Sezzle Reports First-Quarter 2024 Results

Rhea-AI Summary

Sezzle Inc. (NASDAQ: SEZL) reports strong financial results for the first quarter of 2024, with GAAP Net Income exceeding 2023's total. The company's focus on profitable growth led to a YoY increase in Underlying Merchant Sales, Total Income, and Operating Income. Sezzle raised FY2024 GAAP Net Income guidance from $20.0 million to $30.0 million. The company also announced a new $150.0 million receivables funding facility and updated guidance for FY2024. Sezzle continues to prioritize equity capital management and shareholder returns.

Positive

• Strong financial results for 1Q24, with GAAP Net Income exceeding 2023's total.

• YoY increase in Underlying Merchant Sales, Total Income, and Operating Income.

• Increased FY2024 GAAP Net Income guidance from $20.0 million to $30.0 million.

• New $150.0 million receivables funding facility with improved terms to accelerate growth.

• Updated FY2024 guidance on Total Income Growth and GAAP Diluted Earnings per Share.

• Equity capital management focus with $3.5 million already repurchased.

Negative

• Loss for the Fair Value Adjustment on Warrants of $1.3 million in 1Q24.

• Delisting from the ASX resulted in amendments to outstanding warrant obligations.

• Sezzle recognized a loss for the Fair Value Adjustment on Warrants in 1Q24.

• Transaction Related Costs increased as a percentage of UMS and Total Income YoY.

• Total Operating Expenses increased by 13.3% YoY in 1Q24.

Minneapolis, MN, May 08, 2024 (GLOBE NEWSWIRE) -- Sezzle Inc. (NASDAQ:SEZL) (Sezzle or Company) // Purpose-driven digital payment platform, Sezzle, is pleased to update the market on key financial metrics for the quarter ended March 31, 2024.

“This quarter’s results are a testament to the Company’s commitment and strategic focus on profitable growth, as GAAP Net Income for 1Q24 exceeded GAAP Net Income for all of 2023,” noted Charlie Youakim, Sezzle Chairman and CEO. “Further, the successful refinancing of our credit facility, putting us on a solid foundation, coupled with our strategic initiatives gives us the confidence to increase our FY2024 GAAP Net Income guidance from $20.0 million to $30.0 million.”

First-Quarter 2024 Highlights

• Underlying Merchant Sales (UMS) rose by 33.2% YoY to $492.7 million, setting a new non-holiday UMS record. The YoY growth was driven by increased consumer engagement, as evidenced by the overall consumer purchase frequency increasing to 4.5 times in 1Q24 from 3.1 times in 1Q23[1].

• • The top 10% of consumers, as measured by UMS, transacted 53 times per year based on transaction activity during the rolling twelve-month period ending March 31, 2024.

• Total Income for the quarter was $47.0 million, representing a YoY increase of 35.5%. As a percentage of UMS, Total Income reached an all-time high of 9.5%.

• In 1Q24, Total Operating Expenses increased 13.3% YoY to $33.1 million. The increase was due to the YoY increase in Transaction Expense and Provision for Uncollectible Accounts, resulting from increased transaction volume. However, as a percentage of UMS and Total Income, Total Operating Expenses decreased 1.2 and 13.8 percentage points, respectively, to 6.7% and 70.6%.

• Transaction Related Costs as a percentage of UMS and Total Income increased YoY from 3.6% and 38.4% to 4.3% and 44.7%, respectively. The increase in costs as a percentage of UMS and Total Income was primarily due to the outperformance of the Provision for Credit Losses in 1Q23 relative to 1Q24.

• Non-transaction Related Operating Expenses decreased 16.1% YoY to $16.2M. As a percentage of Total Income, Non-transaction Related Operating Expenses fell 21.2 percentage points YoY to 34.5% from 55.7%, reflecting the Company’s commitment to accelerating top-line growth while lowering operating expenses.

• Due to robust top-line performance and a continued focus on operating efficiency, Operating Income surged by 155.3% YoY to a record $13.8 million. This represents a 13.8 percentage point increase in Operating Margin from 15.6% in 1Q23 to 29.4% in 1Q24.

