SEZL - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the Sezzle, Inc.

Second Quarter Financial Results Conference Call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Charlie Youakim. Please go ahead.

Charles Youakim

you. Thank and XXXX everyone, Call. Quarter to welcome afternoon, Second Sezzle's Earnings Good name Charlie My Youakim. is Corp. and CEO by Karen Head Financial the Chairman our Officer, of our and I'm Hartje; Executive Chief today of Sezzle. I'm joined Devon IR, Lee Brading. In our announcement have the earnings filed with on presentation this our conjunction along on SEC with sezzle.com. conference with it we our call, posted earnings and investor website

the Investor press done Relations not and the If already so, you please will to within There, you presentation find of section earnings the release our our earnings under website. have go quarterly section. financial

have the results. and Slide how provides an to we share that positive Please updated out our Now excited get X. Slide X actions results QX you. all to our of let's the ahead of way, into our extremely overview guidance duties translating We're are started. with administrative flip

rose see, in and purchase can frequency QX you As year-on-year, revenue growth strong driven consumer growth. by subscriber X.X%

reported we'll impact valuation later its a $XX.X forward. What the outpacing of is the asset in growth Our recognizing Yes, that includes recognizing Analytics. Net effectively million tax for at at tax be anyone benefit assets. is income taxes the effect. pulling recorded But income gets $XX.X release means it allowance year of for against as the $XX.X previously quarter This deferred their before as the research tax excited, that is our too for a and full next deferred came quarter. million. discrete now, pay companies such for Adobe million onetime industry by buy third-party

proud we which for $XX.X are income of still net million, adjusted is a So, quarter number that of. very the

because a income the performance. few about more onetime our investors guidance diluted comp don't across of make we can net interest. share onetime we removing now adjusted of net income are it the understand fiscal aren't stock-based we items like difficult are and per raising term million $X.XX board. and result, adjusted a out our We're providing the real guidance $XX But costs As and items, just that adjusted, worry XXXX for respectively. adjusting to And

walk the the and more the a the of at end onetime of through will items presentation. We detailed all guidance explanation

by end of subscriber total XX% quarter year. continues XX consumer the per increased grow stood count by top consumers and of XX,XXX as to times during transacting Our at engagement QX. XXX,XXX evidenced average an of This at to the the XXx number our

great measuring quarter, exceed to matter also discussed XX, margin growth, percent the in another very XX, percent one metrics We gross the net guess XX-plus XX own of to for which Nonetheless, achieving XXX. percent rule one XX, we of income continue short stick say no to could XX-plus margin. We close equation. results QX, revenue margin and each came how XX-plus I line. these the rule to but fell of of Last gross strongly we slices quarter. the that just of our equates created

obvious It's principles quarter we X. continue as company, on guidance. affecting increase profitability the higher a from on focus As and to a forward with that each shown continue income positively our forward report guiding as are net outside we push to Slide we

from love. is and products us they a lifetime increasing launch example value our profitability the way subscription into of to key every don't our set woven of laser outside initiatives. A finding that cost-saving part of activities I with truly bottom value product great The a for is of increase decision the formula increasing It of will anywhere is revenue-generating consumers. our truly the line However, people appreciate the make on think of lifetime results. to premium focus improving we consumers

that those our to continue to of consumers bottom-line on goal thus to which opportunities believe and eye we value enhancing believe lifetime consumers already numerous with of have consumer We and A part say happy in top improving to that to green all to we will an offerings the are satisfaction. We frequency need, product more new area. retention, we is and that key them, users. continue and providing have products provide drive we and acquiring enhance lead continue shoots results. enhancing us experience need the Sezzle I'm want seeing new this with

in a are experiencing report see that stakeholder should will users QX, presentation we the be results must active starting users. and in growth profit are driving You growth From but perspective, active that good important, bottom-line and sequential later we recognize we we year-over-year that quarterly in in also stewards.

be public a after us. has the to company stewards next Corp, buy and only which that the Sezzle corporation being comes are later generation pay benefit certified good proud a is are that for B now, We

last driven Slide was increase initiatives on of shown quarter few quarter's As the subscribers. growth The X, of XXX,XXX by paying this $XX,XXX. we outpaced The XX,XXX that different are growth subscribers off. have a

meaning funnel. pay efforts coming in our more starting federal to users First, into attracting the are off, consumers top are first-time to of the

for expanded we current to are consumer users sign-ups. join. have pool that available strong by we increased driven And of have Second, ad LTVs, our third, the spending

profitability the losses. We credit for trade-off these and are monitoring efforts closely between

