Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sezzle Inc (SEZL, Financial) reported a significant 71.3% year-over-year increase in quarterly revenue, driven by a rise in consumer purchase frequency and subscriber growth.
- The company achieved a net income of $15.4 million, with a net income margin of 22.1%, and an adjusted net income of $17.3 million, marking a new quarterly high.
- Sezzle Inc (SEZL) exceeded its own 'rule of 100' with a score of 151, showcasing strong financial performance with 71% revenue growth, a 55% gross margin, and a 25% adjusted net income margin.
- The launch of a banking program with Web Bank is expected to unify product contracts across the U.S., simplifying regulatory procedures and enhancing profitability.
- Sezzle Inc (SEZL) raised its 2024 guidance due to stronger-than-expected results and the impact of the new banking program, with a projected 20% growth in 2025 adjusted EPS over 2024.
Negative Points
- The company faced challenges with increased marketing costs due to political ads, which limited their advertising efforts during the quarter.
- There is potential volatility in subscriber counts as the new on-demand product may cause fluctuations, with subscribers possibly decreasing as on-demand usage increases.
- Sezzle Inc (SEZL) anticipates a roughly 20% tax headwind in 2025, which could impact future profitability.
- The company is experiencing seasonality in its business, with increased spending in Q4 due to the holiday season, which may lead to higher principal loss rates.
- Despite strong growth, Sezzle Inc (SEZL) acknowledges the need to balance between on-demand and subscription products, which may require adjustments and learning curves.
Q & A Highlights
Q: Could you talk a little bit about what you've learned so far with the bank partner and how the new on-demand product is going?
A: Charlie Youakim, Executive Chairman & CEO: The partnership with Web Bank has simplified our business, allowing us to focus on a unified product construct, which aids profitability. The on-demand product has led to a 30% increase in activations, reducing entry friction for consumers and serving as a bridge to subscription services.
Q: Any update on the bank products you want to offer, and what's the current thinking there?
A: Charlie Youakim, Executive Chairman & CEO: We are focusing on enhancing shopping features in the app to attract new consumers and increase product stickiness. While we may launch one or two financial services products in 2025, the near-term focus is on shopping features.
Q: Can you clarify the full-year 2024 guidance, and is the adjustment related to the banking program launch costs?
A: Karen Hartje, Chief Financial Officer: The adjustment is due to discrete tax items, not the banking program. We released a valuation allowance against our deferred tax asset, which created a significant tax item that we adjusted for a more meaningful investor number.
Q: What inning do you think Sezzle is in, and what's the outlook from here?
A: Charlie Youakim, Executive Chairman & CEO: We are outperforming the buy now, pay later sector, which is expected to grow 20% year-on-year. Our strategy is to gain market share in this growing sector through strong strategies and quality growth, not chasing growth at any cost.
Q: Is there any seasonality with your business, especially going into the holiday season?
A: Charlie Youakim, Executive Chairman & CEO: Yes, there is seasonality. We play defense during the holidays to prevent overspending, which differentiates us from credit cards. Q4 sees increased spending, but we restrict it to avoid customer failure. Q1 spending decreases, but tax returns help lower principal loss rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
