Sebastian Siemiatkowski, CEO of Klarna, speaking at a fintech event in London on Monday, April 4, 2022.
Chris Ratcliffe | Bloomberg via Getty Images
HELSINKI, Finland — Klarna will change into profitable again by next yr after making deep cuts to its workforce, CEO Sebastian Siemiatkowski told CNBC.
Klarna lost greater than $580 million in the primary six months of 2022 because the buy now, pay later giant burned through money to speed up its expansion in key growth markets just like the U.S. and Britain.
Under pressure from investors to slim down its operations, the corporate reduced headcount by about 10% in May. Klarna had hired tons of of latest employees over the course of 2020 and 2021 to capitalize on growth fueled by the consequences of Covid-19.
“We will return to profitability” by the summer of next yr, Siemiatkowski told CNBC in an interview on the sidelines of the Slush technology conference last week. “We should always be back to profitability on a month-by-month basis, not necessarily on an annual basis.”
The Stockholm-based startup saw 85% erased from its market value in a so-called “down round” earlier this yr, taking the corporate’s valuation down from $46 billion to $6.7 billion, as investor sentiment surrounding tech shifted over fears of the next rate of interest environment.
Buy now, pay later firms, which permit shoppers to defer payments to a later date or pay over installments, have been particularly impacted by souring investor sentiment.
Siemiatkowski said the firm’s depressed valuation reflected a broader “correction” in fintech. In the general public markets, PayPal has seen its shares slump greater than 70% since reaching an all-time high in July 2021.
Ahead of the curve?
Siemiatkowski said the timing of the job cuts in May was fortunate for Klarna and its employees. Many employees would have been unable to seek out latest jobs today, he added, because the likes of Meta and Amazon have laid off 1000’s and tech stays a competitive field.
“To a point, all of us were lucky that we took that call in May because, as we have been tracking the individuals who left Klarna behind, principally almost everyone got a job,” Siemiatkowski said.
“If we might have done that today, that probably unfortunately wouldn’t have been the case.”
His comments may raise eyebrows for former employees, a few of whom reportedly said the layoffs were abrupt, unexpected and messily communicated. Klarna informed staff of the redundancies in a pre-recorded video message. Siemiatkowski also shared a listing of the names of employees who were let go publicly on social media, sparking privacy concerns.
While Siemiatkowski admitted to creating some “mistakes” around moves to maintain costs under control, he stressed that he believed it was the best decision.
“I believe to a point actually, Klarna was ahead of the curve,” he said. “For those who take a look at it now, there’s been tons of people that’ve been making similar decisions.”
“I believe it’s sign that we faced reality, that we recognized what was occurring, and that we took those decisions,” he added.
Siemiatkowski said there was some “insanity” brought on by the competition amongst tech firms to draw one of the best talent. The job market was largely employee-driven, particularly in tech, as employers struggled to fill vacancies.
That trend is under threat now, nevertheless, as the specter of a looming recession has prompted employers to tighten their belts.
Earlier this month, Meta, Twitter and Amazon all announced they’d lay off 1000’s of employees. Meta let go 11,000 of its employees, while Amazon parted with 10,000 employees. Under the reign of its latest owner Elon Musk, Twitter laid off about half of its workforce.
The tech sector has been under pressure broadly amid rising rates of interest, high inflation and the prospect of a worldwide economic downturn.
However the mass layoff trend has been criticized by others within the industry. Julian Teicke, CEO of digital insurance startup Wefox, decried the wave of layoffs, telling CNBC in an interview that he’s “disgusted” by the disregard of some corporations for his or her employees.
“I think that CEOs need to do every little thing of their power to guard their employees,” he said in a separate interview at Slush. “I have not seen that within the tech industry. And I’m disgusted by that.”