• Total Income Less Transaction Related Costs rose to $26.0 million in 1Q24 compared to $21.4 million in the prior year driven by top-line growth and declined as a percentage of Total Income to 55.3% due to higher Transaction Related Costs.

• GAAP Net Income reached a new quarterly high of $8.0 million in 1Q24, exceeding FY23 GAAP Net Income of $7.1 million. The resulting GAAP Diluted Earnings per Share[2] came in at $1.34 for 1Q24, compared to $0.31 in 1Q23 and $1.25 for FY23.

• The Company posted Adjusted EBTDA and Adjusted EBITDA (non-GAAP financial measures) of $10.9 million and $15.0 million, respectively, for the quarter ended March 31, 2024.

First-Quarter Balance Sheet and Liquidity

• As of March 31, 2024, Sezzle had $82.2 million of cash on hand ($4.4 million restricted) and $72.0 million drawn on its $100.0 million credit facility.

• Total Stockholders’ Equity for 1Q24 stood at $29.6 million, an increase of 116.7% YoY and 34.0 % QoQ.

• During the quarter, due to Sezzle’s delisting from the ASX, the Company amended the terms of all outstanding warrant obligations, resulting in the conversion of the warrants from liability to stockholders' equity. Therefore, the Company will no longer remeasure and recognize gains or losses on changes in the fair market value of the outstanding warrants.

• • For the quarters ended March 31, 2024 and 2023, Sezzle recognized a loss for the Fair Value Adjustment on Warrants of $1.3 million ($0.21 per diluted share) and $0.4 million ($0.08 per diluted share²), respectively, within Other Income (Expense) on the Consolidated Statements of Operations and Comprehensive Income.

• On April 22, 2024, Sezzle announced a new $150.0 million receivables funding facility with an affiliate of Bastion Management II (Bastion), replacing the previous $100 million facility established with Bastion and affiliates in October 2022. The improved terms of the new facility significantly reduce the Company’s borrowing costs (from SOFR plus 11.50% to 3-month Term SOFR plus 6.75%) and provide additional liquidity to accelerate top-line growth and pursue new strategic initiatives.

Updated FY2024 Guidance

• Raising the following components of FY2024 guidance:

• • GAAP Net Income: $30.0 million versus $20.0 million provided with 4Q23 earnings.

• • Increasing Total Income Growth: 25% versus 20% provided with 4Q23 earnings.

• Including new guidance on GAAP Diluted Earnings per Share of approximately $5.00.

• Maintaining Total Income Less Transaction Related Costs at 50% of Total Income.

Equity Capital Management

• As of May 7, 2024, Sezzle has repurchased $3.5 million as part of the $5.0 million stock repurchase program announced on December 22, 2023. Management will continue to evaluate capital return options for shareholders including, but not limited to, dividends, incremental share repurchases, or a combination of both.

Upcoming Events

• The Company will host its 2024 Annual Meeting of Shareholders on June 13, 2024 at 5:00 p.m. (U.S. Eastern Time) via live webcast conducted exclusively online at: https://meetnow.global/MFH4YSX. Please refer to the definitive proxy statement filed on April 23, 2024, for further information regarding the event.

• Sezzle Management will participate in the upcoming investor conferences:

• • May 16, 2024: Needham’s 19th Annual Technology, Media, & Consumer Conference.

• • May 22-23, 2024: B. Riley Securities’ 24th Annual Institutional Investor Conference.

• • June 18, 2024: HSBC Global Digital Finance Forum 2024.

• • June 25, 2024: Northland Growth Conference 2024.

Quarterly Conference Call and Presentation

The Company will host its first quarter earnings conference call on May 08, 2024, at 5:00pm ET.

To register for the call, please navigate to: https://dpregister.com/sreg/10188081/fc2ce10535

Upon registration, participants will receive the dial-in number. Those without internet access or unable to pre-register may dial in by calling: 1-866-777-2509 (US toll free) or 1-412-317-5413 (international toll). A replay will be available until May 15, 2024. To access the replay dial 1-877-344-7529 (US toll free) or 1-412-317-0088 (International toll). Replay access code: 3128697.

