See the accompanying Notes to the Consolidated Financial Statements.

These unaudited consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP)(“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (SEC)(“SEC”) applicable to interim financial statements. While these consolidated financial statements and the accompanying notes thereof reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These consolidated financial statements and their accompanying notes should be read in conjunction with the consolidated financial statement disclosures in our 20202021 annual consolidated financial statements. Sezzle Income in the fourth quarter has historically been strongest for the Company, in line with consumer spending habits during the holiday shopping season. Operating results reported for the three and nine months ended September 30, 2021March 31, 2022 might not be indicative of the results for any subsequent period or the entire year ending December 31, 2021.2022.

Sezzle Inc. (the “Company” or “Sezzle”) uses the same accounting policies in preparing quarterly and annual consolidated financial statements. The Company consolidates the accounts of subsidiaries for which it has a controlling financial interest. The accompanying consolidated financial statements include all the accounts and activitiesactivity of Sezzle Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions are eliminated duringin consolidation.

None of the recent accounting pronouncements issuedWe conduct our operations through a single operating segment and, therefore, 1 reportable segment. There are no significant concentrations by the Financial Accounting Standards Board during the nine months ended September 30, 2021state or geographical location, nor are within scope for the Company; therefore, it does not expectthere any of the recent accounting pronouncements issued to have a material effect on the Company’s consolidated financial statements.significant individual customer concentrations by balance.

Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). FairThe accounting guidance includes a fair value measurements are reported in one of three levels reflectinghierarchy that prioritizes the inputs to valuation techniques used to determinemeasure fair value. The three levels of the fair value hierarchy are as follows:

The Company measures the value of its money market securities on a regular basis. The fair value of its money market securities, totaling $12,035$1,893,726 and $9,996,155$6,408,389 as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, are based on Level 1 inputs and are included within cash and cash equivalents on the consolidated balance sheets.

On February 25, 2022 the Company amended its existing line of credit covenants as disclosed in Note 3.7. Line of Credit within the notes to the consolidated financial statements. Additionally, on March 10, 2022 the Company undertook a workforce reduction to provide the Company with an additional cost savings. Management is also exploring scaling back the Company’s international operations to further reduce the Company’s future expenses.

Sezzle receivesincome as disclosed within the consolidated statements of operations and comprehensive loss is comprised of merchant fees and rescheduled payment fees, less note origination costs.

Sezzle earns its income primarily from fees paid by merchants in exchange for Sezzle’s payment processing services. These fees are applied to the underlying sales to consumers passing through the Company’s platform and are predominantly based on a percentage of the consumer order value plus a fixed fee per transaction. Consumer installment payment plans typically consist of 4 installments, with the first payment made at the time of purchase and subsequent payments coming due every two weeks thereafter. Additionally, consumers mayConsumers are allowed to reschedule their initial installment plan by delaying payment for up to two weeks, for which Sezzle earnsone time without incurring a reschedule fee and the principal of a rescheduled payment fee. The total of merchant fees and rescheduledis not considered to be delinquent. If consumers reschedule a payment fees, less note origination costs,more than once in the same order cycle they are collectively referredsubject to as Sezzle income within the consolidated statements of operations and comprehensive loss.a reschedule fee. Note origination costs are comprised of costs paid to third-parties to obtain data for underwriting consumers which result in a successful transaction. Such costs which result in a declined order are recorded inwithin third-party technology and data within operating expenses inon the consolidated statements of operations and comprehensive loss.

Sezzle income is initially recorded as a reduction to notes receivable, net, within the consolidated balance sheets. Sezzle income is then recognized over the average duration of the note using the effective interest rate method. Total Sezzle income to be recognized over the duration of existing notes receivable outstanding was $4,536,345$4,611,497 and $3,458,222$5,240,919 as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Total Sezzle income recognized was $24,474,900$24,127,630 and $13,574,847$22,252,390 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $70,460,583 and $31,461,964respectively. Sezzle income in the fourth quarter has historically been strongest for the nine months ended September 30, 2021 and 2020, respectively.Company, in line with consumer spending habits during the holiday shopping season.

