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Klarna CEO says timing of layoffs was ‘fortunate’, eyes 2023 profitability

Sebastian Siemiatkowski, CEO of Klarna, speaking at a fintech event in London, Monday, April 4, 2022.

Chris Ratcliffe | Bloomberg via Getty Images

HELSINKI, Finland — Klarna will be profitable again by next year after making deep cuts to its workforce, CEO Sebastian Siemiatkowski told CNBC.

Klarna to hit over $580 million in first six months of 2022 as buy now, pay later to accelerate its expansion in key growth markets like the US and UK.

Under pressure from investors to downsize its operations, the company reduced its workforce by about 10% in May. Klarna hired hundreds of new employees during 2020 and 2021 to take advantage of the growth brought about by the impact of COVID-19.

“We’re going to return to profitability” by the summer of next year, Siemiatkowski told CNBC in an interview on the sidelines of the Slush Technology conference last week. “We must get back to profitability on a month-to-month basis, not necessarily an annual basis.”

The Stockholm-based startup wiped 85% off its market value in a so-called “down round” earlier this year, taking the company’s valuation from $46 billion to $6.7 billion, as investor sentiment around the tech turned to fears of higher interest. But got transferred. rate environment.

Buy now, pay later firms, which allow buyers to defer payments till a later date or pay in instalments, have been particularly affected by the souring in investor sentiment.

Siemiatkowski said the firm’s depressed valuation reflected broader “corrections” in fintech. in public markets, paypal Its shares have seen a decline of over 70% since hitting an all-time high in July 2021.

ahead of the curve?

Siemiatkowski said the timing of the May job cuts was fortunate for Klarna and its employees. He said that many workers today cannot find a new job, as they like meta And Amazon Thousands have laid off and technology remains a competitive field.

“To some extent, we were all lucky that we made this decision in May because, as we’ve been tracking the people who left behind in Klarna, basically almost everyone got a job,” Siemiatkowski said.

“If we had done it today, it probably wouldn’t have happened unfortunately.”

His remarks may raise eyebrows for former employees, some of whom reportedly said The layoffs were sudden, unexpected and unfair. Klarna informed about the staff shortage in a pre-recorded video message. Siemiatkowski also shared a list of names of employees that had been publicly known on social media, raising privacy concerns.

While Siemiatkowski acknowledged making some “mistakes” to keep costs under control, he insisted he believed it was the right decision.

“I think actually to some extent, Klarna was ahead of the curve,” he said. “If you look at it now, there are a lot of people who are making similar decisions.”

“I think it’s a good sign that we faced reality, that we recognized what was going on, and we took those decisions,” he said.

Siemiatkowski said there was some “madness” due to competition among tech firms to attract the best talent. The job market was largely employee driven, especially in tech, as employers struggled to fill vacancies.

However, this trend is now under threat, as the threat of recession has prompted employers to tighten their gears.

Earlier this month, Meta, Twitter and Amazon all announced they would be laying off thousands of employees. Meta has let go of 11,000 of its employees, while Amazon has laid off 10,000 workers. Under the reign of its new owner, Elon Musk, Twitter laid off nearly half of its workforce.

The tech sector has largely been under pressure amid rising interest rates, high inflation and the prospect of a global economic recession.

But the trend of massive layoffs has been criticized by others in the industry. Julian Tyke, CEO of digital insurance startup Wefox, told CNBC in an interview that he is “disgusted” by some companies’ disregard for their employees.

“I believe CEOs have to do everything in their power to protect their employees,” he said in a separate interview on Slush. “I haven’t seen anything like this in the tech industry. And I hate it.”

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