(Bloomberg) -- Klarna shrank its net losses 76% in 2023 as the buy-now-pay-later firm makes preparations for one of the biggest IPOs of the year. 

The Stockholm-based fintech lost about 400 million kronor in the fourth quarter, having briefly moved into profit in the previous three months, taking its total net losses for the year to 2.5 billion kronor.  

“While we continue on our journey to long-term profitability, we made a conscious decision to invest in growth in the peak shopping season of Q4,” Sebastian Siemiatkowski, chief executive officer, said in a statement.

Revenue rose by 22% to 23.5 billion kronor ($2.3 billion) during the year, accelerating its pace of growth as it targeted further expansion in the US — which is now its biggest market, overtaking Germany. 

Klarna has begun laying the groundwork for an initial public offering that would allow new investors into the firm and potentially turn the page on a turbulent couple of years. Bloomberg News reported Tuesday that it was looking at a valuation of about $20 billion as it makes detailed plans to list in the third quarter. Siemiatkowski signaled last month that a US IPO might happen “quite soon.”

In recent years, the company’s price tag has swung wildly — slumping to $6.7 billion in 2022 from about $45.6 billion during the Covid pandemic —  as investors reconsidered the growth of easy credit at a time of rising interest rates. 

Bloomberg Intelligence estimated in January that Klarna had a valuation of about $17.5 billion, with the European fintech space more broadly recovering by focusing on cost optimization and margin management. Klarna’s results come as payments company Worldline SA reported its first annual loss as a public company. 

Klarna’s operating expenses shrank 16% to 14.5 billion kronor last year, with the group employing 4,201 people at the end of the year, down from 5,441 at the start, as part of Siemiatkowski’s pledge to restore the firm to profitability. The firm has hailed its investment in generative artificial intelligence for creating some of the savings, for example by handling the equivalent customer services questions of 700 full-time staff.

Klarna, once Europe’s most valuable startup, offers credit to about 150 million shoppers globally looking to spread the cost of online purchases. The value of goods sold using Klarna rose 17% last year and despite the inflation strain on customers in many markets, credit losses shrank by almost a third last year, and represented 0.38% of the value of goods sold.

Earlier this year, Klarna launched a monthly subscription plan in the US to offer deals on shopping and create a fresh revenue stream. 

Klarna’s shareholders were embroiled in a boardroom dispute in recent weeks that stemmed from co-founder Victor Jacobsson’s role at the company. Major backer Sequoia was at one stage calling for the resignation of the firm’s chairman, Michael Moritz, but later reversed course and replaced its own board representative instead. 

(Updates to add details of quarterly profit, BI valuation, AI savings from fourth paragraph.)

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