Sezzle also earns income from consumers in the form of account reactivation fees. These fees are assessed to consumers who fail to make a timely payment. Sezzle allows, at a minimum and subject to state jurisdiction regulation, a 48-hour waiver period where fees are dismissed if the installment is paid by the consumer. Account reactivation fees are recognized at the time the fee is charged to the consumer, less an allowance for uncollectible amounts. Account reactivation fee income recognized totaled $4,005,998$3,506,332 and $2,345,126$3,778,368 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $11,480,978 and $5,240,930 for the nine months ended September 30, 2021 and 2020, respectively.

Sezzle’s notes receivable comprise outstanding consumer principal and account reschedule fees that Sezzle reasonably expects to collect from its consumers. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, Sezzle’s notes receivable, related allowance for uncollectible accounts, and deferred net origination fees are recorded within the consolidated balance sheets as follows:

Sezzle maintains an allowance for uncollectible accounts at a level necessary to absorb estimated probable losses on principal and reschedule fee receivables from consumers. Any amounts delinquent after 90 days are charged-off with an offsetting reversal of the allowance for doubtful accounts through the provision for uncollectible accounts. Additionally, amounts identified as no longer collectible—such as when a consumer becomes deceased or bankrupt—are charged off immediately. Principal payments recovered after the 90 day charge-off period are recognized as a reduction to the allowance for uncollectible accounts in the period the receivable is recovered. Sezzle has not changed the methodology for estimating its allowance for uncollectible accounts during the ninethree months ended September 30, 2021.March 31, 2022.

Deferred Sezzle income is comprised of unrecognized merchant fees and consumer reschedule fees net of direct note origination costs, which are recognized over the duration of the note with the consumer and are recorded as an offset to Sezzle income on the consolidated statements of operations and comprehensive loss. Sezzle’s notes receivable had a weighted average days outstanding of 34 days, consistent with the prior year’s duration.

As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the balance of other receivables, net, on the consolidated balance sheets is comprised of the following:

Account reactivation fees are applied to principal installments that are delinquent for more than 48 hours (or longer depending on the regulations within a specific state jurisdiction) after the scheduled installment payment date. Any account reactivation fees associated with a delinquent payment are considered to be the same number of days delinquent as the principal payment. Account reactivation fees receivable, net, is comprised of outstanding account reactivation fees that Sezzle reasonably expects to collect from its consumers.

As of September 30, 2021March 31, 2022 and December 31, 2020,2021, Sezzle’s account reactivation fees receivable and related allowance for uncollectible accounts are recorded within the consolidated balance sheets as follows:

Sezzle maintains the allowance at a level necessary to absorb estimated probable losses on consumer account reactivation fee receivables. Any amounts delinquent after 90 days are charged-off with an offsetting reversal of the allowance for doubtful accounts through the provision for uncollectible accounts. Additionally, amounts identified as no longer collectible—such as when a consumer becomes deceased or bankrupt—are charged off immediately. Payments recovered after the 90 day charge-off period are recognized as a reduction to the allowance for uncollectible accounts in the period the receivable is recovered. Sezzle has not changed the methodology for estimating its allowance for uncollectible accounts during the ninethree months ended September 30, 2021.March 31, 2022.

Receivables from merchants primarily represent merchant fees charged, but not yet paid,receivable for orders settled with the Sezzle Virtual Card solution. Such receivables totaled $1,718,834 and $3,738,765 as of March 31, 2022 and December 31, 2021, respectively. Virtual card transactions are settled with the merchant for the full purchase price at the point of sale and Sezzle separately invoices the merchant for the merchant fees due to Sezzle.

Additionally, the Company. Additionally, duringCompany had other uncollectible receivables, net, which totaled $58,518 and $19,891 as of March 31, 2022 and December 31, 2021, respectively. During the three months ended September 30,March 31, 2022 and 2021, and 2020, the Company recorded direct write-downs of $539,242$194,033 and $110,392,$344,636, respectively, forrelated to these other uncollectible receivables from merchants which isare included in transaction expense on the consolidated statements of operations and comprehensive loss. Such write-downs are also included in the provision for uncollectible other receivables. Such write-downs forreceivables on the nine months ended September 30, 2021 and 2020 were $994,425 and $274,705, respectively.consolidated statements of cash flows.