In conjunction with the earnings call, the Company will release its presentation on the Sezzle Investor Relations website before the call. Please navigate to the Sezzle Investor Relations website for the presentation that management will review on the call.

Investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when we establish reserves for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.

Contact Information

Lee Brading, CFA Investor Relations +1 651 240 6001 InvestorRelations@sezzle.com

Erin Foran Media Enquiries +1 651 403 2184 erin.foran@sezzle.com

About Sezzle Inc.

Sezzle is a fintech company on a mission to financially empower the next generation. Sezzle’s payment platform increases the purchasing power for millions of consumers by offering interest-free installment plans at online stores and select in-store locations. Sezzle’s transparent, inclusive, and seamless payment option allows consumers to take control over their spending, be more responsible, and gain access to financial freedom.

For more information visit sezzle.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements include our expectations, whether stated or implied, regarding our financing plans and other future events.

Forward-looking statements generally can be identified by the use of words such as "anticipate," "expect," "plan," "could," "may," "will," "believe," "estimate," "forecast," "goal," "project," other words or expressions of similar meaning (or the negative versions of such words or expressions). These forward-looking statements address various matters including statements regarding the timing or nature of future operating or financial performance or other events. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others: impact of the “buy-now, pay-later” (“BNPL”) industry becoming subject to increased regulatory scrutiny; impact of operating in a highly competitive industry; impact of macro-economic conditions on consumer spending; our ability to increase our merchant network, our base of consumers and underlying merchant sales (UMS); our ability to effectively manage growth, sustain our growth rate and maintain our market share; our ability to maintain adequate access to capital in order to meet the capital requirements of our business; impact of exposure to consumer bad debts and insolvency of merchants; impact of the integration, support and prominent presentation of our platform by our merchants; impact of any data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions; impact of key vendors or merchants failing to comply with legal or regulatory requirements or to provide various services that are important to our operations; impact of the loss of key partners and merchant relationships; impact of exchange rate fluctuations in the international markets in which we operate; impact of our delisting from the Australian Securities Exchange and trading on Nasdaq Capital Market as our sole trading exchange; our ability to protect our intellectual property rights and third party allegations of the misappropriation of intellectual property rights; our ability to retain employees and recruit additional employees; impact of the costs of complying with various laws and regulations applicable to the BNPL industry in the United States and Canada; and our ability to achieve our public benefit purpose and maintain our B Corporation certification. The Company cautions investors not to place considerable reliance on the forward-looking statements contained in this press release. You are encouraged to read the Company's filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements. The Company's business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

Non-GAAP Financial Measures

To supplement our operating results prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), we present the following non-GAAP financial measures: Total income less transaction related costs; transaction related costs; non-transaction related operating expenses; adjusted earnings before taxes, depreciation, and amortization (“Adjusted EBTDA”); adjusted operating expenses; adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”); and Adjusted EBITDA margin. Definitions of these non-GAAP financial measures and summaries of the reasons why management believes that the presentation of these non-GAAP financial measures provide useful information to the company and investors are as follows:

• Total income less transaction related costs is defined as GAAP total income less transaction related costs. Transaction related costs is the sum of GAAP transaction expense, provision for credit losses, and net interest expense less certain non-recurring charges as detailed in the reconciliation table of GAAP operating income to non-GAAP total income less transaction related costs above. We believe that total income less transaction related costs is a useful financial measure to both management and investors for evaluating the economic value of orders processed on the Sezzle Platform;
  
  

• Non-transaction related operating expenses is defined as the sum of GAAP personnel; third-party technology and data; marketing, advertising, and tradeshows; and general and administrative operating expenses. We believe that non-transaction related operating expenses is a useful financial measure to both management and investors for evaluating our management of operating expenses not directly attributable to orders processed on the Sezzle Platform.
  
  

• Adjusted EBTDA is defined as GAAP net income, adjusted for certain non-cash and non-recurring charges including depreciation, amortization, equity and incentive–based compensation, and merger-related costs as detailed in the reconciliation table of GAAP net income to adjusted EBTDA. We believe that this financial measure is a useful measure for period-to-period comparison of our business by removing the effect of certain non-cash and non-recurring charges that may not directly correlate to the underlying performance of our business.
  
