(Bloomberg) -- Klarna Bank AB swung to an adjusted profit in the first quarter as the buy-now-pay-later firm slashed costs, making progress ahead of potentially one of the biggest stock market debuts of the year. 

The Stockholm-based fintech said adjusted operating income was 229 million kronor ($21.6 million) for the three months through March, from a loss of 498 million kronor in the same period a year ago. 

Including restructuring costs, share payments and other elements, Klarna shrank its operating losses 78% on a year ago to 263 million kronor. 

“Klarna continues its acceleration with 29% revenue growth year on year,” Sebastian Siemiatkowski, chief executive officer, said in a statement. “We have once again delivered a profitable quarter.”

The firm, once Europe’s most valuable startup before a downturn in fintech valuations, has been profitable in two of the last three quarters on an adjusted basis. Revenue in the US, now its biggest market, rose by 38% year-on-year, as it targets further expansion via partnerships with the likes of Uber, Expedia and Hotels.com.

Net credit losses were 1.2 billion kronor, up from 775 million kronor a year ago, as Klarna customers spread the cost of merchandise worth 247 billion kronor, up 17% year-on-year. 

AI Cost Cuts

Klarna reduced operating expenses by 11% in the first quarter compared to a year ago, with the firm hailing artificial intelligence for producing much of the savings. 

David Sandström, chief marketing officer at Klarna, said last week the firm’s use of AI was “driving more marketing activity while saving tens of millions of dollars a year.” He said one example was using AI-generated pictures instead of paying for stock photos. 

Staff at the firm, which has a partnership with OpenAI, have built over 300 generative AI projects for internal use. 

IPO Ready

In May, Siemiatkowski said his firm was “definitely ready” for an initial public offering. The fintech confirmed this week it had set up a new UK-based holding company — a key milestone that gives the firm flexibility on where it will list. 

It also means the company has eliminated preferential rights for early shareholders, which were a source of boardroom drama over governance issues in November.

Klarna has attracted investment from backers including Sequoia Capital, SoftBank’s Vision Fund and Mubadala. 

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