👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics, my weekly newsletter where I unpack how the world’s best CFOs and business experts use metrics to make better decisions.

There is just no rest for the weary.

Two S1’s in two weeks. First CoreWeave (our breakdown), now Klarna.

I write this on vacation in Disney, in the thick of the night, two miller lattes deep, trying not to wake my wife and children with my Lenovo’s glow.

But when an S1 drops, I’m your guy. So let’s do the damn thing.

Klarna, the Swedish fintech giant, has filed to go public on the New York Stock Exchange (ticker: KLAR). This IPO will be a major test for the Buy Now, Pay Later (BNPL) sector, which has seen explosive growth since COVID (remember how everyone wanted to buy a Peloton, and like not pay for it until the stimi check hit?). And it’s a timely move, as they’ll experience less regulatory scrutiny since the Consumer Financial Protection Bureau (along with a gaggle of other government agencies) was effectively ctrl alt deleted by the new presidential administration.

Klarna’s pitch: Modernize payments, remove friction, and let consumers buy now, pay later—without credit card debt.

In recent years the company evolved beyond BNPL into a broader finance and commerce ecosystem, including payments, shopping insights, and banking services.

Just a few years ago, Klarna was valued at $46 billion in private markets. Now? Its expected IPO valuation is between $15B and $20B—a stark reminder of fintech’s changing market sentiment, and intimate ties to interest rates.

Klarna is betting that its brand, scale, and new business lines will convince investors it’s not subprime lending in disguise, but rather a complete financial platform, and a net positive for society.

Klarna offers short-term installment loans to consumers, and charges merchants a fee for facilitating transactions. It makes money primarily from merchant fees (typically 3% of the transaction), interest-bearing financing for consumers, and its growing advertising and data insights business. While consumers benefit from interest-free BNPL options, it’s the merchants who pay the bulk of Klarna’s fees in exchange for higher conversion rates, larger basket sizes, and access to Klarna’s shopper network. The basic thinking: merchants are willing to part with a few points of margin to get consumers to buy 97% of a product they wouldn’t have originally.

Klarna is monetizing transactions more efficiently, getting more out of each transaction. Take rate increased from 2.3% (2022) to 2.7% (2024), meaning it is earning more revenue per dollar of transaction volume.

However, gross merchandise volume (GMV) grew only 14% YoY in 2024, which means revenue growth is outpacing transaction volume growth. This is largely due to:

While this is a positive trend for short-term monetization, it raises long-term questions about whether Klarna is over-earning on fees, which could draw regulatory scrutiny or push merchants and consumers to work with lower cost providers.

Klarna turned a small net profit, but its core business remains unprofitable once you count credit losses and stock based comp.

Klarna’s AI-driven cost cutting is key to its profitability story. If you recall, their CEO proudly announced in late 2024 that they were dropping Salesforce and Workday, choosing to build the systems themselves internally using AI (more on that below).

But rising credit losses raise concerns about loan performance and how much they’re reaching into riskier cohorts to grow revenue.

Unlike Affirm, Klarna has a banking license, allowing it to fund loans with consumer deposits instead of expensive debt. That’s right - they’re a bank. Which means their podcast commercials must be much shorter sans the disclosures.

This gives it a significant cost advantage, but also subjects it to higher regulatory oversight.

If deposit growth slows, Klarna could be forced to rely on higher-cost debt financing, reducing its margin advantage over competitors.

👉 Affirm has higher gross margins and faster growth, but remains unprofitable.

At its peak in 2021, Klarna was valued at $46B in private markets. Now, it’s targeting a $15B-$20B IPO valuation—a reality check for late-stage fintechs. The last three years have been all about rightsizing their cost structure and cutting headcount.

Klarna’s margin expansion is coming more from automation than revenue growth:

👉 Klarna isn’t just a BNPL company—it’s trying to build an AI-first financial platform, both internally and externally.

Unlike Affirm, Klarna funds its BNPL loans through $9.5B in consumer deposits, giving it a cheaper cost of capital than debt-funded rivals. But:

👉 This banking model makes Klarna more stable but also subjects it to tighter oversight internationally, even if the US CFPB eases off for a few years.

Klarna’s US revenue grew 39% YoY, surpassing Europe. But:

👉 Winning the US market is key, but Klarna faces competitive headwinds.