right seen is one. the We have that expect date the have path chosen and to we

for consumers. While losses, amount has our of example by from more will is which in offset that our we more and growth it be through of is more trade-off higher-margin us paying to believe higher now, half up and provision year, quarter we credit an The products second know the the see we our off. The provision to positive and enhanced allows active margins, to been creation. The increase profitability have expect feedback value increase than mid-X% more products open overwhelming. second that. lifetime engagement We an to ultimately in of potentially in year-on-year consumers

and out all profitability generation. think it our and Slide next gleaned use newer gamification, And shows of more and this you And rank of of new data all on is simply empowering payment high a aligns seeing method Our Toto locations rewarding the but On for wanted incredible pay X streaks where payment past. buy credit sure are it method later an lifetime engagement more repayment allows the payment proper time. are results, only the we done a update as with mainstream top pay-in-X this another consumer with and now, mission more we all layer and NPS over educating values. From is now on have moving is becoming segmentation. streaks a at the Sezzle's through ever-evolving Slide and finance scores dominated plus users. In as and a X, apparel-only in that how of importance I'm focused consumers is of good you product, this popular the of information enhanced Once users figured our cards in credit we're all good that. increasing the deal we're from that order to our suggesting adaptation landscape repayment. We which modern rose debit into the user of consumer the one are once or happy we in the level, results. Not with again wallet only credit of by us is financially more, through to aligns very behavior on that of seeing is efforts seeing we what that using

process. More XXXX. We and continue in our merchant At subscriptions From recently, and original lifetime such XXXX experience integration evolve streets, consumers' initiatives and have to in each as values. the increase XXXX consumer expect adapt to we stakeholders. in add increased add experience launched reporting consumer and we value to the for product and the to and product XXXX our which to thus marketplace consumer stage, our enhanced lifetime value in we direct other payment credit

significant is leg with forward, our the to our consumer. we in expand partnership the As relationship bank journey look next the

We are the live expect with process in with progress have made complete partner the and to the them quarter. future fourth excited go our and about bank we

through to timing. the shared a States our in before couple as today. guidance. of as included the have we of the details of in on our prefer benefits discussed We remind will forward our it of state-by-state bank the have future banking we the we We points. Initially, control outside as it me construct United of have lot our bird partnership approach or part go guidance relationship the the impact you have hand let I of not partnership product a past the versus the yet to anything forces include of won't benefits across to calls, can unify related us but monetary allow

fees fees, state imagine, state such As to varying late widely. not on as laws you with consistent are from might state restrictions

user future if acquisition partnership, with The believe will subscription even on a gate, bit business of us Once setup lifetime current a product also unified be launch we this makes they We our expansion. Out product construct products the of value will use live believe this expect ways. help partnership allow complicated Our which our launch demand, bank in a have and can profitability. level. consumers national will we're allow a limits running consumer to that state-by-state we on more couple we us to the and the to with everywhere, key to also don't a us.

sale onetime can on First, us use to subscriber. not a with we And integrated everyone of with wants to transaction are at consumer be with. fee point a demand, the the merchants pay

Second, winning competitive merchants. become enterprise help we in will believe it more us

are to the quiver. adding reiterate, very eras to we be Just more excited to

of equally financial active we is Sezzle daily frequency, sample regular addition It's to on to as on which rewarding transactions both Slide to part shoppers of for see. and a all and lives. screen green in want In tracking are nothing to small subscriptions about everywhere metrics to their closely quarter. The unique improvements next the in metrics, number we expect and be use nonfinancial exciting tied green growth but rapid except merchants X. in the shown consumers, with There are the

quarter-over-quarter to continue financial call quarterly who our over results X to consumer happy go we added and results have the We confident the also accounts. And believe that quarter-over-quarter grow are to our strong we are show active reflect why in turn We our momentum detail. the I'm seeing we in the momentum. that, will the will business Karen? to greater Slide Karen CFO, that with Hartje, over

Karen Hartje

the to XX% a XXX% previous increase in revenue provided $X.X of end Thank anywhere XXXX On launched Total of in year. subscription UMS to million you, and to revenue a dive compared quarter increased second all. that quarter XXXX. Net results $XX.X was as in million income Charlie, little hello Slide the to the excited due for XX.X% at Sezzle the XX. in came deeper year-over-year I'm into June increase and earlier. Charlie in to

and only improvement start rate of us Adjusted of the the income likely of deferred less adjustment a discrete was thus our company's net current income the total at $XX.X the tax to of quarter allowance. In of the to of operating second to adjusted non-transaction-related XX.X% of further discrete $XX.X UMS of Charlie by related in benefit position a to the adjusted our as total provided call, XXXX, million on to and realized EBITDA in more was previous Slide of and million XX.X% year-over-year performance have putting As than net in across-the-board total in costs subscription, prior the taxable are the of anywhere. company's year. Those On they transaction-related nature grew determined XXX,XXX expenses the is unit the particularly reflected quarter, the that growth the year. subscribers $X.X as of to XX.X%. Other growth year. The June valuation we to the our At compared the year. outpacing by in second results. growth in anywhere results a noted to in Thus, quarter remove income a quarter XX.X% profitable compared XX% year years. To run the of revenue to until trajectory prior We as we we the net assets XX.X% of not more recorded most civil can only to of likely occurred second revenue tax our deferred economics in XX.X% had to revenue in is prior launch of prior compared XXX,XXX you subscriber the XXXX. attributable second leveraging than see margin end XX, revenue UMS, compared lot subsequently. due we be a the million future driven tax declined are compared our loss and growth didn't quarter UMS income, with reflective XX.X%