Sezzle is currently entered into operating leases for its corporate office spaces in the United States, Canada, India, Lithuania, and Brazil. Total lease expense incurred for the three months ended September 30,March 31, 2022 and 2021 was $108,659 and 2020 was $88,958 and $163,546, respectively. Total lease expense incurred for the nine months ended September 30, 2021 and 2020 was $364,384 and $350,515,$137,180, respectively. Lease expense is recognized within general and administrative expenses on the consolidated statements of operations and comprehensive loss. Cash payments for leases totaled $105,266 and $154,022 for the three months ended March 31, 2022 and 2021, respectively

DuringRight-of-use assets and lease liabilities are recognized as of the nine months ended September 30, 2021, Sezzle renewed a portioncommencement date based on the present value of its operating leases in the United Statesremaining lease payments over the lease term which includes renewal periods that the Company is reasonably certain to exercise. Right-of-use assets and Canada, which it had previously determined it was unlikelylease liabilities are recorded within current assets and liabilities, respectively, on the consolidated balance sheets. The Company has elected not to renew. As a result, Sezzle recorded an increase in its operatingrecognize right-of-use assets and its corresponding lease liabilities on short-term leases with terms of $142,597.one year or less.

The expected maturity of the Company’s operating leases as of September 30, 2021March 31, 2022 is as follows:

TheAs of March 31, 2022, the weighted average remaining term of the Company’s operating leases is 0.71.4 years and its weighted average discount rate for all operating leases is 4.75%5.25%. As of September 30,December 31, 2021, the weighted average remaining term of the Company’s operating leases was 1.5 years and its weighted average discount rate for all operating leases was 5.25%. As of March 31, 2022, Sezzle has not entered into any lease agreements that contain residual value guarantees or financial covenants.

Sezzle offers its merchants an interest bearing program in which merchants may defer payment from the Company in exchange for interest. Merchant accounts payable in total were $90,735,441$95,273,209 and $60,933,272$96,516,668 as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, as disclosed in the consolidated balance sheets. Of these amounts, $78,605,159$77,793,261 and $53,528,501$78,097,910 were recorded within the merchant interest program balance as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.

DeferredEffective March 1, 2022, deferred payments retained in the program bear interest at the Secured Overnight Financing Rate (“SOFR”) plus 3 percent on an annual basis, compounding daily. Prior to that, deferred payments retained in the program bore interest at the LIBOR daily (3 month) rate plus three3 percent (3.0%) on an annual basis, compounding daily. The weighted average annual percentage yield was 3.18%3.19% and 4.76%3.27% for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 3.23% and 6.15% for the nine months ended September 30, 2021 and 2020, respectively. Interest expense associated with the program totaled $620,353$593,576 and $441,986$462,735 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $1,666,420 and $1,063,182 for the nine months ended September 30, 2021 and 2020, respectively.

Deferred payments are due on demand, up to $250,000 during any seven day period, at the request of the merchant. Any request larger than $250,000 is honored after 7 days. Sezzle reserves the right to impose additional limits on the program and make changes to the program without notice or limits. These limits and changes to the program can include but are not limited to: maximum balances, withdrawal amount limits, and withdrawal frequency.

On February 10, 2021, Sezzle entered into an agreement with Goldman Sachs Bank USA (the ‘Class A’ senior lender), and Bastion Consumer Funding II LLC and Bastion Funding IV LLC (the ‘Class B’ mezzanine lenders) for a $250,000,000 receivables funding facility. The funding facility has a maturity date of June 12, 2023 (a 28-month term from the agreement date). NaN percent of the total available funding facility ($125,000,000) is committed while the remaining 50 percent is available to the Company for expanding its funding capacity. The loan agreement is subject to both affirmative and negative covenants. The Company had an outstanding line of credit balance of $5,000,000$52,800,000 as of September 30, 2021 and isMarch 31, 2022, recorded within line of credit, net, as a non-current liability on the consolidated balance sheets.

