Sezzle Inc. Q1 FY2025 earnings call

Key Points

• Charlie highlighted 12th straight quarter of positive year-on-year revenue and operating income growth.
• Launch of banking partnership with WebBank in September 2024, with Q1 2025 being the first full quarter of benefit.
• GMV grew 64% YOY, revenue 123% YOY, driven by 77% YOY growth in MODS.
• Net income for Q1 2025 was $36.2 million, with 2025 net income guidance increased to $120 million from $80.4 million and EPS to $3.25 from $2.21.
• Launched $50 million share repurchase program and six-for-one stock split.
• Product enhancements like Pay-in-5 and Auto-Couponing in beta; focus on financial tools and shopping features.
• MODS up 77% YOY to 658,000; active consumer count rose sequentially for fourth straight quarter.
• Signed enterprise-level merchants such as SCHEELS and WAP.com.

Total revenue increased 123% year-over-year to $104.9 million. GMV rose 64% year-over-year. Adjusted net income grew 286% year-over-year to $36.1 million. Total revenue less transaction-related costs was $74 million, representing 70.4% of total revenue. The revenue contribution from various segments was driven by growth in GMV and MODS, with GMV up 64% YOY and MODS up 77% YOY to 658,000.

Guidance

• Increased 2025 net income guidance by nearly 50% to $120 million from $80.4 million.
• Bumped up 2025 EPS guidance from $2.21 to $3.25.
• Expect 60% plus top line growth due to positive trends in subscription and on-demand products, with subscribers holding up and non-subscribers engaging with on-demand.

Risks

• Market volatility and uncertainty could impact the business.
• Provision for credit losses may trend higher, but remains within the guided range of 2.5% to 3%.

Q: Can you tell us about the funnel of new merchants, types and sizes?

A: We focus on enterprise-level merchants, also have a midsized funnel. We're pushing into new categories like groceries. Merchants often test with one BNPL provider first and may add additional providers later.

Q: What is the uplift from on-demand?

A: On-demand is seeing monthly sequential growth. It has a lower barrier to entry, helps market subscription products as users can then be promoted to subscription offerings.

Q: What is the financial benefit of the WebBank partnership?

A: Revenue yield improvement due to better product offering through WebBank, as we're able to run the product as designed through the WebBank partnership.

Q: How is credit quality managed?

A: Strong profitability allows more open credit while maintaining gross margins. First quarter benefited from tax refunds; still expect provision for credit losses in the range of 2.5%-3% for 2025.

Q: Describe Pay-in-5 and Auto-Couponing.

A: Pay-in-5 was developed based on positive customer feedback, being an 8-week product with slightly lower payment amounts. Auto-Couponing aims to add value for customers by providing coupons to help them save money.