XX.X% We revenue all-time quarterly happy at total an reached in point to quarter. are percentage out the high second a UMS that also as of

on XX. all transaction-related We to costs our of have bundled Slide

look can X% payment the let's primarily level We Xs. to at UMS. is maintain declined which First, of this in costs. transaction processing expense, That low believe we

improvement Next, net level credit to new we've lowered a interest component into losses. from bps million our borrowing $XX provision the is by April, lowered seen by cost a expense last which entered million credit our and borrowing transaction-related in significant of $XX costs $XX required facility we as XXX our million. The in for annually

as As refund as due the the risen anticipated, UMS to has first typically quarter season. percentage lowest it is point tax a of the

rise it especially X. tends progresses, year the the to As quarter during season, holiday

the trend mid-Xs. occur expect a be similar it we to to and wouldn't For reach surprised XXXX, see

more into of we expect closely revenue the to than for seeing losses. and in earlier, we an in offset economics unit and as consumers increase As a funnel, as Charlie the an such, and coming subscribers are increase top provision in move the higher monitoring discussed more are credit

UMS points results X.X% second XX, a quarter, the Our and transaction-related in year-over-year for our Slide year quarter the revenue basis great X.X% rising XXX a as X% of Despite basis shown from XXX points and of less previous our total of percentage credit in revenue, quarter-over-quarter. provision costs increased this. example losses on to prior are

to later XX%, fiscal quarter results XX%. our well we you As guidance economic unit increasing above in therefore, see will presentation, our our previous second guidance XXXX are our of and were

improving for Slide quickly It Turning combination down that becomes profitability costs, evident a of strong the performance. while holding non-transaction-related combination operating line unit XX. is to bottom

in operating it we such acquisition. allow what do, we good at is that the will For have make money of but customer do non-transaction-related made as investing we not might the past, to remainder thing amazing in costs, and more the to expect but finding of where is brand particularly can XXXX, The marketing. in investments position awareness some ourselves internally in we that are a the expense in profitability. not We business see bottom-line pickup one making in joke

turn between income. the out became Slide net valuation the quarters, release Speaking net reconciliation allowance, we XX, and bottom at performance, minor of line but past where size with the income it we've necessary. lay In the adjustments, to had adjusted of

also XX%. We adjusted like exceeded first the EBITDA. to For our margin time, net income to refer realize many investors

of our net So, metrics where income slide margin comparison adjusted reached XX EBITDA, provides EBITDA to the adjusted XX.X%.

end, in improved As the in new further position discussed our for in footnotes, of our last quarterly closed conference some liquidity sheet call, facility our pert quarter with a $XX.X metrics, shows $X.X and now, you'll April. Slide X, XX the our $X.X repurchased the July balance sure $XXX like million, credit key we quarter, million and as XXXX. was and on approximately looked million had was see ahead fully that but availability I in representing growth capacity million as of the open left of we million market, solidified also Slide that fine executed $XX.X I'm we line leaving of during repurchase by everybody our the has would outlook, to shares XX. credit. to note plan. The in

me Let a to before the few highlights call Q&A. turning provide over

We net income are guidance net increasing total income share. for be and our per margin, excited revenue, to

Without adjusted on due items, net for tax the XXXX. all guidance details, and bottom the Slide of leads the also think rate of earlier, to of the providing me of small we are a XXXX. the tax we to into the dynamic a discrete get a remainder lot discussed our Russell I income, We for cap, time, are XX, so are diving mid-single-digit for positive guidance now, continue, first providing we As but it it. fiscal Right expect rest the the guidance momentum shown speaks to in is valuation. business, but which of for itself. We've the we

as our indices. sense compared that valuation, with growth popular considering the and we might trade profitability our to You half at valuation continue less aren't with happy than market we

evaluate both. With we of to, continue today, return over share shareholders, million have for stock not incremental to of happy call As including, but and options special will to turn December since repurchases, the XXXX, a dividends, please of in or capital we limited $XX to completed the as questions. to you take repurchases Q&A. that, your we line combination the will Operator, would are like open operator I for

Operator

[Operator with instructions] Our question Northland. comes first Grondahl from Mike FNBO