Effective January 1, 2022, the Company amended its Revolving Credit and Security Agreement, dated as of February 10, 2021, as amended (the “2021 Credit Agreement” and, such amendment, the “January Credit Agreement Amendment”), which was entered into by Sezzle Funding SPE II, LLC, a wholly owned indirect subsidiary of Sezzle (the “Borrower”), Goldman Sachs Bank USA (the “Class A senior lender”), and Bastion Consumer Funding II LLC and Bastion Funding IV LLC (the “Class B mezzanine lenders���). The funding facilityJanuary Credit Agreement replaced references to LIBOR with the U.S. Federal Reserve’s Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment of 0.262% (collectively, “Adjusted SOFR”). The 2021 Credit Agreement carries an interest rate of 3-month LIBOR+Adjusted SOFR+3.375% and 3-month LIBOR+Adjusted SOFR+10.689% (the LIBORAdjusted SOFR floor rate is set at 0.25%) for funds borrowed from the Class A senior lender and the Class B lender,mezzanine lenders, respectively. As of September 30, 2021,March 31, 2022, the weighted average interest rate was 5.250%5.53%. Interest on borrowings is due on collection dates as specified in the loan agreement, typically fortnightly. For the three and nine months ended September 30, 2021, interest expense relating to the utilization of the line of credit was $185,035 and $1,172,366, respectively.

On April 14, 2020,February 25, 2022, the Company received loan proceeds inentered into an additional amendment (the “February Credit Agreement Amendment”) to the amount of $1,220,332 under the U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The PPP, established as2021 Credit Agreement. As part of the CARES Act, provides loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. PPP loans are uncollateralizedFebruary Credit Agreement Amendment, certain definitions and guaranteed by the SBA, and are forgivable after a “covered period” (eight or twenty-four weeks) as long as the borrower maintains its payroll levels and uses the loan proceeds for eligible expenses, including payroll, benefits, rent, and utilities. The forgiveness amount will be reduced if the borrower terminates employees or reduces salaries and wages more than 25% during the covered period. Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1% with payments deferred until the SBA remits the borrower’s loan forgiveness amount to the lender, or, if the borrower does not apply for forgiveness, ten months after the end of the covered period. PPP loan terms provide for customary events of default including payment defaults, breachesunder the 2021 Credit Agreement were amended to clarify the terms of representationsapplicable cure periods, involving replacement of the servicer and warranties,a required change in the level of availability and insolvency events and may be accelerated upondata exchanged with the occurrence of one or more of these events of default. Additionally, the PPP loan terms do not include prepayment penalties.backup servicer.

On June 24, 2021,February 25, 2022, the Company repaidentered into Amendment No. 1 (the “Limited Guaranty Amendment”) to that certain Limited Guaranty and Indemnity Agreement, dated as of February 10, 2021, by and among the loanCompany (as “Limited Guarantor” thereunder) and the Administrative Agent (the “Limited Guaranty”). The Limited Guaranty Amendment adjusted and provided alternatives for certain Limited Guarantor financial covenant measurement thresholds and required certain Limited Guarantor compliance reporting obligations during a defined modification period. The length of the modification period is dependent in full, comprising $1,220,332 in principalpart upon the ongoing status and $14,779 in accrued interest. The SBA reservesprogress towards the right to audit any PPP loan, regardlessclosing of size. These audits may occur after forgiveness has been granted or the loan has been repaid in full. In accordance with the CARES Act, all borrowers are required to maintain their PPP loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request.

Certain agreements also contain provisions that may require payments by the Company and are contingent on Sezzle and/or the third party meeting specified criteria, such as achieving volume targets and implementation benchmarks.

The computation for basic net loss per share is established by dividing net losses for the period by the weighted average shares outstanding during the reporting period, including repurchases carried as treasury stock. Diluted net loss per share is computed in a similar manner, with the weighted average shares outstanding increasing from the assumed exercise of employee stock options (including options classified as liabilities) and assumed vesting of restricted stock units (if dilutive). Given the Company is in a loss position, the impact of including assumed exercises of stock options and vesting of restricted stock units would have an anti-dilutive impact on the calculation of diluted net loss per share and, accordingly, diluted and basic net loss per share were equal for the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021.

We are a purpose-driven payments company that is on a mission to financially empower the next generation. Launched in 2017, we have built a digital payments platform that allows merchants to offer their consumers a flexible alternative to traditional credit. As of September 30, 2021,March 31, 2022, our platform has supported the business growth of 44,40049 thousand Active Merchants while serving 3.23.5 million Active Consumers. Through our payments products we aim to enable consumers to take control over their spending, be more responsible, and gain access to financial freedom. Our vision is to create a digital ecosystem benefiting all of our stakeholders— merchant partners, consumers, employees, communities and investors—while continuing to drive ethical growth.

