Sezzle Inc. Q3 FY2025 earnings call

• Launched features like the Earn tab, Sezzle Arcade, and MoneyIQ in the app to enhance consumer engagement. - Utilized AI for initiatives such as a support chatbot and AI shopping assistant to boost productivity. - Adjusted go-to-market strategy by deemphasizing on-demand in favor of subscription, with subscribers rising to 568,000 by end of Q3. - Addressed corporate strategic projects including an antitrust suit, capital markets exploration (exercised $75 million accordion on credit facility), and banking charter discovery process.

Total revenue grew 67% year-on-year in Q3 to $116.8 million. GAAP net income and adjusted net income grew over 50% to $26.7 million and $25.4 million respectively. GMV increased 58.7% year-on-year to reach the first $1 billion quarter. Take rate rose 60 basis points to 11.2%. Transaction-related costs as a percentage of GMV increased to 3.1%, but non-transaction-related operating expenses decreased 2.9 percentage points year-over-year to 27.1%.

• Reaffirmed top line growth and adjusted net income guidance. - Raised GAAP net income guidance to $125 million. - Adjusted EPS guidance for 2026 to $4.35. - Increased adjusted EBITDA range to $175 million to $180 million from $170 million to $175 million.

• Antitrust suit where defendant has petitioned court to dismiss, outcome to be known in December. - Capital markets exploration involves refinancing challenges. - Banking charter discovery process is a long and uncertain endeavor with no guarantee of success.

Q: Talk about deemphasizing on-demand in Q3 and impact on growth.

A: Deemphasized around mid-quarter due to conversion and lifetime value analysis; on-demand used more for merchants, subscription prioritized for consumers with better lifetime values.

Q: Discuss take rate trends and credit losses.

A: Take rate trends aim for 60% gross margin; 3.1% credit losses in line with expectations, expected to align with 2.5% to 2.75% range for 2025.

Q: Big picture on BNPL market in US.

A: BNPL seen as having many years of growth ahead, preferred by consumers as a safer budgeting tool vs credit cards.

Q: Pivoting back to subscriptions, marketing difference.

A: Marketing now focuses on offering subscriptions, previously more on on-demand purchase requests; pricing increased due to inflation.