Mike Grondahl

you to question, sequentially mentioned, Charlie, you very quarter. on Congratulations subscriptions first some a hey, had XXX. first-time My strong initiatives XX,XXX users. for growing

more be spending. one of current few expand ad each might outlook You're some on of and know, trying and your to pool of a details don't the kind subscriptions? I for just users helpful those

Charles Youakim

providing results, into bit marketing we're channels. to on guidance any we more quarter-over-quarter And are Yes, then not little the subscriptions, a emphasis putting Mike.

stronger of business makes keep Our on overly do say that. I have as side. and steady just is, as like that jerky to view kind it. We wouldn't stronger pushing we or aggressive on about acceleration a as we're like a like get financially, it we or the sense that pedal push to

total at that's because So, function, number, bit. in where got there's a at some answer be goes that us of right? helped think you know to users I our total But from ratio the just look that limiting subscribers point, you be. hard some to active the quarter-over-quarter think We and sort it's might where here, terms and between tell to don't if to of for this

and which or the is TAM to consists mini-TAM and for intermediate the users, trying on count. the growing grow keep on like subscriber like keep an a accelerating we accelerating active So, both groups,

because be X. point, Does sense? both think on limiting function that's make there'll think at we're that of sort the I some focused we So, between where some

Mike Grondahl

a correct? is subscriber, like per anywhere, premium Yes, directionally. $XX And just like then month average the and

Charles Youakim

same. Yes, that's the

Mike Grondahl

to And last on then any in out live new merchant your are relationships quarter merchants or call that just the X? now

Charles Youakim

had announced will here, in pipeline something say actually partnerships. significant thing No, we some the some we we're is to launches watching tied merchant. if the growing we the in I not closely. ways team we are the would of our call have as mentioned And, pipeline. that That's have a in publicly that one the bank

of passed product. bank a merchants that some the our partnership merchants consumer. They're on-demand fees us looking margins. or are have generally are through for more the the helps So, more launch Those lower on to product

some product as that tied we that that well. behind launch So, of kind of of have

Mike Grondahl

revenue percent where sort of modeled, and feel going tailwind a nice a number? How that as Or about getting than pushing you should How a it that forward? that XX.X%, more Is was Your higher? also for you do record efficient, more subscriptions. of UMS think you higher that like we number looked about guys. almost have we you're

Charles Youakim

as Of helps a course, I personally. north on I to us new And love moving company, I But But with it. then we also think launching. want that. keep it have subscription products

so, margins. We project that's is us with and top really that. where on mentioned get But to hard line gross go. as plus And margins might gross a top going helps getting goal which company our we higher helps definitely again, to gold, that line, keep increasing that XX% forward have

to But do what a big this that's monitor good is I that. we that to range might new going new introduce question do going think be mark it. products, somewhere probably the as those doubt But in about we to number. No products place forward start.

Mike Grondahl

me. one income, $XX.X for net And then, in XQ. million Adjusted last

I $X.X XQ, so think million. million $XX.X slide, per in that

in step of? it half Is Your would I'm imply something thinking down kind $XX there should income Or just of adjusted if about seasonally of back of kind be the of year, guidance the $XX.X there? net we cognizant right. there the million million

Charles Youakim

a they that quarter because a now, that make comes it's consumers. In then for us don't I think of to product, later evolve. We because but with in quarter they is overspent consumers default definitely lovely consumers -- our that and to this don't cards for they balances is oversee credit it's situation, on again. sure our leads think lost tend that up default overspend us, along, want they the they I quarter, seasonal a consumers fourth I mean, a can't higher to quarter product, overspend, start leads fantastic flip some because and product buy build is think, I consumers find transact aren't best higher volume the to we try is higher default quarter once why if such because to to which pay also with side, that

So, have fourth tend defenses, we loss play higher lot in rates of quarter. a to the

biggest anyone happen can so, with and going misguide to don't think the we And forward, the variable the in I probably that's fourth variability quarter. want that

I guiding that's we're for. about think what really more

Operator

over I closing you concludes would turn conference This to back question-and-answer session. any came like the our to Charlie for remarks.

Charles Youakim

I'd also, closing, I to incredible comm In Thank love the the I for thank like but the know guarantee I since you. we Sezzle to can listeners in to all Thank quarter. And team's duct those look team. conference the again, work the services are And has than that on that I think know frequent above call you, fast. been more operator. like a think I and legs through your Charlie past the outside, extremely past Sezzle moving water, the Munger. just below quarter

Thank investors, the all, is your big money but i.e., that's and quote for and waiting. holders. a real of buying federal Munger selling, in the not The great Charlie the long-term appropriate another day. rest have Here's the you in

Operator

The now concluded. conference has Thank presentation. attending for today's you

disconnect. may You now

Sezzle (SEZL) 7 Aug 242024 Q2 Earnings call transcript