The Sezzle Platform connects consumers with merchants via our core proprietary, digital payments platform that instantly extends credit at the point-of-sale. Our core product is differentiated from traditional lenders through our credit-and-capital-light approach, and we believe that it is mutually beneficial for our merchants and consumers given the network effects inherent in our platform. We enable consumers to acquire merchandise upfront and spread payments over four equal, interest-free installments over six weeks. We realize high repeat usage rates by many of our consumers, with the top 10% of our consumers measured by Underlying Merchant Sales (UMS, as defined below) transacting an average of 4947 times per year based on the transaction activity during the rolling twelve months ended September 30, 2021,March 31, 2022, although historical transaction activity is not an indication of future results.

Our core product offering is completely free for consumers who pay on time; instead, we generate a substantial majority of our revenues by charging our merchants fees in the form of a Merchant Discount Rate. We recently launchedalso offer Sezzle Up, an upgraded version of the core Sezzle experience which provides a credit-building solution for new-to-credit consumers, helping consumers adopt credit responsibly and build their credit history. WeAdditionally, we have also expanded our product suite to provide consumers with access to a long-term installment lending option through a partnership.partnerships, which is still in an early development stage.

A critical component of our business model is the ability to effectively manage the repayment risk inherent in allowing consumers to pay over time. To that end, a team of Sezzle engineers and risk specialists oversee our proprietary systems, identify transactions with elevated risk of fraud, assess the credit risk of the consumer and assign spending limits, and manage the ultimate receipt of funds. Further, we believe repayment risk is more limited relative to other traditional forms of unsecured credit because consumers primarily settle 25% of the purchase value upfront. Additionally, ongoing user interactions allow us to continuously refine and enhance the effectiveness of these platform tools through machine learning.

The information contained herein relating to the Zip Merger Agreement and the transactions contemplated thereby is qualified in this Form 10-Q includes “forward-looking statements” under Section 27Aits entirety by reference to the full text of the Securities ActZip Merger Agreement and Section 21E of the Exchange Act. All statements, other than statements of historical fact included in this Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Form 10-Q, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in this Form 10-Q. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available informationrelated documents attached as exhibits to the outcome and timing of future events. Nevertheless, and despiteCurrent Report on Form 8-K filed with the fact that management’s expectations and estimates are basedSEC on assumptions management believes to be reasonable and data management believes to be reliable, our actual results, performance or achievements are subject to future risks and uncertainties, any of which could materially affect our actual performance. Risks and uncertainties that could affect such performance include, but are not limited to:

We have set out below a discussion of the key factors that have affected our financial performance and that are expected to impact our performance going forward.

Our ability to profitably scale our business is reliant on adoption of the Sezzle Platform by both consumers and merchants. Changes in our Active Merchant and Active Consumer bases (as such terms are defined below) have had, and will continue to have, an impact on our results of operations. It is costly for us to recruit (and in some cases retain) Active Merchants. Turnover in our merchant base could result in higher than anticipated over-headoverhead costs.

We believe that we have built a sustainable, transparent business model in which our success is aligned with the financial success of our merchants and consumers. We earn fees from our merchants predominately based on a percentage of the UMS value plus a fixed fee per transaction, or the Merchant Discount Rate. We pay our merchants for transaction value upfront net of the merchant fees owed to us and assume all costs associated with the consumer payment processing, fraud and payment default. Merchant-related fees comprised approximately 82%83% and 83%82% of our Total Income for the three and nine months ended September 30,March 31, 2022 and 2021, respectively.

We depend on continued relationships with our current merchants or merchant partners and on the acquisition of new merchants to maintain and grow our business. We added 4,100 and 17,7002 thousand Active Merchants during the three and nine months ended September 30, 2021, respectively,March 31, 2022, totaling 44,40049 thousand Active Merchants on the platform at the end of the same period. Although for the three and nine months ended September 30, 2021,March 31, 2022, we did not currently depend on any one merchant for more than 10% of Merchant-related fees, our business is still at a relatively early stage and our merchant revenue is not as diversified as it might be for a more mature business.

Our integration into scaled e-commerce platforms is expected to give more merchants the opportunity to offer Sezzle as a payment option at checkout, and we expect that our partnerships with larger retailers such as Target will familiarize more consumers with the Sezzle Platform.