  

• Adjusted EBITDA is defined as GAAP net income, adjusted for certain non-cash and non-recurring charges including depreciation, amortization, equity and incentive–based compensation, and merger-related costs, as well as net interest expense as detailed in the reconciliation table of GAAP net income to adjusted EBITDA. We believe that this financial measure is a useful measure for period-to-period comparison of our business by removing the effect of certain non-cash and non-recurring charges, as well as funding costs, that may not directly correlate to the underlying performance of our business.
  
  

• Adjusted EBITDA margin is defined as Adjusted EBITDA divided by GAAP total income. We believe that this financial measure is a useful measure for period-to-period comparison of our business’ unit economics by removing the effect of certain non-cash and non-recurring charges, as well as funding costs, that may not directly correlate to the underlying performance of our business.

Additionally, we have included these non-GAAP measures because they are key measures used by our management to evaluate our operating performance, guide future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of resources. Therefore, we believe these measures provide useful information to investors and other users of this press release to understand and evaluate our operating results in the same manner as our management and board of directors. However, non-GAAP financial measures have limitations, should be considered supplemental in nature, and are not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP. These limitations include the following:

• Total income less transaction-related costs is not intended to be measures of operating profit or cash flow profitability as they exclude key operating expenses such as personnel, general and administrative, and third-party technology and data, which have been, and will continue to be for the foreseeable future, significant recurring GAAP expenses.

• Transaction related costs exclude significant expenses such as personnel, general and administrative, and third-party technology and data, which have been, and will continue to be for the foreseeable future, significant recurring GAAP expenses.

• Non-transaction related operating expenses exclude significant expenses, including transaction expense and provision for credit losses, which have been, and will continue to be for the foreseeable future, significant recurring GAAP expenses.

• Adjusted EBTDA, adjusted EBITDA, and adjusted EBITDA margin exclude certain recurring, non-cash charges such as depreciation, amortization, and equity and incentive–based compensation, which have been, and will continue to be for the foreseeable future, recurring GAAP expenses. Further, these non-GAAP financial measures exclude certain significant cash inflows and outflows, which have a significant impact on our working capital and cash.

• Adjusted EBITDA excludes net interest expense, which has a significant impact on our GAAP net income, working capital, and cash.

• Long-lived assets being depreciated or amortized may need to be replaced in the future, and these non-GAAP financial measures do not reflect the capital expenditures needed for such replacements, or for any new capital expenditures or commitments.

• These non-GAAP financial measures do not reflect income taxes that may represent a reduction in cash available to us.

• Non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs.

• Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Because of these limitations, you should not consider these non-GAAP financial measures in isolation or as substitutes for analysis of our financial results as reported under GAAP, and these non-GAAP financial measures should be considered alongside other financial performance measures, including net income and other financial results presented in accordance with GAAP. We encourage you to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

 

 

 

 

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[1] Represents average purchase frequency for the last 90 days as of the respective quarter end.

[2] Effective May 11, 2023, Sezzle performed a 1-for-38 stock split. Share and per-share amounts are retroactively restated.

Attachments

• Appendix - Reconciliation of GAAP to Non-GAAP Financial Measures
• 1Q24 GAAP Operating Results and 1Q24 Non-GAAP Operating Results

FAQ

What are Sezzle's key financial metrics for the first quarter of 2024?

Sezzle's key financial metrics for 1Q24 include a YoY increase in Underlying Merchant Sales, Total Income, and Operating Income.

What is Sezzle's updated FY2024 guidance for GAAP Net Income?

Sezzle raised its FY2024 GAAP Net Income guidance from $20.0 million to $30.0 million.

What new funding facility did Sezzle announce in April 2024?

Sezzle announced a new $150.0 million receivables funding facility with improved terms to accelerate growth.

What equity capital management initiatives is Sezzle focusing on?

Sezzle is prioritizing equity capital management with $3.5 million already repurchased.

What negative impact did the delisting from the ASX have on Sezzle?

The delisting resulted in amendments to outstanding warrant obligations, with Sezzle recognizing a loss for the Fair Value Adjustment on Warrants.