37% of Sezzle Anywhere Orders Occur in-Store Amid BNPL Momentum

The momentum of buy now, pay later (BNPL) remains unabated, Sezzle management said on the company’s conference call on Thursday (Aug. 7), marked by double-digit growth in revenues, strong uptake in subscriptions and in-store purchases and active consumers.

But investors sent the shares down sharply, off 23% in after-hours trading, retracing the more than 200% gains seen in the stock year to date.

Disrupting the Payments Landscape

During the conference call with analysts, CEO Charlie Youakim said: “We continue to disrupt the existing payments industry. I’m sure you’ve noticed it just like we have, as it seems like there’s an article coming out every other week in a major publication talking about the growth of BNPL and its impact on the world. Some of these publications get it and understand that this product is helps consumers budget and manage their spending.

“And others don’t and just regurgitate the standard ‘consumers using credit is bad’ mantra that’s been out there since the invention of the credit card. Even with the negative press, we’re happy,” he told analysts.

He recounted that the criticisms are reminiscent of the 1950s, when cards were introduced, warning of overspending — but by the 1970s, he said, half of households held cards.

“We think BNPL will evolve into a similar story, including the pushback from the media along the way,” Youakim said.

Difference Versus Credit Cards

He stated on the call: “Our flexibility allows payments to be matched to budgets, which is critically important for a large segment of consumers. As a reminder, customers must be current with us, or they aren’t allowed to continue to use this as a payment method. This is one of the key areas where we differ from credit cards.”

Drilling down into the results, the CEO said that revenues were up 76% to $98.7 million, and he said, too, that “we are also still on pace with our guidance,” which projects adjusted net income rising 85% year on year.

The company spent $8.8 million on marketing in the second quarter, said Youakim, compared to $1 million in the previous year.

“We don’t take this lightly as we value every dollar, but we also believe that this is the right time for this future investment as our profitability and positive free cash flow have positioned us well to both grow and reinvest.”

Monthly active users rose 52% year over year, and as Yoaukim said, “the engagement from revenue generating users increased 138%.”

Earnings materials revealed that there were 2.8 million active consumers in the second quarter. There were 412,000 merchants in the latest quarter, up from 346,000 in the first quarter. Monthly on-demand and subscriber counts reached 748,000, compared to 462,000 last year, and were up 14% sequentially.

“These users have strong lifetime values due to the repeat and recurring nature of their interactions with Sezzle, with subscription services at the forefront of that recurring engagement,” Youakim said. “I know many of you think of us as an online payment method, but take note, 37% of Anywhere orders are in store.”

The Anywhere offering gives consumers access to pay with Sezzle wherever Visa is accepted.

Purchase frequency was up year-over-year but flat sequentially. Youakim said the trend was due to the “launch of On Demand as it has shown a significant amount of growth in a very short time. Longer term, the short-term investment with On Demand users will lead to greater profitability. Our On Demand users are profitable, but just not as profitable as our premium or anywhere subscribers. But over time, we believe that On Demand users will migrate further into our products suite and become future Anywhere enthusiasts.”

Sezzle CFO Karen Hartje said on the call that adjusted net income nearly doubled, growing 91.8% year over year; gross merchandise value (GMV) grew 74.2% year-over-year to $927 million.

There was an increase in provision for credit losses to 2.2% of GMV “as we continue leaning into growth while meeting our stated target of 2.5 to 3% annual provision,” said the CFO.

Asked on the call about the competitive environment, Youakim said that the pricing environment has been relatively stable.

As he told analysts, with a nod to the critics of the BNPL industry, “talk is cheap, and we plan to keep letting our results do the talking.”