In addition, investment in sales, co-marketing, and offering of competitively priced merchant fee rates and incentives are critical for us to onboard new and retain existing merchants and grow utilization of the Sezzle Platform. We currently provide our merchants with a toolkit to grow their businesses. Our merchants gain access to our marketing efforts that begin with a launch campaign to introduce new brands to Sezzle consumers. We face intense competitive pressure to bring new larger merchants on to our platform. In order to stay competitive, we have and may continue to need to adjust our pricing or offer incentives to larger merchants to increase payments volume. These pricing structures with merchants include up-front cash payments, fee discounts, rebates, credits, performance-based incentives, marketing, and other support payments that impact our revenues and profitability. We expect to continue to incur substantial costs to acquire these larger merchants. Certain agreements contain provisions that may require us to make payments to certain of our merchants and are contingent on us and/or the merchantmerchants meeting specified criteria, such as achieving volume targets and

There is a risk that we may lose merchants for a variety of reasons, including a failure to meet key contractual or commercial requirements, or merchants shifting to other service providers, including competitors or in-house offerings. We also face the risk that our key partners could become competitors of our business if such partners are able to determine how we have designed and implemented our model to provide our services.

Our expanding product suite enables us to further promote our mission of financial empowerment, and the adoption of these products by our consumers is expected to drive operating and financial performance. In partnership with TransUnion, we engineered Sezzle Up, an upgraded version of the core Sezzle experience that launched in 2020 and supports consumers in building their credit scores by permitting us to report their payment histories to credit bureaus. As these consumers pay on time, their credit scores and spending limits on the Sezzle Platform can increase, which is likely tomay result in consumers making larger purchases that will generate an increase in merchant fees. Other parts of our product suite and proprietary merchant interface are specifically designed to streamline the merchant experience. For example, we believe that our Sezzle Virtual Card bolsters our omnichannel offering and provides a rapid-installation, point-of-sale option for brick-and-mortar retailers through its compatibility with Apple Pay and Google Pay. With the Sezzle Virtual Card, consumers can enjoy in-store shopping with the convenience of immediately tapping into the Sezzle Platform with the “swipe” of their card at the point-of-sale. In addition, we recently partneredwork with Ally Financialother lending partners to offer consumers at participating merchants longer-term, monthly fixed-rate installment-loan products, that extend up to 60 months, which will support consumer purchases for big ticket items and those transactions earn us a fee from Ally Financial.on such transactions. We continue to seek out new partners to adopt our existing products and strategize on new products to complement our platform and core products, which we believe will have an impact on continued growth of our business.

To continue to grow our business, we need to maintain and increase our existing Active Consumer base and introduce new consumers to our platform. We rely heavily on our growing merchant base to offer our core product to new consumers at the point of sale for online transactions. We have developed newcontinue to provide offerings such as Sezzle Spend, which is a way we can issue credit to enable our merchants to offerSezzle accounts for various reasons, often involving rewards and promotions to new consumers. We have consistently added Active Consumers each quarter since our inception, while the number of transactions per Active Consumer has typically increased each quarter as well. We added 309,000 and 962,0000.1 million Active Consumers during the three and nine months ended September 30, 2021, respectively,March 31, 2022, totaling 3,193,0003.5 million Active Consumers on the platform at the end of the same period. In addition, weWe realize high repeat usage rates as a result of our differentiated offering, with the top 10% of our consumers measured by UMS transacting 4947 times per year based on the transaction activity during the rolling twelve months ended September 30, 2021,March 31, 2022, although historical transaction activity is not an indication of future results.

A critical component of our business model is the ability to effectively manage the repayment risk inherent in allowing consumers to pay over time. To that end, a team of Sezzle engineers and risk specialists oversee our proprietary systems, identify transactions with elevated risk of fraud, assess the credit risk of the consumer and assign spending limits, and manage the ultimate receipt of funds. Because consumers primarily settle 25% of the purchase value upfront at the point of sale, we believe repayment risk is more limited relative to other traditional forms of unsecured consumer credit. Further, ongoing user interactions allow us to continuously refine and enhance the effectiveness of these platform tools through machine learning.

