Klarna moves its CFO search to New York, and the market reprices it as a lender

Klarna announced that CFO Niclas Neglen, after six years, and CMO David Sandstrom, of nearly a decade, are leaving, on the same day the company tempered its full-year guidance and its stock fell about 22%; both are to transition out by early 2027.

Klarna said it has begun a search for a New York-based CFO.

Chief Marketing Officer David Sandstrom will depart at the beginning of next year after nine years, and Siemiatkowski said Sandstrom built one of the most recognized brands in global finance.

Gross merchandise value jumped 18% to $36.6 billion in the second quarter.

Active customers rose 8% to 120 million and active merchants increased 54% to 1.2 million.

Siemiatkowski said on the second-quarter earnings call: "This is an early heads up, not a goodbye" and "Nothing changes tomorrow."

Klarna cut its full-year revenue outlook to $4.08 billion to $4.16 billion, citing weakness in German retail spending, its largest market in Europe.

Transaction margin outlook was raised to $1.62 billion to $1.65 billion, or 1.09% of GMV, up from the 1.04% Klarna guided in May.

Klarna said neither transition was the result of any disagreement with the company on matters related to its operations, policies or practices.

Klarna shares fell an additional 2.19% on Wednesday, closing the regular session at $14.73.

Klarna reported second-quarter diluted earnings per share of $0.01, beating Wall Street expectations, and a surprise $9 million net profit.

Revenue of $1.04 billion exceeded the $988 million expectation by about $52 million, roughly 5%.

Transaction margin dollars rose 42% to $446 million, and Klarna now says transaction margin dollars will be its north-star KPI instead of GMV.

Klarna now expects gross merchandise volume of $149 billion to $151 billion, down from more than $155 billion, largely due to currency conversions and a softening in Germany, its largest market by volume.

Morningstar senior equity analyst Niklas Kammer wrote that transaction margin dollar guidance was raised for the full year but still fell short of expectations, and that declining visibility into volume growth resulted in a material two-percentage-point-per-year reduction in his volume growth expectations.

The transaction margin guidance of 1.09% of GMV versus 1.04% in May is an increase of five basis points.

Klarna will measure originations of its long-term lending product Fair Financing in the U.S. and Germany at fair value, meaning income will be booked as an upfront gain rather than over the life of the loan.

Neglen said Klarna is shifting to fair value accounting as it looks to sell more loans on the secondary market and limit loans kept on its balance sheet, having ramped forward flows to the point where substantially all loans will be eligible to be sold in the second half of the year.

KBW analyst Sanjay Sakhrani said the shift to fair value accounting mid-year is likely to raise some questions.

Zacks Investment Research stock strategist Jeremy Mullin said Klarna is telling the market it would rather be smaller and more profitable than chase GMV, that pairing that pivot with CFO news isn't sitting well, and that the sell-off signals traders won't take the margin story on faith with U.S. transaction margin still far behind mature markets.

The U.S. is Klarna's largest market by revenue and its fastest-growing large market, with more than 30 million customers.

Shawn Cole, president of executive search firm Cowen Partners, said having the CFO based in London created some strain now that Klarna is U.S.-listed, that naming New York in the press release is of note as a prestige and capital-markets signal, and that the mandate shifts toward a leader with U.S. public company experience, capital markets expertise, credit and balance-sheet sophistication, and banking and regulated financial markets experience.

Klarna trades on the New York Stock Exchange under the ticker KLAR, and Sequoia Capital, an investor since 2010, remains its largest institutional shareholder.

A 22.3% fall followed by a further 2.19% fall is a cumulative decline of about 24%.

Chief operating officer Camilla Giesecke left Klarna in April after more than nine years.

A $9 million net profit on $1.04 billion of revenue is a net margin of about 0.9%.

The GMV guidance midpoint of $150 billion is about $5 billion, or roughly 3%, below the prior figure of more than $155 billion.

More than 30 million U.S. customers out of 120 million active customers is about a quarter of the base.