Sezzle Inc. Reports Strong Growth Amid Challenges

Sezzle Inc. ((SEZL)) has held its Q2 earnings call. Read on for the main highlights of the call.

Sezzle Inc.’s recent earnings call conveyed a generally positive sentiment, underscored by robust revenue growth and strong customer engagement. The company emphasized its strategic marketing investments and high customer satisfaction levels. However, challenges such as a decline in GAAP net income, increased credit losses, and lower profitability from new On-Demand users were also acknowledged. The ongoing lawsuit with Shopify remains a point of concern.

Strong Revenue Growth

Sezzle reported an impressive 76.4% year-over-year increase in total revenue, reaching $98.7 million for the second quarter. This substantial growth highlights the company’s successful efforts in expanding its market presence and increasing its revenue streams.

Net Income and Profitability

The company saw its adjusted net income nearly double, growing 91.8% year-over-year to $24.4 million. Additionally, adjusted EBITDA increased by 106% to $37.9 million, representing 38.4% of total revenue. These figures underscore Sezzle’s effective cost management and operational efficiency.

Marketing Investment

Sezzle significantly increased its marketing spend to $8.8 million in Q2, up from $1 million the previous year. This investment is aimed at enhancing customer acquisition and retention, reflecting the company’s commitment to long-term growth.

Customer Engagement Metrics

Monthly active users rose by 52% year-over-year, with engagement from revenue-generating users increasing by 138%. These metrics demonstrate Sezzle’s success in boosting user activity and generating more revenue from its customer base.

High NPS Score

Sezzle achieved an impressive Net Promoter Score (NPS) of 75, indicating strong customer satisfaction and loyalty. This high score suggests that customers are likely to recommend Sezzle’s services to others, which is crucial for sustained growth.

Decline in GAAP Net Income

The earnings call noted a slight decrease in GAAP net income, attributed to a smaller discrete tax benefit in 2025 compared to an outsized benefit in 2024. This decline highlights the impact of tax-related factors on the company’s financial results.

Provision for Credit Losses

Sezzle’s provision for credit losses increased to 2.2% of GMV as the company pursued growth, though it remained within the target range of 2.5% to 3%. This indicates a cautious approach to managing credit risk while expanding its business.

Lower Profitability of On-Demand Users

On-Demand users, a significant growth driver, are less profitable than Premium or Anywhere subscribers. This presents a challenge for Sezzle as it seeks to balance growth with profitability.

Lawsuit with Shopify

No updates were provided on the lawsuit with Shopify, which could take 3 to 5 years to resolve. This ongoing legal matter remains a potential risk factor for the company.

Forward-Looking Guidance

Sezzle’s forward-looking guidance remains optimistic, with CEO Charlie Youakim highlighting strong financial performance and strategic investments. The company projects adjusted EBITDA for 2025 at $170 million to $175 million, reflecting a balanced growth strategy that includes managing risk and maintaining profitability. Sezzle is focused on expanding its product offerings and enhancing customer engagement, with significant increases in both monthly active users and revenue-generating user engagement.

In conclusion, Sezzle Inc.’s earnings call painted a picture of strong growth and strategic investments, tempered by certain financial challenges and ongoing legal issues. The company’s robust revenue increase and high customer satisfaction levels are promising, but the decline in GAAP net income and lower profitability from On-Demand users require careful management. Investors will be keenly watching how Sezzle navigates these challenges while maintaining its growth trajectory.