We absorb the costs of all core product uncollectible receivables from our consumers. The provision for uncollectible accounts is a majorsignificant component of our operating expenses, and excessive exposure to consumer repayment failure may impact our results of operations. We believe our systems and processes are highly effective and allow for predominantly accurate, real-time decisions in connection with the consumer transaction approval process. As our consumer base grows, the availability of data on consumer repayment behavior will also better optimize our systems and ability to make real-time consumers repayment capability decisions on a go forward basis. Optimizing repayment capacity decisions of our current and future consumer base may reduce our provision for uncollectible accounts and related charge-offs by providing optimal credit limitslimitations on spending power to qualified consumers.

Maintaining our funding strategy and our low cost of capital is important to our ability to grow our business. We have created an efficient funding strategy which, in our view, has allowed us to scale our business and drive rapid growth. The speed with which we are able to recycle capital due to the short-term nature of our products has a multiplier effect on our committed capital.

Our funding helps drive our low cost of capital. We rely on more efficient revolving credit facilities with high advance rates to fund our receivables over time and also use merchant account payables as an alternative low-cost funding source.

Our business depends on consumers transacting with merchants, which in turn can be affected by changes in general economic conditions. For example, the retail sector is affected by such macro-economic conditions as unemployment, interest rates, consumer confidence, economic recessions, downturns or extended periods of uncertainty or volatility, all of which may influence customer spending, and suppliers’ and retailers’ focus and investment in outsourcing solutions. This may subsequently impact our ability to generate income. Additionally, in weaker economic environments, consumers may have less disposable income to spend and so may be less likely to purchase products by utilizing our services and bad debts may increase as a result of consumers’ failure to repay the loans originated on the Sezzle Platform. Our industry is also impacted by numerous consumer finance and protection regulations, both domestic and international, and the prospects of new regulations, and the cost to comply with such regulations, have an ongoing impact on our results of operations and financial performance.

In addition to our continued investmentWe primarily operate in the United States global expansion remains a priority for us. We launchedand have operations in Canada, in 2019, commenced operations in India, Brazil and certain countries in Europe. During the first quarter of 2022, we decided to scale back operations in Europe to essential requirements, such as supporting cross-border merchant relationships. Additionally, we are planning to cease payment processing activities in 2020,India. Finally, we are exploring the possibility of spinning off our Brazilian operations to the local management team and are currentlytaking a minority stake in the early stages of expansion into Brazil. We will continue to extend our platform into attractive new geographies that are ripe for adoption of our product offering. Thus far, we have focused on entering new markets organically rather than through acquisitions. Our approach involves identifying a strong, local entrepreneurial team to lead our expansion. We may be required to expend significant additional capital to implement our international expansion plans.resulting company.

We experience seasonality as a result of spending patterns of our Active Consumers. Sezzle Income and UMS in the fourth quarter have historically been strongest for us, in line with consumer spending habits during the holiday shopping season, which has typically been accompanied by increased charge-offs when compared to the prior three quarters. This is most evident in merchant fees as these are recognized whenover the duration of the note with the consumer once the terms of the executed merchant agreement have been fulfilled and the merchant successfully confirms the transaction.

The COVID-19 pandemic has had, and continues to have, a significant impact on the U.S. economy and the markets in which we operate. We believe that our performance during this period demonstrates the value and effectiveness of our platform, the resilience of our business model, and the capabilities of our risk management and underwriting approach.

UMS is defined as the total value of sales made by merchants based on the purchase price of each confirmed sale where a consumer has selected the Sezzle Platform as the applicable payment option. UMS does not represent revenue earned by us, is not a component of our income, nor is included within our financial results prepared in accordance with GAAP. However, we believe that UMS is a useful operating metric to both us and our investors in assessing the volume of transactions that take place on the Sezzle Platform, which is an indicator of the success of our merchants and the strength of the Sezzle Platform.

For the three months ended September 30,March 31, 2022 and 2021, and 2020, UMS totaled $460.7$450.5 million and $228.2$375.1 million, respectively, which is an increase of 102%20.1%. For the nine months ended September 30, 2021 and 2020, UMS totaled $1.2 billion and $535.6 million, respectively, which is an increase of 133%. The growth in UMS is driven by our continued improvements in growing our Active Merchant and Active Consumer base, year over year.