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Klarna's cash burn shows signs of slowing

Lucinda Shen
Aug 31, 2022
Illustration of the Klarna logo next to an old time pocket watch

Illustration: Sarah Grillo/Axios

Swedish BNPL company Klarna burned through more than half of its cash balance and posted ballooning losses for the first half of the year.

Why it matters: Investors are looking for early signs that Klarna can tamp down on its costs after the company woke up from its lockdown-era spending spree.

  • It laid off 10% of its global workforce and took an 85% cut to its valuation in return for capital earlier this year.

Of note: We say early signs because Klarna's layoffs came in May, meaning the full impact of that reduction may not be seen until the next earnings report.

  • Klarna also closed on its $800 million financing round in July.

Driving the news: One thing is clear — the company has pulled back on its cash burn but still has more work to do. Klarna started the year with about $1.8 billion in cash, which dwindled to about $1.1 billion as it acquired PriceRunner in the U.K. in the first quarter.

  • That burn slowed by the second quarter of the year, with Klarna closing out June with about $879 million in cash and cash equivalents.
  • Net operating income grew 18%, to $705 million, from January through June, showing a slowdown from the 41% growth it enjoyed in the same period a year earlier.

The bottom line: The strength of Klarna's business will also determine the ammo it has to go up against Affirm amid the Swedish company's U.S. expansion effort.

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