Klarna is expanding into high-margin merchant services, positioning itself beyond BNPL:

👉 The beauty of building a two sided market is advertising emerges as a high margin opportunity at scale.

Klarna disclosed material weaknesses in internal controls related to:

👉 Klarna won’t have an external audit of internal controls until 2026, meaning investors won’t get full transparency for two years.

This is a really big deal.

👉 With many insiders already cashing out, will they continue selling once the IPO lock-up expires? And how large will stock based comp weigh in future years as the company looks to keep key personnel motivated, especially after +20 years of building the company.

Not all fintech revenue streams are valued equally.

👉 Klarna might be able to get Affirm’s +7x multiple despite lower margins, lower growth, and profitability concerns but should trade much higher than PayPal (~2-3x revenue) given its diversified business model.

Since Klarna is now UK based, they rely on IFRS accounting standards rather than GAAP. And Klarna heavily relies on non-IFRS metrics that exclude stock-based compensation, restructuring costs, and IPO expenses.

Why it matters: Klarna’s numbers may inflate its true profitability (or lack thereof), and investors need to adjust accordingly.

Klarna packages and sells BNPL receivables to investors—similar to how banks securitize credit card debt. Ever seen The Big Short? You can securitize anything!

Why it matters: While this frees up capital, it means investors don’t see the full extent of Klarna’s credit exposure. Especially if portions are off balance sheet.

Why it matters: A corporate move right before an IPO often raises questions—was this done for regulatory arbitrage, tax benefits, or investor optics?

Klarna has paid over $7 million to entities connected to CEO Sebastian Siemiatkowski’s wife.

Why it matters: Related-party transactions always raise corporate governance concerns, especially when public companies are paying entities linked to executives’ families.

In this scenario, Klarna successfully transitions from a BNPL lender to a diversified fintech platform, expanding beyond lending into high-margin services.

Klarna remains a leading BNPL player but struggles to break free from its lending-heavy model.

In this scenario, Klarna struggles with rising credit losses, increased regulation, and funding cost pressure.

A strong debut could reopen the IPO market for fintech unicorns like Revolut, Chime, and Stripe (not that Stripe actually wants to go public, even though we keep wishing it).

And more importantly—Klarna’s IPO will be a bellwether for whether public markets are ready to embrace fintechs again or if the sector remains stuck in a cycle of high-growth skepticism. Investors will be watching closely to see if Klarna is a category-defining fintech platform or just another lending business fighting an uphill battle against regulation and credit risk.

None of this is investment advice. I wrote this in bed on vacation in Disney World. Do your own homework.

TL;DR: Multiples are UP week-over-week.

Top 10 Medians:

Revenue multiples are a shortcut to compare valuations across the technology landscape, where companies may not yet be profitable. The most standard timeframe for revenue multiple comparison is on a “Next Twelve Months” (NTM Revenue) basis.

NTM is a generous cut, as it gives a company “credit” for a full “rolling” future year. It also puts all companies on equal footing, regardless of their fiscal year end and quarterly seasonality.

However, not all technology sectors or monetization strategies receive the same “credit” on their forward revenue, which operators should be aware of when they create comp sets for their own companies. That is why I break them out as separate “indexes”.

Reasons may include:

From a macro perspective, multiples trend higher in low interest environments, and vice versa.

Multiples shown are calculated by taking the Enterprise Value / NTM revenue.

Market Cap fluctuates with share price day to day, while Total Debt and Cash are taken from the most recent quarterly financial statements available. That’s why we share this report each week - to keep up with changes in the stock market, and to update for quarterly earnings reports when they drop.

Historically, a 10x NTM Revenue multiple has been viewed as a “premium” valuation reserved for the best of the best companies.

Companies that can do more with less tend to earn higher valuations.

Three of the most common and consistently publicly available metrics to measure efficiency include:

A few other notes on efficiency metrics:

Decreasing your OPEX relative to revenue demonstrates Operating Leverage, and leaves more dollars to drop to the bottom line, as companies strive to achieve +25% profitability at scale.

The most common buckets companies put their operating costs into are:

All of these are taken on a Gaap basis and therefore INCLUDE stock based comp, a non cash expense.