge, there isn't any reason klarna can't describe their transaction volume as revenue. Then declare their margin 3%. As a private tech company I would assume that they are using the broadest possible definition of revenue.
      - junofan 4y ago
        Dunno about Sweden but lots of compensation stuff triggers financial reporting requirements for obvious reasons.
      - Montaque 4y ago
        No. GAAP and IFRS have very strict definitions of Revenue. Transaction volume falls under the agency principle. Its not the Co's revenue.

throwaway859383 4y ago

Up until a massive expansion push some years ago, Klarna used to be a profitable company. It expanded from 3200 employees in 2019 to the 7000 that are there now. They also started spending money on experiments that had not much to do with the core business.

indymike 4y ago
Employee count may be the worst business metric of all time.
- ImPostingOnHN 4y ago
  depends, for what? it is a good metric for number of employees you employ :)
- throwaway98797 4y ago
  money raised is better (worse)